Your one (very small) benefit from “The Bailout”

Dear Explainer,
Although the Bicycle Commuter Act was passed in 2008, very few companies have implemented it for their employees. Is it that complex or just a corporate stance?

Denny Rue
St. Paul, Minnesota

Dear Denny,
Since the law didn’t actually go into effect until January 1 of 2009, it will be hard to track precisely just how many employers and employees have opted to take advantage of the program until the end of tax season this year. Nonetheless, I have to agree, there hasn’t exactly been a stampede to use the credits available under the Bicycle Commuter Act of ’08.

It could be that a lot of companies don’t know about it and, given the very small tax benefit, it may be that some have simply concluded that it’s a bit more of a hassle than it’s worth.

First a bit of history. The idea is a simple one. It was advanced by one of cycling’s best friends on Capitol Hill, Congressman Earl Blumenauer, a Democrat from Oregon. Blumenauer and his fellow Oregonian, Senator Ron Wyden, had been pushing the idea for years. Blumenauer said he was driven by the fact that the government already provides tax credits and subsidies to employers and employees who opt to car pool or rely on public transportation. Coupled with programs that offset parking costs – which obviously encourage commuters to drive their cars – those subsidies run about $4.5 billion a year. Under that program, companies can offer tax-exempt monthly benefits of up to $215 for qualified parking programs or up to $115 a month for those who use public transportation or carpools. All of that has been codified into Section 132(f) of the IRS Code.

Blumenauer said it made little sense to have a Federal Transportation Fringe Benefit program that encouraged driving or – to a lesser degree – advanced public transportation while ignoring cycling. It was counterintuitive, said Blumenauer, to discriminate “against those burning calories, not fuel.” And we have to agree.

As good as the idea is, it took Blumenauer and his Congressional allies more than seven years to get this thing passed. The Bicycle Commuter Act was finally passed in the waning days of the Bush administration as part of the much larger Emergency Economic Stabilization Act of 2008, the bill otherwise known as “The Bailout.”

According to pre-enactment estimates from the Joint Committee on Taxation, the predicted annual fiscal impact of the amendment was right around a million bucks. Ironically, even though the $700 billion Bailout probably contained enough money to either replace every bicycle on the planet with a Campy Record-equipped Pinarello Prince, Blumenauer’s little amendment became the focus of anger, rage and ridicule in some quarters.

That paragon of thoughtful discourse, Rush Limbaugh, chalked it up to a broad conspiracy to deny Americans their fundamental right to drive.

“And, by the way, don’t think this is just happenstance in there,” El Rushbaugh pontificated. “What do you bet the odds are that some wacko environmentalist lobbyist got to some senator to put this in there? The real purpose is to get people out of their cars down the road. This is step number one.”

The conspiracy in action

Okay, so now that Blumenauer and his fellow members of the vast two-wheeled conspiracy were unmasked, what precisely does the bill do?

Well, we suspect even Blumenauer would have to agree that the bill doesn’t really do all that much.

At its most basic, the Act simply amended Section 132(f) of the tax code to include “bicycles” in the definition of transportation that qualifies for tax-free fringe benefits. The provision allows employers to offer their employees a tax-exempt transportation fringe benefit of $20 per month to offset “reasonable expenses” related to bicycle commuting.

According to our friends at the IRS, those reasonable expenses “include the purchase of a bicycle and bicycle improvements, repair, and storage. These are considered reasonable expenses as long as the bicycle is regularly used for travel between the employee’s residence and place of employment.”

So, in order to qualify for that $240 a year, you have to “regularly” use your bike for your commute. While “regularly” isn’t exactly a precise term, you’re probably safe if you use your bike at least three days a week. Furthermore, if you take advantage of the bike benefit, you are then ineligible for other transportation benefits that were already available under Section 132(f).

So, for example, if your commute is like mine was when I lived in Colorado, you might not find it all that helpful. Living in Golden, I would often get to the office by taking the bus for the first part of the trip, simply to avoid the worst parts of Highway 93, a heavily traveled two-lane road to Boulder. I would have my bike with me and jump off the bus once we got past the suicidal part of the trip and ride in for the final six miles to VeloNews Global Headquarters. Even if the bicycle element of that commute qualified as “regular” use, I would have been better off trying to be compensated for the bus part (up to $115/month) as opposed to taking advantage of the BCA ($20/month). Of course, taking advantage of either is really dependent upon your employer’s decision to offer the benefit in the first place. It’s not something you can do solely on your own.

So ultimately, the answer to your question, Denny, is that there may be a combination of factors at play here. If it turns out that few employers offer the benefit, it may be that many of them don’t know a lot about the program yet. Add to that the fact that the benefit is not all that great and there are certain record-keeping requirements necessary to take advantage of any incentive program and we may not see all that many folks taking advantage of the deal.

If your employer doesn’t currently offer the benefits under Section 132(f), it might be worth your while to let them know that it’s out there. You can start by providing your boss or your Human Resources coordinator with a copy of the latest version of IRS Publication 15-B, otherwise known as “The Employer’s Tax Guide to Fringe Benefits.” It makes for terrific bed-time reading and what the heck, you might find something else in there that you and your employer might think is a nifty benefit.

Ultimately, with or without the Bicycle Commuter Act, most of us realize that the benefits of riding a bike to and from work far exceed the $240 you might get under the provisions of Representative Blumenauer’s amendment. Frankly, I might just take advantage of it to advance the idea that yes, this is indeed “step number one,” and our ultimate goal really is to “get people out of their cars down the road.”

Really, Rush, you oughta try it some time.

FILED UNDER: Explainer / No Spoil TAGS: Explainer

Charles Pelkey

Charles Pelkey joined VeloNews in 1994 after serving as press secretary for former GOP Whip Alan K. Simpson in the U.S. Senate. Pelkey has worked as a journalist since 1985 and held a number of editorial positions at VeloNews including Senior Editor of VeloNews.com. Pelkey earned a JD from the University of Wyoming College of Law and lives in Laramie, Wyoming, with Diana, his wife of 25 years, and their two children, Philip and Annika, whose presence serves as a constant reminder of what really matters. Pelkey left VeloNews in July, 2011, but continues to be a regular contributor. Charles can now be found at liveupdateguy.com

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