Putting it all together - How H.R.1424 meshes with IRC 132.f

Thanks to the Cornell Law School Legal Information Institute (LII), I was able to encorporate the legal changes from H.R.1424 with Internal Revenue Code TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter B > PART III > § 132 Certain fringe benefits

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Change(a):

(f) Qualified transportation fringe

(1)In general

For purposes of this section, the term “qualified transportation fringe” means any of the following provided by an employer to an employee:

(A) Transportation in a commuter highway vehicle if such transportation is in connection with travel between the employee’s residence and place of employment.

(B) Any transit pass.

(C) Qualified parking.

(D) Any qualified bicycle commuting reimbursement.

Change (b):

(2) Limitation on exclusion

The amount of the fringe benefits which are provided by an employer to any employee and which may be excluded from gross income under subsection (a)(5) shall not exceed—

(A) $100 per month in the case of the aggregate of the benefits described in subparagraphs (A) and (B) of paragraph (1),

(B) $175 per month in the case of qualified parking, and

(C) the applicable annual limitation in the case of any qualified bicycle commuting reimbursement.

Change (c):

(5) Definitions

For purposes of this subsection—

(A) Transit pass

The term “transit pass” means any pass, token, farecard, voucher, or similar item entitling a person to transportation (or transportation at a reduced price) if such transportation is—

(i) on mass transit facilities (whether or not publicly owned), or

(ii) provided by any person in the business of transporting persons for compensation or hire if such transportation is provided in a vehicle meeting the requirements of subparagraph (B)(i).

(B) Commuter highway vehicle
The term “commuter highway vehicle” means any highway vehicle—

(i) the seating capacity of which is at least 6 adults (not including the driver), and

(ii) at least 80 percent of the mileage use of which can reasonably be expected to be—

(I) for purposes of transporting employees in connection with travel between their residences and their place of employment, and

(II) on trips during which the number of employees transported for such purposes is at least 1/2 of the adult seating capacity of such vehicle (not including the driver).

(C) Qualified parking
The term “qualified parking” means parking provided to an employee on or near the business premises of the employer or on or near a location from which the employee commutes to work by transportation described in subparagraph (A), in a commuter highway vehicle, or by carpool. Such term shall not include any parking on or near property used by the employee for residential purposes.

(D) Transportation provided by employer
Transportation referred to in paragraph (1)(A) shall be considered to be provided by an employer if such transportation is furnished in a commuter highway vehicle operated by or for the employer.

(E) Employee
For purposes of this subsection, the term “employee” does not include an individual who is an employee within the meaning of section 401 (c)(1).

(F) DEFINITIONS RELATED TO BICYCLE COMMUTING REIMBURSEMENT-

(i) QUALIFIED BICYCLE COMMUTING REIMBURSEMENT- The term `qualified bicycle commuting reimbursement' means, with respect to any calendar year, any employer reimbursement during the 15-month period beginning with the first day of such calendar year for reasonable expenses incurred by the employee during such calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if such bicycle is regularly used for travel between the employee's residence and place of employment.

(ii) APPLICABLE ANNUAL LIMITATION- The term `applicable annual limitation' means, with respect to any employee for any calendar year, the product of $20 multiplied by the number of qualified bicycle commuting months during such year.

(iii) QUALIFIED BICYCLE COMMUTING MONTH- The term `qualified bicycle commuting month' means, with respect to any employee, any month during which such employee--

(I) regularly uses the bicycle for a substantial portion of the travel between the employee's residence and place of employment, and

(II) does not receive any benefit described in subparagraph (A), (B), or (C) of paragraph (1).

Change (d):

(4) No constructive receipt

No amount shall be included in the gross income of an employee solely because the employee may choose between any qualified transportation fringe (other than a qualified bicycle commuting reimbursement) and compensation which would otherwise be includible in gross income of such employee.

Now there is some debate on the blog of a teammate of mine as to wether or not the bicycle transportation fringe benefit will mean money in his/our pockets. Jim Abrams (AP) is summarizes the tax changes as follows: "Allowing employers to exempt from taxation what they spend on some fringe benefits for workers who commute to work by bicycle, for example reimbursing the cost of parking the bikes. Cost: $2 million." However, qualified parking was already addressed under the IRC with it's own line item. 'Qualified bicycle commuting reimbursement' is an entirely separate line item. It is also explicitly defined as reimbursement 'for reasonable expenses incurred by the employee during such calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if such bicycle is regularly used for travel between the employee's residence and place of employment.' Now if your employer were to charge for bicycle parking, and you would pay your employer, who would then reimburse you for what you paid them, then your employer would be able to reap the tax benefit with no additional tangible benefit realized by the bicycle commuter. But I don't know if this would be legal. I read storage to mean if there was nowhere on site at your residence or place of employment to park your bicycle, you would then be able to apply $20 per month to the cost of bicycle storage.

Yokota Fritz also has a good write up with a lot of discussion. Bike commuter benefit now law! - Cyclelicious. Click here for the complete text of H.R.1424 SEC. 211. TRANSPORTATION FRINGE BENEFIT TO BICYCLE COMMUTERS as taken from and linked to The LIBRARY of CONGRESS.

So let's hear it, what's your take on the bill, the way it was passed, and what it means?