Full text of bicycle commuter tax benefit recently passed by Congress

The Bicycle Commuter Tax Provision was recently passed by Congress as part of HR1424 and signed into law by President Bush. Many people have questions about this new law and how it may affect them.

In general, the law allows employers to give a tax-free benefit to bicycle commuters of up to $20/month, to cover the expenses of bicycle commuting.

The details of how this will be put into practice, however, are not completely clear at this time.

Here is some information that may help, however:

The law itself amends current federal statutes.

We understand that regulations about the new tax benefit are being written right now--and are not yet finished.

But the relevant federal statute, as amended, reads:

26 USC Section 132(f).

1. 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:
   1. (A) Transportation in a commuter highway vehicle if such transportation is in connection with travel between the employees residence and place of employment.
   2. (B) Any transit pass.
   3. (Q) Qualified parking.
   4. (D) Any qualified bicycle commuting reimbursement.
2. 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-
   1. (A) $110 per month in the case of the aggregate of the benefits described in subparagraphs (A) and (B) of paragraph (1),
   2. (B) $200 per month in the case of qualified parking, and
   3. (C) the applicable annual limitation in the case of any qualified bicycle commuting reimbursement.
      
      
3. 3. Cash reimbursements. - For purposes of this subsection, the term "qualified transportation fringe" includes a cash reimbursement by an employer to an employee for a benefit described in paragraph (1). The preceding sentence shall apply to a cash reimbursement for any transit pass only if a Voucher or similar item which may be exchanged only for a transit pass is not readily available for direct distribution by the employer to the employee.
   
   
4. 4. No Constructive Receipt. - No amount shall be included in the gross income of an employee solely because the employee may chose 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.
   
   
5. 5. Definitions. - For the purposes of this subsection-
   1. (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-
      1. on mass transit facilities (whether or not publicly owned), or
      2. 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).
   2. (B) Commuter highway vehicle. - The term "commuter highway vehicle" means any highway vehicle-
      1. the seating capacity of which is at least 6 adults (not including the driver), and
      2. at least 80 percent of the mileage use of which can reasonably be expected to be-
         1. for purposes of transporting employees in connection with travel between their residences and their place of employment, and
         2. 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).
   3. (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.
   4. (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
   5. (E) Employee. - For the purposes of this subsection, the term "employee" does not include an individual who is an employee within the meaning of section 401(c)(1).
   6. (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).
      
      
      
   7. 6. Inflation adjustment.
      1. (A) In General. - In the case of any taxable year beginning in a calendar year after 1999, the dollar amounts contained in subparagraphs (A) and (B) of paragraph (2) shall be increased by an amount equal to -
         1. such dollar amount, multiplied by
         2. The cost-of-living adjustment determined under section I (f)(3) for the calendar year in which the taxable year begins, by substituting "calendar year 1998" for "calendar year 1992".
      2. (B) Rounding. - If any increase determined under subparagraph (A) is not a multiple of $5, such increase shall be rounded to the next lowest multiple of $5.
         
         
   8. 7. Coordination with other provisions. - For the purposes of this section, the terms "working condition fringe" and "de minimis fringe" shall not include any qualified transportation fringe (determined without regard to paragraph (2)).
   
   Sources:
   
   Base section is here: https://www.metrostlouis.org/GettingStarted/TryTransit/section132.asp
   
   HR1424 is here: https://www.congress.gov//cgi-bin/query/z?c110:H.R.1424.eas: