Prior to the Tax Cuts and Jobs Act made some changes to the treatment of qualified transportation fringe benefits (Section 132(f)), primarily making the employer costs non-deductible (Section 274(a)(4)), “qualified bicycle commuting reimbursement” was such a fringe benefit. That benefit was repealed for 8 years for some reason. It is not clear why it was repealed. I don’t believe its temporary repeal generated lots of revenue as it was as small fringe benefit (about $20 per month and only for 15 months per employee) and likely not offered by many employers or used by many employees.

The bicycle benefit covered the reasonable expenses of an employee for purchase of a bicycle, its improvements and repair and storage if regulary used by the employee to get from home to work and back.

Riding a bike to work isn’t an option for many workers who have long distances or unsafe routes or no biking option due to the need to use freeways to get to work. But for workers who can bike to work, isn’t that a benefit to many people? It means fewer cars on the road and less pollution. If there are already bike lanes available, better yet.

If a tax break is to be provided, why not offer a refundable credit for the purchase or a bike with reasonable cost limits and an income phase-out level?

Well, I’m not aware of a proposal for that other than an e-bike tax credit that was in the Build Back Better proposal (and why only for an e-bike?). But, in May 2023, Senators Blumenauer and Brown introduced the Bicycle Commuter Act to restore the bicycle qualified transportation fringe benefit but increasing the benefit exclusion (assuming an employer provides the benefit) and making it pre-tax. They also expand it to cover scooters, e-bikes and bikeshare.

The sponsors note that biking to work reduces carbon emissions and helps counteract the reality that the tax law incentives driving over biking.

Sounds good, but why not offer a credit to help someone buy and maintain a bike for commuting (and with an income threshold or reduced credit as income rises)? There are negative externalities of driving even with electric cars which still cause congestion. The tax law can be a way to address this. After purchase of a reasnably priced bike, the annual maintenance costs are low so the credit would be small. But could be increased to offer a better incentive to bike if possible. While a similar credit might be considered for the use of public transportation, it often is already subsidized by local, state and/or federal governments.

What do you think? Professor Annette Nellen, San Jose State University, San Jose, CA