ISSUE:

Riding your bicycle to work is a good thing, right?  Well, it no longer has the tax benefit it might have in 2017.

 

SITUATION:

Idaho Bible College & Seminary (IBCS) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(i).  They are not required to file Form 990 annually.

IBCS’s Controller called us to say that, historically, they have paid a monthly “reimbursement” to several staff and faculty who ride their bikes to campus.  Prior to the enactment of the new tax law (January 1, 2018 in this case), “qualified bicycle commuting reimbursements” of up to $20 per qualifying bicycle commuting month were excludible from an employee’s gross income. A qualifying bicycle commuting month was any month during which the employee regularly used the bicycle for a substantial portion of travel to a place of employment and during which the employee does not receive transportation in a commuter highway vehicle, a transit pass, or qualified parking from an employer.

Reasonable expenses were those incurred in a calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if the bicycle was regularly used for travel between the employee’s residence and place of employment.

IBCS’s Controller stated/asked, “So, if we continue to pay a $20 amount for ‘qualified bicycle commuting months,’ it will be taxable to the employee, right?”

To which we replied, “Right.”

 

RULES:

Explanation of the Senate Amendment to the “Tax Cuts and Jobs Act” (adopted):

The provision suspends the exclusion from gross income and wages for qualified bicycle commuting reimbursements. The exclusion does not apply to taxable years beginning after December 31, 2017 and before January 1, 2026.

Precise narrative from the “Tax Cuts and Jobs Act” of 2017:

SEC. 11047. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE COMMUTING REIMBURSEMENT.

(a) IN GENERAL. – Section 132(f) is amended by adding at the end the following new paragraph:

‘‘(8) SUSPENSION OF QUALIFIED BICYCLE COMMUTING REIMBURSEMENT EXCLUSION. – Paragraph (1)(D) shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.’’.

(b) EFFECTIVE DATE. – The amendment made by this section shall apply to taxable years beginning after December 31, 2017.

 

BOTTOM LINE:

  • Beyond the transportation fringe benefit that might be deemed unrelated business income, there is a suspension of the “bicycle to work” exclusion.
  • Were you even aware of the “Qualified Bicycle Commuting Reimbursement?”
  • Has your institution historically “reimbursed” bicyclists under I.R.C. section 132(f)(5)(F)?
  • If so, have you communicated that this “fringe benefit” will now be taxable – throught 2025?

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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