Resource: Tax Incentive for B-BOPing
Title: Tax Incentive for B-BOPing
Resource type: Program/project
Topics: Communities, Energy, Individual Choices, Transportation
Keywords: BBOP, parking subsidy, cash out, revenue-neutral, green tax
Audience: Business, Government, Citizens, Nonprofit
Region: Minnesota Statewide, Outside Minnesota
Summary: B-BOPing (biking, busing or car/van pooling) is financially attractive for employees and employers when a 1997 law is used.
Content: Many companies and organizations provide free or reduced cost (that is, subsidized) parking spaces for their employees as a tax-free fringe benefit. This benefit often acts as a strong incentive against employees who might otherwise commute by bus, car or van pool and by bicycle. These alternatives to driving solo and parking decrease traffic congestion, air and water pollution and energy consumption. The Federal IRS program described below provides an incentive for both employers and employees to increase B-BOPing.

The following text is from the web site below:

"Both employers and employees save on the cost of commuting by taking advantage of the Internal Revenue Service's (IRS) Qualified Transportation Fringe (QTR) Benefits program, a special tax code regulation that works to significantly reduce commuting cost. The Internal Revenue Service Code 132 (f) allows nontaxable spending up to $230 per month on combined value of commuter transportation and transit passes as well as $230 per month for parking, totaling to $460 per month tax-free. Essentially, neither the employer nor the employee pays taxes on the cost of commuting up to the $230 limit respectively. Savings for both employer and employee are significant.

What Is In the Fine Print Of the Benefits?

The IRS offers the tax benefits for commuter transportation in a commuter highway vehicle, transit passes, qualified parking, and qualified bicycle commuting expenses.

Commuter Highway Vehicle (Vanpool)

For a commuter highway vehicle to qualify for tax exclusion, the vehicle must be:

Provided by an employer or a third party for the employer,

Used for travel between employee residence (or parking lot) and the workplace,

Able to provide seating for at least six (6) adults, excluding the driver,

Occupied by at least 50% employees, excluding the driver,

Used for transporting employees between residences, the workplace, and/or parking lots (at least 80% of the mileage).

Transit Passes

By definition, a transit pass is any pass, token, fare card, voucher, etc. entitling a person to transportation. In order for a transit pass to qualify for tax exclusion, the pass must be used for transportation on a public or privately-owned mass transit system, or on transportation provided by a person in the business of transporting people in a qualified commuter highway vehicle (see above). For discounted transit passes, the discounted price must be used in the tax exclusion. The maximum nontaxable value per person is limited to the combined value of commuter transportation and transit passes per month ($230 + $230 parking = $460 per month).

Qualified Parking

To qualify for tax exclusion, parking must be provided to employees on or near either the business work premises, or location from which employees continue to commute to work by another mode of transportation, such as commuter highway vehicle or mass transit station.

Qualified Bicycle Commuting Expenses

Employees who choose to use a bicycle to commute to work qualify to exclude reimbursements from taxes offered by the employer.

How Does the Business Benefit?

By providing a commuter benefit instead of additional salary, the business saves money. Although both commuter benefits and salary are tax deductible as a business expense, the commuter benefit does not require payroll taxes, thus saving the business a substantial amount of money.

The benefits target only current employees; former employees and independent contractors are ineligible."

For more details see
http://www.commutesolutions.com/commuter-resources/tax-benefits/

See http://tinyurl.com/3xs43l for a 2001 US EPA document entitled Parking Cash Out: Implementing Commuter Benefits Under the Commuter Choice Leadership Initiative.

See http://www.vtpi.org/tdm/tdm8.htm for more about Commuter Financial Incentives, including Parking Cash Out, Travel Allowance, Transit and Rideshare Benefits.

On January 1, 2009, the IRS added qualified bicycle commuting reimbursement (up to $240/yr.) to the list of qualified transportation fringe benefits available to employees. See details at http://www.bikeleague.org/news/100708faq.php

Suggested by: Philipp Muessig
Added: 02/26/01
Updated: 08/29/11