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It’s Not All About PPACA: IRS Opines on 132 Transportation Fringes and Bike Sharing

Posted in Plan Administration, Welfare Plans

Health care reform may be in the forefront right now, but there are other benefits available to employees.  Last month, the IRS issued Information Letter 2013-0032 that took a look at transportation fringes under Section 132.  Specifically, they looked at bike share programs.  Several cities throughout the country have adopted these programs and the IRS was asked to opine on whether the use of these programs qualifies as a “fringe” not subject to taxation if paid for by the employer.  The IRS said no, meaning that employers cannot exclude expenses for bike share programs from an employee’s gross income.

Under Section 132, certain qualified transportation fringe benefits provided by the employer can be excluded from gross income.  These include
  • Transit passes.
  • Qualified parking.
  • Qualified bicycle commuting reimbursements.
  • Transportation in a commuter highway vehicle (that is, vanpool arrangements).

The IRS determined that bike share programs are not “transit passes” because they don’t use mass transit facilities.  It also determined, because “qualified bicycle commuting reimbursements” are limited to purchase, repair or storage of a bike regularly used for travel between the home and office, a bike share cost would not meet this definition.  So the end result is that employers cannot provide bike sharing as a non-taxable fringe. 

Now, even though bike share programs will not qualify for the favorable tax treatment, that does not mean employers cannot still offer the reimbursement.  It would just have to be included in gross income.  From a practical perspective, though, I think this little tidbit of information can serve as a reminder to employers that, even though this one is not permitted, others are, and there are a whole host of possible “fringe benefits” that are available to provide to employees.  So while we are considering the potential added cost of health care post-reform, don’t overlook the possibility of putting something back into your benefits arsenal that can at least maybe partially offset some of the pain.