In a Compliance Alert, Segal said effective January 1, 2009, private and public sector employers may provide tax-free subsidies to employees who regularly bike to work. According to the Alert, the language in the new law indicates that the bicycle transit benefit can only be paid by the employer, and the employee is not allowed to fund the benefit on a pre-tax basis.
The reimbursement can be up to $20/month for reasonable expenses incurred by an employee for the purchase of a bicycle and bicycle improvements, repair, and storage, if the employee regularly bikes to work during that month. Segal said the amount of reimbursement does not appear to be eligible for annual statutory increases.
Employees can receive either the bicycle reimbursement for a particular month or other transit benefits, but not both. Previously, under Â§132 of the IRC, employers could offer parking, transit passes and vanpooling benefits subject to a statutory maximum amount, funded either by the employer or on a pre-tax basis by employees.
The sponsor of the benefit, Congressman Earl Blumenauer (D-Oregon) said an employer could choose to offer benefits in a variety of ways, including reimbursement of receipts, regular monthly payments, or some sort of voucher system, according to the Alert.
Segal suggests that although a formal written plan document is not required under IRC Â§132, it is a good idea to draft a plan document to clearly establish the terms of the benefits, including what expenses are reimbursable, what type of receipts or documentation is required, and what the rules are for submitting expense reimbursement requests.
When the version of the EESA that was signed is available online it can be accessed here .