Proposed changes tucked inside the House and Senate tax reform bills could eliminate incentives for private employers to provide commuter benefits for their employees.
It’s one of the key tenets of the two bills, passed alternately by the House and by a Senate committee earlier this month: With such a significant decrease in corporate tax rates under the tax reform proposal, there would be no need for the commuter benefits and other small benefits that complicate the nation’s tax code.
But the proposal concerns transit advocates and agencies across the country, who argue that eliminating the incentives to business owners will affect a wide cross section of people who drive, take transit or bike to work.
“These are important benefits to working people, and we’d like to preserve them as much as possible,” said Rob Healy, vice president of government affairs at the American Public Transportation Association. “By taking away the employer deduction, they’ve kind of undermined the incentive for employers.”
The provisions related to commuter benefits differ somewhat between the House and Senate versions of the bill, which Republicans in Congress are hoping to reconcile and pass by the end of the year. But each features a provision that would repeal a tax deduction for employers who provide parking or transit passes as a fringe benefit for their employees.
Here’s how the benefit works: Employers provide parking or transit passes as benefits, free or subsidized for employees. Employers are incentivized to provide those perks to workers because the tax code helps them defray the cost of picking up the tab. Employers can deduct their workers’ transportation fees — up to $260 per month per person — as a business expense, slightly lowering the amount of corporate taxes the business must pay each year.
But the House and Senate bills bar businesses from writing off those benefits as a deductible expense. Companies would still be allowed to pay for workers’ monthly parking subscription or transit passes — or workers could pay their own transportation costs, using pretax income.
But companies wouldn’t get the tax write-off for picking up the tab.
Earlier this month, representatives for Metrolink, the passenger rail system serving Southern California, wrote to House Ways and Means Committee Chairman Kevin Brady (R-Tex.), asking that lawmakers kill the provision.
“Removing the exclusion would result in an effective tax hike for hundreds of businesses and thousands of employees,” said the letter, signed by Andrew F. Kotyuk, chairman of the Metrolink board of directors. “This works in opposition to our goals of creating jobs and bringing back manufacturing to the states.”
Similar overtures have been made to Congress by the American Public Transportation Association as well as the League of American Bicyclists, a bike advocacy organization. Their concern is aimed at a provision included in the Senate’s bill that would repeal a federal bike commuter benefit, which reimburses up to $20 per month in bike-related supplies or services — helmets, lights, spare parts, repairs costs or bike storage fees — for workers who regularly bike to work.
According to Ken McLeod, policy director at the League of American Bicyclists, there are no firm numbers on how many people use the benefit, but some estimates suggest that the program costs the federal government about $5 million a year.
McLeod said that more than 1,400 bike commuters associated with his organization have written to the Senate Finance Committee urging that lawmakers drop the repeal. It’s hard to tell whether legislators intended for the repeal to send a discouraging message to the cycling community, McLeod said, but that’s how it has been interpreted by many cyclists.
“Our current transportation benefit system really does prioritize people driving to work and encourages parking, and allows those people to recover those costs,” McLeod said. “So this is frustrating for someone who bikes to work and who thinks that biking and walking to work is a good thing.”