It's not all dead, because employers can still deduct the cost of providing the benefit, but in 2018, employees will have to pay a tax on that.
Reimbursements for qualified bicycle expenses paid on or after January 1, 2018 are deductible by the employer, but employees must include the reimbursement in the recipient’s income.
And it could get better because
Beginning with the 2026 tax year, qualified bicycle commuting reimbursements will again be excludible from employees’ income, but will no longer be deductible by employers.
It will be interesting to see if there is an increase or decrease in employers offering the benefit this year and again in 2026 (or if anyone will bother to measure that). The measure is not expected to generate more than $50 million in revenue during the period of suspension - and I suspect it will be much less than $50 million.
When the provision was proposed, the Joint Committee on Taxation estimated it would cost $10 million over 10 years - but it didn't last that long. Blumenauer says the eliminating it would save $5 million a year, but I don't know where he gets that. I suspect it is from the Joint Committee's estimates, which only defined it as "less than $50 million". I'd be surprised if the Joint Committee was off by more than a factor of 5 (remember, employers can still deduct the cost of the benefit) back in 2007 and so I think the less than $50 million is more like $10 million or less.
What is unfortunate is that no one has done, or is likely to do, a study of the benefit's efficacy. Did it encourage more people to bike commute or did it just make things fairer? Did it help deal with the energy crisis? How much did it cost? I don't think we'll ever know now.
Similar changes are being made to other transportation fringe benefits like transit benefits.
Beginning in 2018, employers may no longer deduct qualified transportation fringe benefits expenses, or any expenses for providing transportation for an employee to commute between his or her residence and place of employment, except as necessary for ensuring the employee’s safety. Previously, employers were able to deduct these expenses and the expenses were excludible from the employee’s income. While TCJA changed the employer’s ability to deduct the expenses, there was no change in an employee’s ability to exclude the expenses from his or her income.
The elimination of the parking and transit benefits deduction is expected to generate $17.7 billion in revenue over the next decade. Congress expects that increase in tax payments to be offset for employers by lower corporate tax rates established by the new tax law." But for bike commuters - I guess there's the other tax cuts?
Transportation benefits in DC will survive in part because the federal government is going to continue offering them (what do they care about taxes) and in part because DC law requires them for employers with more than 20 employees.
The Huffington Post posits that their is no budget or policy goal here, just an attempt to stick it to liberal city dwelling types who live on the East Coast.
“It could certainly be that. Or it could just be one [senator] who had a bad experience with a cyclist,” said Ken McLeod, policy director at the League of American Bicyclists, a national advocacy group. “It’s a relatively innocuous benefit that doesn’t cost the federal government pretty much anything. It seems like it must be a personal or cultural thing rather than actual public policy.”
Perhaps this can be set right, and the benefit can be made better (can pay with pre-tax dollars, use it for bike sharing, parity, etc..)
Along with Blumenauer, Rep. Vern Buchanan (R-Fla.) is co-chair of the congressional bike caucus. He’s also a member of the tax-writing House Ways and Means Committee, yet even he seemed blindsided by the shift in bike tax policy.
“We gotta change that,” Buchanan said. “I just haven’t focused on that but now that you brought it up, I will.”