Bike Commuter Act, “Hummer tax loophole” up for House vote tomorrow
Posted by Jonathan Maus (Editor-in-Chief) on February 26th, 2008 at 1:03 pm
Summit last year, hopes his Bike Commuter
Act will finally fly with lawmakers.
(Photo © J. Maus)
On the heels of record profits by the big five oil companies, U.S. Congressman Earl Blumenauer (D-Portland) will once again try to enact a tax benefit for bike commuters and close the “Hummer tax loophole.”
The bike commuter tax benefit (a.k.a. the Bike Commuter Act and the Conserve By Bike provision) would amend the IRS code to include “bicycles” in the definition of transportation covered by fringe benefits. The Hummer tax loophole would fix what Blumenauer refers to as “a serious mistake” in the tax code that provides an additional tax break for business purchases of luxury SUVs weighing over 6,000 lbs.
According to a statement from Blumenauer’s office announcing vote, several weeks ago Exxon Mobil reported earning $40.6 billion in 2007 — the largest corporate profit in American history — equal to $132 for every U.S. resident (or $1,287 of profit for every second of 2007).
The bike commuter and Hummer loophole provisions are two of four provisions introduced by Blumenauer that are part of the Renewable Energy and Energy Conservation Tax Act (H.R.5351) that the House will vote on tomorrow.
Both provisions were part of an Energy Plan that passed the House back in August, but were later stripped by the Senate before passage of the Plan.
Read my previous coverage of the Bike Commuter Act in my Special Coverage section.
UPDATE: The Act, with these two provisions, passed the House today. Now it’s onto the Senate and eventually the White House (where Bush has threatened to veto it.)
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February 26th, 2008 13:23
gosh, I'm having one of those firstie days. Don't tell the boss.
What is the Hummer loophole, exactly? Is this the tax break to businesses that buy huge trucks?
And I know this is national stuff, but am the only one outraged that in Oregon hybrids have to pay a higher registration fee than Hummers?
February 26th, 2008 13:33
This is once again legislation that will affect such a small minority of cyclists that I see it as severely overblown, and a waste of precious resources.
Not even close to what should, or even needs to be done.
Yet the time, money, and resources have already been spent in getting it this far, so what the hell, right?
Might as well push it on through, so a handful of corporate employed cyclists can get their $50 dollars, while others continue to die on the streets, unprotected by effective laws.
February 26th, 2008 13:36
I believe the Hummer loophole is the provision for a tax break for individuals who purchase vehicles over a certain weight for "business use." The original indea was for trucks or larger pickups but eventually the larger SUVs got large enough to qualify but don't really follow the intent.
February 26th, 2008 13:42
@3: Yes, this is provision to which I was referring. Although, I don't think it pertains to "Individuals" but rather small businesses.
And if indeed we are correct, it's a silly provision. As I understand it, if my wife had a business license for her knitting classes that she teaches, we could pretty much buy an F350 for close to nothing.
February 26th, 2008 13:44
Sorry for not explaining what the two provisions were. I've updated the story with more information. You can also read my previous coverage for more background.
February 26th, 2008 13:45
Dabby,
This is exactly what cyclists should hope elected reps are doing with their time and resources - It not 450 for a few individuals - If you click the link to the actual bill in the article it reads that Earl is asking that bikes get the same treatment as other commuter programs - $215/month, for drivers participating in qualified parking plans, or $110/month for those who use transit or vanpooling. That means anywhere from $100-$200 per month - = $1200 to $2400 a year. Not $50. And this bill does not restrict which businesses. It would allow cyclists to get a tax break or cash payments from employers and more important, it would encourage more people to ride their bikes to work. What part of that is a minority? overblown? and a waste of resources?
February 26th, 2008 14:00
I specifically choose where I live so I can walk to work. Been doing it for 10 years in 3 different states.
My carbon foot print is even less than a cyclist. I don't wear out tires and tubes, I don't need extra clothes made out of acrylic material (oil based), not to mention the metals and plastics for the rest of the bike and equipment.
When do I get rewarded with a tax break for being environmentally responsible?
February 26th, 2008 14:01
Small minority?
Sorry Dabby, but you've got it wrong, there. Heaps of employers give parking and public transit to their employees tax-free. Benefits for bicyclists? They're taxed. ANY business with employees can do this. This isn't just for suits. I convinced the HR dept. for my old non-profit employer to give us a bike benefit and they did it, for hundreds of staff (in Portland, Minneapolis, Baltimore, and NYC)...but we had to pay tax on that benefit, while staff who had their car parking paid for, didn't have to pay any tax on that benefit. This is a big thing.
Nearer and dearer to your heart, perhaps, is the fact that courier companies could give their couriers "bike commuting bonuses" of some sort tax free! The notorious stinginess of courier companies, though, is a separate issue...
February 26th, 2008 14:02
I believe in the past it was stated that it was going to be restricted to $50 dollars for a cyclist. And only if the emploeyer is signed up with such program, and not for every working cyclist. That is what I was referring to. I have not yet read the new wording.
My dollar amounts may be wrong, but my sentiment that this is not what needs to be legislated is on the mark.
February 26th, 2008 14:03
"When do I get rewarded with a tax break for being environmentally responsible?"
In a perfect world, immediately... but in reality, you'll get a tax break when your desired mode of travel has a demonstrated ability to significantly impact global climate change, has a large and politically active constituency, and has the potential to become the preferred transportation option for millions of Americans.
February 26th, 2008 14:31
Carl,
While I see where you are coming from, it is still up to the employer to agree to sign up. Which does not make it available to everyone, but to those who have empathetic employer's, much the same as drivers/ bus riders who are seeking to get the same style benefit.
This should be made available to everyone, regardless of who they work for, who uses an alternative and more Earth friendly mode of transportation than burning precious fossil fuels, through proper documentation on your yearly tax forms.
It is certainly a misguided use of resources, and precious legislation time and money, as presented. Not too mention the number of years it has been repeatedly attempted to push through.
I would hope that Earl will concentrate on more important legislation issues in the future.
February 26th, 2008 14:32
Oops, I believe I meant sympathetic employer's.
February 26th, 2008 14:40
In other words, Jonathan (# 10), when the oil runs out.
February 26th, 2008 18:01
how about buy a hummer go to jail.
February 26th, 2008 20:12
The City of Portland could easily encourage businesses to reward (much more than current) employees who commute. I read this week that the Marylhurst is now a car commuter university. Why not make it a bike communter/centric university? More bikes on the road = less air pollution.
February 26th, 2008 22:00
While I support the bike commuter act, why don't we get rid of the car commuter act? When exactly was giving people tax free parking benefits a good idea in the first place, and hasn't that time passed?
February 26th, 2008 22:50
[...] off, from BikePortland, I learned that the tax break I had read about did not survive it’s initial introduction. [...]
February 26th, 2008 23:34
Blumenauer is a gem, he really is.
February 27th, 2008 07:31
Gawd, there is so much confusion on tax law. I don't support any inefficient vehicle purchase encourgagement, but nobody is getting anything for free.
If you purchase a $25k vehicle (SUV or not) and use it 100% for business, you are still paying full price for it, and eventually get to deduct the full amount.
Normally, such a business asset would be depreciated (deducted) over its tax life of 5+ years. What the "loop hole" does is potentially allow deduction of the entire amount in the first year. The loop hole favors large vehicles because vehicles other than these "large" vehicles generally must be depreciated over their full tax life, rather than in the Year One.
In total, you don't get to deduct any more than normal. You just get to front-load your deduction and effectively defer payment of tax to future years.
Keep in mind this is a deduction, not a credit (as are all business expenses). If you deduct a $25k vehicle in Year One under this law, and you are in the 20% tax bracket, you have reduced your tax by $5k in Year One.
February 27th, 2008 08:10
Hopefully this passes. It'd be a good tool to use to encourage more people to bike.
Somehow I think a company like Exxon with $40bn in profits might be interested in stopping this, so we should probably all contact our legislators and tell them we want them to pass it.
February 27th, 2008 09:00
A bit of clarification about the hummer loophole.
Under normal tax law, a business is allowed to deduct up to $25,000 for the purchase of a vehicle. In 2003, a law passed which raised that number to $100,000, but only for vehicles weighing 6,000 lbs or more.
The justification for this law went something like this:
A contractor has three employees. They each drive large trucks. If the contractor got one extremely large truck (with four seats), all of the workers could ride to their construction site together.
In real life, all four of them buy bigger trucks, claim them as write offs, and each get 8 mpg. (How could we expect otherwise)
February 27th, 2008 09:48
Carl, #8: if an employer of bike couriers gives their couriers anything called a bonus, it goes through payroll. As you've stated it, an employer would get in trouble with the feds and state for trying to give their employees compensation and disguising it as something else. Bad.
Randy, #15: Marylhurst is car-centric because you can't get their safely by bike. The bike lanes on hwy 43 through West Linn to Lake O are dangerous and sketchy; the only place they're any good around Marylhurst is, well, right there in front of it. If the City of West Linn and Lake O made an effort to make their cities more bike-friendly, with at least bike lanes, Marylhurst would be able to be more bike-centric.
February 27th, 2008 11:17
KT - but Carl is saying that the bike commuting benefit would not be taxed, because it would be a fringe benefit excluded from taxable income.
Just like health insurance and the current transportation benefits. It may seem like a "bonus" or "compensation" to an employee, and the employer gets a deduction for it, but the employee does not pay tax on it.
February 27th, 2008 11:42
Hey Dabby,
So, I've read all these responses, and I still don't see how this legistlation is a waste of time. I get that you are upset that employers must "opt in" to this type of process, and that this excludes cyclists whose employers chose not to.
However, isn't it the government's responsibility to give the choice to the business, and not force businesses to pay benefits? I see this as a WONDERFUL use of Legistlative time, one that gives me the power to request of my employer to "opt in" and if they do not, to have them explain to me why not. Furthermore, bike-friendly businesses who do "opt in" will have a benefits package that could give them an edge when it comes to leveraging for qualified employees.
Do I have this wrong?
February 27th, 2008 12:41
The bill as I recall was originally designed so that farmers could write off the depreciation on their farm equipment. Then SUVs showed up and got bigger and bigger and eventually any corp that owned a vehicle > 6k pounds could write off the depreciation of those vehicles, essentially making them near free vehicles for the company.
February 27th, 2008 20:40
The caption for that photo should be:
I can drive my Hummer through a tax loophole THIS BIG!
February 27th, 2008 22:15
Schrauf, tax computations totally throw me. From your last sentence in comment #19, I gather that the big incentive for Hummer buyers, is that they clear a nice, tidy $5000 bucks from their tax payment in the first year. Extra pocket money!
"If you deduct a $25k vehicle in Year One under this law, and you are in the 20% tax bracket, you have reduced your tax by $5k in Year One." Schrauf
February 28th, 2008 09:38
Schrauf, I took it that Carl was suggesting that current courier employers could give their bikey employees a transpo benefit anyway-- but from where I'm sitting in the payroll department, it's taxable as a bonus or as supplemental compensation because bicycle commuting is currently not allowed as a non-taxable fringe benefit.
Giving it to them right now and not running it through payroll as additional compensation is illegal, and the IRS would in all likelihood view it as disguising compensation as something else-- which means the employer would need to pony up the taxes associated with it out of their own pocket.
That doesn't save anyone anything.
This is from the payroll perspective.
Now, if the law gets passed, then yes, it falls under the non-taxable fringe benefit just like the other transpo benefits. And how are you going to spend your extra $110 per month? (Or whatever it ends up being) :)
February 28th, 2008 12:00
So, when I try to look up what happened to this bill all I get are links to the one that failed earlier this session. What was the vote?
May 4th, 2008 01:11
[...] - Taxing new bicycles purchased in the State of Oregon (instead, we have folks lobbying for tax breaks!) [...]