Promoting Micromobility Usage Through the Internal Revenue Code

Micromobility services like scooter and bikeshares provide numerous benefits to riders, local governments, and the public at large. A 2021 CBInsights report summarizes micromobility’s many upsides: “micromobility services increase access to public transportation, reduce the amount of cars on the road, lower our environmental footprint, and provide convenient methods of transportation for short trips — all while being cost-effective.” Zeroing in on the tradeoffs between micromobilty services and driving, two Carnegie Mellon professors analyzed commuter data from Seattle in a 2022 article and estimated that “up to 18% of short car trips could be replaced by micromobility.” While the authors also emphasized that micromobility services can “only decrease emissions by 2-3%,” they also stated that switching to micromobility had positive effects on both public health and road congestion. Commentators like Kersten Heineke, co-leader of the McKinsey Center for Future Mobility, anticipate that micromobility ridership will continue to increase in the coming years, and the government can play a role in supporting that growth. 

In the United States, Congress can encourage workers with short car commutes to switch to micromobility services by amending the Internal Revenue Code to allow employers to reimburse employees’ micromobility payments with pre-tax dollars. The relevant provision of the Internal Revenue Code—26 U.S. Code § 132—excludes qualifying “fringe benefits” from being counted as part of an employee’s gross income for tax purposes, including certain commuter benefits. From 2008 to 2017, those exempted commuter benefits included “bicycle commuting benefit[s],” defined as “reasonable expenses incurred… for the purchase of a bicycle and bicycle improvements, repair, and storage,” if the employee “regularly” used the bicycle for commuting.

However, the Tax Cuts and Jobs Act of 2017 suspended the bicycle commuting benefit from 2018 to 2025, and cycling advocates have yet to successfully push for its reinstatement. In January 2021, Representative Earl Blumenauer introduced the Bicycle Commuter Act of 2021, which would have repealed the benefit’s suspension. (The bill was also discussed in a  2021 Journal of Law and Mobility blog post by Claire Taigman.) The Act would have also expanded the bicycle commuting benefit’s definition to include bikeshare payments. The text of the bill appeared as a provision in the Build Back Better Act, but died with that bill and failed to make it into the Inflation Reduction Act of 2022. 

But our current system of commuting benefits may need to be reworked to a greater extent than the Bicycle Commuter Act proposed. In a 2017 report, advocacy group TransitCenter explained that the current commuter benefit structure incentivizes car commuting by allowing employees to pay for parking with pre-tax dollars. TransitCenter pointed to a 2014 article by scholars Andrea Hamre and Ralph Buehler to show that “providing commuters with both ‘free’ parking and subsidized transit results in no change in behavior compared with offering neither benefit.” TransitCenter noted that the only drivers benefitted by the current commuter benefit provisions are those who “work in dense downtown centers, which are often centers of high-paying employment.” This small segment of commuters enjoyed subsidized parking to the tune of “$7.3 billion in lost federal and state income and payroll tax revenues every year.” In a 2016 article published in Bloomberg, Eric Jaffe discussed Hamre and Buehler’s article and another TransitCenter report on the same topic and stated his conclusion in stark terms, writing that eliminating parking benefits “would mean billions of dollars a year in tax revenue that could be used for other public services, billions of fewer annual vehicles miles, and likely higher salaries.” 

Congress could rework the Internal Revenue Code’s commuter benefits provisions to incentivize lower-emission and congestion-busting methods of transportation in several ways. A comparatively restrained reform would mirror the Bicycle Commuter Act by reinstating the bicycle commuting benefit and expanding its definition to include bikesharing. A more ambitious reform would also expand the benefit’s definition to include micromobility services more generally. For example, the list of “qualified transportation fringe” benefits in 26 U.S. Code § 132(f)(1) could be expanded to include “any qualified micromobility commuting reimbursement” without singling out bikeshares over scooters. Finally, the most transformative proposal would reinstate the bicycle commuting benefit, create a micromobility commuting benefit, and curtail or eliminate the current parking benefit. 

While converting short drives to micromobility trips will not have a massive impact on greenhouse gas emissions on its own, there are few downsides to promoting micromobility-based commuting. By amending the Internal Revenue Code to reward workers who switch to micromobility, Congress could signal federal backing for the environmentally friendly and already popular mode of transportation.