News for Employers to Employees

Bicycle Commuting Reimbursement Exclusion

§132 Before TCJA, qualified bicycle commuting reimbursements of up to $20 per qualifying bicycle commuting month were excludable from an employee’s gross in come (§132). A qualifying bicycle commuting month was any month during which the employee regularly used the bicycle for a substantial portion of travel to a place of employment and during which the employee did not receive transportation in a commuter highway vehicle, a transit pass, or qualified parking from an employer. However, the TCJA suspended the exclusion from gross in come and wages for qualified bicycle commuting reimbursements. 

 

How Does BBB Impact This?

The $20 per month qualified bicycle commuting reimbursement exclusion received by an employee from an employer was set to return for taxable years beginning after December 31, 2025. However, the BBB permanently eliminates the qualified bicycle commuting reimbursement exclusion. For qualified transportation fringe benefits other than the qualified bicycle com muting reimbursement, the provision adds an additional year of inflation adjustment. 

 

Moving Expense Reimbursement Exclusion & Deduction 

§217 Prior to the TCJA, qualified moving expense reimbursements provided by an employer to an employee were excluded from the employee’s income. Qualified moving expenses are payments received by an individual from an employer as a payment for or reimbursement of expenses by an employee that would have been deductible as moving expenses under §217 if directly paid or incurred by the individual. In addition, individual taxpayers could deduct moving expenses for job-related moves if their new job was at least 50 miles farther from their old home and they worked full-time at the new job for at least 39 weeks in the first year after moving. The TCJA repealed the exclusion from gross income and wages for qualified moving expense reimbursements (except in the case of a member of the Armed Forces of the United States on active duty who moves pursuant to a military or der) and the deduction for moving expenses. 

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How Does BBB Impact This?

Both the exclusion for qualified moving expenses reimbursement and the deduction for moving expenses were set to return for taxable years beginning after December 31, 2025. However, the BBB permanently eliminates both the exclusion for qualified moving expenses reimbursement and the de duction for moving expenses, except for active-duty members of the Armed Forces and members of the Intelligence Community. 

 

Small Business Stock Gain Exclusion

Section 1202 provides for the partial exclusion of gain on the sale of qualified small business stock (QSBS) held for more than five years. For stock acquired after September 27, 2010, the exclusion is 100 percent; for stock acquired in earlier periods, the exclusion is 50 percent or 75 percent, depending on the acquisition date. Gain excluded under §1202 is not treated as a preference item for alternative minimum tax (AMT) purposes for post-2010 acquisitions. The exclusion is subject to a per-issuer cap: generally, the greater of $10 million or 10 times the taxpayer’s basis in the stock. Eligibility also depends on the corporation's aggregate gross assets not exceeding $50 million at the time of issuance.

 

How Does BBB Impact This?

The BBB modifies the QSBS gain exclusion by providing a tiered gain exclusion for QSBS acquired after the date of enactment. In particular, the provision allows a 50 percent exclusion after three years, 75 percent after four years, and 100 percent after five years. Also, the proposal increases the per issuer dollar cap to $15 million for post-enactment shares, indexed to inflation beginning in 2027. For stock issued after the applicable date, the corporate-level aggregate-asset ceiling is increased to $75 million, indexed to inflation beginning in 2027. The provision is generally effective for stock issued or acquired, and for taxable years commencing on or after the date of enactment. 

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Reminders

The COVID-19-related credit for qualified sick and family leave wages is limited to leave taken after March 31, 2020, and before October 1, 2021. Generally, the credit for qualified sick and family leave wages as enacted under the Families First Coronavirus Response Act (FFCRA) and amended and extended by the COVID-related Tax Relief Act of 2020 for leave taken after March 31, 2020, and before April 1, 2021, and the credit for qualified sick and family leave wages under sections 3131, 3132, and 3133 of the Internal Revenue Code, as enacted under the American Rescue Plan Act of 2021 (the ARP), for leave taken after March 31, 2021, and before October 1, 2021, have expired. However, employers that pay qualified sick and family leave wages in 2023 for leave taken after March 31, 2020, and before October 1, 2021, are eligible to claim a credit for qualified sick and family leave wages in 2023. See the March 2023 revision of the Instructions for Form 941 or the 2023 Instructions for Form 944 for more information.

 

Disaster Tax Relief

Disaster tax relief is available for those impacted by disasters

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Bicycle Commuting Reimbursements

Under the new tax law, employers can deduct qualified bicycle commuting reimbursements as a business expense for 2018 through 2025 but employers must now include these reimbursements in the employee’s wages.

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Exclusion from Income of Qualified Moving Expense Reimbursements

For 2018 through 2025, employers must include moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion for qualified moving expense reimbursements.

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Exception 1: Members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if:

• They are on active duty

• They move pursuant to a military order and incident to a permanent change of station

• The move expenses would qualify as a deduction if the employee didn’t get a reimbursement

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Exception 2: Employers may exclude from wages any 2018 reimbursements to or payments on behalf of employees for moving expenses incurred for a move that took place prior to January 1, 2018, and which would have been deductible had they been paid prior to that date

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Employee Achievement Award — Tangible Personal Property Defined  

Special rules allow an employee to exclude certain achievement awards from their wages if the awards are tangible personal property. An employer also may deduct awards that are tangible personal property, subject to certain deduction limits. 

The new law clarifies that tangible personal property doesn’t include cash, cash equivalents, gift cards, gift coupons, certain gift certificates, tickets to theater or sporting events, vacations, meals, lodging, stocks, bonds, securities, and other similar items.