Two-Tired to Fight About It
Ernie Neve, CPA
January 28, 2018
When you think of "federal crime," you probably think of big-ticket offenses like mail fraud, identity theft, and tax evasion. But our criminal code is also full of, shall we say, lesser offenses. For example, according to the Crime a Day Twitter feed, "18 USC §1854 makes it a federal crime to cut, chip, or chop a government-owned tree to get turpentine out of it." 7 USC §8313 "makes it a federal crime to bring an imported camel's blanket into the United States without the permission of the port inspector." And 8 USC §1865 "makes it a federal crime to roller skate in Alaska's Sitka National Historical Park."
Our Internal Revenue Code similarly focuses most of its attention on core questions like brackets, rates, standard deductions, and personal credits. But the tax code's 70,000 pages include their fair share of lesserprovisions, too. And the Tax Cuts and Jobs Act that just passed includes a couple that might sound like the tax equivalent of sneaking a smelly camel's blanket in under a port inspector's nose.
Here's one that just seems petty and mean. Under the old law, you could exclude a whopping $20 per month of income for expenses related to riding your bike to work, so long as you weren't getting other pretax transit benefits. That's not a whole lot of benefit for bike commuters. Granted, most bikes aren't that expensive — but cyclists face far bigger dangers than taxes, in the form of road-hogging trucks and SUVs who can run them over without even seeing them.
Section 11047 of the Act lets the air out of the "qualified bicycle commuting reimbursement," for tax years beginning after December 31, 2017 and before January 1, 2026. And how much will derailing this break save the Treasury? A million dollars. A whole million dollars a year in new revenue. That's a rounding error, at best, for a bill with trillions of dollars of impact.
Of course, the bill keeps the tax subsidies for car commuters that cost the Treasury $8.6 billion per year — and contribute to the six tons of carbon the average vehicle pumps into the atmosphere every year as well!
Here's another minuscule transportation-related change that wasn't buried quite so deep in the act's fine print, and so attracted a bit more attention. Under the old law, Code Section 4261 imposed a 7.5% ticket tax on payments to aircraft service management companies that help private plane owners with chores like scheduling, flight planning, and weather forecasting. The purpose of the tax was to replace revenue the Treasury loses by not charging private aviation passengers a ticket tax.
Section 13822 of the Act eliminates those taxes, under the rationale that aircraft management services shouldn't pay the ticket tax because they don't sell tickets. Plenty of observers cried foul at the fat cat jet owners getting another tax break. But the provision's primary sponsor was Democratic Senator Sherrod Brown of Ohio, who is nobody's idea of a pawn of the rich. And the congressional Joint Committee on Taxation estimates that grounding the tax will cost the Treasury less than $500,000 per year.
Paying the least amount of tax obviously means starting with bigger questions like choosing the right entity for your business. But this week's story shows that, whether your ride to work is a Schwinn or a Cessna, there's always an opportunity for planning. So call us when you're ready to save. We don't care how you get to our office . . . we just want to see you do it!