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CCH® PAYROLL — 10/1/08

Senate passes extenders bill; FUTA surtax extension

The Senate has passed the Energy Improvement and Extension Act of 2008 (H.R. 6049). The House-passed version did not contain the FUTA surtax extension (see CCH Payroll Management Guide Report Letter 1263/2045, dated June 3, 2008).

FUTA surtax

The 0.2% FUTA surtax would be extended through December 31, 2009.

Bicycle commuters

The bill would add an employer-paid qualified bicycle commuting reimbursement fringe benefit as a qualified transportation fringe benefit. A qualified bicycle commuting reimbursement fringe benefit would mean any employer reimbursement to an employee for reasonable expenses incurred by the employee during the calendar year for the purchase and repair of a bicycle, bicycle improvements, and bicycle storage, provided that the bicycle is regularly used for travel between the employee’s residence and place of employment.

The maximum amount that could be excluded from an employee’s gross income for a calendar year on account of a bicycle commuting reimbursement fringe benefit would be the applicable annual limitation for the employee for that calendar year. The applicable annual limitation for an employee for a calendar year would be equal to the product of $20 multiplied by the number of the employee’s qualified bicycle commuting months for the year. The $20 amount would not be indexed for inflation.

A qualified bicycle commuting month would mean, with respect to an employee, any month for which the employee does not receive any other qualified transportation fringe benefit and during which the employee regularly uses a bicycle for a substantial portion of travel between the employee’s residence and place of employment. Thus, no amount would be credited towards an employee’s applicable annual limitation for any month in which an employee’s usage of a bicycle is infrequent or constitutes an insubstantial portion of the employee’s commute. A bicycle commuting reimbursement fringe benefit could not be funded by an elective salary contribution on the part of an employee. The provision would be effective for taxable years beginning after December 31, 2008.

Hurricane Katrina WOTC

The WOTC for certain Hurricane Katrina employees employed within the core disaster area would be extended through August 28, 2008. A Hurricane Katrina employee employed within the core disaster area would be an individual who on August 28, 2005, had a principal place of abode in the core disaster area and who was hired on or after August 28, 2005, and before August 29, 2008, for a position, the principal place of employment of which was located in the core disaster area. The other special rules (e.g., certification and previous employment) for Hurricane Katrina employees would apply. The provision would be effective for individuals hired after August 28, 2007, and before August 29, 2008.

Charity mileage rate

The mileage rate individuals use to compute a tax deduction for personal vehicle expenses associated with charitable would be set at 70% of the current standard business mileage rate, beginning on the applicable disaster date and ending on December 31, 2008. Currently, the charity rate is 14 cents-per-mile.

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