Maryland General Assembly Approves Transit Tax Credit

In the final afternoon of its 1999 session, the Maryland General Assembly yesterday passed a tax credit that will cut commuting costs for transit riders by as much as $720 per year and generate an annual tax cut of up to $360 per employee for Maryland employers. Senate Bill 390, which now goes to the Governor for his signature, provides a 50 percent tax credit for employer-provided transit benefits up to $30 per employee per month. The measure won support from an unusually diverse coalition of business, labor and environmental groups who endorsed it as a way to save commuters money, while reducing traffic and pollution.

“This is by far the largest incentive of its kind anywhere in America,” said Michael Replogle, federal transportation director of the Environmental Defense Fund (EDF), who pressed for passage of the bill. “It shows Maryland is a good place to do business, to work, and to travel. Incentives like this cut pollution by rewarding employers who help employees make smart travel choices. Combined with new federal Commuter Choice tax reforms that allow employees to pay for transit using pre-tax dollars and to get cash in lieu of free workplace parking, this tax credit will help curb growing traffic problems.”

This initiative was sponsored by Maryland Senator Ida Ruben and Delegate Paul Carlson and had the endorsement of the Environmental Defense Fund, the Chesapeake Bay Foundation, Sierra Club, 1000 Friends of Maryland, labor unions, and business groups such as the Maryland Chamber of Commerce and the Maryland Highway Contractors Association, Greater Washington Board of Trade, Greater Baltimore Committee, as well as Governor Glendening’s Administration.

Under the new tax credit, starting July 1, 1999, employers can take a credit against the corporate income tax, the financial institution franchise tax, or insurance premium tax for half of the cost of subsidizing transit benefits for their employees. For example, under the new Maryland law an employer might give an employee a free $60 transit pass every month while claiming a $30 tax credit. Or the employer might choose to pay for half the cost of a monthly transit pass valued at $60, claiming a $15 a month tax credit, while the employee pays half of the cost using pre-tax earnings, cutting the after-tax cost for the employee to under $20.