A tax deduction for employers covering mass transit and ridesharing expenses has not likely had a major effect due to lack of awareness – even among Colorado’s transit agencies.

That finding from the Office of the State Auditor came from its analysis of the mass transit and ridesharing expenses deduction, which has existed since 1979. The office “could not definitively determine” whether the tax expenditure is meeting its original goal. In large part, that was because the General Assembly failed to state a purpose in the 41-year-old policy, but also, “it is not likely that many taxpayers are using the deduction.”

An additional hindrance to the tax deduction was the disallowance, prior to 2018, of employers claiming a state deduction because a federal tax expenditure was also available. That changed following the 2017 tax law that the Trump Administration and congressional Republicans passed, but even so, the auditor’s office found awareness to be low of the state deduction.

“Specifically, none of the Colorado transit agencies that we consulted were aware of the deduction, including those that regularly have contact with employers and had informed employers about the federal deduction when it was available,” the report indicated.

Auditors estimated that the state tax deduction could save employers $50 to $87 per employee per year, substantially less than the EcoPass program of the Regional Transportation District, which could amount to up to $1,800 in savings. Compared with six other states that offer a similar policy, Colorado’s was the least generous.

“Ridesharing” under the law means travel to or from a workplace in a vehicle not operated for profit – meaning carpools or vanpools. The deduction is also only available to “C corporations,” or those who are taxed separately from their owners. 

Although the 1979 General Assembly appeared to have been acting out of a desire to decrease single-occupant vehicle commuting, auditors estimated that ridesharing may have become less common since then, with ridesharing amounting to only 0.3% the number of transit trips. Because the law does not encompass the modern understanding of ridesharing – that is to say, through for-profit companies like Lyft or Uber – the report suggested the law’s definition of ridesharing may be obsolete.

One transit agency indicated to auditors that the deduction “may be a useful tool” in speaking with employers about transportation options for workers, now that the agency is aware of it.