Tax credits of up to $1,500 for e-bikes added to Minnesota Senate transportation budget

Minnesotans purchasing electric-assisted bikes could get a tax credit worth up to $1,500 under an incentive added to the Minnesota Senate transportation budget.

A prominent seller of electric cargo bikes called the proposal generous, though the initial program would be capped at $2 million. A similar program in the city of Denver that also capped how much the government would spend on rebates ran out of money in days.

“This is a big deal,” said Luke Breen, the owner of Perennial Cycle in south Minneapolis. “That would lure a ton of people to electric bikes.”

The proposal, led by Sen. Omar Fateh, DFL-Minneapolis, is patterned after the Denver program and statewide incentive for e-bikes in Colorado. The credits in Fateh’s amendment would allow a resident who buys from an in-state retailer to claim a credit equal to 75% of the purchase price of an e-bike plus accessories like helmets, locks, bags and reflective clothing. A couple filing their taxes jointly could each take advantage of the credit.

The value of the credit steps down at incomes higher than $50,000 for a married couple, $25,000 for a single tax filer until it reaches 50%. To make sure the $2 million cap isn’t exceeded, bike buyers would have to send an application to the state Department of Revenue, which would distribute tax certificates on a first-come, first-served basis.

While the Denver program quickly reached its cap, the statewide program in Colorado that begins this summer has a pot of $12 million.

Fateh said he was approached by people in his district asking for e-bike incentives. “I’m glad that they did. Folks just want to get more cars off the road and make folks healthier,” Fateh said.

The bill includes provisions to assure that 40% of the credits go to buyers at middle and low-incomes. Fateh had introduced his proposal as a separate bill with a House version sponsored by Rep. Lucy Rehm, DFL-Chanhassen. Often bills that appropriate money are introduced and heard in committees but are then incorporated into budget omnibus bills. 

Rep. Frank Hornstein, the Minneapolis DFLer who chairs the House Transportation Committee, said the provision is not in the House version of the budget but said “that’s definitely an item we’ll be talking about in the conference committee.

“I personally strongly support that,” Hornstein said.

Breen said his store has moved toward the sale of premium e-bikes, especially cargo bikes, in a price range from $3,000 to $11,000. But chain bike stores carry e-bikes that cost $1,800, so the credit would be worth between $900 and $1,350 depending on a buyer’s income.

The price for e-bikes is higher than for bikes without electric assistance, but Breen said buyers tend to use them less for recreation and more for transportation. The price comparisons aren’t to a bike but to a car. A large market is parents with small children who use cargo bikes to replace a second car, he said.

Breen said he doesn’t think the rebates will change the type of customer who is shopping for an e-bike. He said it could move buyers who are already thinking about e-bikes but are on the fence. They are people, he said, who are thinking, “I want to drive less and ride more.”

That makes the bill central to a DFL legislative theme of reducing emissions by funding and creating incentives for electric cars and buses, heat pumps and solar panels.

Endorsed by state bike groups such as People for Bikes and the Bicycle Alliance of Minnesota or BikeMN, the bills were aimed at the market Breen touts as his strongest: those who want to partially or fully shift their commuting and errand running trips from cars to e-bikes.

BikeMN cited a study (partly funded by People for Bikes) that found that if 15% of car trips were made by e-bike, emissions would drop by 12%. A North American survey by professors at Portland State University found that 46% of e-bike commute trips replaced an automobile commute.