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You can now use pretax dollars to pay for UberPool, which is huge

Carpooling is the public transit

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On Tuesday, Uber announced a “first-of-a-kind” partnership with WageWorks, a major administrator of employee benefits, that will allow commuters in New York City to use pretax dollars to pay for UberPool. It’s a major step for the ride-hailing company in its quest to position its carpooling service as a form of public transportation.

Uber says commuters with WageWorks accounts could save up to 40 percent on their UberPool rides under the program. The benefit will be available first in New York City, and then will roll out to Philadelphia, Chicago, and San Francisco. WageWorks says the goal is to make the new benefit available to all the cities where UberPool is active, including Atlanta, Boston, Denver, Los Angeles, Miami, New Jersey, San Diego, Seattle, and Washington, DC. 

New York City is the perfect place to start, thanks to a new law that went into effect in January requiring businesses with 20 or more employees to provide “the opportunity to use pre-tax income to pay for their transportation by public or privately owned mass transit or in a commuter highway vehicle.” Employees can use up to $255 a month of their pretax income for monthly transit expenses.

“benefits do not cover carpooling”

The law is mostly used to subsidize MetroCard purchases, but says nothing about ride-hailing apps like Uber. However, according to the New York City Department of Consumer Affairs, the law does not apply to carpooling. “Qualified transportation fringe benefits do not cover carpooling, unless the vehicle meets the requirements of a ‘commuter highway vehicle’ under federal law.” The IRS defines commuter highway vehicles as those that can carry “at least 6 adults (not including the driver),” which could exclude many midsized vehicles in Uber’s fleet.

WageWorks is aware of the limitations of the new partnership with Uber. “Our agreement with Uber is that any car that is dispatched for UberPool to a WageWorks commuter will have capacity for six passengers,” Dan Neuberger, president of commuter services at WageWorks, told Crain’s New York Business. Uber did not immediately respond to questions about how those legal requirements would be handled.

A spokesperson for Lyft said the company was focused on “working with policymakers around the country to ensure that [transportation network company] services such as Lyft Line” — Lyft’s version of UberPool — “are qualified to receive benefits afforded to other transit options.”

Nonetheless, this is certainly a big win for Uber, which has been fighting an uphill battle for respectability in the public transportation world. The ride-hailing giant has been accused of attempting to kill off mass transit with a variety of features that essentially mimic the actions of public buses. But Uber argues that its goal is to compliment, not kill, public transportation by solving the so-called “first-mile/last-mile challenge,” a phrase used to describe the difficulty in getting people between transit hubs and their homes.

Updated August 31st, 11:59AM ET: Responding to a question about federal requirements concerning the size of the vehicle, an Uber spokesperson said, “We have a mix of UberX and UberXL  on UberPOOL so when you select your Wage Works card as your payment method and request UberPOOL our system knows to only send you an UberXL car (6 or more).”