A bike share program allows a customer to rent a bicycle at Point A, use it for a short amount of time, and then return it to one of many other spots in the same city. Most commonly these programs are in big cities such as New York, Chicago, San Francisco, but smaller cities such as Des Moines also have the programs. Bike share programs are typically cheaper than a cab, more flexible than a bus, and quicker than walking. (I was pleasantly surprised to learn a one-year membership in Des Moines is currently on special for $40. With our recent below-zero weather, the bikes likely aren't being used much currently... ) Bikes typically don't get stuck in traffic jams like a car or bus might. The rider has the added benefit of making it a one-way trip if you meet a friend after work or the weather changes during the day. Understandably, these programs are becoming more and more popular.
Now how is this tax related? Section 132 of the Internal Revenue Code excludes the value of qualified transportation benefits provided by an employer from the employee's income. Basically, an employer can pay for bus passes, car pooling, or parking for an employee without having to treat that as income to the employee. It is a win-win situation: employers like it because they can still deduct the cost as an expense and the employee gets an added "perk" without being taxed on it as income. If an employee wanted his employer to pay the costs of the bike share program instead of paying for a mass transit pass or parking, is the bike share similarly a qualified transportation expense? Section 132 was drafted before bike share programs became popular, so one inquiring mind asked the IRS to approve bike share expenses as a qualified transportation fringe benefit. It seems like they are similar, but the IRS looked at the issue and ruled it does not qualify. As a result, if an employer pays for an employee to use a bike share program, that fringe benefit is considered income to the employee and will be taxed as such. (IRS Information Letter 2013-0032 has the full explanation.)
I don't think this is the end to bike-share programs; the individuals who currently use the bikes will likely continue. Employers may still encourage use of the program as a cheaper and not to mention healthier alternative than driving or taking a cab. The programs are also popular with tourists or visitors to the city. Unfortunately, this may deter some employees from asking their employer to trade their parking pass for a bike share membership.