Publication 15-B Employer'S Tax Guide To Fringe Benefits

date you use this rule for the automobile and ends on

to figure its value. Figure the daily lease value by multiply-

December 31 of the fourth full calendar year following that

ing the annual lease value by a fraction, using four times

date.

the number of days of availability as the numerator and

Figure the annual lease value for each later 4-year

365 as the denominator.

period by determining the FMV of the automobile on Janu-

However, you can apply a prorated annual lease value

ary 1 of the first year of the later 4-year period and select-

for a period of continuous availability of less than 30 days

ing the amount in column (2) of the table that corresponds

by treating the automobile as if it had been available for 30

to the appropriate dollar range in column (1).

days. Use a prorated annual lease value if it would result in

a lower valuation than applying the daily lease value to the

Using the special accounting rule. If you use the

shorter period of availability.

special accounting rule for fringe benefits discussed in

section 4, you can figure the annual lease value for each

Unsafe Conditions Commuting Rule

later 4-year period at the beginning of the special account-

ing period that starts immediately before the January 1

Under this rule, the value of commuting transportation you

date described in the previous paragraph.

provide to a qualified employee solely because of unsafe

For example, assume that you use the special account-

conditions is $1.50 for a one-way commute (that is, from

ing rule and that, beginning on November 1, 2002, the

home to work or from work to home). This amount must be

special accounting period is November 1 to October 31.

included in the employee’s wages or reimbursed by the

You elected to use the lease value rule as of January 1,

employee.

2003. You can refigure the annual lease value on Novem-

You can use the unsafe conditions commuting rule if all

ber 1, 2006, rather than on January 1, 2007.

of the following requirements are met.

Transferring an automobile from one employee to an-

•

The employee would ordinarily walk or use public

other. Unless the primary purpose of the transfer is to

transportation for commuting.

reduce Federal taxes, you can refigure the annual lease

•

value based on the FMV of the automobile on January 1 of

You have a written policy under which you do not

the calendar year of transfer.

provide the transportation for personal purposes

However, if you use the special accounting rule for

other than commuting because of unsafe conditions.

fringe benefits discussed in section 4, you can refigure the

•

The employee does not use the transportation for

annual lease value (based on the FMV of the automobile)

personal purposes other than commuting because of

at the beginning of the special accounting period in which

unsafe conditions.

the transfer occurs.

These requirements must be met on a trip-by-trip basis.

Prorated Annual Lease Value

Commuting transportation. This is transportation to or

from work using any motorized wheeled vehicle (including

If you provide an automobile to an employee for a continu-

an automobile) manufactured for use on public streets,

ous period of 30 or more days but less than an entire

roads, and highways. You or the employee must buy the

calendar year, you can prorate the annual lease value.

transportation from a party that is not related to you. If the

Figure the prorated annual lease value by multiplying the

employee buys it, you must reimburse the employee for its

annual lease value by a fraction, using the number of days

cost (for example, cab fare) under a bona fide reimburse-

of availability as the numerator and 365 as the denomina-

ment arrangement.

tor.

If you provide an automobile continuously for at least 30

Qualified employee. A qualified employee for 2003 is

days, but the period covers 2 calendar years (2 special

one who:

accounting periods if you are using the special accounting

•

rule for fringe benefits discussed in section 4), you can use

Performs services during the year,

the prorated annual lease value or the daily lease value.

•

Is paid on an hourly basis,

If you have 20 or more automobiles, see Regulations

•

section 1.61-21(d)(6).

Is not claimed under section 213(a)(1) of the Fair

If an automobile is unavailable to the employee because

Labor Standards Act of 1938 (as amended) to be

of his or her personal reasons (for example, if the em-

exempt from the minimum wage and maximum hour

ployee is on vacation), you cannot take into account the

provisions,

periods of unavailability when you use a prorated annual

•

Is within a classification for which you actually pay,

lease value.

or have specified in writing that you will pay, over-

You cannot use a prorated annual lease value if

time pay of at least one and one-half times the regu-

the reduction of Federal tax is the main reason

lar rate provided in section 207 of the 1938 Act, and

the automobile is unavailable.

CAUTION

•

Receives pay of not more than $90,000 during the

year.

However, an employee is not considered a qualified em-

ployee if you do not comply with the recordkeeping require-

Daily Lease Value

ments concerning the employee’s wages, hours, and other

If you provide an automobile to an employee for a continu-

conditions and practices of employment under section

ous period of less than 30 days, use the daily lease value

211(c) of the 1938 Act and the related regulations.

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Publication 15-B Employer'S Tax Guide To Fringe Benefits - 2003 Page 21

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