Publication 15 B - Employer'S Tax Guide To Fringe Benefits - 2002 Page 16
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24Employee. For this exclusion, treat the following individu-
Tuition Reduction
als as employees.
1) A current employee.
An educational organization can exclude the value of a
qualified tuition reduction it provides to an employee from
2) A partner who performs services for a partnership.
the employee’s wages.
3) A director of your company.
A tuition reduction for undergraduate education gener-
ally qualifies for this exclusion if it is for the education of the
4) An independent contractor who performs services for
following individuals.
you.
1) A current employee.
Vehicle allocation rules. If you provide a car for an
2) A former employee who retired or left on disability.
employee’s use, the amount you can exclude as a working
condition benefit is the amount that would be allowable as
3) A widow or widower of an individual who died while
a deductible business expense if the employee paid for its
an employee.
use. That is, if the employee uses the car for both business
4) A widow or widower of a former employee who re-
and personal use, the value of the working condition bene-
tired or left on disability.
fit is the part determined to be for business use of the
vehicle. See Business use of your car under Personal
5) A dependent child or spouse of any individual listed
Expenses in chapter 1 of Publication 535. Also, see the
in (1) through (4), above.
special rules for certain demonstrator cars and qualified
A tuition reduction for graduate education qualifies for
nonpersonal-use vehicles, discussed next.
this exclusion only if it is for the education of a graduate
However, instead of excluding the value of the working
student who performs teaching or research activities for
condition benefit, you can include the entire annual lease
the educational organization.
value of the car in the employee’s wages. The employee
For more information on this exclusion, see Publication
can then claim any deductible business expense for the
520, Scholarships and Fellowships.
car as an itemized deduction on his or her personal income
tax return. This option is available only if you use the lease
value rule (discussed in section 3) to value the benefit.
Working Condition Benefits
Demonstrator cars. All of the use of a demonstrator car
This exclusion applies to property and services you pro-
by your full-time auto salesperson generally qualifies as a
vide to an employee so that the employee can perform his
working condition benefit if the use is primarily to facilitate
or her job. It applies to the extent the employee could
the services the salesperson provided for you and there
deduct the cost of the property or services as a business
are substantial restrictions on personal use. For more
expense or depreciation expense if he or she had paid it.
information and the definition of “full-time auto salesper-
The employee must meet any substantiation requirements
son,” see section 1.132-5(o) of the regulations.
that apply to the deduction. Examples of working condition
benefits include an employee’s use of a company car for
Qualified nonpersonal-use vehicles. All of an
business and job-related education provided to an em-
employee’s use of a qualified nonpersonal-use vehicle is a
ployee.
working condition benefit. A qualified nonpersonal-use ve-
This exclusion also applies to a cash payment you
hicle is any vehicle the employee is not likely to use more
provide for an employee’s expenses for a specific or prear-
than minimally for personal purposes because of its de-
ranged business activity for which a deduction is allowable
sign. Qualified nonpersonal-use vehicles generally include
to the employee. You must require the employee to verify
all of the following vehicles.
that the payment is actually used for those expenses and
to return any unused part of the payment.
1) Clearly marked police and fire vehicles.
For information on deductible employee business ex-
2) Unmarked vehicles used by law enforcement officers
penses, see Unreimbursed Employee Expenses in Pub-
if the use is officially authorized.
lication 529, Miscellaneous Deductions.
The exclusion does not apply to the following items.
3) An ambulance or hearse used for its specific pur-
pose.
•
A service or property provided under a flexible
4) Any vehicle designed to carry cargo with a loaded
spending account in which you agree to provide the
gross vehicle weight over 14,000 pounds.
employee, over a time period, a certain level of un-
specified noncash benefits with a predetermined
5) Delivery trucks with seating for the driver only, or the
cash value.
driver plus a folding jump seat.
•
A physical examination program you provide, even if
6) A passenger bus with a capacity of at least 20 pas-
mandatory.
sengers used for its specific purpose.
•
Any item to the extent the employee could deduct its
7) School buses.
cost as an expense for a trade or business other
8) Tractors and other special purpose farm vehicles.
than your trade or business.
Page 16
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