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

Pickup trucks. A pickup truck with a loaded gross vehi-

Exception for independent contractors. You cannot

cle weight of 14,000 pounds or less is a qualified nonper-

exclude the value of parking or the use of consumer goods

sonal use vehicle if it has been specially modified so it is

you provide in a product testing program from the compen-

not likely to be used more than minimally for personal

sation you pay to an independent contractor who performs

purposes. For example, a pickup truck qualifies if it is

services for you.

clearly marked with permanently affixed decals, special

Exception for company directors. You cannot ex-

painting, or other advertising associated with your trade,

clude the value of the use of consumer goods you provide

business, or function and meets either of the following

in a product testing program from the compensation you

requirements.

pay to a director.

1) It is equipped with at least one of the following items.

3. Fringe Benefit Valuation

a) A hydraulic lift gate.

b) Permanent tanks or drums.

Rules

c) Permanent side boards or panels that materially

raise the level of the sides of the truck bed.

This section discusses the rules you must use to determine

the value of a fringe benefit you provide to an employee.

d) Other heavy equipment (such as an electric gen-

You must determine the value of any benefit you cannot

erator, welder, boom, or crane used to tow auto-

exclude under the rules in section 2 or for which the

mobiles and other vehicles).

amount you can exclude is limited. See Including taxable

benefits in pay under Are Fringe Benefits Taxable? in

2) It is used primarily to transport a particular type of

section 1.

load (other than over the public highways) in a con-

In most cases, you must use the general valuation rule

struction, manufacturing, processing, farming, min-

to value a fringe benefit. However, you may be able to use

ing, drilling, timbering, or other similar operation for

a special valuation rule to determine the value of certain

which it was specially designed or significantly modi-

benefits.

fied.

This section does not discuss the special valuation rule

used to value meals provided at an employer-operated

Vans. A van with a loaded gross vehicle weight of

eating facility for employees. These rules are discussed in

14,000 pounds or less is a qualified nonpersonal use

section 1.61-21(j) of the regulations. This section also does

vehicle if it has been specially modified so it is not likely to

not discuss the special valuation rules used to value the

be used more than minimally for personal purposes. For

use of aircraft. These rules are discussed in sections

example, a van qualifies if it is clearly marked with perma-

1.61-21(g) and (h) of the regulations.

nently affixed decals, special painting, or other advertising

This section discusses the general valuation rule and

associated with your trade, business, or function and has a

the following special valuation rules for employee transpor-

seat for the driver only (or the driver and one other person)

tation benefits.

and either of the following items.

•

Cents-per-mile rule

1) Permanent shelving that fills most of the cargo area.

•

Commuting rule

2) An open cargo area and the van always carries mer-

•

chandise, material, or equipment used in your trade,

Lease value rule

business, or function.

•

Unsafe conditions commuting rule

Outplacement services. An employee’s use of outplace-

ment services qualifies as a working condition benefit if

General Valuation Rule

you provide the services to the employee on the basis of

need and you get a substantial business benefit from the

services distinct from the benefit you would get from the

You must use the general valuation rule to determine the

payment of additional wages. Substantial business bene-

value of most fringe benefits. Under this rule, the value of a

fits include promoting a positive business image, maintain-

fringe benefit is its fair market value.

ing employee morale, and avoiding wrongful termination

Fair market value. The fair market value of a fringe bene-

suits.

fit is the amount an employee would have to pay a third

Outplacement services do not qualify as a working con-

party in an arm’s-length transaction to buy or lease the

dition benefit if the employee can choose to receive cash

benefit. Determine this amount on the basis of all the facts

or taxable benefits in place of the services. If you maintain

and circumstances.

a severance plan and permit employees to get outplace-

Neither the amount the employee considers to be the

ment services with reduced severance pay, include in the

value of the fringe benefit nor the cost you incur to provide

employee’s wages the difference between the unreduced

the benefit determines its fair market value.

severance and the reduced severance payments.

Exclusion from wages. You can generally exclude the

Employer-provided vehicles. In general, the fair market

value of a working condition benefit you provide to an

value of an employer-provided vehicle is the amount the

employee from the employee’s wages.

employee would have to pay a third party to lease the

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Publication 15 B - Employer'S Tax Guide To Fringe Benefits - 2002 Page 17

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