Publication 15 B - Employer'S Tax Guide To Fringe Benefits - 2002 Page 19
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24The value of any other service you provide for a vehicle
a control employee as any highly compensated employee.
is not included in the cents-per-mile rate. Use the general
A highly compensated employee for 2002 is an employee
valuation rule to value these services.
who meets either of the following tests.
1) The employee was a 5% owner at any time during
the year or the preceding year.
Commuting Rule
2) The employee received more than $90,000 in pay for
Under this rule, you determine the value of a vehicle you
the preceding year.
provide to an employee for commuting use by multiplying
You can choose to ignore test (2) if the employee was not
each one-way commute (that is, from home to work or from
also in the top 20% of employees when ranked by pay for
work to home) by $1.50. If more than one employee com-
the preceding year.
mutes in the vehicle, this value applies to each employee.
This amount must be included in the employee’s wages or
reimbursed by the employee.
Lease Value Rule
You can use the commuting rule if all the following
requirements are met.
Under this rule, you determine the value of an automobile
1) You provide the vehicle to an employee for use in
you provide to an employee by using its annual lease
your trade or business and, for bona fide noncom-
value. For an automobile provided only part of the year,
pensatory business reasons, you require the em-
use either its prorated annual lease value or its daily lease
ployee to commute in the vehicle. You will be treated
value.
as if you had met this requirement if the vehicle is
If the automobile is used by the employee in your busi-
generally used each workday to carry at least three
ness, you generally reduce the lease value by the amount
employees to and from work in an employer-spon-
that is excluded from the employee’s wages as a working
sored commuting pool.
condition benefit. However, you can choose to include the
2) You establish a written policy under which you do not
entire lease value in the employee’s wages. See Vehicle
allow the employee to use the vehicle for personal
Allocation Rules under Working Condition Benefits in
purposes, other than for commuting or de minimis
section 2.
personal use (such as a stop for a personal errand
on the way between a business delivery and the
Automobile. For this rule, an automobile is any
employee’s home). Personal use of a vehicle is all
4-wheeled vehicle (such as a car, pickup truck, or van)
use that is not for your trade or business.
manufactured primarily for use on public streets, roads,
and highways.
3) The employee does not use the vehicle for personal
purposes, other than commuting and de minimis per-
Consistency requirements. If you use the lease value
sonal use.
rule, the following requirements apply:
4) If this vehicle is an automobile (any 4-wheeled vehi-
cle, such as a car, pickup truck, or van), the em-
1) You must begin using this rule on the first day you
ployee who uses it for commuting is not a control
make the automobile available to any employee for
employee (see below).
personal use. However, the following exceptions ap-
ply:
Vehicle. For this rule, a vehicle is any motorized wheeled
a) If you use the commuting rule (discussed earlier)
vehicle, including an automobile, manufactured primarily
when you first make the automobile available to
for use on public streets, roads, and highways.
any employee for personal use, you can change
Control employee. A control employee for 2002 is gener-
to the lease value rule on the first day for which
ally any of the following employees.
you do not use the commuting rule.
b) If you use the cents-per-mile rule (discussed ear-
1) A board or shareholder-appointed, confirmed, or
lier) when you first make the automobile available
elected officer whose pay is $80,000 or more.
to any employee for personal use, you can
2) A director.
change to the lease value rule on the first day on
which the automobile no longer qualifies for the
3) An employee whose pay is $160,000 or more.
cents-per-mile rule.
4) An employee who owns a 1% or more equity, capital,
or profits interest in your business.
2) You must use this rule for all later years in which you
make the automobile available to any employee, ex-
5) A government employee whose compensation is
cept that you can use the commuting rule for any
equal to or exceeds Federal Government Executive
year during which use of the automobile qualifies.
Level V ($121,600 for 2002).
3) You must continue to use this rule if you provide a
6) An elected official.
replacement automobile to the employee and your
primary reason for the replacement is to reduce fed-
Highly compensated employee alternative. Instead
eral taxes.
of using the preceding definition, you can choose to define
Page 19
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