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

4-year lease term. The annual lease values in the table

Daily Lease Value

are based on a 4-year lease term. These values will gener-

ally stay the same for the period that begins with the first

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

date you use this rule for the automobile and ends on

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

December 31 of the fourth full calendar year following that

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

date.

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

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 fair market value of the automo-

However, you can apply a prorated annual lease value

bile on January 1 of the first year of the later 4-year period

for a period of continuous availability of less than 30 days

and selecting the amount in column 2 of the table that

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

corresponds to the appropriate dollar range in column 1.

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

Using the special accounting rule. If you use the

a lower valuation than applying the daily lease value to the

special accounting rule for fringe benefits discussed in

shorter period of availability.

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

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

ing period that starts immediately before the January 1

Unsafe Conditions Commuting

date described in the previous paragraph.

Rule

For example, assume that you use the special account-

ing rule and that, beginning on November 1, 2001, the

special accounting period is November 1 to October 31.

Under this rule, the value of commuting transportation you

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

provide a qualified employee solely because of unsafe

2002. You can refigure the annual lease value on Novem-

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

ber 1, 2005, rather than on January 1, 2006.

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

included in the employee’s wages or reimbursed by the

Transferring an automobile from one employee to an-

employee.

other. Unless the primary purpose of the transfer is to

You can use the unsafe conditions commuting rule if all

reduce federal taxes, you can refigure the annual lease

the following requirements are met.

value based on the fair market value of the automobile on

1) The employee would ordinarily walk or use public

January 1 of the calendar year of transfer.

transportation for commuting.

However, if you use the special accounting rule for

fringe benefits discussed in section 4, you can refigure the

2) You have a written policy under which you do not

annual lease value (based on the fair market value of the

provide the transportation for personal purposes

automobile) at the beginning of the special accounting

other than commuting because of unsafe conditions.

period in which the transfer occurs.

3) The employee does not use the transportation for

personal purposes other than commuting because of

Prorated Annual Lease Value

unsafe conditions.

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

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

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

Commuting transportation. This is transportation to or

calendar year, you can prorate the annual lease value.

from work by any motorized wheeled vehicle (including an

Figure the prorated annual lease value by multiplying the

automobile) manufactured for use on public streets, roads,

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

and highways. You or the employee must buy the transpor-

of availability as the numerator and 365 as the denomina-

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

tor.

buys it, you must reimburse the employee for its cost (for

If you provide an automobile continuously for at least 30

example, cabfare) under a bona fide reimbursement ar-

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

rangement.

accounting periods if you are using the special accounting

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

Qualified employee. A qualified employee for 2002 is

the prorated annual lease value or the daily lease value.

one who:

If you have 20 or more automobiles, see section

1) Performs services during the year,

1.61-21(d)(6) of the regulations.

If an automobile is unavailable to the employee because

2) Is paid on an hourly basis,

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

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

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

Labor Standards Act of 1938 (as amended) to be

periods of unavailability when you use a prorated annual

exempt from the minimum wage and maximum hour

lease value.

provisions,

You cannot use a prorated annual lease value if

4) Is within a classification for which you actually pay,

the reduction of federal tax is the main reason the

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

automobile is unavailable.

CAUTION

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

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

Page 21

Publication 15 B - Employer'S Tax Guide To Fringe Benefits - 2002 Page 21

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