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Date: October 29, 2004 Bulletin Number: 507
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Subject

Reporting the Taxable Value of Personal Use of Employer- Provided Vehicles for 2004

Purpose
To provide instructions for reporting the taxable value of employer-provided vehicles for 2004.
Affected Employees
Employees with employer-provided vehicles.
Effective Date(s)
Immediately.
Background

Employers (agencies) providing a vehicle to an employee, which the employee can use for personal use, must include in the employee’s wages an amount that represents the value the employee received for personal use of the vehicle. The employee must report to the employer all business use of the vehicle. If an employee fails to report business use, all miles driven are defined as personal use by the employee, and all miles are included in the employee’s income.

OSC will report the value of personal use of an employer-provided vehicle, for the period November 1, 2003 through October 31, 2004, as income on 2004 W-2s. Therefore, the taxable amounts for 2004 should be reported as soon as possible, but no later than Pay Period 18-Lag November 25 through December 8 and Pay Period 19-Current for Institution December 9 through December 22 and Pay Period 19-Lag December 2 through December 15 and Pay Period 20-Current for Administration December 16 through December 29.

Determining the Value

The following methods may be used to determine the taxable value of a vehicle:

Annual Lease Value (ALV) Method
This method may be used only by employees who have unrestricted use of a vehicle. Employees who are prohibited from using a vehicle for personal use cannot use this method. The ALV of a vehicle is determined as follows:

    1. Determine the fair market value (FMV) of a vehicle as of the first date the vehicle is made available to the employee. The FMV may be determined by using the average retail value listed in a nationally recognized pricing guide. Typically, the “blue book” value may be used because it is a publicized valuation of vehicles that is acceptable by the IRS.
    1. Find the ALV in the table found on Attachment A of this bulletin based upon the appropriate fair market value of the car as determined in Step 1 above.

The cost of fuel is not included in the Annual Lease Value of a vehicle and should be valued separately on Form AC 3173 (Attachment B). Employees must complete, sign and return this form to their agency’s personnel office.

If a chauffeur or other driver is provided, a reasonable value must be determined and included for the personal miles, if applicable.

Fixed Rate Per Mile Method
Employees can use this method as an alternative to either the Annual Lease Value method or the Special Commuting Rule. The Fixed Rate Per Mile Method cannot be used for vehicles that were first made available for employees’ personal use in 2004 if the fair market value exceeds $14,800.

If gasoline is not supplied or reimbursed, the rate per mile is 32.0 cents per mile. If gasoline is supplied or reimbursed by the employer, the rate is 37.5 cents per mile.

Special Commuting Rule
Commuting is valued at $1.50 each way ($3.00 per round trip) for each day the vehicle is used for commuting. Employees who are prohibited from using a vehicle for personal use must use this method. Employees who have unrestricted use of a vehicle or employees whose annual salary is equal to or greater than $127,300 are not permitted to use the Special Commuting Rule. (The Special Commuting Rule cannot be used for vehicles that were first made available for employees’ personal use in 2004 if the fair market value exceeds $14,800.

State Officers
State Officers who have a vehicle for unrestricted use should be reminded of the following provisions of the rules:
    1. Officers who have the same vehicle as they had in 2003 must use the same method as was used last year to determine the taxable value. The officer must also use that method for all future reporting periods. Officers who have had the same vehicle since January 1, 2000 (four full years) may re-compute the Annual Lease Value for this reporting period.
    2. Officers who are newly assigned a vehicle or who receive a replacement vehicle may choose either the Annual Lease Value Method or the Fixed Rate Per Mile Method for the new vehicle. However, the selected method must be used for all future periods during which the officer has the vehicle. Once the Annual Lease Value has been established, it must be used for a four-year period or until the officer no longer has the vehicle.
Employee’s Responsibility for Documentation

Employees are responsible for maintaining documentation to support the business use of the vehicle. The standard for record keeping is “adequate records or sufficient evidence” to support any business use of their vehicle.

Examples of acceptable substantiation are:

  • account books
  • diaries
  • log receipts
  • bills
  • trip sheets
  • expense forms.
    Written records made at or near the time the expense was incurred should be maintained to document the time, date, place and purpose of business travel.

A form similar to the sample (AC 3173) attached to this Bulletin should be completed and signed by each employee covered by the regulations. The form should be retained by the agency.

Qualified nonpersonal use vehicles, including trucks and vans, are exempt from business use substantiation.

The following vehicles are unlikely to be used for personal reasons and are exempt from the substantiation requirements:

    • buses
    • ambulances
    • police and fire vehicles
    • construction vehicles
    • cement trucks
    • forklifts.

Pickup Trucks and Vans as Qualified Nonpersonal Use Vehicles

IRS has provided additional guidelines for determining when certain specifically modified pickup trucks or vans will be recognized as qualified nonpersonal use vehicles.

Pickup trucks with a loaded gross vehicle weight of 14,000 pounds or less:

    1. Vehicle is clearly marked with permanently affixed decals or with special painting or other advertising associated with the employer’s trade, business, or function and is equipped with at least one of the following:
      • Hydraulic lift gate
      • Permanently installed tanks or drums
      • Permanently installed side boards or panels materially raising the level of the sides of the bed of the pickup truck
      • Other heavy equipment such as an electric generator, welder, boom or crane used to tow automobile and other vehicle
    2. The vehicle is clearly marked with permanently affixed decals or with special painting or other advertising associated with the employer’s trade, business, or function, is actually used primarily for transporting a particular type of load other than over the public highway in connection with construction, manufacturing, processing, farming, mining, drilling, timbering, or other similar operation, and has been designed or modified to a significant degree for such use.

Vans with a loaded gross vehicle weight not over 14,000 pounds:

    1. Vehicle is clearly marked with permanently affixed decals or with special painting or other advertising associated with the employer’s trade, business, or function.
    2. Vehicle has a seat only for the driver or the driver and one other person.
    3. Vehicle has either permanent shelving installed that fills most of the cargo area or the cargo area is open.
    4. Vehicle constantly (during both working and nonworking hours) carries merchandise, material, or equipment used in the employer’s trade, business, or function.

Agency Actions
Agencies may enter the taxable value using the Earn Code FRB into the Payroll System on the Time Entry Pages or through the agency’s Miscellaneous File. For information regarding submission of Time Entry transactions, see Payroll Bulletin No. 408.
W-2 Information

The taxable value of personal use of an employer-provided vehicle is subject to Income and Social Security/Medicare taxes and must be reported as income on the W-2. New York State will not withhold federal income taxes. However, State, local and Social Security/Medicare taxes must be withheld.

While OSC cannot withhold taxes for Inactive employees, OSC will include the taxable value on the employee’s W-2.

The amount is not considered salary for the purposes of computing retirement benefits.

Paycheck/Advice
The taxable value amount will appear on the employee’s paycheck or direct deposit advice and will be included in the YTD Gross Earnings.
Attachments
Attachment A – Annual Lease Value Table
Attachment B – AC 3173
Questions

Questions regarding Time Entry transactions should be directed to your agency’s Payroll Auditor.

Questions regarding adjustments to employee W-2s and taxable value calculation may be directed to the Payroll Deductions mailbox.