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Date: October 28, 2005 Bulletin Number: 588
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Subject
Reporting the Taxable Value of Personal Use of Employer- Provided Vehicles for 2005
Purpose
To provide instructions for reporting the taxable value of employer-provided vehicles for 2005.
Affected Employees
Employees with employer-provided vehicles.
Effective Dates
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, 2004 through October 31, 2005, as income on 2005 W-2s. Therefore, the taxable amounts for 2005 should be reported as soon as possible, but no later than Pay Periods 18-Lag and 19-Current for Institution payrolls and Pay Periods 18-Lag and 19-Current for Administration payrolls.

Determining the Value
The following rules are in effect for the reporting period.

Cents-Per-Mile Rule
Employees may use the cents-per-mile rule if either of the following requirements is met:
  • Vehicle is expected to be regularly used for business throughout the calendar year (or for a shorter period during which the vehicle is owned or leased)
  • Vehicle meets the mileage test that the vehicle is actually driven at least 10,000 miles during the year. If the vehicle is owned or leased only part of the year, reduce the 10,000 mile requirement proportionately.
For 2005 reporting, the standard mileage rate for the period of November 1, 2004 through August 31, 2005, the rate is 40.5 cents a mile. According to an Internal Revenue Service special adjustment, the standard mileage rate for the period of September 1, 2005 through October 31, 2005 has been increased to 48.5 cents a mile. The cents-per-mile rule cannot be used for vehicles that were first made available to employees in 2005 if the fair market value exceeds $14,800 for a passenger automobile and $16,300 for a truck or van. The term “trucks and vans” refers to passenger automobiles that are built on a truck chassis, including minivans and sport utility vehicles (SUVs) that are built on a truck chassis.

If gasoline is not supplied or reimbursed, the rate per mile is 35.0 cents per mile for the period of November 1, 2004 through August 31, 2005 and 43.0 cents per mile for the period of September 1, 2005 through October 31, 2005.

Commuting Rule
Commuting is valued at $1.50 each way ($3.00 per round trip) for each day the vehicle is used for commuting. If more than one employee commutes in the vehicle, this value applies to each employee. This amount must be included in the employee’s wages or reimbursed by the employee.

The commuting rule can be used if all the following requirements are met:
  • The vehicle is provided to an employee for business use, for bona fide non-compensatory business reasons, the employee is required to commute in the vehicle. This requirement is met if the vehicle is generally used each workday to carry at least three (3) employees to and from work in an employer-sponsored commuting pool.

  • A written policy is established under which the employee is not allowed to use the vehicle for personal purposes other than for commuting or de minimis personal use (such as a stop for a personal errand on the way between a business delivery and the employee’s home).

  • The employee does not use the vehicle for personal purposes other than commuting and de minimis personal use.

  • The employee who uses the vehicle is not receiving compensation equal to or exceeding $131,400 or is an elected official.
Annual Lease Value Method (ALV)
Under this method, the value of an automobile provided to an employee is determined by using its annual lease value. For an automobile provided only part of the year, use either its prorated annual lease value or its daily lease value.

Employees who have unrestricted use of a vehicle should use this method. Employees who are prohibited from using a vehicle for personal use cannot use this method. The ALV of a car is determined as follows:
  1. Determine the fair market value of the vehicle as of the first day on which it was made available to an employee for personal use.

  2. Find the ALV in Attachment A of this Bulletin for the appropriate fair market value of the car as determined in Step 1 above.
Employees who have a vehicle for unrestricted use should be reminded of the following provisions of the rules:
  1. Employees who have the same vehicle as they had in 2004 must use the same method as was used last year to determine the taxable value. They must also use that method for all future reporting periods. Employees who have had the same vehicle since January 1, 2001 (four (4) full years) may re-compute the annual lease value for this reporting period.

  2. Employees 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, that method must be used for all future periods during which they have the vehicle. Once the Annual Lease Value has been established, it must be used for a four-year period or until the individual no longer has the vehicle.

  3. 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 or 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 or 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 truck with a loaded gross vehicle weight of 14,000 pounds or less:
  1. Vehicle should be 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 vehicles

  1. 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.
A van with a loaded gross vehicle weight not over 14,000 pounds is a qualified nonpersonal use vehicle if:
  • Vehicle is clearly marked with permanently affixed decals or with special painting or other advertising associated with the employer’s trade, business, or function.
  • Vehicle has a seat only for the driver or the driver and one other person.
  • Vehicle has either permanent shelving installed that fills most of the cargo area or the cargo area is open.
  • 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 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 amount will appear on the paycheck stub or direct deposit advice and will be included in the YTD Gross.
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 this bulletin may be directed to the Payroll Deductions mailbox.