Page 38 - The EDGE Fall 2022

Fringe Benefits— Are They Gifts or Taxable?

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White said, until HB2210 was passed by the for bus drivers to stay cool and hydrated in the
Legislature in 2021. It allows districts to provide summer are OK,” Huie said. “These items can be
food and beverages at school district events, considered safety equipment necessary for the
including official school functions and training employee to perform his or her job.”
sessions, as long as doing so does not violate the
Gift Clause.” Examples of acceptable items for staff recognition
are certificates, plaques, pen and pencil sets with
An Attorney General’s opinion in 2010, which the district or school logo and shirts with district
predates the new law, says districts should adopt or school logo.
a policy, regulation, or practice of limitations
of what can be provided, and provide examples “Gifts to employees should be tied to an official
of types of snacks and refreshments and what school or department recognition program,” Huie
funding sources can be used. Also, districts should recommended.
have an approval process for what is considered
a district event and if the meeting must span a White said the rental of school facilities, such as
certain amount of time for refreshments to be a playground or pool for a birthday party, should
offered. not be provided free of charge or at a discounted
rate. Therefore, no benefit is provided. The use
For example, if the food is purchased for an of the school gym for an exercise break while at
employee achievement luncheon in which several work should consider worker’s compensation and
employees were recognized, the district might not liability issues.
violate the Gift Clause, White said. The district
would have to demonstrate the value is nominal
per employee. The AG recommended that districts “Gift cards are taxable, no matter the

not use district funds for holiday meals and amount.” - Cheryl White
celebrations.

On the issue of T-shirts, apparel and accessories, “The purchase of gym membership for employees,
Huie said, “The purchase of uniforms, attire, or if included as part of district benefit plan, or
equipment necessary for an employee to perform documented as a fringe benefit in the employment
his or her job would not constitute a violation of contract, is allowable, but taxable under IRS
the Gift Clause. What we are concerned about rules,” White said. “The allowable funding source
here is what is excessive?” would follow the employee’s normal position
funding source. The benefit is taxable, regardless
A suit and a tie for a coach would be considered of the amount or how often the employee uses the
excessive, she said. A polo shirt with the school or athletic facility.”
team logo would be more appropriate.

“Umbrellas and hats to protect crossing guards Lizette Huie can be reached at: lhuie@sahuarita.net
from the sun, and cooling towels and water bottles Cheryl White can be reached at: cheryl.white@heinfeldmeech.com

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38 THE EDGE FALL 2022