Page 600 - TaxAdviser_2022

CASE STUDY

■ The employee includes the value
These special methods can be beneficial of the benefit in income within the
time for filing the tax return for the
because they can reduce the amount tax year (including extensions) in
which the benefit is provided;
of taxable income attributable to an ■ The employee is not a control
employee’s personal use of a employee; and

company-provided auto. ■ The employer demonstrates a
good-faith effort to treat the benefit
correctly for reporting purposes.
An employee may use a special
Using the commuting the employer’s income tax deduction for valuation rule if (1) the employer uses
value method the operating expenses of the vehicle. that rule or (2) the employer does not
If an employee is required to commute treat the value of the benefit as wages
in an employer-provided vehicle, the Using the cents-per-mile method for reporting purposes, but one of the
commuting valuation rule can be used to The standard mileage rate may be used second through fourth conditions above
determine the value of the personal com- to determine the value of an employer- for using a special valuation rule ex-
muting use to include in the employee’s provided automobile. However, this ists (Regs. Sec. 1.61-21(c)(2)(ii)). An
taxable compensation. Commuting use rule may be used only for autos that employee may always use the general
of an auto may be valued at $3 per round the employer expects will be regularly valuation rule even if the employer uses
trip ($1.50 per one-way commute) if used in the employer’s trade or business a special valuation rule. If an employer
the following requirements are met throughout the year, or for autos that and employee use a special rule, the
(Regs. Secs. 1.61-21(f)(1) and (f)(3)): are actually driven at least 10,000 miles employee’s gross income includes the
■ The auto must be owned or leased by in that year and used primarily by em- amount determined by the employer
the employer and provided for use in ployees. This special valuation method under the special rule reduced by the
the employer’s trade or business; cannot be used if the auto’s FMV when sum of:
■ The employer must, for bona fide first made available to any employee ■ Any amount reimbursed by the
noncompensatory business reasons, for personal use exceeds the inflation- employee to the employer; and
require the employee to commute adjusted annual limit. For 2022, the ■ Any amount excludable from income
in the automobile (e.g., 24-hours limit is $56,100 for a passenger auto- under another income tax provision
on-call); mobile, van, or truck (Notice 2022-3). of the Code.
■ The employer must have a written The cents-per-mile valuation includes Once a special valuation method
policy under which neither the insurance, maintenance, and fuel. If fuel has been elected for a particular auto,
employee, nor any individual whose is not provided by the employer, the it must be used for the life of that auto,
use would be taxable to the employee cents-per-mile rate may be reduced except in the case of the commuting
(e.g., the employee’s spouse), may use by no more than 5.5 cents per mile valuation method, which can be used
the auto for personal purposes other (Regs. Sec. 1.61-21(e)(3)). for any qualifying period. An exception
than commuting or de minimis per- applies to employers that properly elect
sonal use; Meeting the requirements to use a special valuation method other
■ Except for de minimis personal use, to use special valuation than the cents-per-mile rule because the
the employee does not use the auto methods FMV of the auto exceeds the applicable
for any personal purpose other than A special valuation rule may not be used limits for use of the cents-per-mile
commuting; and by either the employer or employee un- method (Notice 89-110). ■
■ The employee required to use the auto less one of the following requirements is
for commuting must not be a control satisfied (Regs. Sec. 1.61-21(c)(3)(ii)): Contributor
employee of the employer (as defined ■ The employer treats the value of the
in Regs. Sec. 1.61-21(f)(5)). benefit as wages for reporting pur- Trenda B. Hackett, CPA, is an executive
Note: The commuting valuation rule poses within the time for filing the editor with Thomson Reuters Checkpoint.
is applicable only for determining the tax return for the tax year (including For more information about this column,
amount included in the employee’s in- extensions) in which the benefit is contact thetaxadviser@aicpa.org.
come. It is not applicable for determining provided;

58 November 2022 The Tax Adviser