By Gerald S. Deutsch, Esq.
Glen Head, NY
In the fall of 2010, pursuant to the provisions of the Small Business Jobs Act of 2010, cellular phones were removed as a "listed property" for years after 2009. This meant that the harsh substantiation rules needed for a deduction no longer would apply to cellular phones. In Notice 2011-72, 2011-38 I.R.B. 407, the IRS explains some of the ramifications of this change.
The Notice points out that, while the legislation removed cellular phones from the definition of listed property, it did not otherwise alter the requirement that an employer-provided cell phone is a fringe benefit, the value of which must be included in the employee's gross income, unless an exclusion applies.
This Notice further provides that, when an employer provides an employee with a cellular phone primarily for noncompensatory business reasons, the IRS will treat the employee's use of the cell phone for reasons related to the employer's trade or business as a working condition fringe benefit, the value of which may be excludible from the employee's income and, solely for purposes of determining whether the working condition fringe benefit provision applies, the substantiation requirements that the employee would have to meet are deemed to be satisfied.
In addition, the IRS will deem the value of any personal use of a cellular phone provided by the employer primarily for noncompensatory business purposes to be excludible from the employee's income as a de minimis fringe benefit.
For more information, in the Tax Management Portfolios, see Elwood and Moore, 394 T.M., Employee Fringe Benefits, and in Tax Practice Series, see ¶5960, Statutory Fringe Benefits.