Advisory Committee on Tax Exempt and Government Entities (ACT ...

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Page 11 of 18168(h)(8) REGULATIONS. --The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.168(i) DEFINITIONS AND SPECIAL RULES. --For purposes of this section --168(i)(l) CLASS LIFE. --Except as provided in this section, the term "class life" means the class life (if any) which would be applicable with respect to anyproperty as of January 1, 1986, under subsection (m) of section 167 (determined without regard to paragraph (4) and as if the taxpayer had made an electionunder such subsection). The Secretary, through an oftice established In the Treasury, shall monitor and analyze actual experience with respect to all depreciableassets. The reference in this paragraph to subsection (m) of section 167 shall be treated as a reference to such subsection as in effect on the day before the dateof the enactment of the Revenue Reconciliation Act of 1990.168(i)(2) QUALIFIED TECHNOLOGICAL EQUIPMENT. --168(i)(2)(A) IN GENERAL. --The term "qualified technological equipment" means --168(i)(2)(A)(i) any computer or peripheral equipment, 168(i)(2)(A)(ii) any high technology telephone statlon equipment installed on the customer's premises, and 168(i)(2)(A)(iii) any high technology medical equipment 168(i)(2)(B) COMPUTER OR PERIPHERAL EQUIPMENT DEFINED. --For purposes of this paragraph --168(i)(2)(B)(i) IN GENERAL. --The term "computer or peripheral equipment" means --168(i)(2)(B)(i)(l) any computer, and168(i)(2)(B)(i)(ll) any related peripheral equipment.168(i)(2)(B)(ii) COMPUTER. --The term "computer" means a programmable electronically activated device which --168(i)(2)(B)(ii)(l) is capable of accepting information, applying prescribed processes to the information, and supplying the results of these processeswith or without human intervention, and168(i)(2)(B)(ii)(ll) consists of a central processing unit containing extensive storage, loglc, arithmetic, and control capabilities.168(i)(2)(B)(iii) RELATED PERIPHERAL EQUIPMENT. --The term "related peripheral equipment" means any auxiliary machine (whether on-line or offline)which IS designed to be placed under the control of the central processing unit of a computer.168(i)(2)(B)(iv) EXCEPTIONS. --The term "computer or peripheral equipment" shall not include --168(i)(2)(B)(iv)(l) any equipment which is an integral part of other property which is not a computer. 168(i)(2)(B)(iv)(ll) typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment, and 168(i)(2)(B)(iv)(lIl) equipment of a kind used primarily for amusement or entertainment of the user. 168(i)(2)(C) HIGH TECHNOLOGY MEDICAL EQUIPMENT. --For purposes of this paragraph, the term "high technology medical equipment" means any electronic,electromechanical, or computer-based high technology equipment used in the screening, monitoring, observation, diagnosis, or treatment of patients in a laboratory, medical, or hospital environment. 168(i)(3) LEASE TERM. --168(i)(3)(A) IN GENERAL. --In determining a lease term --168(i)(3)(A)(i) there shall be taken into account options to renew.168(i)(3)(A)(ii) the term of a lease shall Include the term of any servlce contract or stmllar arrangement (whether or not treated as a lease under sectlon7701 (e)) --168(i)(3)(A)(ii)(l) which is part of the same transaction (or series of related transactions) which includes the lease, and168(i)(3)(A)(ii)(ll) which is with respect to the property subject to the lease or substantially similar property,168(i)(3)(A)(iii) 2 or more successive leases which are part of the same transaction (or a series of related transactions) wlth respect to the same orsubstantially similar property shall be treated as 1 lease.168(i)(3)(B) SPECIAL RULE FOR FAIR RENTAL OPTIONS ON NONRESIDENTIAL REAL PROPERTY OR RESIDENTIAL RENTAL PROPERTY. --Forpurposes of clause (i) of subparagraph (A), in the case of nonresidential real property or residential rental property, there shall not be taken into account anyoption to renew at fair market value, determined at the time of renewal.168(i)(4) GENERAL ASSET ACCOUNTS. --Under regulations, a taxpayer may malntain 1 or more general asset accounts for any property to which thissection applies. Except as provided in regulations, all proceeds realized on any disposition of properly in a general asset account shall be included in income asordinary Income.168(i)(S) CHANGES IN USE. --The Secretary shall, by regulations, provide for the method of determining the deduction allowable under section 167(a) with respect to any tangible property for any taxable year (and the succeeding taxable years) during which such property changes status under this section but continues to be held by the same person.
Employee Cell Phones Page 1 of 1Employee Cell PhonesGovernment employers frequently provide their employees with cellular telephones andpagers to employees to conduct business. This can raise special tax concerns, due to the factthat these items are listed property under the Internal Revenue Code, and becauseemployees may use them for business as well as personal use.What is Listed Property?"Listed property" includes items obtained for use in a business but designated by the InternalRevenue Code as lending themselves easily to personal use. This includes automobiles,computers, and entertainment or recreation-related items. In 1989,cellular telephones wereadded to this category. Although the use of these phones IS much more widespread andeconomical today, they remain listed property and are subject to these restrictions.For a for-profit business, the designation of an item as listed property has implications fordepreciation deductions taken by the business and the computation of net income. However,this article focuses on the employment tax issues raised for employees of governmententities.Substantiation RequirementsTo be able to exclude the use by an employee from taxable income from an employer-ownedcell phone, the employer must have some method to require the employee to keep rewrdsthat distinguish business from personal phone charges. If the telephone is used exclusivelyfor business, all use is excludable from income (as a working condition fringe benefit). Theamount that represents personal use is included in the wages of the employee. This includesindividual personal calls, as well as a pro rata share of monthly service charges.In general, this means that unless the employer has a policy requiring employees to keeprecords, or the employee does not keep records, thevalue of the use of the phone will beincome to the employee.At a minimum, the employee should keep a record of each call and its business purpose. Ifcalls are itemized on a monthly statement, they should be identifiable as personal orbusiness, and the employee should retain any supporting evidence of the business calls. Thisinformation should be submitted to the employer, who must maintain these records to supportthe exclusion of the phone use from the employee's wages.The following situations illustrate the application of the rules:Example 1: A municipal government provides an employee a cell phone for businesspurposes. The government's written policy prohibits personal use of the phone. Thegovernment routinely audits the employee's phone billings to confirm that personal calls werenot made. No personal calls were actually made by the employee. The business use of thephone is not taxable to the employee.Example 2. A municipal government provides an employee a cell phone for businesspurposes. The government's written policy prohibits personal use of the phone. However, thegovernment does not audit phone use to verify exclusive business use. The fair market valueof the phone, plus each monthly service charge and any individual call charges are taxableincome to the employee, reportable on Form W-2.Example 3: A state agency provides an employee with a cell phone and pays the monthlyservice charge. The employee is required to highlight personal calls on the monthly bill. Theemployee is then required to timely reimburse the agency for the cost of the personal calls,and the employee is charged a pro rata share of the monthly charge. The value of thebusiness use portion of the phone is not taxable to the employeeEmployee-Owned TelephonesIf the employee owns the phone, the listed property requirements do not apply. Any amountsthe employer reimburses the employee for business use of the employee's own phone mayoe excludable from wages ~f the employee accounts for the expense under the accountableplan rules See ? ~~ii;~t on 15 Employer's Tax Gu~de (Circular E), for more lnformatlon aboutthe accountable plan rules.
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