Publication 15b |
2000 Tax Year |
Working Condition Benefits
This exclusion applies to property and services you provide to an
employee so that the employee can perform his or her job. It applies
to the extent the employee could deduct the cost of the property or
services as a business expense or depreciation expense if he or she
had paid it. The employee must meet any substantiation requirements
that apply to the deduction. Examples of working condition benefits
include an employee's use of a company car for business and
job-related education provided to an employee.
This exclusion also applies to a cash payment you provide for an
employee's expenses for a specific or prearranged business activity to
the extent the employee could deduct the expenses if he or she had
paid them without reimbursement. You must require the employee to
verify that the payment is actually used for those expenses and to
return any unused part of the payment.
For information on deductible employee business expenses, see
Unreimbursed Employee Expenses in Publication 529,
Miscellaneous Deductions.
The exclusion does not apply to the following items.
- A service or property provided under a flexible spending
account in which you agree to provide the employee, over a time
period, a certain level of unspecified noncash benefits with a
predetermined cash value.
- A physical examination program you provide, even if
mandatory.
- Any item to the extent the employee could deduct its cost as
an expense for a trade or business other than your trade or
business.
Employee.
For this exclusion, treat the following individuals as employees.
- A current employee.
- A partner who performs services for a partnership.
- A director of your company.
- An independent contractor who performs services for
you.
Vehicle allocation rules.
If you provide a car for an employee's use, the amount you can
exclude as a working condition benefit is the amount that would be
allowable as a deductible business expense if the employee paid for
its use. That is, if the employee uses the car for both business and
personal use, the value of the working condition benefit is the part
determined to be for business use of the vehicle. See Business
use of your car under Personal Expenses in chapter 1 of Publication 535.
Also, see the special rules for certain
demonstrator cars and qualified nonpersonal-use vehicles, discussed
next.
However, instead of excluding the value of the working condition
benefit, you can include the entire annual lease value of the car in
the employee's wages. The employee can then claim any deductible
business expense for the car as an itemized deduction on his or her
personal income tax return. This option is available only if you use
the lease value rule (discussed in chapter 3)
to value the benefit.
Demonstrator cars.
All of the use of a demonstrator car by your full-time auto
salesperson generally qualifies as a working condition benefit if the
use is primarily to facilitate the services the salesperson provided
for you and there are substantial restrictions on personal use. For
more information and the definition of "full-time auto salesperson,"
see section 1.132-5(o) of the regulations.
Qualified nonpersonal-use vehicles.
All of an employee's use of a qualified nonpersonal-use vehicle is
a working condition benefit. A qualified nonpersonal-use vehicle is
any vehicle the employee is not likely to use more than minimally for
personal purposes because of its design. Qualified nonpersonal-use
vehicles generally include all of the following vehicles.
- Clearly marked police and fire vehicles.
- Unmarked vehicles used by law enforcement officers if the
use is officially authorized.
- An ambulance or hearse used for its specific purpose.
- Any vehicle designed to carry cargo with a loaded gross
vehicle weight over 14,000 pounds.
- Delivery trucks with seating for the driver only, or the
driver plus a folding jump seat.
- A passenger bus with a capacity of at least 20 passengers
used for its specific purpose.
- School buses.
- Tractors and other special purpose farm vehicles.
Pickup trucks.
A pickup truck with a loaded gross vehicle weight of 14,000 pounds
or less is a qualified nonpersonal use vehicle if it has been
specially modified so it is not likely to be used more than minimally
for personal purposes. For example, a pickup truck qualifies if it is
clearly marked with permanently affixed decals, special painting, or
other advertising associated with your trade, business, or function
and meets either of the following requirements.
- It is equipped with at least one of the following items.
- A hydraulic lift gate.
- Permanent tanks or drums.
- Permanent side boards or panels that materially raise the
level of the sides of the truck bed.
- Other heavy equipment (such as an electric generator,
welder, boom, or crane used to tow automobiles and other
vehicles).
- It is used primarily to transport a particular type of load
(other than over the public highways) in a construction,
manufacturing, processing, farming, mining, drilling, timbering, or
other similar operation for which it was specially designed or
significantly modified.
Vans.
A van with a loaded gross vehicle weight of 14,000 pounds or less
is a qualified nonpersonal use vehicle if it has been specially
modified so it is not likely to be used more than minimally for
personal purposes. For example, a van qualifies if it is clearly
marked with permanently affixed decals, special painting, or other
advertising associated with your trade, business, or function and has
a seat for the driver only (or the driver and one other person) and
either of the following items.
- Permanent shelving that fills most of the cargo area.
- An open cargo area and the van always carries merchandise,
material, or equipment used in your trade, business, or
function.
Outplacement services.
An employee's use of outplacement services qualifies as a working
condition benefit if you provide the services to the employee on the
basis of need and you get a substantial business benefit from the
services distinct from the benefit you would get from the payment of
additional wages. Substantial business benefits include promoting a
positive business image, maintaining employee morale, and avoiding
wrongful termination suits.
Outplacement services do not qualify as a working condition benefit
if the employee can choose to receive cash or taxable benefits in
place of the services. If you maintain a severance plan and permit
employees to get outplacement services with reduced severance pay,
include in the employee's wages the difference between the unreduced
severance and the reduced severance payments.
Exclusion from wages.
You can generally exclude the value of a working condition benefit
you provide to an employee from the employee's wages.
Exception for independent contractors.
You cannot exclude the value of parking or the use of consumer
goods you provide in a product testing program from the compensation
you pay to an independent contractor who performs services for you.
Exception for company directors.
You cannot exclude the value of the use of consumer goods you
provide in a product testing program from the compensation you pay to
a director.
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