Determination of the Maximum Value of a Vehicle for Use With the Fleet-Average and Vehicle Cents-per-Mile Valuation Rules |
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Kirsten Wielobob
Department of the Treasury
23 August 2019
[Federal Register Volume 84, Number 164 (Friday, August 23, 2019)]
[Proposed Rules]
[Pages 44258-44262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-18044]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 84, No. 164 / Friday, August 23, 2019 /
Proposed Rules
[[Page 44258]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-101378-19]
RIN 1545-BP14
Determination of the Maximum Value of a Vehicle for Use With the
Fleet-Average and Vehicle Cents-per-Mile Valuation Rules
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document sets forth proposed regulations regarding
special valuation rules for employers and employees to use in
determining the amount to include in an employee's gross income for
personal use of an employer-provided vehicle. The proposed regulations
reflect changes made by the Tax Cuts and Jobs Act, Public Law 115-97
(the Act).
DATES: Comments and requests for a public hearing must be received by
October 22, 2019.
ADDRESSES: Submit electronic submissions via the Federal eRulemaking
Portal at www.regulations.gov (indicate IRS and REG-101378-19) by
following the online instructions for submitting comments. Once
submitted to the Federal eRulemaking Portal, comments cannot be edited
or withdrawn. The Department of the Treasury (Treasury Department) and
the IRS will publish for public availability any comment received to
its public docket, whether submitted electronically or in hard copy.
Send hard copy submissions to: CC:PA:LPD:PR (REG-101378-19), Room 5203,
Internal Revenue Service, P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
101378-19), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue NW, Washington, DC 20224.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Gabriel J. Minc at (202) 317-4774; concerning submissions of comments
or to request a public hearing, Regina L. Johnson at (202) 317-6901
(not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
If an employer provides an employee with a vehicle that is
available to the employee for personal use, the value of the personal
use must generally be included in the employee's income under section
61 of the Internal Revenue Code (the Code). In addition, benefits paid
as remuneration for employment, including the personal use of employer-
provided vehicles, generally are also wages for purposes of the Federal
Insurance Contributions Act (FICA), the Federal Unemployment Tax Act
(FUTA) and the Collection of Income Tax at Source on Wages (federal
income tax withholding). Sections 3121(a), 3306(b), and 3401(a).
The amount that must be included in the employee's income and wages
for the personal use of an employer-provided vehicle generally is
determined by reference to the vehicle's fair market value (FMV).
However, the regulations under section 61 provide special valuation
rules for employer-provided vehicles. If an employer chooses to use a
special valuation rule, the special value is treated as the FMV of the
benefit for income tax and employment tax purposes. Sec. 1.61-
21(b)(4). Two such special valuation rules, the fleet-average valuation
rule and the vehicle cents-per-mile valuation rule, are set forth in
Sec. 1.61-21(d)(5)(v) and Sec. 1.61-21(e), respectively. These two
special valuation rules are subject to limitations, including that they
may be used only in connection with vehicles having values that do not
exceed a maximum amount set forth in the regulations.
Under the current Sec. 1.61-21 regulations (the final
regulations), the vehicle cents-per-mile valuation rule may be used
only to value the personal use of a vehicle having a value no greater
than $12,800 (the sum of the maximum recovery deductions allowable
under section 280F(a)(2) for the recovery period of the vehicle). Sec.
1.61-21(e)(1)(iii). The fleet-average valuation rule may be used only
to value the personal use of vehicles having values no greater than
$16,500. Sec. 1.61-21(d)(5)(v)(D). (The fleet-average valuation rule
uses the term ``automobile'' rather than ``vehicle.'' For convenience,
this preamble uses the term ``vehicle'' except in specific discussions
of the fleet-average valuation rule or the section 280F depreciation
limitations.) Under the final regulations, each of these maximum values
is adjusted annually pursuant to section 280F(d)(7).
The Fleet-Average Valuation Rule
The fleet-average valuation rule is an optional component of a
special valuation rule called the automobile lease valuation rule set
forth in Sec. 1.61-21(d). Under the automobile lease valuation rule,
the value of the personal use of an employer-provided automobile
available to an employee for an entire year is the portion of the
annual lease value determined under the regulations (Annual Lease
Value) relating to the availability of the automobile for personal use.
Furthermore, provided the FMV of the automobile does not exceed the
maximum value permitted under Sec. 1.61-21(d)(5)(v), an employer with
a fleet of 20 or more automobiles may use a fleet-average value for
purposes of calculating the Annual Lease Value of any automobile in the
fleet.
The fleet-average value is the average of the fair market values of
all the automobiles in the fleet. However, Sec. 1.61-21(d)(5)(v)(D)
provides that the value of an employee's personal use of an automobile
may not be determined under the fleet-average valuation rule for a
calendar year if the FMV of the automobile on the first date the
automobile is made available to the employee exceeds the base value of
$16,500, as adjusted annually pursuant to section 280F(d)(7). Section
1.61-21(d)(5)(v)(D) provides that the first such adjustment shall be
for calendar year 1989, subject to minor modifications to the section
280F(d)(7) formula specified in the regulations. In other words, under
the final regulations, the maximum value for use of the fleet-average
rule is the base value of $16,500, as adjusted annually under section
280F(d)(7) every year since 1989.
[[Page 44259]]
Prior to enactment of the Act, the automobile price inflation
adjustment of section 280F(d)(7)(B) was calculated using the ``new
car'' component of the Consumer Price Index (CPI) ``automobile
component.'' Beginning in 2005, the IRS began to calculate the price
inflation adjustment for trucks and vans separately from cars using the
``new truck'' component of the CPI, and continued using the ``new car''
component of the CPI for automobiles other than trucks and vans. Rev.
Proc. 2005-48, 2005-32 I.R.B. 271. For 2017, the year prior to the
enactment of the Act, the maximum value for use of this rule was
$21,100 for a passenger automobile and $23,300 for a truck or van. See
Notice 2017-03, 2017-2 I.R.B. 368.
Section 1.61-21(d)(5)(v)(B) provides that the fleet-average
valuation rule may be used by an employer as of January 1 of any
calendar year following the calendar year in which the employer
acquires a sufficient number of automobiles to total a fleet of 20 or
more, each one satisfying the maximum value requirement of Sec. 1.61-
21(d)(5)(v)(D). The Annual Lease Value calculated for automobiles in
the fleet, based on the fleet-average value, must remain in effect for
the period that begins with the first January 1 the fleet-average
valuation rule is applied by the employer to the automobiles in the
fleet and ends on December 31 of the subsequent calendar year. The
Annual Lease Value for each subsequent two-year period is calculated by
determining the fleet average value of the automobiles in the fleet as
of the first January 1 of such period. An employer may cease using the
fleet-average valuation rule as of any January 1.
2. The Vehicle Cents-per-Mile Valuation Rule
Another special valuation rule is the vehicle cents-per-mile rule
in Sec. 1.61-21(e). Under Sec. 1.61-21(e), if an employer provides an
employee with the use of a vehicle that the employer reasonably expects
will be regularly used in the employer's trade or business throughout
the calendar year (or such shorter period as the vehicle may be owned
or leased by the employer), or that satisfies the requirements of Sec.
1.61-21(e)(1)(ii) (i.e., the vehicle is actually driven at least 10,000
miles in the year and use of the vehicle during the year is primarily
by employees), the value of the personal use may be determined based on
the applicable standard mileage rate multiplied by the total number of
miles the vehicle is driven by the employee for personal purposes.
Section 1.61-21(e)(1)(iii)(A) provides that the value of the
personal use may not be determined under the vehicle cents-per-mile
valuation rule for a calendar year if the fair market value of the
vehicle on the first date the vehicle is made available to the employee
exceeds the sum of the maximum recovery deductions allowable under
section 280F(a) for a five-year period for an automobile first placed
in service during that calendar year (whether or not the automobile is
actually placed in service during that year), as adjusted by section
280F(d)(7). The final regulations also provide that, under this rule,
with respect to a vehicle placed in service in or after 1989, the
limitation on value is $12,800, as adjusted under section 280F(d)(7).
In other words, under the final regulations, the maximum value of a
vehicle for use of the vehicle cents-per-mile valuation rule is the
base value of $12,800, as adjusted annually under section 280F(d)(7)
since 1989. As with the fleet-average valuation rule, beginning in
2005, the IRS calculated the price inflation adjustment for trucks and
vans separately from cars. See Rev. Proc. 2005-48. For 2017, the year
prior to the enactment of the Act, the maximum value for use of the
vehicle cents-per-mile valuation rule was $15,900 for a passenger
automobile and $17,800 for a truck or van. See Notice 2017-03.
Section 1.61-21(e)(5)(i) states that an employer must adopt the
vehicle cents-per-mile valuation rule for a vehicle to take effect by
the first day on which the vehicle is used by an employee of the
employer for personal use (or, if another special valuation rule called
the commuting valuation rule of Sec. 1.61-21(f) is used when the
vehicle is first used by an employee of the employer for personal use,
the first day on which the commuting valuation rule is not used).
Section 1.61-21(e)(5)(ii) also provides, in part, that once the vehicle
cents-per-mile valuation rule has been adopted for a vehicle by an
employer, the rule must be used by the employer for all subsequent
years in which the vehicle qualifies for use of the rule, except that
the employer may, for any year during which use of the vehicle
qualifies for the commuting valuation rule of Sec. 1.61-21(f), use the
commuting valuation rule with respect to the vehicle.
3. Tax Cuts and Jobs Act Changes and the Maximum Vehicle Values for
2018 and 2019
The Act made the following amendments to the Code:
(1) For owners of passenger automobiles, section 280F(a), as
modified by section 13202(a)(1) of the Act, imposes dollar limitations
on the depreciation deduction for the year the taxpayer places the
passenger automobile in service and for each succeeding year. The
amendments made by the Act substantially increase the maximum annual
dollar limitations on the depreciation deductions for passenger
automobiles. The new dollar limitations are based on the depreciation,
over a five-year recovery period, of a passenger automobile with a cost
of $50,000 (formerly $12,800).
(2) Section 11002(d)(8) of the Act amended section 280F(d)(7)(B)
effective for tax years beginning after December 31, 2017. Pursuant to
these amendments, the price inflation amount for automobiles (including
trucks and vans) is calculated using both the CPI automobile component
and the Chained Consumer Price Index for All Urban Consumers (C-CPI-U)
automobile component.
a. Notice 2019-08--The Maximum Value for 2018
To implement the changes described above, Notice 2019-08, 2019-3
I.R.B. 354, provides interim guidance for 2018 on new procedures for
calculating the price inflation adjustments to the maximum vehicle
values for use with the special valuation rules under Sec. 1.61-21(d)
and (e) using section 280F(d)(7), as modified by sections 11002 and
13202 of the Act. Notice 2019-08 states that the Treasury Department
and the IRS anticipated that further guidance would be issued in the
form of proposed regulations and expected that the regulations would be
consistent with the rules set forth in Notice 2019-08.
Notice 2019-08 provides that, consistent with the substantial
increase in the dollar limitations on depreciation deductions under
section 280F(a), as modified by section 13202(a)(1) of the Act, the
Treasury Department and the IRS intend to amend Sec. 1.61-21(d) and
(e) to incorporate a higher base value of $50,000 as the maximum value
for use of the vehicle cents-per-mile and fleet-average valuation rules
effective for the 2018 calendar year. Notice 2019-08 further states
that the Treasury Department and the IRS intend that the regulations
would be modified to provide that this $50,000 base value will be
adjusted annually using section 280F(d)(7) for 2019 and subsequent
years. Accordingly, Notice 2019-08 provides that, for 2018, the maximum
value for use of the vehicle cents-per-mile and fleet-average valuation
rules is $50,000.
Finally, for 2018 and 2019, Notice 2019-08 provides that the
Treasury
[[Page 44260]]
Department and the IRS will not publish separate maximum values for
trucks and vans for use with the fleet-average and vehicle cents-per-
mile valuation rules. As noted above, the Act amended section
280F(d)(7)(B) to make inflation adjustments based on the CPI and C-CPI-
U automobile component. The C-CPI-U automobile component does not
currently have separate components for new cars and new trucks.
Accordingly, due to the lack of data, the Treasury Department and the
IRS will publish only one maximum value of a vehicle for use with the
vehicle cents-per-mile and fleet-average valuation rules beginning in
2019.
b. Notice 2019-34--The Maximum Vehicle Value for 2019
Notice 2019-34, 2019-22 I.R.B. 1257, provides that the inflation-
adjusted maximum value of an employer-provided vehicle (including cars,
vans and trucks) first made available to employees for personal use in
calendar year 2019 for which the vehicle cents-per-mile valuation rule
provided under Sec. 1.61-21(e), or the fleet-average valuation rule
provided under Sec. 1.61-21(d), may be applicable is $50,400. Notice
2019-34 also provides information about the manner in which the
Treasury Department and the IRS intend to publish this maximum vehicle
value in the future.
As noted in Notice 2019-34, Rev. Proc. 2010-51, 2010-51 I.R.B. 883,
provides rules for using optional standard mileage rates in computing
the deductible costs of operating an automobile for business,
charitable, medical, or moving expense purposes. Section 2.12(1) of
Rev. Proc. 2010-51 provides that the IRS publishes both the standard
mileage rates for the use of an automobile for business, charitable,
medical, and moving expense purposes, and the maximum standard
automobile cost that may be used in computing the allowance under a
fixed and variable rate (FAVR) plan, in a separate annual notice. See,
e.g., Notice 2019-02, 2019-02 I.R.B. 281.
Notice 2019-34 indicates that, in amending Sec. 1.61-21(d) and (e)
to incorporate a higher base value of $50,000 as the maximum value for
use with the vehicle cents-per-mile and the fleet-average valuation
rules, the IRS and Treasury Department expected that the maximum value
for use of those rules for 2019 and subsequent years would be the same
as the maximum standard automobile cost that may be used in computing
the allowance under a FAVR plan. Accordingly, Notice 2019-34 provides
that the maximum value for use with the fleet-average and vehicle
cents-per-mile valuation rules will be published in the annual notice
providing the standard mileage rates for use of an automobile for
business, charitable, medical, and moving expense purposes and the
maximum standard automobile cost that may be used in computing the
allowance under a FAVR plan.
Notice 2019-34 also provides that the Treasury Department and the
IRS intend to revise Sec. 1.61-21(d) to include a transition rule for
any employer that did not qualify to use the fleet-average valuation
rule prior to January 1, 2018 because the inflation-adjusted maximum
value requirement of Sec. 1.61-21(d)(5)(v)(D), as published by the IRS
in a notice or revenue procedure applicable to the year the automobile
was first made available to any employee of the employer, was not met.
In such a case, under the transition rule, the employer may adopt the
fleet-average valuation rule for 2018 or 2019, provided the
requirements of Sec. 1.61-21(d)(5)(v) are met for that year using the
maximum values set forth in Notice 2019-08 ($50,000) or Notice 2019-34
($50,400), respectively.
In addition, Notice 2019-34 states that the Treasury Department and
the IRS intend to revise Sec. 1.61-21(e) to provide a transition rule
for vehicles first made available to employees for personal use before
calendar year 2018, if the employer did not qualify under Sec. 1.61-
21(e)(5) to adopt the vehicle cents-per-mile valuation rule for the
vehicle on the first day on which the vehicle was used by the employee
for personal use because the fair market value of the vehicle exceeded
the inflation-adjusted limitation of Sec. 1.61-21(e)(1)(iii) as
published by the IRS in a notice or revenue procedure applicable to the
year the vehicle was first used by the employee for personal use. In
such a case, under the transition rule, the employer may first adopt
the vehicle cents-per-mile valuation rule for the 2018 or 2019 taxable
year based on the maximum fair market value of a vehicle for purposes
of the vehicle cents-per-mile valuation rule set forth in Notice 2019-
08 ($50,000) or Notice 2019-34 ($50,400), respectively.
Similarly, Notice 2019-34 also provides that the Treasury
Department and the IRS intend to amend Sec. 1.61-21(e) to provide a
transition rule for a vehicle first placed in service before calendar
year 2018 if the commuting valuation rule of Sec. 1.61-21(f) was used
when the vehicle was first used by an employee of the employer for
personal use, and the employer did not qualify to switch to the vehicle
cents-per-mile valuation rule on the first day on which the commuting
valuation rule was not used because the vehicle had a fair market value
in excess of the inflation-adjusted maximum permitted under Sec. 1.61-
21(e)(1)(iii) as published by the IRS in a notice or revenue procedure
applicable to the year the commuting valuation rule was first not used.
Under the transition rule, the employer may adopt the vehicle cents-
per-mile valuation rule for the 2018 or 2019 taxable year based on the
maximum fair market value of the vehicle for purposes of the vehicle
cents-per-mile valuation rule set forth in Notice 2019-08 or Notice
2019-34, respectively.
With respect to the transition rules described above, Notice 2019-
34 adds that, consistent with Sec. 1.61-21(e)(5), an employer that
adopts the vehicle cents-per-mile valuation rule must continue to use
the rule for all subsequent years in which the vehicle qualifies for
use of the rule, except that the employer may, for any year during
which use of the vehicle qualifies for the commuting valuation rule of
Sec. 1.61-21(f), use the commuting valuation rule with respect to the
vehicle.
Explanation of Provisions
These proposed regulations update the fleet-average and vehicle
cents-per-mile valuation rules described in Sec. 1.61-21(d) and (e),
respectively, to align the limitations on the maximum vehicle fair
market values for use of these special valuation rules with the changes
made by the Act to the depreciation limitations in section 280F.
Specifically, consistent with the substantial increase in the dollar
limitations on depreciation deductions under section 280F(a), these
proposed regulations increase, effective for the 2018 calendar year,
the maximum base fair market value of a vehicle for use of the fleet-
average or vehicle cents-per-mile valuation rule to $50,000. As
previously, the maximum fair market value of a vehicle for purposes of
the fleet-average and vehicle cents-per-mile valuation rule is adjusted
annually under section 280F(d)(7). This annual adjustment will be
calculated in accordance with section 280F(d)(7) as amended by the Act.
Consistent with Notice 2019-34, the Treasury Department and the IRS
expect that the inflation-adjusted maximum fair market value for a
vehicle for purposes of the fleet-average and vehicle cents-per-mile
valuation rules will be included in the annual notice published by the
IRS providing the standard mileage rates for the use of an automobile
for business, charitable, medical, and moving expense purposes and the
maximum standard automobile
[[Page 44261]]
cost for purposes of an allowance under a FAVR plan.
Furthermore, consistent with Notice 2019-34, the following
transition rules are included in these proposed regulations:
(1) With respect to the fleet-average valuation rule, if an
employer did not qualify to use the fleet-average valuation rule prior
to January 1, 2018 with respect to an automobile because the fair
market value of the automobile exceeded the inflation-adjusted maximum
value requirement of Sec. 1.61-21(d)(5)(v)(D), as published by the IRS
in a notice or revenue procedure applicable to the year the automobile
was first made available to any employee of the employer, the employer
may adopt the fleet-average valuation rule for 2018 or 2019, provided
the fair market value of the automobile does not exceed $50,000 on
January 1, 2018, or $50,400 on January 1, 2019, respectively.
(2) With respect to the vehicle cents-per-mile valuation rule, for
a vehicle first made available to any employee of the employer for
personal use before calendar year 2018, if an employer did not qualify
under Sec. 1.61-21(e)(5) to adopt the vehicle cents-per-mile valuation
rule on the first day on which the vehicle was used by the employee for
personal use because the fair market value of the vehicle exceeded the
inflation-adjusted limitation of Sec. 1.61-21(e)(1)(iii), as published
by the IRS in a notice or revenue procedure applicable to the year the
vehicle was first used by the employee for personal use, the employer
may first adopt the vehicle cents-per-mile valuation rule for the 2018
or 2019 taxable year with respect to the vehicle, provided the fair
market value of the vehicle does not exceed $50,000 on January 1, 2018,
or $50,400 on January 1, 2019, respectively. Similarly, if the
commuting valuation rule of Sec. 1.61-21(f) was utilized when the
vehicle was first used by an employee of the employer for personal use,
and the employer did not qualify to switch to the vehicle cents-per-
mile valuation rule on the first day on which the commuting valuation
rule was not used because the vehicle had a fair market value in excess
of the inflation-adjusted limitation of Sec. 1.61-21(e)(1)(iii), as
published by the IRS in a notice or revenue procedure applicable to the
year the commuting valuation rule was first not used, the employer may
adopt the vehicle cents-per-mile valuation rule for the 2018 or 2019
taxable year, provided the fair market value of the vehicle does not
exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019,
respectively. However, consistent with Sec. 1.61-21(e)(5), an employer
that adopts the vehicle cents-per-mile valuation rule must continue to
use the rule for all subsequent years in which the vehicle qualifies
for use of the rule, except that the employer may, for any year during
which use of the vehicle qualifies for the commuting valuation rule of
Sec. 1.61-21(f), use the commuting valuation rule with respect to the
vehicle.
Until amendments to the final regulations are published under
Treas. Reg. Sec. 1.61-21(d) and (e) in the Federal Register, taxpayers
may rely on the guidance provided in these proposed regulations.
Special Analyses
These proposed regulations are not subject to review under section
6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement
(April 11, 2018) between the Department of the Treasury and the Office
of Management and Budget regarding review of tax regulations.
It is hereby certified that these proposed regulations will not
have a significant economic impact on a substantial number of small
entities pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter
6). This certification is based on the fact that the proposed
regulations would update existing regulations to comport with the
statutory changes to section 280F made by the Act. Although the
proposed regulations might affect a substantial number of small
entities, the economic impact of the proposed regulations is not
expected to be significant.
Since the current vehicle valuation rules in the regulations are
tied to inflation adjustments under section 280F, the statutory changes
to section 280F necessitate modifications to the procedures for
calculating annual inflation adjustments to the maximum fair market
value of a vehicle permitted for use with the fleet-average and vehicle
cents-per-mile special valuation rules. These proposed revised special
valuation rules are consistent with the base values and methodology
used for section 280F purposes and simplify the determination of the
amount employers must include in employees' income and wages for income
and employment tax purposes for the personal use of employer-provided
vehicles. The modifications that would be made by these proposed
regulations to the maximum fair market value of a vehicle permitted for
use with the fleet-average and vehicle cents-per-mile special valuation
rules, and the transition rules provided in connection with these
proposed regulations, increase the number of employers and employees
that may take advantage of the special valuation rules, without
increasing costs to the employer.
Notwithstanding this certification that the proposed regulations
would not have a significant economic impact on a substantial number of
small entities, the Treasury Department and the IRS invite comments on
the impacts these proposed regulations may have on small entities.
Pursuant to section 7805(f), these proposed regulations will be
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Comments and Requests for Public Hearing
The Treasury Department and the IRS request comments on all aspects
of the proposed rules.
Before these proposed regulations are adopted as final regulations,
consideration will be given to any comments that are submitted timely
to the IRS as prescribed in this preamble under the ADDRESSES heading.
All comments are available at https://www.regulations.gov or upon
request. If a public hearing is scheduled, notice of the date, time,
and place of the public hearing will be published in the Federal
Register.
Drafting Information
The principal author of these regulations is Gabriel Minc of the
Office of the Associate Chief Counsel (Employee Benefits, Exempt
Organizations, and Employment Tax). However, other personnel from the
IRS and the Treasury Department participated in their development.
Statement of Availability
The IRS Notices and Revenue Procedures cited in this preamble are
published in the Internal Revenue Bulletin (or Cumulative Bulletin) and
are available from the Superintendent of Documents, U.S. Government
Publishing Office, Washington, DC 20402, or by visiting the IRS website
at http://www.irs.gov.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is proposed to be amended as follows:
[[Page 44262]]
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.61-21 is amended by revising paragraph (d)(5)(v)(D),
adding paragraphs (d)(5)(v)(G) and (H), revising paragraph
(e)(1)(iii)(A), revising paragraph (e)(5)(i), and adding paragraphs
(e)(5)(vi) and (e)(6), to read as follows:
Sec. 1.61-21 Taxation of fringe benefits.
* * * * *
(d) * * *
(5) * * *
(v) * * *
(D) Limitations on use of fleet-average rule. The rule provided in
this paragraph (d)(5)(v) may not be used for any automobile the fair
market value of which (determined pursuant to paragraphs (d)(5)(i)
through (iv) of this section as of the first date on which the
automobile is made available to any employee of the employer for
personal use) exceeds $50,000, as adjusted by section 280F(d)(7). The
first such adjustment shall be for calendar year 2019. In addition, the
rule provided in this paragraph (d)(5)(v) may only be used for
automobiles that the employer reasonably expects will regularly be used
in the employer's trade or business. For rules concerning when an
automobile is regularly used in the employer's business, see paragraph
(e)(1)(iv) of this section.
* * * * *
(G) Transition rule for 2018 and 2019. Notwithstanding paragraph
(d)(5)(v)(B) of this section, an employer that did not qualify to use
the fleet-average valuation rule prior to January 1, 2018 with respect
to any automobile (including a truck or van) because the fair market
value of the vehicle exceeded the inflation-adjusted maximum value
requirement of paragraph (d)(5)(v)(D) of this section, as published by
the Service in a notice or revenue procedure applicable to the year the
vehicle was first made available to any employee of the employer, may
adopt the fleet-average valuation rule for 2018 or 2019 with respect to
the vehicle, provided the fair market value of the vehicle does not
exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019,
respectively.
(H) Applicability date. Paragraphs (d)(5)(v)(D), and (G) of this
section apply to taxable years beginning on or after [INSERT DATE OF
PUBLICATION OF THE FINAL RULE IN THE Federal Register]. Notwithstanding
the first sentence of this paragraph (d)(5)(v)(H), any taxpayer may
choose to apply paragraph (d)(5)(v)(G) of this section beginning on or
after January 1, 2018.
* * * * *
(e) * * *
(1) * * *
(iii) * * *
(A) In general. The value of the use of an automobile (as defined
in paragraph (d)(1)(ii) of this section) may not be determined under
the vehicle cents-per-mile valuation rule of this paragraph (e) for a
calendar year if the fair market value of the automobile (determined
pursuant to paragraphs (d)(5)(i) through (iv) of this section as of the
first date on which the automobile is made available to any employee of
the employer for personal use) exceeds $50,000, as adjusted by section
280F(d)(7). The first such adjustment shall be for calendar year 2019.
* * * * *
(5) * * *
(i) Use of the vehicle cents-per-mile valuation rule by an
employer. An employer must adopt the vehicle cents-per-mile valuation
rule of this paragraph (e) for a vehicle to take effect by the first
day on which the vehicle is used by an employee of the employer for
personal use (or, if the commuting valuation rule of paragraph (f) of
this section is used when the vehicle is first used by an employee of
the employer for personal use, the first day on which the commuting
valuation rule is not used).
* * * * *
(vi) Transition rule for 2018 and 2019. For a vehicle first made
available to any employee of the employer for personal use before
calendar year 2018, if an employer did not qualify under this paragraph
(e)(5) to adopt the vehicle cents-per-mile valuation rule on the first
day on which the vehicle is used by the employee for personal use
because the fair market value of the vehicle exceeded the inflation-
adjusted limitation of paragraph (e)(1)(iii), as published by the
Service in a notice or revenue procedure applicable to the year the
vehicle was first used by the employee for personal use, may first
adopt the vehicle cents-per-mile valuation rule for the 2018 or 2019
taxable year, provided the fair market value of the vehicle does not
exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019,
respectively. Similarly, for a vehicle first made available to any
employee of the employer for personal use before calendar year 2018, if
the commuting valuation rule of paragraph (f) of this section was used
when the vehicle was first used by the employee for personal use, and
the employer did not qualify to switch to the vehicle cents-per-mile
valuation rule of this paragraph (e) on the first day on which the
commuting valuation rule of paragraph (f) of this section was not used
because the vehicle had a fair market value in excess of the inflation-
adjusted limitation of paragraph (e)(1)(iii) of this section, as
published by the Service in a notice or revenue procedure applicable to
the year the commuting valuation rule was first not used, the employer
may adopt the vehicle cents-per-mile valuation rule for the 2018 or
2019 taxable year, provided the fair market value of the vehicle does
not exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019,
respectively. However, in accordance with paragraph (e)(5)(ii) of this
section, an employer that adopts the vehicle cents-per-mile valuation
rule pursuant to this paragraph (e)(5)(vi) must continue to use the
rule for all subsequent years in which the vehicle qualifies for use of
the rule, except that the employer may, for any year during which use
of the vehicle qualifies for the commuting valuation rule of paragraph
(f) of this section, use the commuting valuation rule with regard to
the vehicle.
(6) Applicability date. Paragraphs (e)(1)(iii)(A) and (e)(5)(i),
and (vi) of this section apply to taxable years beginning on or after
[INSERT DATE OF PUBLICATION OF THE FINAL RULE IN THE Federal Register].
Notwithstanding the first sentence of this paragraph (e)(6), any
taxpayer may choose to apply paragraph (e)(5)(vi) of this section
beginning on or after January 1, 2018.
* * * * *
Kirsten Wielobob,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2019-18044 Filed 8-22-19; 8:45 am]
BILLING CODE 4830-01-P