Tax News

CCH (cch.taxgroup.com) reports:

  IRS Commissioner Douglas H. Shulman said on June 16 that the Service supports easing the listed property rules under Code Sec. 280F for employer-provided cell phones. Shulman's announcement came just one week after the IRS proposed simplifying the substantiation rules (Notice 2009-46; TAXDAY, 2009/06/08, I.1). Shulman also stressed that the IRS is not "cracking down" on employer-provided cell phones, contrary to some media reports.

Listed Property

  Under current rules, employer-provided cell phones used for business purposes are excluded from the employee's gross income and the cell phone expense is a deductible business expense for the employer if substantiation requirements are met. Personal use, however, is included in the employee's gross income. In Notice 2009-46, the IRS announced several proposals to simplify the substantiation rules. These included a minimal personal use method, a safe harbor method and a statistical sampling method.

  The IRS's announcement was welcomed by businesses and practitioners. "Businesses need flexibility," Karen Facer-Mee, CPA, president of the Greater Philadelphia Chapter of the Pennsylvania Institute of CPAs (PICPA), told CCH. "Employers have different cell phone usage among different departments. Cell phone use by the individuals in the sales department is going to be different from cell phone use by administrative personnel."

  At the same time, confusion arose whether the IRS was intending tougher enforcement of the current rules. "Some have incorrectly implied that the IRS is cracking down on employee use of employer-provided cell phones," Shulman said in a statement. "To the contrary, the IRS is attempting to simplify the rules and eliminate uncertainty for businesses and individuals."

Pending Legislation

  Shulman called on Congress to reform the listed property rules as they apply to cell phones. "Treasury Secretary Timothy Geithner and I ask that Congress act to make clear that there will be no tax consequence to employers or employees for personal use of work-related devices such as cell phones provided by employers." Shulman added that technological changes since 1989 have made the current rules obsolete.

  In the House, Rep. Sam Johnson, R-Tex., has introduced legislation (HR 690) to remove cell phones from the category of listed property under Code Sec. 280F. The bill has has 33 co-sponsors and has been referred to the House Ways and Means Committee. Sen. John Kerry, D-Mass., has introduced similar legislation (Sen 144) in the Senate; his bill has 45 co-sponsors and has been referred to the Senate Finance Committee.

  By George L. Yaksick, Jr., CCH News Staff

Statement of IRS Commissioner Shulman Regarding Employer-Provided Cell Phones