11-P-033 Employee Taxability of State-Owned or Leased Vehicles (Supersedes 11-P-018)

DATE:	June 27, 2011
SUBJECT:	Employee Taxability of State-Owned or Leased Vehicles
EFFECTIVE DATE:	July 1, 2011
CONTACT:	Kathy Ogle	(785) 296-2290	Kathy.Ogle@da.ks.gov
APPROVAL:
SUMMARY:	IRS Changes Cents-Per-Mile Valuation Rule for Final Six Months of Calendar Year 2011

The Internal Revenue Service (IRS) has increased the standard mileage rate from 51 cents to 55.5 cents beginning July 1, 2011, through December 31, 2011 under the Cents-Per-Mile method of valuing an employee’s personal (commuting) use of a state-owned or leased vehicle.  The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile.  The Cents-Per-Mile valuation is one of several methodologies that can be used to calculate fringe benefit income.  See Informational Circular No. 05-P-023*.  Using this methodology, fringe benefit income is calculated by multiplying the 55.5 cents rate by the number of personal (commuting) miles driven by the employee in the state-owned or leased vehicle.  To be eligible to use the Cents-Per-Mile method, at least 50% of the vehicle’s total mileage is used for the employer’s trade or business, or the vehicle is primarily used by employees and the total mileage for the vehicle exceeds 10,000 miles per year.  The Cents-Per-Mile method may not be used for ‘luxury’ vehicles.  If a vehicle is first made available to an employee for personal (commuting) use in calendar year 2011 and the agency wishes to use the Cents-Per-Mile method, the fair market value of the vehicle cannot exceed $15,300 for a car (unchanged from 2010), and $16,200 for a passenger truck or van (up from $16,000 in 2010).  Agencies and employees are also reminded that the only personal use of a state-owned or leased vehicle allowed under state law is to commute between the employee’s work station and home, and then in only limited situations.

Please note that this Informational Circular does not impact the State’s privately owned vehicle mileage reimbursement rate. 

*Informational Circular No. 05-P-023 contains an incorrect K.A.R. reference number in the next to the last paragraph of the POLICY section.  The reference should be:  Kansas Administrative Regulation 1-17-2a(b)(1).

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