06-P-005 Employee Taxability of State-Owned or Leased Vehicles (Revises 05-P-023)
|DATE:||September 16, 2005|
|SUBJECT:||Employee Taxability of State-Owned or Leased Vehicles|
|EFFECTIVE DATE:||September 1, 2005|
|CONTACT:||Kathy Ogle||(785) 296-2290||Kathy.Ogle@da.state.ks.us|
|SUMMARY:||IRS Changes to Cents-Per-Mile Valuation Rule for End of Calendar Year 2005|
The Internal Revenue Service (IRS) has increased the mileage rate from 40.5 cents (for January 1, 2005 through August 31, 2005) to 48.5 cents (for September 1, 2005 through December 31, 2005) under the Cents-Per-Mile method of valuing an employee's personal (commuting) use of a state-owned or leased vehicle. The new rate is effective for the last four months of 2005 in a response by the IRS to the recent gas price increases. The Cents-Per-Mile valuation is one of several methodologies that can be used to calculate fringe benefit income. Using this methodology, fringe benefit income is calculated by multiplying the 48.5 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 2005 and the agency wishes to use the Cents-Per-Mile method, the fair market value of the vehicle cannot exceed $14,800. 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.