Seal of the Office of the State Comptroller

MEMORANDUM NO. 98-4

January 30, 1998

TO THE HEADS OF ALL STATE AGENCIES

ATTENTION: Chief Administrative and Fiscal Officers, Business Managers, and Payroll and Personnel Officers
SUBJECT: Calculation of the Taxable Benefit of the Non-Business Use of State-Provided Vehicles, Calendar Year 1998
  1. PURPOSE AND APPROACH
    When a state employee commutes in or uses a state vehicle for personal business, certain tax consequences result. The Internal Revenue Service views the personal use as a taxable benefit to the employee and has established guidelines on how to determine how much the dollar value of that benefit would be. In certain circumstances, the State of Connecticut also charges for the personal use of state vehicles.

    This memorandum is being issued to:

  2. AUTHORITY
    Federal Public Law 99-44, Internal Revenue Code (IRC), Section 61 states: An employee may use a special valuation rule only if the employer uses that same rule. For the 1998 calendar year, the state will continue the use of the special valuation rules previously established.
  3. VALUATION METHODS
    The following methods are to be used in valuing the taxable benefit:
    1. Commuting Value Method - for use by a non-control employee only (defined in Section IV);

      Personal commutation to work is valued at a daily commuting rate of $1.50 for each one-way trip or ($3.00 round trip).

    2. Lease Value Method - A monthly value of $193.00 per 30-day month plus 5.5 cents per mile for gasoline is assessed; or
    3. Vehicle Cents-per-Mile - Personal miles are valued at 32.5 cents per mile. If the employer does not supply gasoline, the rate is reduced by 5.5 cents, to 27 cents per mile.

      NOTE: Special rules may apply when using each of these methods. Once one of the valuation methods is elected, the employee must use it for all subsequent years unless the qualification rules are not met.

  4. CALCULATION OF THE TAXABLE BENEFIT
    To calculate the value of his/her commuting or personal miles an employee would:
    1. Select the Appropriate Method

      Control employees can choose only the lease value or the cents-per-mile methods for calculation of the taxable benefit. All other employees must use the commuting value method.

      A control employee is defined as:

      1. an elected official; or
      2. an employee whose annual compensation will equal or exceed $110,700 in 1998; or
      3. an employee who is allowed to use a State-owned vehicle for non-business use in addition to home-to-office travel (Special State of Connecticut definition).
    2. Perform the Calculation
      Example 1: Commuting Value Method (used by all non-control employees)

      The employee commuted round trips to work for 60 days during the reporting quarter. The rate of $3.00/day is multiplied by 60 days = $180.00.

      Example 2: Control employee using lease value or cents-per-mile

      The employee has been assigned a state vehicle for the first time. She commutes to work 20 miles round trip for 60 days in the quarterly reporting period. She may choose one method of valuing the use of the vehicle. A comparison of the methods follows:

      • Lease Value
      $193/month for 3 months = $ 579.00
      20 miles/day at 5.5 cents/mile multiplied by 60 days = $ 66.00
      TOTAL QUARTERLY AMOUNT $ 645.00
      • Cents-Per-Mile
      20 miles/day at 32.5 cents/mile by 60 days
      TOTAL QUARTERLY AMOUNT $ 390.00

      In this example the cents-per-mile method is the least costly. However, once a method is selected, the employee must continue with that method regardless of his/her changes in circumstances.

    3. Net Out Any Reimbursement Amount

      Net out any amount that has been paid to the state as reimbursement for personal use (if the amount paid the state exceeds the taxable benefit for the tax year, the benefit equals zero. Credit amounts can not be carried forward).

      In example 1 above, the employee does not reimburse the state for the commuting use of the vehicle; therefore, a value of $180.00 will be added to the employee's reported wages.

      In example 2 above, if the employee reimbursed the state for Home-to-Office travel, at a rate of 2.50 per day for 60 days which equals $150.00, the net reportable benefit is $240.00 ($390.00 - 150.00).

      The Commissioner of the Department of Administrative Services (DAS) issues a memorandum concerning the rates for the reimbursement of Home-to-Office travel. Not all employees are required to reimburse the state. Questions concerning State reimbursement should be addressed to DAS.

    4. Submit Paperwork

      Submit the required paperwork to his/her business office for inclusion in a payroll transaction.

      Special forms are available to facilitate this process. Certain categories of vehicle use are exempt from taxation. Please refer to Comptroller's Memoranda Nos. 86-13 and 89-55 or the Comptroller's Policy Manual, Section VIII, Taxation of Vehicles, for details.

  5. AGENCY RESPONSIBILITY
    Agencies are to notify concerned employees of the preceding requirements and of the change to the definition of control employee, lease value rate, and cents-per-mile valuation rate.

    Agencies must continue to maintain the records necessary to properly determine and report on the dollar value of the vehicle use benefit for the period November 1, 1997 through October 31, 1998.

  6. QUESTIONS

    Questions may be directed to the Office of the State Comptroller as follows:

    Computation and Benefits: Policy Services Division, 860-702-3440;

    Payroll Procedures: Payroll Services Division, 860-702-3463;

    Reimbursement Requirements: DAS, Director of State Fleet Operations, 566-5940.

 

NANCY WYMAN
STATE COMPTROLLER

NW:EL:jrs

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