February 6, 2001


Attention: Chief Administrative and Fiscal Officers, Business Managers, Payroll and Personnel Officers

Calculation of the Taxable Benefit of the Non-Business Use of State-Provided Vehicles, Calendar Year 2001


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.

This memorandum is being issued to:


Effective January 1, 1986, Federal Public Law 99-44 mandates that an employee's personal use of an employer-owned or leased vehicle must be reported to the Internal Revenue Service as taxable income. "Personal use" is defined as any non-business use, including commuting from an employee's home to his or her worksite. The term "vehicle" means "any motorized wheeled vehicle manufactured primarily for use on public streets, roads and highways" and generally includes automobiles. Except for certain exceptions as set forth later in this memorandum, all State of Connecticut employees will be subject to taxation on any state vehicle use which is not documented as business use. State agencies will be responsible for implementing the applicable reporting requirements.

The following IRS requirements and other guidelines are set forth to assist agencies in determining those employees whose use of state vehicles is deemed taxable and in reporting the dollar value, by employee, of such benefits.


As stated by the three branches of government, the policy of the State of Connecticut basically prohibits personal use of state-owned/leased vehicles except for home-to-worksite travel as required by the employer. Under the State of Connecticut's written policy, no employee may use the vehicle for personal purposes other than de minimis use (e.g., a stop for lunch between two business appointments or deliveries). Refer to DAS General Letter No. 115 dated November 1997 (PDF format).


The following methods are to be used in valuing the taxable benefit:

A. Commuting Value Method -  for use by a non-control employee only (defined in Section V).

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

B. Lease Value Method - A monthly rate of $193.00 per 30-day month plus 5.5 cents per mile for gasoline is assessed; or a per diem rate of $25.76.

NOTE: If the vehicle is used more than seven days in a month, it is advantageous to use the monthly rate rather than the per diem rate.

C. Vehicle Cents-Per-Mile - Personal miles are valued at 34.5 cents per mile effective January 1, 2001. If the employer does not supply gasoline, the rate is reduced by 5.5 cents to 29 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.


To calculate the value of his or her commuting or personal miles an employee would:

A. Select the Appropriate Method

Control employees can choose only the lease value or the cents-per-mile methods for calculation of the taxable benefit.

A control employee is defined as:

a. an elected official; or

b. an employee whose annual compensation will equal or exceed $117,600 in 2001; or

c. 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).

All other employees must use the commuting value method.

B. 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 Leave Value or Cents-Per-Mile

The employee has been assigned a state vehicle for the first time. She commutes 20 miles to work 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



$ 645.00





20 miles/day at 34.5 cents/mile by 60 days





$ 414.00


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 despite any changes in his or her circumstances.

C. 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 cannot be carried forward.)

In Example 1 above, the employee does not reimburse the state for the commuting use of this 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 $264.00 ($414.00 - 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.

VI. EXCEPTIONS (Applicable to Eligible Control and Non-Control Employees)

The following categories of vehicle use are not presently subject to taxation:

1. Qualified Non-Personal Use Vehicles

The term "qualified non-personal use vehicle" is applied to any vehicle that, because of its nature, is not likely to be used more than a very limited (i.e., de minimis) amount for personal purposes.

Refer to Attachment "A" for a listing of "qualified non-personal use vehicles" that fall within this exception with explanatory information concerning the exception requirements for vans and trucks and the narrowly-defined requirements for "law enforcement officer".

2. Overnight Parking ("Garaging") of Vehicle at Approved State-Owned or Leased Facility

Taxation will not apply if an employee uses an approved state-owned or leased facility for the overnight "garaging" of an assigned state vehicle even though such facility was some distance from the employee's worksite and possibly close to his or her home. However, this exception is qualified by three stipulations: (a) a vehicle usage and parking location must make "good business sense" to the employer; (b) overnight parking location must be approved by the employer; and (c) if the driver transports one or more passengers from their home(s) to the worksite, such passengers are subject to taxation on the derived benefits.

3. De Minimis Use of Vehicle

According to Section 1.132-6 of the IRS Regulations, the term "de minimis fringe" means any property or service, the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer's employees) so small as to make accounting for it unreasonable or administratively impracticable.

The regulations give as an example of fringe benefit that is not excludable from gross income: the commuting use of an employer-provided automobile more than one day a month. The regulations also say that "the fact that the commuting use of an employer-provided vehicle more than one day a month is an example of a benefit not excludable as a de minimis fringe does not mean that the commuting use of a vehicle up to 12 times per year is excludable from gross income as de minimis fringe".


Vehicle Usage Fringe Benefit Computation Records

1. The Vehicle Usage Fringe Benefit Computation Records are:

Computation Record for Lease Value Method (Form CO-961);

Computation Record for Cents-Per-Mile Method (Form CO-960); and

Computation Record for Special Commuting Rate (Form CO-959).

These forms are now available through Vanguard at 860-563-1054. Agency needs will vary depending upon the agency's election of methods for control employees.

2. From the information on the Monthly Usage Report (Form CCP-40), the agency will then post data as needed to the Employee's Computation Record.

3. Follow instructions on the Computation Record to calculate the monthly value of the fringe benefit.

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

5. Retain the Computation Record and the documenting CCP-40 for the later of (a) three years or (b) until examination by the Auditors of Public Accounts.


Agencies are to notify concerned employees of the preceding requirements and 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, 2000 through October 31, 2001.


Questions may be directed 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, (860) 566-5940.





Attachment: Attachment A

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