STATE OF CONNECTICUT
THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775
MEMORANDUM NO. 2004-04
January 20, 2004
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 2004|
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.
III. STATE'S VEHICLE USE POLICY
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 the Department of Administrative Services General Letter No. 115 dated November 1997.
IV. VALUATION METHODS
The following methods are to be used in valuing the taxable benefit:
V. CALCULATION OF THE TAXABLE BENEFIT
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 $127,300 in 2004.
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:
|$214/month for 3 months||=||$642.00|
|20 miles/day at 5.5 cents/mile|
|multiplied by 60 days||=||$ 66.00|
|TOTAL QUARTERLY AMOUNT||=||$708.00|
|20 miles/day at 37.5 cents/mile by 60 days|
|TOTAL QUARTERLY AMOUNT||=||$450.00|
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.
VI. EXCEPTIONS (Applicable to Eligible Control and Non-Control Employees)
The following categories of vehicle use are not presently subject to taxation:
VII. REPORTING REQUIREMENTS
Vehicle Usage Fringe Benefit Computation Records
VIII. AGENCY RESPONSIBILITY
Agencies are to notify concerned employees of the preceding requirements and the definition of control employee and the 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, 2003 through October 31, 2004.
Questions may be directed as follows:
Computation and Benefits: Policy Services Division, (860) 702-3440;
Payroll Procedures: Payroll Services Division, (860) 702-3463;
On-line Home to Office Usage: DAS, Financial Services Center, (860) 713-5003.
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