Final Regulations

Yesterday, December 9, the IRS released final regulations implementing the Section 274(a)(4) and 274(l) deduction disallowances, adopted as part of the 2017 Tax Cuts and Jobs Act.  Section 274(a)(4) disallows employer deductions for the cost of providing qualified transportation fringe (“QTF”) benefits provided to employees.  Section 274(l) provides a broader deduction disallowance for expenses paid for, or to reimburse for, employees’ trips between their residences and their places of employment.  Both deduction disallowances took effect for tax years beginning after December 31, 2017.

The final regulations largely follow the approach taken in the proposed regulations issued in June, which built on earlier guidance provided in Notice 2018-99.  Treasury Regulation § 1.274-13 addresses the deduction disallowance under section 274(a)(4) for the cost of QTFs provided under section 132(f), such as qualified parking, transit passes, and other tax-free commuting benefits.  Treasury Regulation § 1.274-14 addresses the deduction disallowance under section 274(a).
Continue Reading IRS Issues Final Regulations on Commuting Expenses Deduction Disallowances

As previewed by the recent final Form W-4 regulations published in October (see earlier coverage), the IRS released a draft of Publication 15-T (Federal Income Tax Withholding Methods) on November 17.  The publication provides a new computational method for employers who must continue to rely on pre-2020 Forms W-4 to determine the amount of…

For decades, employers and employees have been effectively precluded from using two of the handiest special valuation rules—the fleet-average and vehicle cents-per-mile valuation rules—to value employees’ personal use of employer-provided vehicles.  The 1989 fringe benefit regulations imposed modest maximum vehicle values ($16,500 and $12,800, respectively, as adjusted for inflation) to limit the use of the rules, which have not kept pace with rising vehicle costs.

When the 2017 Tax Cuts and Jobs Act (“TCJA”) increased the dollar limitations on the depreciation deductions for luxury automobiles under section 280F(a), the permitted maximum value of a vehicle, when using either special valuation rule, increased to $50,000, which is adjusted for inflation beginning with calendar year 2019.  On February 5, 2020, Treasury published final regulations amending Treasury Regulation § 1.61-21 to align the increased limitations on the maximum vehicle fair market values with the TCJA changes.  Consistent with earlier guidance in proposed regulations, Notice 2019-08, and Notice 2019-34, the final regulations also provide transition rules for employers who desire to retroactively use either special value rule for 2018 or 2019, if the vehicle would have met the increased maximum value requirement in the year the vehicle was first made available to any employee of the employer.
Continue Reading New Treasury Regulations Ease Payroll Administration Related to Employer-Provided Vehicles