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koFlew IRS rules �FiSCaj Conditions
<br />n benefits has
<br />impact on cities demand for servid
<br />_ — by Laurie Micciche
<br />The Internal Revenue Service last""
<br />•' ` "•
<br />Wednesday held a pmss conference to
<br />CHANGE IN -
<br />announcethepromulgationoflemporary
<br />regulations to give employers and em•
<br />COb1MOTYCOMMONS '
<br />-
<br />ployees guidance on how to calculate in.
<br />come tax liability on certain fringe bene•
<br />r
<br />fits, such as personal use of municipal
<br />vehicles—induding police cruisers and
<br />a
<br />is sf 4e
<br />utus,.ate
<br />ether type of es
<br />., ��,..�...
<br />The new rules detail various means by
<br />detail
<br />• ••^ �
<br />• ..,,,.,, ��r,
<br />which to calculate the "fair market value'
<br />of taxable noncash benefits, such as the
<br />..e....._
<br />personal use by a municipal employee of
<br />�....-...._�..
<br />a city -owned vehicle. Under the regula•
<br />•••. -•--•
<br />Hone, dries must conform to a timetable
<br />����"
<br />for withholding 20
<br />g permtofthevelueof
<br />••-"`"
<br />+� •-•.
<br />an employee's taxable non-wh benefits.
<br />�"-""" "�
<br />4�..,�.
<br />The regulations, which are autortutti•
<br />ally in effect from the iiiiia tit of en•
<br />^. snsacemen , vlas be shred a m di-
<br />heal as a result of public comment.
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<br />Among the specific requirements with
<br />which cities must conform sire a r
<br />Qom. f„
<br />The 9*h Congress b,
<br />rule for company and municipal cars used
<br />a used
<br />by employees. The amount of taxable
<br />pal program. Tie 9S
<br />income attributed to en empkryee is di-
<br />by Frank Shaholh yl r the reaulho
<br />sede
<br />redly related to the proportion of ar
<br />revenue sharing, e
<br />mileage spent in personal travel. The IRS
<br />The 991h Congress started work a day ment block grants (
<br />proposes a safe harbor rude whereby the
<br />before it was officially sworn in last opment action gee
<br />regulations establish a "fair market
<br />Inursdayasthe Senate Finance Commit• municipal wasiewai
<br />value" for the auto in question, determine
<br />tee held hearings on the need for federal construction grants,
<br />an annual value (30% in the first year),
<br />deficit reductions. grants, and highway
<br />and then derives the taxable income to
<br />The Finance Committee hearing lation programs.
<br />the employee by taking the percentage of
<br />marked the Iasi day Kansas' Sen. Robert In the first senior
<br />personal use.
<br />Dade (R) chaired the Senate tax panel again on deficits,
<br />The rules establish a separate safe har•
<br />before officially assuming his new status and economic deveh
<br />bor rule for commuting vehicles—i.r.:
<br />as Senate Majority Leader. The hearing to reduce the defin
<br />where police of.icers are entitled to take
<br />demonstrated that deficit teduction will rate of poverty. Th,
<br />thevcruisers home, bul are not pennittLd
<br />remain Dole's lop prindty, and that Dole sider whether to re:
<br />any personal ese. In these situations, if a
<br />will keep the tax code in mind as a means the municipal was,
<br />car is used for these commuting purposes
<br />to deal with deficits. grant program to en
<br />at least 15 days a year, then. the IRS
<br />City leaders will watch this new Con• with federal envin
<br />imputes a benefit the equivalent of fl a
<br />gross confront virtually every key munici•
<br />day to the employee. In other words, V a
<br />mutingty com-
<br />rdt200
<br />L p
<br />The deductibilit7
<br />puyee rposes
<br />muting purpaees only 200 days a year,
<br />days a year,
<br />of s{•
<br />1• {+
<br />the city should Impute additional Income
<br />to that employee of $1 x 200 days -
<br />This la thrsrrnnJ s
<br />execility
<br />by BobDllger
<br />$800. The city must then withhold 20%
<br />IhrdisIsI
<br />n(srr
<br />thedediltral
<br />of that S800, or f 160 lo quarterly with-
<br />rasabir incurs
<br />Depending on how one views the from a more lengthy
<br />holdings.
<br />The rules Instruct employers to alcu-
<br />dexluehbJity of state and local luxes from later this year bu Nb
<br />Wahtr federal income, it either reduces
<br />late fringe -benefit taxable income quar•
<br />federal income lax burdens or reduces
<br />terlyfor withholding purposes. Within 30
<br />slate and local tax burdens, halfofhis state and I
<br />days of the end of a calendar quartL:, the
<br />hit example, a taxpayer in the 50 per. cutting his slate and
<br />employer must withhold the flat 20 per-
<br />rent federal marginal income tax bracket half. Similarly, laxp,
<br />rem of the value of the taxAb!e ftlrtg„
<br />with a Slim no fewer}i inrime tax. oh. Lq,l fMeral tneUrm• t
<br />benefit earned during the previous quit-
<br />ligation and a $10,000 state and local tax deductibility as a me
<br />Irr. This withholding requirement be
<br />obligation an view deduchbilityas a way and local lax burden
<br />comes mandatory for the second calendar
<br />toreduce his federal income tax obliga• No matter how tax
<br />quarter of1985Qune30,1985),sothat
<br />tionby$3,000(50permntofhis state and ibility, either as a fed,
<br />cibr. must begin compliance stern as of
<br />local tax obligation). Or, a taxpayer in the or as a state and I
<br />April 1, 1985 in order to insure meeting
<br />same mmomic circumstances can view elimination of deduct
<br />'he June 30 withholding requirement. U
<br />drJueobdity as a federal rebate equal to more difficult fur sta
<br />
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