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Employer-Provided Cell Phones Removed from Listed Property

September 23, 2010

As part of legislation including $12 billion in tax relief aimed at helping small businesses, Congress has passed legislation removing employer-provided cell phones from the definition of listed property.  The House by a vote of 237-187 has passed H.R. 5297, the Small Business Lending Funding Act, as approved by the Senate on September 16. President Obama is expected to sign the measure into law shortly.

The effective date of the provision is January 1, 2010.     

In response to the outpouring of employer opposition (including colleges and universities) to taxability and complicated recordkeeping requirements related to personal use of employer-provided cell phones, this year Treasury and IRS were very vocal in pushing Congress to simplify this issue by removing cellular phones and similar telecommunications devices (smart phones) from the definition of listed property, which the bill does.    

Considering the Administration's strong support for getting rid of the taxability of employer-provided cellular phones, further interest in this issue on the Service's part is unexpected. An explanation of the provision in the Joint Committee on Taxation technical explanation of the bill begins at page 26.

The text of footnote #90 provides insight into Congressional intent to enable Treasury to allow the non-taxability of cell phones under two exceptions in the tax code:

The provision does not affect Treasury's authority to determine the appropriate characterization of cell phones as a working condition fringe benefit under section 132(d) or that the personal use of such devices that are provided primarily for business purposes may constitute a de minimis fringe benefit, the value of which is so small as to make accounting for it administratively impracticable, under section 132(e).    

Working with the both the higher education community as well as larger coalitions in favor of this provision, NACUBO has pushed for this change in the law for a few years.  While it is a win, it is not without some administrative hurdles and uncertainty for college and university business officers.

It is unclear if and when IRS will provide guidance following enactment of the legislation to assist employers with the many questions they have related to moving forward on these issues.  NACUBO is working to provide additional information with options and strategies for institutions that may be making adjustments to policies and practices in light of the new law.


Mary Bachinger
Director, Tax Policy