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Legislation to Ease Tax Treatment of Employer-Provided Cell Phones

March 3, 2008

Bills have recently been introduced in both houses of Congress to update the tax treatment of employer-provided cell phones and devices such as Blackberries and Treos. Under current law, employers, including colleges and universities, are required to maintain extensive records related to institution-provided cell phones for employees’ business use. As an alternative to this recordkeeping requirement, institutions may provide a taxable allowance for employees to cover the purchase and business use of the phone. If adopted, the proposed legislation would allow employers to provide employees these devices without either maintaining detailed usage records or generating taxable income to the employee. NACUBO supports the legislation, and sent a communication in late February informing institutions about it. 

Background.  Back in 1989 when cell phones were novel technology, expensive, and viewed typically as corporate executive perquisites, Congress enacted legislation adding them to items considered "listed property" under tax code provisions addressing fringe benefits. Items deemed listed property are employer-provided items that require detailed documentation to substantiate business use by employees, such as automobiles.
 
Almost twenty years later, and after dramatic changes in the availability and affordability of cell phones, those old rules are still in effect and have been applied by IRS agents during examinations of institutions. Campuses unable to produce voluminous detailed logs tracking employees’ individual calls have been subject to tax liability.

House. House Ways and Means Committee members Reps. Sam Johnson (R-TX) and  Earl Pomeroy (D-ND) have introduced H.R. 5450, the Modernize Our Bookkeeping In the Law for Employee’s (MOBILE) Cell Phone Act, which removes cell phones and Blackberries/digital devices from being characterized as listed property in the tax code. Currently, the bill has the support of the Association of College and University Telecommunications Administrators (ACUTA), as well as broad support from a number of employer groups.  

Senate. Senator John Kerry (D-MA), a member of the Finance Committee, introduced a companion bill (S. 2668) to H.R. 5450.  The bill is co-sponsored by Senator John Ensign (R-NV), also a member of the Finance Committee. 

At press time, no action had taken place on either bill.

Resources:  text of H.R 5450  

Mary M. Bachinger, director, tax policy, mary.bachinger@nacubo.org
202.861.2581