Pension & Benefits News IRS proposed regs update fleet-average and vehicle cents-per-mile base valuation amounts
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Friday, October 4, 2019

IRS proposed regs update fleet-average and vehicle cents-per-mile base valuation amounts

By Pension and Benefits Editorial Staff

IRS proposed regulations increase a vehicle’s maximum value for eligibility to use the fleet-average valuation rule or the vehicle cents-per-mile valuation rule, implementing changes made by the Tax Cuts and Job Act (P.L. 115-97). The increase to $50,000 is effective for the 2018 calendar year. The maximum value is adjusted annually for inflation after 2018. The proposed regulations provide transition rules for certain employers. Taxpayers may rely on the proposed regulations until final regulation amendments are published in the Federal Register.

Transition rules. The proposed regulations include the following transition rules.

Fleet-average valuation rule. If an employer did not qualify to use the fleet-average valuation rule prior to January 1, 2018 because the automobile’s fair market value exceeded the inflation-adjusted maximum value requirement for the year the automobile was first made available to the employee for personal use, the employer may adopt the fleet-average valuation rule for 2018 or 2019, provided the fair market value of the automobile does not exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019.

Vehicle cents-per-mile valuation rule. An employer that did not qualify to adopt the vehicle cents-per-mile valuation rule for a vehicle first made available to an employee for personal use before calendar year 2018 may first adopt the vehicle cents-per-mile valuation rule for the 2018 or 2019 tax year for the vehicle if:

  • the employer did not qualify to adopt the vehicle cents-per-mile valuation rule because the vehicle’s fair market value exceeded the inflation-adjusted limitation for the year the vehicle was first used by the employee for personal use; and
  • the vehicle’s fair market value does not exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019.

Similarly, if the employer first used the commuting valuation rule, the employer may adopt the vehicle cents-per-mile valuation rule for the 2018 or 2019 tax year if:

  • the employer did not qualify to switch to the vehicle cents-per-mile valuation rule on the first day on which the commuting valuation rule was not used because the vehicle’s fair market value exceeded the inflation-adjusted limitation for the year the commuting valuation rule was first not used; and
  • the fair market value of the vehicle does not exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019.

SOURCE: 84 FR 44258.

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