Pension & Benefits News Proposed regulations update fleet-average and vehicle cents-per-mile base valuation amounts
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Friday, September 6, 2019

Proposed regulations update fleet-average and vehicle cents-per-mile base valuation amounts

By Pension and Benefits Editorial Staff

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. 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.

Tax Cuts Act increased depreciation limits. The Tax Cuts and Job Act (P.L. 115-97) substantially increased the maximum annual dollar limitations on the depreciation deductions for passenger automobiles. The new dollar limitations are based on the depreciation, over a five-year recovery period, of a passenger automobile with a cost of $50,000. As a result, the IRS issued Notice 2019-8, I.R.B. 2019-3, 354, providing that it intends to amend Reg. §1.61-21(d) and (e) to:

  • incorporate a higher base value of $50,000 as the maximum value for use of the vehicle cents-per-mile and fleet-average valuation rules effective for the 2018 calendar year; and
  • adjust the $50,000 base value annually for inflation in 2019 and subsequent years.

Additionally, the Notice provides that the IRS will not publish separate maximum values for trucks and vans for use with the fleet-average and vehicle cents-per-mile valuation rules. For tax years beginning after December 31, 2017, inflation adjustments for these purposes are calculated using both the consumer price index (CPI) automobile component and the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) automobile component (Code Sec. 280F(d)(7)(B)). The C-CPI-U automobile component does not currently have separate components for new cars and new trucks.

The IRS later issued Notice 2019-34, I.R.B. 2019-22, 1257, to:

  • provide a 2019 inflation increase to $50,400 for these amounts; and
  • announce it would revise Reg. §1.61-21(d) to provide a transition rule for certain employers.

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

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