The small business tax relief legislation just passed by Congress and signed by the president includes a long-awaited provision removing cell phones from “listed property” under federal tax law effective for tax years beginning after December 31, 2009. As a result, the stringent record-keeping requirements that have applied for decades will no longer apply to cell phones or similar devices.
The practical impact of the legislation likely will be that employers will be able to provide employees with cell phones primarily for business use on a tax-free basis, with little requirement to document the actual business vs. personal use. The law should result in cell phones being treated like any other pieces of equipment, such as regular telephones, for which detailed usage records are not required.
While the legislative change applies to all U.S. employers and employees, the impact on nonprofit organizations is especially important because violations of the record-keeping requirements for “listed property” by nonprofits can result in “automatic excess benefit transaction” penalties on the individuals involved.
The IRS is expected to issue guidance soon on the practical impact of the legislation, which may affect the specific manner in which employer-provided cell phones are treated for tax purposes.
Churches that would like to change their plans for providing cell phones to employees may wish to wait for IRS guidance to determine the best way to approach this issue. While awaiting IRS guidance, churches may want to use the time to begin shopping carriers and comparing prices for group plans.