Effective January 1, 2010, the Small Business Jobs and Credit Act of 2010 removes cell phones and similar telecommunication equipment (such as PDAs, blackberry, smart phones and the like) from the "listed property" provisions of Internal Revenue Code section 274(d). This change eliminates the detailed substantiation requirements imposed on employers in order to take a business deduction for providing cell phones (and related calling/data plans) to their employees and also eliminates the detailed substantiation required for employees to exclude cell phones from gross income as a working condition fringe benefit.

Hopefully, this will eliminate the need for IRS cell phone audits (which has been a common target on employment tax audits). Further, we are hopeful that he IRS will issue guidance providing that cell phones (and related calling/data plans) to employees is a deductible business expense and generally constitutes either a (1) de minimis fringe benefit, or (2) a non-taxable working condition fringe (at least with respect to phones reasonably anticipated to be used primarily for work), which would result in tax-free treatment (and no more tracking/monitoring actual use).