The use of employer-provided cell phones is no longer subject to the burdensome substantiation rules previously required to be met for employees to exclude from income the benefit of the business use of such phones. As part of the Small Business Jobs Act of 2010 (SBJA), cell phones have been removed from the definition of “listed property” for purposes of Internal Revenue Code section 274(d), under which employees were required to keep detailed records of their personal and business use of the phones. The change is effective for tax years beginning after December 31, 2009. In its technical explanation of the SBJA, the Joint Committee on Taxation indicated that the law did not affect the IRS’s authority to determine the appropriate treatment of employer-provided cell phones as a working condition fringe benefit or a de minimis fringe benefit.
Prior to the passage of the SBJA, the IRS issued Notice 2009-46, which sought comments on proposed simplified procedures for substantiating the business use of employer-provided cell phones. The IRS has not yet provided updated guidance as to what substantiation procedures apply in determining that the benefit of an employer-provided cell phone is excludable from an employee’s income as a working condition fringe benefit or a de minimis fringe benefit. Until such guidance is issued, employers and employees should continue to endeavor to meet the existing requirements under the working condition fringe or de minimis fringe benefit rules by, for example, requiring substantiation of the business use of employer-provided cell phones or limiting personal use of such phones.