In June, the IRS issued a letter in response to a request made to the IRS by U.S. Senator Richard Shelby to respond directly to a taxpayer about a dollar limit on de minimis fringe benefits. The taxpayer stated in its request for guidance that in its workplace, any non-cash gift to an employee with a value of more than $50 had to be processed through payroll for applicable taxes to be withheld. The taxpayer was apparently using the $50 limit as a rule of convenience in the administration of the de minimis fringe benefit rules. The IRS noted that the $50 was not imposed by the Internal Revenue Code.
The IRS stated in its response to the taxpayer that a de minimis fringe benefit is any property or service the value of which is (after taking into account the frequency with which the employer provides similar fringe benefits to other employees) so small that accounting for it would be unreasonable and administratively impracticable.
The IRS then commented that examples in the Treasury Regulations regarding certain fringe benefits excludable from gross income as de minimis fringe benefits include: (i) occasional typing of personal letters by a company’s secretary, (ii) occasional personal use of an employer’s copying machine, provided that the employer exercises sufficient control and imposes significant restrictions on the personal use of the machine so that at least 85% of the use of the machine is for business purposes, (iii) occasional cocktail parties, group meals, or picnics for employees and their guests, (iv) traditional birthday or holiday gifts of property (not cash) with a low fair market value, (v) occasional theater or sporting event tickets, (vi) coffee, donuts, and soft drinks, (vii) local telephone calls, and (viii) flowers, fruit, books, or similar property provided to employees under special circumstances (e.g., on account of illness, outstanding performance, or family crisis). The IRS stated that no dollar limit was placed on any of those examples. And there the guidance ended.
The IRS then graciously stated that it had hoped that the information in its response to the taxpayer was helpful. Although it is difficult to assess how helpful the response by the IRS was to the taxpayer, the taxpayer may take some comfort (perhaps in the category of uneasy sleep but no rude awakening) in that the IRS did not state that the $50 limit as a rule of convenience in the administration of the de minimis fringe benefit rules was excessive or unreasonable.
This response did not constitute a new position taken by the IRS. The response did confirm that the guidance offered in the Treasury Regulations should continue to be followed.