Maximum Values For 2018 For Use With Vehicle Cents-Per-Mile and Fleet-Average Valuation Rules

NOT-134316-17

Maximum Values For 2018 For Use With Vehicle Cents-Per-Mile and Fleet-Average

Valuation Rules

Notice 2019-08

I.

PURPOSE

This notice provides the 2018 maximum values for use with the vehicle cents-

per-mile valuation rule under Treas. Reg. § 1.61-21(e) and the fleet-average valuation

rule, which is an optional component of the automobile lease valuation rule under Treas.

Reg. § 1.61-21(d). These values are adjusted annually for inflation. This notice also

provides interim guidance on new procedures for calculating the inflation adjustments to

the maximum values for use with the special valuation rules under Treas. Reg.

§ 1.61-21(d) and (e) using section 280F(d)(7), as modified by sections 11002 and

13202 of the Tax Cuts and Jobs Act, Pub. L. No. 115-97 (the “Act”). The Internal

Revenue Service (IRS) and the Department of the Treasury (Treasury Department)

anticipate that further guidance on these issues will be issued in the form of proposed

regulations and expect that the regulations will be consistent with the rules set forth in

this notice.

II.

BACKGROUND

If an employer provides an employee with a vehicle that is available to the

employee for personal use, the value of the personal use generally must be included in

the employee’s income. Internal Revenue Code § 61; Treas. Reg. § 1.61-21.

For employer-provided vehicles made available to employees for personal use

that meet the requirements of Treas. Reg. § 1.61-21(e)(1), generally the value of the

personal use may be determined under the vehicle cents-per-mile valuation rule of

Treas. Reg. § 1.61-21(e). However, Treas. Reg. § 1.61-21(e)(1)(iii)(A) provides that for

a vehicle first made available after 1988 to any employee of the employer for personal

use, the value of the personal use may not be determined under the vehicle cents-per-

mile valuation rule for a calendar year if the fair market value of the vehicle (determined

pursuant to Treas. Reg

valuation rule of

Treas. Reg. § 1.61-21(e). However, Treas. Reg. § 1.61-21(e)(1)(iii)(A) provides that for

a vehicle first made available after 1988 to any employee of the employer for personal

use, the value of the personal use may not be determined under the vehicle cents-per-

mile valuation rule for a calendar year if the fair market value of the vehicle (determined

pursuant to Treas. Reg. § 1.61-21(d)(5)(i) through (iv)) on the first date the vehicle is

made available to the employee exceeds the sum of the maximum recovery deductions

allowable under section 280F(a) for a five-year period for an automobile first placed in

service during that calendar year, as adjusted by section 280F(d)(7). The regulation

additionally specifies that, with respect to a vehicle placed in service in or after 1989,

the limitation on value consists of a base value of $12,800 that is adjusted annually

under section 280F(d)(7).

For employer-provided automobiles available to employees for personal use for

an entire year, generally the value of the personal use may be determined under the

automobile lease valuation rule of Treas. Reg. § 1.61-21(d). Under this valuation rule,

the value of the personal use is the Annual Lease Value. Provided the requirements of

Treas. Reg. § 1.61-21(d)(5)(v) are met, an employer with a fleet of 20 or more

automobiles may use a fleet-average value for purposes of calculating the Annual

Lease Values of the automobiles in the employer’s fleet. The fleet-average value is the

average of the fair market values of all the automobiles in the fleet. However, Treas.

Reg. § 1.61-21(d)(5)(v)(D) provides that for an automobile first made available after

1988 to an employee of the employer for personal use, the value of the personal use

may not be determined under the fleet-average valuation rule for a calendar year if the

fair market value of the automobile (determined pursuant to Treas. Reg

market values of all the automobiles in the fleet. However, Treas.

Reg. § 1.61-21(d)(5)(v)(D) provides that for an automobile first made available after

1988 to an employee of the employer for personal use, the value of the personal use

may not be determined under the fleet-average valuation rule for a calendar year if the

fair market value of the automobile (determined pursuant to Treas. Reg.

§ 1.61-21(d)(5)(i) through (v)) on the first date the automobile is made available to the

employee exceeds the base value of $16,500, as adjusted annually for inflation

pursuant to section 280F(d)(7).

Thus, the maximum values for applying the vehicle cents-per-mile and the fleet-

average valuation rules reflect the automobile price inflation adjustment of section

280F(d)(7)(B). Prior to enactment of the Act, this price inflation amount for automobiles

other than trucks and vans was calculated using the “new car” component of the

Consumer Price Index (CPI) “automobile component.” Beginning in 2005, the IRS

began to calculate the price inflation adjustment for trucks and vans separately using

the “new truck” component of the CPI and continued using the “new car” component of

the CPI for automobiles other than trucks and vans. See Rev. Proc. 2005-48, 2005-32

I.R.B. 271.

Section 11002(d)(8) of the Act amended section 280F(d)(7)(B) effective for tax

years beginning after December 31, 2017. Pursuant to these amendments, the price

inflation amount for automobiles (including trucks and vans) is calculated using both the

CPI automobile component and the Chained Consumer Price Index for All Urban

Consumers (C-CPI-U) automobile component. The C-CPI-U does not currently have

separate components for new cars and new trucks.

For owners of passenger automobiles, section 280F(a), as modified by

section 13202(a)(1) of the Act, imposes dollar limitations on the depreciation deduction

for the year the taxpayer places the passenger automobile in service and for each

succeeding year

rban

Consumers (C-CPI-U) automobile component. The C-CPI-U does not currently have

separate components for new cars and new trucks.

For owners of passenger automobiles, section 280F(a), as modified by

section 13202(a)(1) of the Act, imposes dollar limitations on the depreciation deduction

for the year the taxpayer places the passenger automobile in service and for each

succeeding year. The amendments made by the Act 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 (formerly $12,800).

III.

GUIDANCE

Consistent with the substantial increase in the dollar limitations on depreciation

deductions under section 280F(a), as modified by section 13202(a)(1) of the Act, the

IRS and the Treasury Department intend to amend Treas. 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.

Further, the IRS and the Treasury Department intend that the regulations will be

modified to provide that this $50,000 base value will be adjusted annually using section

280F(d)(7) for 2019 and subsequent years. Consistent with this intention, in the interim:

(1) The maximum value of an employer-provided vehicle first made available to

employees for personal use in calendar year 2018 for which the vehicle

cents-per-mile valuation rule provided under Treas. Reg. § 1.61-21(e) may be

applicable is $50,000.

000 base value will be adjusted annually using section

280F(d)(7) for 2019 and subsequent years. Consistent with this intention, in the interim:

(1) The maximum value of an employer-provided vehicle first made available to

employees for personal use in calendar year 2018 for which the vehicle

cents-per-mile valuation rule provided under Treas. Reg. § 1.61-21(e) may be

applicable is $50,000.

(2) The maximum value of an employer-provided automobile first made available

to employees for personal use in calendar year 2018 for which the fleet-

average valuation rule provided under Treas. Reg. § 1.61-21(d) may be

applicable is $50,000.

For 2018 and 2019, due to the lack of data, the IRS and the Treasury

Department will not publish separate maximum values for trucks and vans for use with

the vehicle cents-per-mile and fleet-average valuation rules.

Employer-provided vehicles are noncash fringe benefits that fall within

section 3501(b). Announcement 85-113, 1985-31 I.R.B. 31, provides guidelines for

withholding, paying, and reporting employment tax on taxable noncash fringe benefits.

Announcement 85-113 provides generally that taxpayers may rely on the guidelines in

the announcement until the issuance of regulations that supersede the temporary and

proposed regulations under section 3501(b). No regulations have been issued under

section 3501(b) that supersede the announcement. Thus, Announcement 85-113

generally is applicable to current payments of noncash fringe benefits, including

vehicles.

Section 1 of Announcement 85-113 allows payors of certain noncash fringe

benefits to treat the benefits as paid on any day(s) during the year so long as they treat

benefits provided in a calendar year as paid not later than December 31 of the calendar

year. Section 5 of the announcement allows employers to treat certain benefits paid

during the last two months of the year (or any shorter period) as paid during the

subsequent calendar year

f certain noncash fringe

benefits to treat the benefits as paid on any day(s) during the year so long as they treat

benefits provided in a calendar year as paid not later than December 31 of the calendar

year. Section 5 of the announcement allows employers to treat certain benefits paid

during the last two months of the year (or any shorter period) as paid during the

subsequent calendar year.

Employers that wish to use the vehicle cents-per-mile rule or the fleet-average

value rule for 2018 based on the maximum values set forth in this notice may use the

rules in Announcement 85-113 or the adjustment process under section 6413 or the

refund claim process under section 6402 to correct any overpayment of federal

employment taxes on these amounts (see the regulations under these sections, Rev.

Rul. 2009-39, 2009-52 I.R.B. 951, section 13 of Publication 15 (Circular E), Employer’s

Tax Guide, and the Instructions for Form 941-X, Adjusted Employer’s QUARTERLY

Federal Tax Return or Claim for Refund for information on these adjustment and refund

claim processes).

IV.

REQUEST FOR COMMENTS

Interested parties are invited to submit comments on this notice by February 19,

2019. Comments should include a reference to Notice 2019-08. Comments may be

submitted electronically via the Federal eRulemaking Portal at www.regulations.gov

(type IRS-2019-08 in the search field on the regulations.gov homepage to find this

notice and submit comments). Alternatively, submissions may be sent to

CC:PA:LPD:PR (Notice 2019-08), Room 5203, Internal Revenue Service, P.O. Box

7604, Ben Franklin Station, Washington, DC 20044. Submissions also may be hand

delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to

CC:PA:LPD:PR (Notice 2019-08), Courier’s Desk, Internal Revenue Service, 1111

Constitution Avenue, NW, Washington, DC 20044. All comments submitted by the

public in response to this notice will be available for public inspection and copying in

their entirety.

V

tion, Washington, DC 20044. Submissions also may be hand

delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to

CC:PA:LPD:PR (Notice 2019-08), Courier’s Desk, Internal Revenue Service, 1111

Constitution Avenue, NW, Washington, DC 20044. All comments submitted by the

public in response to this notice will be available for public inspection and copying in

their entirety.

V.

DRAFTING INFORMATION

The principal author of this notice is Gabriel Minc of the Office of Associate Chief

Counsel (Tax Exempt and Government Entities). For further information regarding this

notice contact Mr. Minc at (202) 317-4774 (not a toll-free call).