Administrative Policies Fringe Benefit Taxation Policies Effective September 1, 2008
TABLE OF CONTENTS Fringe Benefit Taxation City-Provided Cell Phones (2.10) 1 Reimbursement for Personal Use Form 3 City-Provided Vehicles (2.11) 4 Take Home Vehicle Authorization Form 7 Meals and Per Diem (2.12) 8 Per Diem Request Form (Same Day Travel) 11
Policy Name: City-provided Cell Phones Policy Number: 2.10 Effective Date: September 1, 2008 Policy It is the Policy of the City of Douglas to restrict personal use of City-provided cell phones. City-provided Cell Phones are intended primarily for official City business purposes. Personal use of City-provided cell phones shall be held to infrequent use or emergency events. All other personal use is considered taxable by the IRS. The value of all personal use, except for infrequent use or emergency events, will be reimbursed to the City. Employees shall monitor copies of applicable billing statements to determine personal use and return it to the IT Department with a receipt of reimbursement, if applicable, and a completed Reimbursement for Personal Use Form. An employee shall not be required to pay more than the actual amount paid by the City for the individual cell phone account. The employee is required to make reimbursement to the City even if the personal use did not cause the City to exceed plan rates or minutes. The City will monitor that this policy is being followed by conducting periodic audits of phone bills. Department Directors are required to ensure that their respective employees are in compliance with this policy. Definitions Infrequent Personal Use - For purposes of this policy, infrequent non taxable personal use is considered infrequent use such as: a call to a school due to a sick child a call to make a doctor's appointment other infrequent and occasional situations that are similar in nature Infrequent use should not exceed 5 minutes on an occasional basis. Procedures Billing Statement Review & Reimbursement Procedure The IT Department will distribute monthly billing statements electronically to authorized cell phone users. Cell phone users shall then: Review each monthly billing statement for your assigned phone number and document the use of personal calls according to minutes used. Fringe Benefit Taxation 1
Use the Reimbursement for Personal Use Form to calculate the value of the personal calls made based on the number of minutes used for personal calls at the rate of.06 cents per minute and reimburse the City for this amount. For cell phones that are not billed by pooled minutes, calculate a percentage of personal calls made to determine the amount reimbursed to the City. Submit payment for personal use of cell phones to cashiers at the Water Revenue Office. Submit a receipt of the reimbursement along with a completed Reimbursement for Personal Use Form to the IT Department within 60 days of the receipt of electronic billing. Monitoring Procedure Supervisors and/or Department Directors are required to sign all Reimbursement for Personal Use Forms before they are submitted to the IT Department. The Finance Department will conduct random and periodic audits to ensure compliance with this policy. Additional Information - Noncompliance with this policy and procedure will result in disciplinary action. Fringe Benefit Taxation 2
Reimbursement for Personal Use Form Employee Name: Department/Division: Position Title: Cell Phone Number: Billing Month: Pooled Minutes Plan Monthly total cell phone charges: $ Personal Minutes Used (PMU): Cost per Minute (CPM): $0.06 Total amount to be paid PMU * CPM: $ OR Non Pooled Minutes Plan Monthly total cell phone charges (CPC): $ Business Minutes Used: % Personal Minutes Used (PMU): % Total amount to be paid CPC * PMU%: $ Stipulations An employee shall not be required to pay more than the actual amount paid by the City for an individual cell phone account. The employee is required to reimburse the City even if the personal use did not cause the City to exceed plan rates or minutes. Employee Certification I certify to the information presented by me shown above. Employee Signature Date Supervisor Signature Date Department Head Date Fringe Benefit Taxation 3
Title: City-provided Vehicles Policy Number: 2.11 Effective Date: September 1, 2008 Policy It is the policy of the City of Douglas to restrict personal use of City-provided vehicles. City vehicles are provided to employees for official business use. The City requires some employees to commute to and from work in a City-provided vehicle for valid business reasons. The City Manager must approve all take-home vehicle assignments with the exception of qualified nonpersonal use vehicles. Except for qualified nonpersonal use vehicles, commuting to and from work is a personal use by the employee and is considered taxable by the IRS. A personal use commute tax of $1.50 each way will be used as the value of the commute for tax purposes, in accordance with IRS guidelines. Other than personal use for commuting purposes, only infrequent personal use, or emergency personal use is authorized for City-provided vehicles. City-provided vehicles that are not authorized as "take-home" vehicles must be kept on employer premises, in a secure location. "Control Employees" are subject to either the Automobile Lease Valuation Rule or a Vehicle Cents-Per-Mile Rule in determining personal use for commuting, as the commuting rule does not apply, according to the IRS. In this case, valuation will be determined by the payroll office according to IRS guidelines. Use of a qualified nonpersonal-use vehicle, including commuting, is nontaxable to the employee. Monitoring by the City is required to maintain that City vehicles are being used in accordance to this policy. Definitions Control Employee - For purposes of this policy, a control employee is a highly compensated employee with a base salary of $100,000 per year or more. Infrequent Personal Use -for purposes of this policy, infrequent non taxable personal use is as follows: Small personal detour while on business, such as driving to lunch while out of the office on business. Infrequent (not more than one day per month) commuting in employer Fringe Benefit Taxation 4
vehicle. This does not mean that an employee can receive excludable reimbursements for commuting 12 days a year. The rule is available to cover infrequent, occasional situations. Qualified Nonpersonal-Use Vehicle - a qualified nonpersonal-use vehicle is any vehicle that the employee is not likely to use more than minimally for personal purposes because of its design. Qualified nonpersonal-use vehicles generally include all of the following vehicles: Clearly marked police and fire vehicles Unmarked vehicles used by law enforcement officers if the use is officially authorized An ambulance Any vehicle designed to carry cargo with a loaded gross vehicle weight over 14,000 pounds A passenger bus with a capacity of at least 20 passengers used for its specific purpose Tractors and other special purpose heavy equipment Truck (not van or pickup) designed to carry tools, equipment, etc. Qualified Specialized Utility Repair Truck Permanent interior construction, shelves, racks are included When employee is required to commute for emergency call-outs to restore or maintain power services, i.e. gas, water, sewer Clearly Marked Police or Fire Vehicles Note: Marking on a license plate is NOT considered a "clear mark." Employee must always be on call Employee must be required by the employer to use the vehicle for commuting No personal use other than for commuting Unmarked Law Enforcement Vehicles Vehicle must be used only by a full-time LAW ENFORCEMENT Officer; i.e., officer authorized to carry firearms, execute warrants, and make arrests. The officer must regularly carry firearms, except when it is not possible to do so because of the requirements of undercover work. Vans and Pickups do not qualify unless specifically modified to be unlikely to have more than minimal personal use and only for use by law enforcement personnel as defined above. Procedures Eligibility and Authorization -In order to be eligible to take home a City vehicle, employees must meet the following requirements. Changes to these requirements may result in loss of an employee s authorization to take home a City vehicle. Fringe Benefit Taxation 5
Employee is assigned to 24-hour on-call duty; OR The City requires that an employee drive the vehicle home for security purposes or to prevent vandalism of the vehicle; OR other required legitimate business reason as approved by the City Manager Take-Home Vehicle Procedures - If an employee is assigned a take-home vehicle (other than a qualified nonpersonal-use vehicle), the employee shall: Complete a Take Home Vehicle Authorization Form and submit to the Payroll Office Complete a new Authorization Form each December to keep records updated annually Notify the Payroll Office if a "take home" vehicle is no longer authorized Take Home Vehicle Authorization Forms are available at the Payroll Office. Payroll Office Procedures - The Payroll Office shall process as taxable wages the value of a daily commute (1.50 each way) of at least $3.00 per day for each employee authorized with a take-home vehicle. The commute tax will be computed each pay-period, for all active Take Home Vehicle Authorization Forms on file At the end of each calendar year the Payroll Office will distribute requests for updates on all activetake Home Vehicle Authorizations and update employee payroll records accordingly Additional Information - Noncompliance with this policy and procedure will result in disciplinary action. Fringe Benefit Taxation 6
Take Home Vehicle Authorization Form Year of Use: Employee Name: Home Address: Department/Division: Position Title: Unit #: Make, model & year of vehicle: VIN #: In order to be eligible to take home a City vehicle, employees must meet the following requirements. Please check one. ( ) Employee is assigned to 24-hour on-call duty; OR ( ) The City required that an employee drive the vehicle home for security purposes or to prevent vandalism of the vehicle; OR ( ) Other required legitimate business reason as approved by the City Manager. Explain: Employee Certification I certify to the information presented by me shown above. I have read and understand the Cityprovided Vehicles. Policy and agree to comply with the rules and regulations outlined therein. Employee Signature Date ( ) Recommended ( ) Not Recommended Department Director Signature Date ( ) Approve ( ) Disapprove City Manager Signature Date Submit to Payroll Office Fringe Benefit Taxation 7
Policy Name: Meals and Per Diem Policy Number: 2.12 (Formerly Policy 2.01, Policy Letter 8, Policy Letter 7) Effective Date: September 1, 2008 Background The Internal Revenue Code provides that meals are nondeductible personal expenses unless paid or incurred during overnight travel away from an employees ordinary place of business for business purposes. When an employer pays an employee's meals while on business travel away from home but not overnight, in the form of actual cost reimbursement or a per meal per-diem, the payment is deemed to be a payment of an employee's personal living expenses and thus a taxable fringe benefit. As a taxable fringe benefit, the payment is required to be included in the employee's wages for Federal income and employment tax purposes. Policy It is the policy of the City of Douglas to reimburse employees for meals while traveling away from home or while attending meetings or entertaining customers. The taxability of these reimbursements depend on whether there is a valid business reason for the meals, whether the travel is overnight and whether the expenses are substantiated. Definitions De Minimis - infrequent and not on a regular basis In State Per Diem -For in state events, a $31.00 per diem rate will be provided for meals. Meals can be pro-rated for partial day travel as follows: $6.00 for breakfast; $10.00 for lunch; and $15.00 for dinner. Employees or officers leaving before 7:00 a.m. and returning after 6:00 p.m. on the same day will receive per diem for all three meals. Employees or officers leaving after 7:00 a.m. and returning after 6:00 p.m. will receive per diem for lunch and dinner. Employees or officers leaving after 7:00 a.m. and returning before 6:00 p.m. will receive per diem for lunch only. Out of State Per Diem - For out of state events, a total of $50.00 will be provided for meals. Meals can be pro-rated as follows: $10.00 for breakfast; $15.00 for lunch; and $25.00 for dinner. Substantiated expenses - Establishing proof of an expense by submitting receipts- not required in all instances. Meal Reimbursements While Traveling Away From Home On Business Overnight Out of Town Travel -Meal per diem is excludable from wages if an employee is traveling away from their tax home on City business. Traveling away from home means: 1. Employee must be traveling outside of Douglas substantially longer than an Fringe Benefit Taxation 8
ordinary's day work, AND 2. Employee needs to obtain substantial sleep or rest to meet the demands of the work while away from home. Out of Town Travel but NOT Overnight - Meal per diem is taxable as wages if the employee is traveling outside of Douglas and returning on the same day. Meal Reimbursements While NOT Traveling Away From Home Entertainment Meals - Reimbursements or allowances provided to employees for meals while entertaining customers may be excludable from wages if the expenses are ordinary and necessary and meet one of the following tests: Directly Related Test - Meal reimbursements meet the directly related test and may be excludable from wages if: The main purpose of the combined business and meal is the active conduct of business. Business is actually conducted during the meal period, and There is more than a general expectation of deriving income or some other specific business benefit at some future time. Associated Test - Entertainment related meal reimbursements meet the associated test and are excludable from wages if entertainment is: Associated with the active conduct of the City's business and Directly before or after a substantial business discussion Trade or Professional Association Meetings - Reimbursements for meal expenses directly related to and necessary for attending business meetings or conventions of certain exempt organizations are excludable from wages if the expenses of employee attendance are related to City business. These organizations include chambers of commerce, business leagues, and trade or professional associations. De Minimis Exclusion for Occasional Meal Reimbursements Regularly provided meal money does not qualify as an excludable de minimis fringe benefit. Three conditions must be met for treatment of occasional meal money as an excludable de minimis fringe benefit: Occasional Basis - Meal is reasonable in value, and is not provided regularly or frequently, and Provided for Overtime work - Overtime work necessitates an extension of the employee's normal work schedule, and Enables Overtime Work - Provided to enable the employee to work overtime. Meals provided on the employer's premises that are consumed during the overtime period, or meal money expended for meals consumed during that period, satisfy this condition. Fringe Benefit Taxation 9
Other Authorized Expenses The City will also pay the following nontaxable expenses: Single or double room, if lodging is required and approved in advance. Payments may be made in advance by the City or by the use of a procurement card by the employee, whichever is authorized. Receipts are required to be submitted to substantiate for the expense. Conference and seminar registration fees for the employee/official, but not for spouse, children or guests. Payments for fees may be made in advance by the City or by the use of a procurement card by the employee, whichever is authorized. Receipts are required to be submitted to the Finance Department to substantiate for the expense. Procedures for Per Diem and Other Related Reimbursements The City shall provide employees with per diem for allowable business travel meals while traveling away from home overnight using the defined per diem rate through the Accounts Payable Specialist. No receipts are required. Employee must submit check requisition in advance as required by the Purchasing Agent. The City shall reimburse employees for allowable business travel meals while traveling away from home but NOT overnight using the defined per diem rate as wages through the Payroll Specialist. No receipts are required. Employee must submit a per diem request form along with the timesheets to the Payrol Specialist. Meals while not traveling, such as meals with meetings or overtime meals are substantiated using an actual expense method. Receipts are required to be turned into the Accounts Payable Specialist for non taxable reimbursement. Additional Information If an employee chooses not to be reimbursed for expenses, the employee cannot claim the expenses on his/her personal tax return. Non- compliance with this policy will result in disciplinary action. Fringe Benefit Taxation 10
Per Diem Request Form Employee Name: Department/Division: Position Title: Date/Time Left Home/Work: Date/Time Returned Home/Work: Purpose of Trip: Please attach backup documentation regarding training/meeting or other. Itemized description of amount to be reimbursed: Total Per Diem $ Employee Certification I certify to the information presented by me shown above. Employee Signature Date Supervisor Signature Date Department Head Date Submit to Payroll Office with Timesheets. Fringe Benefit Taxation 11