Qualified Nonpersonal Use Vehicles, 32500-32503 [E8-12805]

Download as PDF 32500 Federal Register / Vol. 73, No. 111 / Monday, June 9, 2008 / Proposed Rules The public hearing is being held in the IRS Auditorium, Internal Revenue Service Building, and 1111 Constitution Avenue, NW., Washington, DC 20224. Send Submissions to CC:PA:LPD:PR (REG–124590–07), room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday to CC:PA:LPD:PR (REG–124590– 07), Couriers Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC or sent electronically to Oluwafunmilayo. P.Taylor@irscounsel.treas.gov (REG– 124590–07). FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Ethan Atticks at (202) 622–3840; concerning submissions of comments, the hearing and/or to be placed on the building access list to attend the hearing Funmi Taylor at (202) 622–7180 (not toll-free numbers). ADDRESSES: The subject of the public hearing is the notice of proposed rulemaking (REG– 124590–07) that was published in the Federal Register on Thursday, February 28, 2008 (73 FR 10716). The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing that submitted written comments, must submit an outline of the topics to be addressed and the amount of time to be denoted to each topic (signed original and eight copies). A period of 10 minutes is allotted to each person for presenting oral comments. After the deadline for receiving outlines has passed, the IRS will prepare an agenda containing the schedule of speakers. Copies of the agenda will be made available, free of charge, at the hearing or in the Freedom of Information Reading Room (FOIA RR) (Room 1621) which is located at the 11th and Pennsylvania Avenue, NW., entrance, 1111 Constitution Avenue, NW., Washington, DC. Because of access restrictions, the IRS will not admit visitors beyond the immediate entrance area more than 30 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this document. jlentini on PROD1PC65 with PROPOSALS SUPPLEMENTARY INFORMATION: LaNita VanDyke, Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration). [FR Doc. E8–12875 Filed 6–6–08; 8:45 am] BILLING CODE 4830–01–P VerDate Aug<31>2005 18:31 Jun 06, 2008 Jkt 214001 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 1 [REG–106897–08] RIN 1545–BH65 Qualified Nonpersonal Use Vehicles Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking. AGENCY: SUMMARY: This document contains proposed regulations relating to qualified nonpersonal use vehicles as defined in section 274(i). Qualified nonpersonal use vehicles are excepted from the substantiation requirements of section 274(d)(4) that apply to listed property as defined in section 280F(d)(4). These proposed regulations would add clearly marked public safety officer vehicles as a new type of qualified nonpersonal use vehicles. These proposed regulations would affect employers that provide their employees with qualified nonpersonal use vehicles and the employees who use such vehicles. Written or electronic comments and requests for a public hearing must be received by September 8, 2008. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–106897–08), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–106897–08), Couriers Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. Additionally, taxpayers may submit electronic comments directly via the Federal eRulemaking Portal at www.regulations.gov (IRS REG–106897– 08). FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Don Parkinson or Selvan Boominathan at (202) 622–6040; concerning the submission of comments or requests for a hearing, Kelly Banks at (202) 622– 3628 (not toll-free numbers). SUPPLEMENTARY INFORMATION: DATES: Background This document contains proposed Income Tax Regulations under section 274(i) added by section 2(b) of Public Law 99–44 (May 24, 1985), which provides a definition of qualified nonpersonal use vehicle. Temporary Regulation § 1.274–5T(k), identifying PO 00000 Frm 00015 Fmt 4702 Sfmt 4702 categories of qualified nonpersonal use vehicles, was issued in TD 8061 (1982– 2 CB 93 (1985)). A notice of proposed rulemaking was issued by crossreference to Temporary Regulation § 1.274–5T(k) (50 FR 46088, 1985–2 CB 809 (1985)). These proposed regulations incorporate the text of § 1.274–5T(k) and add clearly marked public safety officer vehicles as a new type of qualified nonpersonal use vehicle, listed along with clearly marked police and fire vehicles at § 1.274–5(k)(2)(ii)(A). Clearly marked public safety officer vehicles are added to the definition of clearly marked police and fire vehicles at § 1.274–5(k)(3), and an example is added at § 1.274–5(k)(8). (See § 601.601(d)(2)(ii)(b).) Explanation of Provisions Section 274(d) provides that a taxpayer is not allowed a deduction or credit for certain expenses unless the expense is substantiated. These substantiation requirements apply to expenses incurred in the of use of any listed property (defined in section 280F(d)(4)), which includes any passenger automobile and any other property used as a means of transportation. Section 274(d) does not apply to any qualified nonpersonal use vehicle as defined in section 274(i). Section 274(i) provides that a qualified nonpersonal use vehicle is any vehicle which by reason of its nature is not likely to be used more than a de minimis amount for personal uses. The legislative history to section 274(i) provided a list of qualified nonpersonal use vehicles and identified a number of examples of qualified nonpersonal use vehicles such as school buses, qualified specialized utility repair trucks, and qualified moving vans. The legislative history indicated that Congress wanted the Commissioner to expand the list to include other vehicles appropriate for listing because by their nature it is highly unlikely that they will be used more than a very minimal amount for personal purposes. H.R. Rep. No. 99–34, at 11 (1985). Passenger automobiles such as sedans and sport utility vehicles are generally not exempt from taxation as qualified nonpersonal use vehicles because by design they can easily be used for personal purposes. However, unmarked law enforcement vehicles and clearly marked police and fire vehicles are included in the list of qualified nonpersonal use vehicles set forth in the legislative history to section 274(i) and incorporated into the proposed and temporary regulations. The IRS and the Treasury Department have become aware of a need for an E:\FR\FM\09JNP1.SGM 09JNP1 jlentini on PROD1PC65 with PROPOSALS Federal Register / Vol. 73, No. 111 / Monday, June 9, 2008 / Proposed Rules additional category of vehicles to be included in the list of qualified nonpersonal use vehicles. Clearly marked vehicles provided to Federal, state and local government workers who respond to emergency situations do not satisfy the current regulations governing qualified nonpersonal use vehicles if the individual workers are not employed by either the fire department or police department. Accordingly, the proposed regulations add clearly marked public safety officer vehicles to the list of qualified nonpersonal use vehicles so that emergency responders receive the same treatment whether they work for the police department, fire department or another department of state or local government. A clearly marked public safety officer vehicle is a vehicle owned or leased by a governmental unit or any agency or instrumentality thereof, that is required to be used for commuting by a public safety officer as defined in section 402(l)(4)(C) who, when not on a regular shift, is on call at all times, provided that any personal use (other than commuting) of the vehicle outside the limit of the public safety officer’s obligation to respond to an emergency is prohibited by such governmental unit. A public safety officer vehicle is clearly marked if, through painted insignia or words, it is readily apparent that the vehicle is a public safety officer vehicle. Section 402(l)(4)(c) provides that the term ‘‘public safety officer’’ shall have the same meaning given such term by the Omnibus Crime Control and Safe Streets Act of 1968, as codified at 42 U.S.C. 3796b(9)(A). 42 U.S.C. 3796b(9)(A) defines public safety officer as ‘‘an individual serving a public agency in an official capacity, with or without compensation, as a law enforcement officer, a firefighter, a chaplain, or as a member of a rescue squad or ambulance crew.’’ Proposed § 1.274–5(k) and (l) provide a list of qualified nonpersonal use vehicles and related definitions. Section 1.274–5(k) and (l) were originally proposed in 1985 (LR–145–84, 50 FR 46088, November 6, 1985) and simultaneously issued as a temporary regulation (TD 8061, 50 FR 46006, November 6, 1985). Paragraph (k) of LR– 145–84 is being re-proposed, with amendments, as part of these proposed regulations. Paragraph (l) provides definitions of the terms ‘‘automobile,’’ ‘‘vehicle,’’ ‘‘employer,’’ ‘‘employee,’’ and ‘‘personal use.’’ Paragraph (l) is being re-proposed, with no changes, as part of these proposed regulations. The corresponding provisions of the proposed regulations in LR–145–84 are withdrawn upon publication of this VerDate Aug<31>2005 18:31 Jun 06, 2008 Jkt 214001 notice. The corresponding provisions of the temporary regulations in TD 8061 will be withdrawn once these proposed regulations are published as final regulations in the Federal Register. It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based upon the fact that these regulations do not require a collection of information and do not impose any new or different requirements on small entities. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking has been submitted to the Chief Council for Advocacy of the Small Business Administration for comment on its impact on small business. Comments and Requests for Public Hearings Before these proposed amendments are adopted, consideration will be given to any written comments that are submitted to CC:PA:LPD:PR (REG– 106897–08). All comments will be available for public inspection and copying. A public hearing will be scheduled and held upon written request by any person who submits written comments on the proposed regulation. Notice of the time and place for the hearing will be published in the Federal Register. Drafting Information The principal authors of these regulations are Don E. Parkinson and Selvan V. Boominathan, Office of the Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury Department participated in their development. List of Subjects in 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. Proposed Amendments to the Regulations Accordingly, 26 CFR part 1 is proposed to be amended as follows: Frm 00016 Fmt 4702 PART 1—INCOME TAXES Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * Special Analyses PO 00000 32501 Sfmt 4702 Par. 2. Section 1.132–5 paragraph (h) is revised to read as follows: § 1.132–5 Working condition fringes. * * * * * (h) Qualified nonpersonal use vehicles—(1) In general. Except as provided in paragraph (h)(2) of this section, 100 percent of the value of the use of a qualified nonpersonal use vehicle (as described in § 1.274–5(k)) is excluded from gross income as a working condition fringe, provided that, in the case of a vehicle described in § 1.274–5(k)(3) through (8), the use of the vehicle conforms to the requirements of that paragraph. (2) Shared usage of qualified nonpersonal use vehicles. In general, a working condition fringe under this paragraph (h) is available to the driver and all passengers of a qualified nonpersonal use vehicle. However, a working condition fringe under this paragraph (h) is available only with respect to the driver and not with respect to any passengers of a qualified nonpersonal use vehicle described in § 1.274–5(k)(2)(ii)(L) or (P). * * * * * Par. 3. Section 1.274–5 paragraphs (k) and (l) and the last sentence of paragraph (m) are revised to read as follows: § 1.274–5 Substantiation requirements. * * * * * (k) Exceptions for qualified nonpersonal use vehicles—(1) In general. The substantiation requirements of section 274(d) and this section do not apply to any qualified nonpersonal use vehicle (as defined in paragraph (k)(2) of this section). (2) Qualified nonpersonal use vehicle—(i) In general. For purposes of section 274(d) and this section, the term qualified nonpersonal use vehicle means any vehicle which, by reason of its nature (that is, design), is not likely to be used more than a de minimis amount for personal purposes. (ii) List of vehicles. Vehicles which are qualified nonpersonal use vehicles include the following: (A) Clearly marked police, fire, and public safety officer vehicles (as defined and to the extent provided in paragraph (k)(3) of this section). (B) Ambulances used as such or hearses used as such. E:\FR\FM\09JNP1.SGM 09JNP1 jlentini on PROD1PC65 with PROPOSALS 32502 Federal Register / Vol. 73, No. 111 / Monday, June 9, 2008 / Proposed Rules (C) Any vehicle designed to carry cargo with a loaded gross vehicle weight over 14,000 pounds. (D) Bucket trucks (cherry pickers). (E) Cement mixers. (F) Combines. (G) Cranes and derricks. (H) Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. (I) Dump trucks (including garbage trucks). (J) Flatbed trucks. (K) Forklifts. (L) Passenger buses used as such with a capacity of at least 20 passengers. (M) Qualified moving vans (as defined in paragraph (k)(4) of this section). (N) Qualified specialized utility repair trucks (as defined in paragraph (k)(5) of this section). (O) Refrigerated trucks. (P) School buses (as defined in section 4221(d)(7)(c)). (Q) Tractors and other special purpose farm vehicles. (R) Unmarked vehicles used by law enforcement officers (as defined in paragraph (k)(6) of this section) if the use is officially authorized. (S) Such other vehicles as the Commissioner may designate. (3) Clearly marked police, fire, or public safety officer vehicles. A police, fire, or public safety officer vehicle is a vehicle, owned or leased by a governmental unit, or any agency or instrumentality thereof, that is required to be used for commuting by a police officer, fire fighter, or public safety officer (as defined in section 402(l)(4)(C) of this chapter) who, when not on a regular shift, is on call at all times, provided that any personal use (other than commuting) of the vehicle outside the limit of the police officer’s arrest powers or the fire fighter’s or public safety officer’s obligation to respond to an emergency is prohibited by such governmental unit. A police, fire, or public safety officer vehicle is clearly marked if, through painted insignia or words, it is readily apparent that the vehicle is a police, fire, or public safety officer vehicle. A marking on a license plate is not a clear marking for purposes of this paragraph (k). (4) Qualified moving van. The term qualified moving van means any truck or van used by a professional moving company in the trade or business of moving household or business goods if— (i) No personal use of the van is allowed other than for travel to and from a move site (or for de minimis personal use, such as a stop for lunch on the way between two move sites); (ii) Personal use for travel to and from a move site is an irregular practice (that VerDate Aug<31>2005 18:31 Jun 06, 2008 Jkt 214001 is, not more than five times a month on average); and (iii) Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee’s residence in relation to the location of the move site, for the van not to be returned to the employer’s business location. (5) Qualified specialized utility repair truck. The term qualified specialized utility repair truck means any truck (not including a van or pickup truck) specifically designed and used to carry heavy tools, testing equipment, or parts if— (i) The shelves, racks, or other permanent interior construction which has been installed to carry and store such heavy items is such that it is unlikely that the truck will be used more than a de minimis amount for personal purposes; and (ii) The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. (6) Unmarked law enforcement vehicles—(i) In general. The substantiation requirements of section 274(d) and this section do not apply to officially authorized uses of an unmarked vehicle by a ‘‘law enforcement officer’’. To qualify for this exception, any personal use must be authorized by the Federal, State, county, or local governmental agency or department that owns or leases the vehicle and employs the officer, and must be incident to law-enforcement functions, such as being able to report directly from home to a stakeout or surveillance site, or to an emergency situation. Use of an unmarked vehicle for vacation or recreation trips cannot qualify as an authorized use. (ii) Law enforcement officer. The term law enforcement officer means an individual who is employed on a fulltime basis by a governmental unit that is responsible for the prevention or investigation of crime involving injury to persons or property (including apprehension or detention of persons for such crimes), who is authorized by law to carry firearms, execute search warrants, and to make arrests (other than merely a citizen’s arrest), and who regularly carries firearms (except when it is not possible to do so because of the requirements of undercover work). The term ‘‘law enforcement officer’’ may include an arson investigator if the investigator otherwise meets the requirements of this paragraph (k)(6)(ii), PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 but does not include Internal Revenue Service special agents. (7) Trucks and vans. The substantiation requirements of section 274(d) and this section apply generally to any pickup truck or van, unless the truck or van has been specially modified with the result that it is not likely to be used more than a de minimis amount for personal purposes. For example, a van that has only a front bench for seating, in which permanent shelving that fills most of the cargo area has been installed, that constantly carries merchandise or equipment, and that has been specially painted with advertising or the company’s name, is a vehicle not likely to be used more than a de minimis amount for personal purposes. (8) Examples. The following examples illustrate the provisions of paragraphs (k)(3) and (6) of this section: Example 1. Detective C, who is a ‘‘law enforcement officer’’ employed by a state police department, headquartered in City M, is provided with an unmarked vehicle (equipped with radio communication) for use during off-duty hours because C must be able to communicate with headquarters and be available for duty at any time (for example, to report to a surveillance or crime site). The police department generally has officially authorized personal use of the vehicle by C but has prohibited use of the vehicle for recreational purposes or for personal purposes outside the state. Thus, C’s use of the vehicle for commuting between headquarters or a surveillance site and home and for personal errands is authorized personal use as described in paragraph (k)(6)(i) of this section. With respect to these authorized uses the vehicle is not subject to the substantiation requirements of section 274(d) and the value of these uses is not included in C’s gross income. Example 2. Detective T is a ‘‘law enforcement officer’’ employed by City M. T is authorized to make arrests only within M’s city limits. T, along with all other officers of the force, is ordinarily on duty for eight hours each work day and on call during the other sixteen hours. T is provided with the use of a clearly marked police vehicle in which T is required to commute to his home in City M. The police department’s official policy regarding marked police vehicles prohibits personal use (other than commuting) of the vehicles outside the city limits. When not using the vehicle on the job, T uses the vehicle only for commuting, personal errands on the way between work and home, and personal errands within City M. All use of the vehicle by T conforms to the requirements of paragraph (k)(3) of this section. Therefore, the value of that use is excluded from T’s gross income as a working condition fringe and the vehicle is not subject to the substantiation requirements of section 274(d). Example 3. Director C is employed by City M as the director of the City’s rescue squad and is provided with a vehicle for use in responding to emergencies. The City’s rescue E:\FR\FM\09JNP1.SGM 09JNP1 Federal Register / Vol. 73, No. 111 / Monday, June 9, 2008 / Proposed Rules squad is not a part of City M’s police or fire departments. The director’s vehicle is a sedan which is painted with insignia and words identifying the vehicle as being owned by the City’s rescue squad. C, when not on a regular shift, is on call at all times. The City’s official policy regarding clearly marked public safety officer vehicles prohibits personal use (other than for commuting) of the vehicle outside of the limits of the public safety officer’s obligation to respond to an emergency. When not using the vehicle to respond to emergencies, City M authorizes C to use the vehicle only for commuting, personal errands on the way between work and home, and personal errands within the limits of C’s obligation to respond to emergencies. With respect to these authorized uses, the vehicle is not subject to the substantiation requirements of section 274(d) and the value of these uses is not includable in C’s gross income. (l) Definitions. For purposes of section 274(d) and this section, the terms automobile and vehicle have the same meanings as prescribed in §§ 1.61– 21(d)(1)(ii) and 1.61–21(e)(2), respectively. Also, for purposes of section 274(d) and this section, the terms employer, employee and personal use have the same meanings as prescribed in § 1.274–6T(e). (m) * * * However, paragraph (j)(3) of this section applies to expenses paid or incurred after September 30, 2002, and paragraph (k) applies to clearly marked public safety officer vehicles, as defined in 1.274–5(k)(3), only with respect to uses occurring after January 1, 2009. Par. 4. Section 1.274–5T is revised by amending paragraphs (k) and (l) as follows: § 1.274–5T Substantiation requirements (temporary). * * * * * (k) and (l) [Reserved]. For further guidance, see §§ 1.274–5(k) and (l). * * * * * Par. 5. Section 1.280F–6 is amended by revising paragraph (b)(2)(ii) to read: § 1.280F–6 Special rules and definitions. jlentini on PROD1PC65 with PROPOSALS * * * * * (b) * * * (2) * * * (ii) Exception. The term ‘‘listed property’’ does not include any vehicle that is a qualified nonpersonal use vehicle as defined in section 274(i) and § 1.274–5(k). * * * * * Steven Miller, Acting Deputy Commissioner for Services and Enforcement. [FR Doc. E8–12805 Filed 6–6–08; 8:45 am] BILLING CODE 4830–01–P VerDate Aug<31>2005 18:31 Jun 06, 2008 Jkt 214001 DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Part 301 [REG–143716–04] RIN 1545-BD67 Declaratory Judgments—Gift Tax Determinations Internal Revenue Service (IRS), Treasury. ACTION: Notice of proposed rulemaking and notice of public hearing. AGENCY: SUMMARY: This document contains proposed regulations under section 7477 of the Internal Revenue Code (Code) regarding petitions filed with the United States Tax Court for declaratory judgments as to the valuation of gifts. Changes to the applicable law were made by section 506(c)(1) of the Taxpayer Relief Act of 1997 (TRA). The proposed regulations primarily affect individuals who are donors of gifts. The proposed regulations provide rules for determining whether a donor may petition the Tax Court with respect to the value of a gift, including guidance regarding the definition of ‘‘exhaustion of administrative remedies.’’ This document also provides a notice of a public hearing on these proposed regulations. Written and electronic comments must be received by September 8, 2008. Outlines of topics to be discussed at the public hearing scheduled for October 16, 2008, must be received by September 11, 2008. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–143716–04), room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG–143716– 04), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, DC. Alternatively, taxpayers may submit electronic comments via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG–143716–04). The public hearing will be held in the auditorium of the Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Juli Ro Kim or George Masnik, (202) 622–3090; concerning submissions of comments, the hearing, and/or to be placed on the building access list to DATES: PO 00000 Frm 00018 Fmt 4702 Sfmt 4702 32503 attend the hearing, Kelly Banks at (202) 622–7180 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background Gift tax is computed by determining a tax on the total of the gifts deemed made by the donor in the year for which the return is filed (the current calendar year) plus the total of that donor’s gifts in prior years (prior taxable gifts). The tax so computed is then reduced by the tax that would have been payable on the prior taxable gifts, had the tax rate for the current taxable year applied to the prior taxable gifts. The result (after taking into account the applicable credit amount under section 2505) is the gift tax on the gifts in the current calendar year. Similarly, the estate tax is computed by determining a tax on the sum of the value of the decedent’s taxable estate and the value of certain taxable gifts (adjusted taxable gifts) made by the decedent prior to death. The tax computed is then reduced by the gift tax that would have been payable on the adjusted taxable gifts, had the estate tax rate applied to the adjusted taxable gifts. The result (after allowing for various credits) is the estate tax on the taxable estate. The Taxpayer Relief Act of 1997 (TRA) (Pub. L. 105–34, 111 Stat. 855), the Internal Revenue Service Restructuring and Reform Act of 1998 (Pub. L. 105–206, 112 Stat. 685), and the Tax and Trade Relief Extension Act of 1998 (Pub. L. 105–277, 112 Stat. 2681– 909), (collectively, the 1998 Acts), enacted or amended sections 2001(f), 2504(c), 6501(c)(9), and 7477, effective in the case of gifts made after August 5, 1997, to provide a degree of finality regarding the valuation of lifetime gifts for gift and estate tax purposes. Congress was concerned that the prior regime resulted in the resolution of controversies based on stale evidence, and necessitated the retention of records for unduly long periods of time. H.R. Rep. No. 105–148 at 359 (1997). Under sections 6501(a) and (c)(9) as amended by TRA and the 1998 Acts, and the applicable regulations, if a transfer of property is adequately disclosed on a gift tax return, then the period of limitations for assessment of gift tax with regard to that transfer will commence to run on the date the return is filed. Once the time for assessment of gift tax has expired for a transfer made after August 5, 1997, the value of the gift as ‘‘finally determined’’ for gift tax purposes, as defined in section 2001(f), is the value to be used for purposes of determining prior taxable gifts in computing the gift tax liability in subsequent years under section 2504(c), E:\FR\FM\09JNP1.SGM 09JNP1

Agencies

[Federal Register Volume 73, Number 111 (Monday, June 9, 2008)]
[Proposed Rules]
[Pages 32500-32503]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-12805]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-106897-08]
RIN 1545-BH65


Qualified Nonpersonal Use Vehicles

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document contains proposed regulations relating to 
qualified nonpersonal use vehicles as defined in section 274(i). 
Qualified nonpersonal use vehicles are excepted from the substantiation 
requirements of section 274(d)(4) that apply to listed property as 
defined in section 280F(d)(4). These proposed regulations would add 
clearly marked public safety officer vehicles as a new type of 
qualified nonpersonal use vehicles. These proposed regulations would 
affect employers that provide their employees with qualified 
nonpersonal use vehicles and the employees who use such vehicles.

DATES: Written or electronic comments and requests for a public hearing 
must be received by September 8, 2008.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-106897-08), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand-delivered between the 
hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-106897-08), Couriers 
Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., 
Washington, DC. Additionally, taxpayers may submit electronic comments 
directly via the Federal eRulemaking Portal at www.regulations.gov (IRS 
REG-106897-08).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Don Parkinson or Selvan Boominathan at (202) 622-6040; concerning the 
submission of comments or requests for a hearing, Kelly Banks at (202) 
622-3628 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed Income Tax Regulations under 
section 274(i) added by section 2(b) of Public Law 99-44 (May 24, 
1985), which provides a definition of qualified nonpersonal use 
vehicle. Temporary Regulation Sec.  1.274-5T(k), identifying categories 
of qualified nonpersonal use vehicles, was issued in TD 8061 (1982-2 CB 
93 (1985)). A notice of proposed rulemaking was issued by cross-
reference to Temporary Regulation Sec.  1.274-5T(k) (50 FR 46088, 1985-
2 CB 809 (1985)). These proposed regulations incorporate the text of 
Sec.  1.274-5T(k) and add clearly marked public safety officer vehicles 
as a new type of qualified nonpersonal use vehicle, listed along with 
clearly marked police and fire vehicles at Sec.  1.274-5(k)(2)(ii)(A). 
Clearly marked public safety officer vehicles are added to the 
definition of clearly marked police and fire vehicles at Sec.  1.274-
5(k)(3), and an example is added at Sec.  1.274-5(k)(8). (See Sec.  
601.601(d)(2)(ii)(b).)

Explanation of Provisions

    Section 274(d) provides that a taxpayer is not allowed a deduction 
or credit for certain expenses unless the expense is substantiated. 
These substantiation requirements apply to expenses incurred in the of 
use of any listed property (defined in section 280F(d)(4)), which 
includes any passenger automobile and any other property used as a 
means of transportation. Section 274(d) does not apply to any qualified 
nonpersonal use vehicle as defined in section 274(i).
    Section 274(i) provides that a qualified nonpersonal use vehicle is 
any vehicle which by reason of its nature is not likely to be used more 
than a de minimis amount for personal uses. The legislative history to 
section 274(i) provided a list of qualified nonpersonal use vehicles 
and identified a number of examples of qualified nonpersonal use 
vehicles such as school buses, qualified specialized utility repair 
trucks, and qualified moving vans. The legislative history indicated 
that Congress wanted the Commissioner to expand the list to include 
other vehicles appropriate for listing because by their nature it is 
highly unlikely that they will be used more than a very minimal amount 
for personal purposes. H.R. Rep. No. 99-34, at 11 (1985).
    Passenger automobiles such as sedans and sport utility vehicles are 
generally not exempt from taxation as qualified nonpersonal use 
vehicles because by design they can easily be used for personal 
purposes. However, unmarked law enforcement vehicles and clearly marked 
police and fire vehicles are included in the list of qualified 
nonpersonal use vehicles set forth in the legislative history to 
section 274(i) and incorporated into the proposed and temporary 
regulations.
    The IRS and the Treasury Department have become aware of a need for 
an

[[Page 32501]]

additional category of vehicles to be included in the list of qualified 
nonpersonal use vehicles. Clearly marked vehicles provided to Federal, 
state and local government workers who respond to emergency situations 
do not satisfy the current regulations governing qualified nonpersonal 
use vehicles if the individual workers are not employed by either the 
fire department or police department. Accordingly, the proposed 
regulations add clearly marked public safety officer vehicles to the 
list of qualified nonpersonal use vehicles so that emergency responders 
receive the same treatment whether they work for the police department, 
fire department or another department of state or local government.
    A clearly marked public safety officer vehicle is a vehicle owned 
or leased by a governmental unit or any agency or instrumentality 
thereof, that is required to be used for commuting by a public safety 
officer as defined in section 402(l)(4)(C) who, when not on a regular 
shift, is on call at all times, provided that any personal use (other 
than commuting) of the vehicle outside the limit of the public safety 
officer's obligation to respond to an emergency is prohibited by such 
governmental unit. A public safety officer vehicle is clearly marked 
if, through painted insignia or words, it is readily apparent that the 
vehicle is a public safety officer vehicle.
    Section 402(l)(4)(c) provides that the term ``public safety 
officer'' shall have the same meaning given such term by the Omnibus 
Crime Control and Safe Streets Act of 1968, as codified at 42 U.S.C. 
3796b(9)(A). 42 U.S.C. 3796b(9)(A) defines public safety officer as 
``an individual serving a public agency in an official capacity, with 
or without compensation, as a law enforcement officer, a firefighter, a 
chaplain, or as a member of a rescue squad or ambulance crew.''
    Proposed Sec.  1.274-5(k) and (l) provide a list of qualified 
nonpersonal use vehicles and related definitions. Section 1.274-5(k) 
and (l) were originally proposed in 1985 (LR-145-84, 50 FR 46088, 
November 6, 1985) and simultaneously issued as a temporary regulation 
(TD 8061, 50 FR 46006, November 6, 1985). Paragraph (k) of LR-145-84 is 
being re-proposed, with amendments, as part of these proposed 
regulations. Paragraph (l) provides definitions of the terms 
``automobile,'' ``vehicle,'' ``employer,'' ``employee,'' and ``personal 
use.'' Paragraph (l) is being re-proposed, with no changes, as part of 
these proposed regulations. The corresponding provisions of the 
proposed regulations in LR-145-84 are withdrawn upon publication of 
this notice. The corresponding provisions of the temporary regulations 
in TD 8061 will be withdrawn once these proposed regulations are 
published as final regulations in the Federal Register.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It is hereby 
certified that these regulations will not have a significant economic 
impact on a substantial number of small entities. This certification is 
based upon the fact that these regulations do not require a collection 
of information and do not impose any new or different requirements on 
small entities. Therefore, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. 
Pursuant to section 7805(f) of the Internal Revenue Code, this notice 
of proposed rulemaking has been submitted to the Chief Council for 
Advocacy of the Small Business Administration for comment on its impact 
on small business.

Comments and Requests for Public Hearings

    Before these proposed amendments are adopted, consideration will be 
given to any written comments that are submitted to CC:PA:LPD:PR (REG-
106897-08). All comments will be available for public inspection and 
copying. A public hearing will be scheduled and held upon written 
request by any person who submits written comments on the proposed 
regulation. Notice of the time and place for the hearing will be 
published in the Federal Register.

Drafting Information

    The principal authors of these regulations are Don E. Parkinson and 
Selvan V. Boominathan, Office of the Associate Chief Counsel (Tax 
Exempt and Government Entities). However, other personnel from the IRS 
and Treasury Department participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 1.132-5 paragraph (h) is revised to read as 
follows:


Sec.  1.132-5  Working condition fringes.

* * * * *
    (h) Qualified nonpersonal use vehicles--(1) In general. Except as 
provided in paragraph (h)(2) of this section, 100 percent of the value 
of the use of a qualified nonpersonal use vehicle (as described in 
Sec.  1.274-5(k)) is excluded from gross income as a working condition 
fringe, provided that, in the case of a vehicle described in Sec.  
1.274-5(k)(3) through (8), the use of the vehicle conforms to the 
requirements of that paragraph.
    (2) Shared usage of qualified nonpersonal use vehicles. In general, 
a working condition fringe under this paragraph (h) is available to the 
driver and all passengers of a qualified nonpersonal use vehicle. 
However, a working condition fringe under this paragraph (h) is 
available only with respect to the driver and not with respect to any 
passengers of a qualified nonpersonal use vehicle described in Sec.  
1.274-5(k)(2)(ii)(L) or (P).
* * * * *
    Par. 3. Section 1.274-5 paragraphs (k) and (l) and the last 
sentence of paragraph (m) are revised to read as follows:


Sec.  1.274-5  Substantiation requirements.

* * * * *
    (k) Exceptions for qualified nonpersonal use vehicles--(1) In 
general. The substantiation requirements of section 274(d) and this 
section do not apply to any qualified nonpersonal use vehicle (as 
defined in paragraph (k)(2) of this section).
    (2) Qualified nonpersonal use vehicle--(i) In general. For purposes 
of section 274(d) and this section, the term qualified nonpersonal use 
vehicle means any vehicle which, by reason of its nature (that is, 
design), is not likely to be used more than a de minimis amount for 
personal purposes.
    (ii) List of vehicles. Vehicles which are qualified nonpersonal use 
vehicles include the following:
    (A) Clearly marked police, fire, and public safety officer vehicles 
(as defined and to the extent provided in paragraph (k)(3) of this 
section).
    (B) Ambulances used as such or hearses used as such.

[[Page 32502]]

    (C) Any vehicle designed to carry cargo with a loaded gross vehicle 
weight over 14,000 pounds.
    (D) Bucket trucks (cherry pickers).
    (E) Cement mixers.
    (F) Combines.
    (G) Cranes and derricks.
    (H) Delivery trucks with seating only for the driver, or only for 
the driver plus a folding jump seat.
    (I) Dump trucks (including garbage trucks).
    (J) Flatbed trucks.
    (K) Forklifts.
    (L) Passenger buses used as such with a capacity of at least 20 
passengers.
    (M) Qualified moving vans (as defined in paragraph (k)(4) of this 
section).
    (N) Qualified specialized utility repair trucks (as defined in 
paragraph (k)(5) of this section).
    (O) Refrigerated trucks.
    (P) School buses (as defined in section 4221(d)(7)(c)).
    (Q) Tractors and other special purpose farm vehicles.
    (R) Unmarked vehicles used by law enforcement officers (as defined 
in paragraph (k)(6) of this section) if the use is officially 
authorized.
    (S) Such other vehicles as the Commissioner may designate.
    (3) Clearly marked police, fire, or public safety officer vehicles. 
A police, fire, or public safety officer vehicle is a vehicle, owned or 
leased by a governmental unit, or any agency or instrumentality 
thereof, that is required to be used for commuting by a police officer, 
fire fighter, or public safety officer (as defined in section 
402(l)(4)(C) of this chapter) who, when not on a regular shift, is on 
call at all times, provided that any personal use (other than 
commuting) of the vehicle outside the limit of the police officer's 
arrest powers or the fire fighter's or public safety officer's 
obligation to respond to an emergency is prohibited by such 
governmental unit. A police, fire, or public safety officer vehicle is 
clearly marked if, through painted insignia or words, it is readily 
apparent that the vehicle is a police, fire, or public safety officer 
vehicle. A marking on a license plate is not a clear marking for 
purposes of this paragraph (k).
    (4) Qualified moving van. The term qualified moving van means any 
truck or van used by a professional moving company in the trade or 
business of moving household or business goods if--
    (i) No personal use of the van is allowed other than for travel to 
and from a move site (or for de minimis personal use, such as a stop 
for lunch on the way between two move sites);
    (ii) Personal use for travel to and from a move site is an 
irregular practice (that is, not more than five times a month on 
average); and
    (iii) Personal use is limited to situations in which it is more 
convenient to the employer, because of the location of the employee's 
residence in relation to the location of the move site, for the van not 
to be returned to the employer's business location.
    (5) Qualified specialized utility repair truck. The term qualified 
specialized utility repair truck means any truck (not including a van 
or pickup truck) specifically designed and used to carry heavy tools, 
testing equipment, or parts if--
    (i) The shelves, racks, or other permanent interior construction 
which has been installed to carry and store such heavy items is such 
that it is unlikely that the truck will be used more than a de minimis 
amount for personal purposes; and
    (ii) The employer requires the employee to drive the truck home in 
order to be able to respond in emergency situations for purposes of 
restoring or maintaining electricity, gas, telephone, water, sewer, or 
steam utility services.
    (6) Unmarked law enforcement vehicles--(i) In general. The 
substantiation requirements of section 274(d) and this section do not 
apply to officially authorized uses of an unmarked vehicle by a ``law 
enforcement officer''. To qualify for this exception, any personal use 
must be authorized by the Federal, State, county, or local governmental 
agency or department that owns or leases the vehicle and employs the 
officer, and must be incident to law-enforcement functions, such as 
being able to report directly from home to a stakeout or surveillance 
site, or to an emergency situation. Use of an unmarked vehicle for 
vacation or recreation trips cannot qualify as an authorized use.
    (ii) Law enforcement officer. The term law enforcement officer 
means an individual who is employed on a full-time basis by a 
governmental unit that is responsible for the prevention or 
investigation of crime involving injury to persons or property 
(including apprehension or detention of persons for such crimes), who 
is authorized by law to carry firearms, execute search warrants, and to 
make arrests (other than merely a citizen's arrest), and who regularly 
carries firearms (except when it is not possible to do so because of 
the requirements of undercover work). The term ``law enforcement 
officer'' may include an arson investigator if the investigator 
otherwise meets the requirements of this paragraph (k)(6)(ii), but does 
not include Internal Revenue Service special agents.
    (7) Trucks and vans. The substantiation requirements of section 
274(d) and this section apply generally to any pickup truck or van, 
unless the truck or van has been specially modified with the result 
that it is not likely to be used more than a de minimis amount for 
personal purposes. For example, a van that has only a front bench for 
seating, in which permanent shelving that fills most of the cargo area 
has been installed, that constantly carries merchandise or equipment, 
and that has been specially painted with advertising or the company's 
name, is a vehicle not likely to be used more than a de minimis amount 
for personal purposes.
    (8) Examples. The following examples illustrate the provisions of 
paragraphs (k)(3) and (6) of this section:

    Example 1. Detective C, who is a ``law enforcement officer'' 
employed by a state police department, headquartered in City M, is 
provided with an unmarked vehicle (equipped with radio 
communication) for use during off-duty hours because C must be able 
to communicate with headquarters and be available for duty at any 
time (for example, to report to a surveillance or crime site). The 
police department generally has officially authorized personal use 
of the vehicle by C but has prohibited use of the vehicle for 
recreational purposes or for personal purposes outside the state. 
Thus, C's use of the vehicle for commuting between headquarters or a 
surveillance site and home and for personal errands is authorized 
personal use as described in paragraph (k)(6)(i) of this section. 
With respect to these authorized uses the vehicle is not subject to 
the substantiation requirements of section 274(d) and the value of 
these uses is not included in C's gross income.
    Example 2. Detective T is a ``law enforcement officer'' employed 
by City M. T is authorized to make arrests only within M's city 
limits. T, along with all other officers of the force, is ordinarily 
on duty for eight hours each work day and on call during the other 
sixteen hours. T is provided with the use of a clearly marked police 
vehicle in which T is required to commute to his home in City M. The 
police department's official policy regarding marked police vehicles 
prohibits personal use (other than commuting) of the vehicles 
outside the city limits. When not using the vehicle on the job, T 
uses the vehicle only for commuting, personal errands on the way 
between work and home, and personal errands within City M. All use 
of the vehicle by T conforms to the requirements of paragraph (k)(3) 
of this section. Therefore, the value of that use is excluded from 
T's gross income as a working condition fringe and the vehicle is 
not subject to the substantiation requirements of section 274(d).
    Example 3. Director C is employed by City M as the director of 
the City's rescue squad and is provided with a vehicle for use in 
responding to emergencies. The City's rescue

[[Page 32503]]

squad is not a part of City M's police or fire departments. The 
director's vehicle is a sedan which is painted with insignia and 
words identifying the vehicle as being owned by the City's rescue 
squad. C, when not on a regular shift, is on call at all times. The 
City's official policy regarding clearly marked public safety 
officer vehicles prohibits personal use (other than for commuting) 
of the vehicle outside of the limits of the public safety officer's 
obligation to respond to an emergency. When not using the vehicle to 
respond to emergencies, City M authorizes C to use the vehicle only 
for commuting, personal errands on the way between work and home, 
and personal errands within the limits of C's obligation to respond 
to emergencies. With respect to these authorized uses, the vehicle 
is not subject to the substantiation requirements of section 274(d) 
and the value of these uses is not includable in C's gross income.

    (l) Definitions. For purposes of section 274(d) and this section, 
the terms automobile and vehicle have the same meanings as prescribed 
in Sec. Sec.  1.61-21(d)(1)(ii) and 1.61-21(e)(2), respectively. Also, 
for purposes of section 274(d) and this section, the terms employer, 
employee and personal use have the same meanings as prescribed in Sec.  
1.274-6T(e).
    (m) * * * However, paragraph (j)(3) of this section applies to 
expenses paid or incurred after September 30, 2002, and paragraph (k) 
applies to clearly marked public safety officer vehicles, as defined in 
1.274-5(k)(3), only with respect to uses occurring after January 1, 
2009.
    Par. 4. Section 1.274-5T is revised by amending paragraphs (k) and 
(l) as follows:


Sec.  1.274-5T  Substantiation requirements (temporary).

* * * * *
    (k) and (l) [Reserved]. For further guidance, see Sec. Sec.  1.274-
5(k) and (l).
* * * * *
    Par. 5. Section 1.280F-6 is amended by revising paragraph 
(b)(2)(ii) to read:


Sec.  1.280F-6  Special rules and definitions.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Exception. The term ``listed property'' does not include any 
vehicle that is a qualified nonpersonal use vehicle as defined in 
section 274(i) and Sec.  1.274-5(k).
* * * * *

Steven Miller,
Acting Deputy Commissioner for Services and Enforcement.
[FR Doc. E8-12805 Filed 6-6-08; 8:45 am]
BILLING CODE 4830-01-P