IRS intends to amend maximum vehicle value regulations

By Sally P. Schreiber, J.D.

The IRS intends to revise its regulations to make them consistent with the recent statutory changes to the automobile price inflation adjustment in Sec. 280F(d)(7), which affect the vehicle value that applies when valuing employees' personal use of employer-provided vehicles (Notice 2019-34). The maximum amount now provided by regulation is $16,500 and is annually adjusted for inflation. The IRS intends to amend the regulations to provide a maximum value of $50,000, as adjusted under Sec. 280F(d)(7). For 2019, the inflation-adjusted amount is $50,400.

When an employer provides an employee with a vehicle that the employee can drive for personal use, the employee must include the value of the personal use in his or her income. There are two methods permitted tocalculate the value of an employee's personal use of an employer-provided vehicle (as long as certain requirements are met): the cents-per-mile rule and the fleet-average-valuation rule (FAVR). These methods are not permitted if the fair market value (FMV) of the vehicle exceeds specified base values on the first date the vehicle is made available to the employee. The IRS noted that it had already issued the cents-per-mile and FAVR values for 2019 for business and other uses (charitable, medical, etc.) in Notice 2019-02.

In Notice 2019-34, the IRS provided that the maximum value of an employer-provided vehicle (including cars, vans, and trucks) first made available to employees for personal use in calendar year 2019 for which the vehicle cents-per-mile valuation rule provided under Regs. Sec. 1.61-21(e) may apply is $50,400.

The maximum value of an employer-provided automobile (including vans and trucks) first made available to employees for personal use in calendar year 2019 for which the FAVR may apply is also $50,400.

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