"Perking up" a company's employees.

• Author: Keefe, Patrick T.

With a new-found focus on retaining employees, many companies are looking for advice on providing low-cost "perks" to their best people. One such idea is in Regs. Sec. 1.61-21(f), which contains a method for valuing an employee's personal use of a company-owned vehicle and can be used to reduce the out-of-pocket costs to salespeople or other employees.

Many companies providing automobiles to their salespeople for business use have adopted policies that require the employees to reimburse the company for any personal use of the vehicle or require the company to report the value of the personal use as additional compensation on the employee's Form W-2. Personal use of the vehicle includes commuting.

As a general rule, company car policies are worded to require employees to reimburse the company at the standard mileage rate--currently 30 cents per mile--for personal use of the vehicle. However, under Regs. Sec. 1.61-21(f), a company can elect to reduce the out-of-pocket costs to its employees by basing the reimbursement on the commuting valuation method. An employer whose company car policy meets the following requirements can use this method.

* The vehicle must be company owned (or leased) and used fulltime in the business.

* For bona-fide, noncompensatory business reasons, the company requires the employee to commute to and/or from work in the company-woned vehicle.

* The company must establish a written policy disallowing personal use of the vehicle unless the use is either de minimis or for commuting.

* Other than de minimis personal use, the employee may not use the vehicle for personal use (other than commuting).

* The employee using the company-owned vehicle may not be a "control employee," defined as --an appointed, confirmed or elected officer with compensation equal to or greater than $50,000; --a director of the company; --any employee with compensation of $100,000 or more; or --an owner of 1% or greater equity...