Source: https://www.currentfederaltaxdevelopments.com/blog/2019/5/8/irs-updates-maximum-cost-of-autos-for-cents-per-mile-and-favr-for-2019
Timestamp: 2019-05-25 15:28:54
Document Index: 659128620

Matched Legal Cases: ['§1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1']

IRS Updates Maximum Cost of Autos for Cents-Per-Mile and FAVR for 2019 — Current Federal Tax Developments
IRS Updates Maximum Cost of Autos for Cents-Per-Mile and FAVR for 2019
The IRS has released the maximum value for employer provided vehicles for purposes of the special valuation rule found at Reg. §1.62-21(d) and (e) for 2019 in Notice 2019-34.
In Notice 2019-08 the IRS had announced that the agency planned to issue regulations that were going to greatly increase the limits for the cost of such vehicles to take into account changes made in the Tax Cuts and Jobs Act, setting the base value at $50,000 adjusted annually for inflation after 2018.
While those proposed regulations are yet to be issued, the new Notice updates the maximum cost limit for use of a Fleet Average Valuation Rule (FAVR) plan and the cents-per-mile optional valuation method for 2019.
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 Treas. Reg. § 1.61-21(e) may be applicable 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 fleet-average valuation rule provided under Treas. Reg. § 1.61-21(d)(5)(v) may be applicable is $50,400.
The notice also provides relief for vehicles that were first provided to employees in years prior to 2018 that did not qualify under the then significantly lower maximum amounts. The Notice states:
…the Treasury Department and the IRS intend to revise Treas. Reg. § 1.61-21(e) to provide that if an employer did not qualify under Treas. Reg. § 1.61-21(e)(5) to adopt the vehicle cents-per-mile valuation rule on the first day on which a vehicle was used by an employee of the employer for personal use because, under the rules in effect before 2018, the vehicle had a fair market value in excess of the maximum permitted in accordance with Treas. Reg. § 1.61-21(e)(1)(iii), the employer may first adopt the vehicle cents-per-mile valuation rule for the 2018 or 2019 taxable year based on the maximum fair market value of a vehicle for purposes of the vehicle cents-per-mile valuation rule set forth in Notice 2019-08 or this Notice 2019-34, as applicable. Similarly, the IRS and Treasury Department intend that the proposed regulations will further provide that if the commuting valuation rule of Treas. Reg. § 1.61-21(f) was used when the vehicle was first used by an employee of the employer for personal use, and the employer did not qualify to switch to the vehicle cents-per-mile rule on the first day on which the commuting valuation rule was not used because, under the rules in effect before 2018, the vehicle had a fair market value in excess of the maximum permitted in accordance with Treas. Reg. § 1.61-21(e)(1)(iii), the employer may adopt the vehicle cents-per-mile valuation rule for the 2018 or 2019 taxable year based on the maximum fair market value of a vehicle for purposes of the vehicle cents-per-mile valuation rule set forth in Notice 2019-08 or this Notice 2019-34, as applicable.
If an employer decides to take advantage of this relief, the notice goes on to describe a consistency rule going forward:
However, consistent with Treas. Reg. § 1.61-21(e)(5), an employer that adopts the vehicle cents-per-mile valuation rule must continue to use the rule for all subsequent years in which the vehicle qualifies for use of the rule, except that the employer may, for any year during which use of the vehicle qualifies for the commuting valuation rule of Treas. Reg. § 1.61-21(f), use the commuting valuation rule with respect to the vehicle.
A similar relief provision is provided in the Notice for taxpayers wishing to switch to using an FAVR plan beginning in 2018 given the higher limits.
The IRS provides that taxpayers may rely on the provisions of this notice until the promised revised regulations are issued. The agency is also asking for comments on the notice, presumably to use in considering the development of the eventual revised regulations.