October 5, 2010
Legislation Drops Cell Phones from "Listed Property"
But churches shouldn't make changes until the IRS issues its guidance.
The small business tax relief legislation just passed by Congress and signed by the president includes a long-awaited provision removing cell phones from "listed property" under federal tax law effective for tax years beginning after December 31, 2009. As a result, the stringent record-keeping requirements that have applied for decades will no longer apply to cell phones or similar devices.
"We expect that the practical impact of the legislation will be that employers will be able to provide employees with cell phones primarily for business use on a tax-free basis, with little requirement to document the actual business vs. personal use," said Mike Batts, managing shareholder of the accounting firm Batts Morrison Wales & Lee, P.A.
Batts, who also serves as an editorial advisor for Church Law & Tax Report, Church Finance Today, and ChurchSafety.com, says he expects the law to result in cell phones being treated like any other pieces of equipment, such as regular telephones, for which detailed usage records are not required.
"While the legislative change applies to all U.S. employers and employees, the impact on nonprofit organizations is especially important because violations of the record-keeping requirements for 'listed property' by nonprofits can result in 'automatic excess benefit transaction' penalties on the individuals involved," he says.
The IRS is expected to issue guidance soon on the practical impact of the legislation, which may affect the specific manner in which employer-provided cell phones are treated for tax purposes. Batts says churches should anticipate a change, but not make official changes to their own cell phone policies until the IRS weighs in. While waiting for IRS guidance, Batts says churches may want to use the time to begin shopping carriers and comparing prices for group plans. The key, according to Batts: Don't act hastily.