Final regulations increase a vehicle’s maximum value for eligibility to use the fleet-average valuation rule or the vehicle cents-per-mile valuation rule. The regulations provide transition rules for certain employers. The final regulations became effective on February 5, 2020.
TCJA Increased Maximum Vehicle Values
Before the Tax Cuts and Job Act (TCJA), the maximum base fair market value of a vehicle for use of the fleet-average valuation rule was $16,500, as adjusted annually for inflation (in 2017: $21,100 for a passenger automobile, and $23,300 for a truck or van). The pre-TCJA maximum base fair market value of a vehicle for use of the vehicle cents- per-mile valuation rule was $12,800, as adjusted annually for inflation (in 2017: $15,900 for a passenger automobile, and $17,800 for a truck or van). The TCJA increased these amounts to $50,000, adjusted for inflation.
To implement the changes, the IRS issued Notice 2019-8, I.R.B. 2019-3, 354, to provide interim guidance for 2018 on new procedures for calculating the price inflation adjustments to the maximum vehicle values for use with the fleet-average valuation rule in Regulation (Reg.) Section 1.61-21(d) and the vehicle cents-per-mile valuation rule in Reg. Section 1.61-21(e) using amended Internal Revenue Code (IRC) Section 280F(d)(7). In Notice 2019-34. I.R.B. 2019-22, 1257, the IRS provided that the inflation-adjusted 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 or the fleet-average valuation rule may be used is $50,400. This guidance also provided information about the manner in which the Treasury Department and the IRS intended to publish the maximum vehicle value in the future.
In August 2019, a notice of proposed rulemaking was published that was consistent with Notice 2019-8 and Notice 2019-34 and reflected changes made by TCJA to the depreciation limitations in IRC Section 280F. The final regulations update the fleet-average and vehicle cents-per-mile valuation rules to conform to the changes made by the TCJA.
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