UC Updates Cell Phone Policy
Cell phones and similar mobile communications devices provided to employees by the University will be treated as a taxable fringe benefit, under an updated policy from the University of California Office of the President. However, employees with such equipment will receive a monthly cash allowance reimbursing them for the payroll tax that is withheld.
The new policy became effective with June earnings paid on June 24, 2009 for biweekly-paid employees and July 1, 2009 for monthly-paid employees.
The new policy is in response to Internal Revenue Service (IRS) payroll audits at UCLA and UCSD. In settling the audits, the University agreed to come into compliance with IRS regulations for employer-provided cell phones and similar mobile communications devices by mid-2009.
The IRS considers cell phone use a taxable fringe benefit to the employee if business and personal use of the phone cannot be substantiated in detail — down to the stated purpose of each business call. In the absence of a call log, the IRS can treat all undocumented calls as personal and the value of those calls as taxable wages, even if the calls were mostly for business.
Congress is considering legislation to remove employer-provided mobile communications devices from IRS-listed property regulations. Although the bills have strong bipartisan support, it's unknown when — or if — legislators will take action to pass these measures into law.
Because compliance with the IRS's current substantiation rules would be impractical, the University has decided to treat UC-provided cell phones and similar mobile communications devices as a taxable fringe benefit. Departments must complete an Imputed Income/Cash Allowance Form (see Related Information) for each employee with a University-provided cell phone or cell phone-enabled personal digital assistant (PDA). For details on how the cash allowance is calculated, see the memo in Related Information.
Departments will be responsible for funding the cost of the cash allowance, so they must confirm that employees who currently have a University-provided phone or cell phone-enabled PDA still need this equipment to perform their jobs. Past access to a University-owned cell phone or an employee’s job title should not be the determining factor by itself in making this assessment.
Impact on Employees
Employees will not experience any disruption in service for their mobile communications devices, nor do they need to contact their service provider. Employees will:
- Be permitted to use their University cell phone or PDA for incidental personal calls as long as they do not exceed their plan minutes.
- Not be required to comply with the detailed IRS substantiation rules with respect to any calls made within their plan minutes.
Certain employees may be excluded from the new policy. They might include:
- Facilities personnel who share cell phone equipment while on duty and other arrangements involving shared equipment use.
- Research personnel who use cell phones as data collection devices or for similar research purposes.
Requests for exceptions should be sent to the Associate Vice Chancellor/Controller’s Office by the Dean or Vice Chancellor for their respective organizations.
Where exceptions have been approved, employees provided with a cell phone or PDA must:
- Document the business and personal use of the device in accordance with the IRS substantiation rules.
- Annotate the cell phone bill indicating the person called and the business purpose of each call.
- Reimburse charges related for any personal calls in a timely manner.
Excess Minutes Charges
If an employee incurs excess minute charges, the department must ask the employee to review the cell phone bill and note the person called and the business purpose for each call exceeding the plan minutes. The employee must reimburse any minutes for personal calls at the excess minute rate.
If there will be an ongoing increase in the employee’s business usage, the department should increase the number of minutes available under the plan and adjust the employee’s imputed income/cash allowance, as appropriate.
Business Use of Personal Cell Phone
Employees who use their personal cell phones for business-related calls may be reimbursed for those calls, but only if they exceed their plan minutes. The reimbursement of business calls would be at the excess minute rate, up to the number of minutes exceeding the plan limit for the month.
To be reimbursed, an employee must provide a copy of his or her cell phone bill identifying the business calls and noting the person called and the purpose of each call. No reimbursement of any business calls is permitted for a month in which the employee has not exceeded his or her plan minutes. In addition, reimbursements are not allowed based on a percentage of total calls made or for the cost of an employee-owned cell phone plan.
University-provided laptops, desktop computers, fax machines, printers, Internet connectivity and other electronic resources provided for use by the employee at home are not covered under the imputed income/cash allowance policy. In addition, data-only PDAs, push-to-talk devices, walkie-talkies and pagers that do not have a cell phone capability are excluded from the policy.