I heard the IRS has dropped the requirement for onerous recordkeeping regarding cell phones provided by churches to staff. Is this true?
Yes. Congress has finally taken action to remove cell phones from listed property. The House voted 237 to 187 to pass H.R. 5297, the Small Business Lending Funding Act, as approved by the Senate. The President signed the bill into law September 27, 2010.
For tax years beginning after Dec. 31, 2009, cell phones (and similar telecommunications equipment) are removed from the definition of listed property under Code Sec. 280F(Code Sec. 280F(d)(4)(A)). As a result, the stringent recordkeeping requirements that have applied for decades will no longer apply to cell phones or similar devices.
We expect the practical impact of the legislation will be that churches 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. Stated differently, we expect 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.
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.
Dan Busby is a certified public accountant, president of the Evangelical Council for Financial Accountability (ECFA), and the author of the Zondervan Clergy Tax & Financial Guide.