23-1: Personal use of employer-provided vehicles

Effective: July 2, 2001
Revised: November 21, 2024
Approved by: Van Christensen
References: Administrative Code R27-3, IRS Publication 15-B

Purpose

Using an employer-provided vehicle for personal use, including commuting, may be taxable income to the employee. This policy explains when an employee’s personal use of an employer-provided vehicle is taxable income.

This policy doesn’t address the proper usage of employer-provided vehicles. Read Administrative Code R27-3 to learn more about the proper use of vehicles.

Definitions

Agency – Any agency, board, bureau, commission, office, department, or other administrative subunit of state government. This definition includes the executive, legislative, and judicial branches.

De minimis personal use – Personal use of a state vehicle that is so infrequent and minimal that accounting for it would be unreasonable or administratively impracticable.

Designee – The person who has written permission from the executive director to act on the executive director’s behalf. The executive director is responsible for selecting a designee who has the knowledge, skills, and experience to make decisions in the best interest of the agency.

Employee – A person employed by the state of Utah, including elected officials.

Employer-provided vehicle – State vehicles and state paid rental vehicles.

Executive director – The executive leader of an agency.

Personal use – Driving for a non-business purpose, such as a commute.

Policy

A – Using an employer-provided vehicle for personal use

1 – When using an employer-provided vehicle, employees must follow:

Administrative Code R27-3 for vehicle use standards; and
IRS Publication 15-B for reporting taxable income.

2 – Agencies must maintain documentation of compliance with Administrative Code R27-3 and IRS Publication 15-B.

3 – State vehicles that are assigned to an elected or state official as part of their compensation package may be used for both business and personal use depending on the statutory authorization.

4 – The executive director or designee may approve an employee to use an employer-provided vehicle for commuting under certain conditions described in Administrative Code R27-3-7.

4a – The agency must make sure the employee complies with the IRS regulations and Administrative Code referred to in section A-1.

5 – If an employee is approved to use an employer-provided vehicle for commuting, the agency must notify the GovOps Division of Fleet Operations.

6 – Using an employer-provided vehicle for personal use is taxable unless the vehicle is a qualified nonpersonal use vehicle (see section B).

7 – The GovOps Division of Fleet Operations must notify the GovOps Division of Finance on the day when an employee is assigned a state vehicle with personal privileges.

7a – The GovOps Division of Fleet must give the GovOps Division of Finance:

the employee’s name; and
the employee’s identification number.

8 – An agency must notify the GovOps Division of Fleet Operations and the GovOps Division of Finance on the day when an employee is no longer assigned a vehicle with personal privileges.

9 – The GovOps Division of Finance must use one of the following IRS rules to determine the employee’s taxable amount of an employer-provided vehicle:

the IRS Commuting rule (see section C); or
the IRS Lease Value rule (see section D).

B – Using a qualified nonpersonal use vehicle

1 – A qualified nonpersonal use vehicle is any vehicle an employee isn’t likely to use more than minimally for personal purposes because of its design, for example a police vehicle, fire vehicle, or ambulance. See IRS Publication 15-B for a complete list of qualified nonpersonal use vehicles.

2 – The employee’s use of a qualified nonpersonal use vehicle is a working condition fringe benefit and is nontaxable.

C – Using the IRS Commuting Rule

1 – An employee may use the IRS Commuting Rule to determine the taxable amount of their personal use of a state vehicle if:

the vehicle and its commute use are required by the employer for legitimate business reasons and aren’t provided as a form of compensation to the employee;
the employee doesn’t use the state vehicle for personal use other than commuting or de minimis personal use;
the employee isn’t an elected official; and
the employee’s total salary and wages are less than the Office of Personnel Management Federal Government Executive Level V compensation amount.

1a – If any of the requirements of the IRS Commuting Rule aren’t met, the employee must use the IRS Lease Value Rule, see section D.

2 – The GovOps Division of Finance payroll team must add the commute value to the employee’s gross taxable income. The commute value is $1.50 per one-way commute or $3 round trip as required by the IRS.

2a – The payroll team must add a recurring non-cash taxable amount of $30 (10 days at $3 per day) per pay period to the employee’s gross taxable income.

3 – If an employee’s actual commute differs from 10 days in a pay period, the employee must adjust the taxable amount by submitting form FI 48: Reimbursement and earnings request to the payroll team each pay period.

3a – If the employee commutes less than 10 days in a pay period, they should submit a negative adjustment equal to the difference in the number of days they actually commuted times $3.

3b – If the employee commutes more than 10 days in a pay period, they must submit a positive adjustment equal to the number of days they commuted over 10 days times $3.

3c – The employee must include a written explanation for the adjustment.

4 – The payroll team must correct the employee’s taxable amount based on the approved FI 48 form.

5 – In cases of carpooling in an employer-provided vehicle, the non-cash taxable amount of $3 per day must be added to the gross taxable income of each employee in the vehicle.

6 – When an employee is no longer assigned a vehicle with commute privileges, the payroll team must remove the employee’s commute value from the payroll system for the effective time period.

D – Using the IRS Lease Value Rule

1 – The GovOps Division of Finance must use the IRS Lease Value Rule for determining the taxable amount of an employee’s personal use of an employer-provided vehicle if they:

don’t qualify for the IRS Commuting Rule (see section C); or
drive a state vehicle authorized by the legislature for personal use.

2 – Under the IRS Lease Value Rule, any personal use of an employer-provided vehicle is taxable, including commuting between the individual’s home and place of work.

3 – Employees must keep trip logs

3a – Employees must document business use of their employer-provided vehicle in a detailed trip log.

3b – Trip logs must show the beginning and ending odometer readings of the vehicle for the reporting period.

3c – Trip logs must include the following for each business trip:

number of miles driven;
date of the trip;
starting location;
destination; and
business purpose.

3d – Trip logs must be reported to the GovOps Division of Finance monthly, quarterly, or annually.

3e – Employees with employer-provided vehicles, who leave state employment prior to the end of the calendar year, must report trip logs to the GovOps Division of Finance upon separation of employment.

3f – Trips logs must be submitted to the GovOps Division of Finance by December 1 each year.

3g – If trip logs don’t contain the required information or aren’t submitted to the GovOps Division of Finance by the due date, the entire lease value of the vehicle must be added to the employee’s gross taxable income.
4 – Using the trip logs and the cost of the vehicle, the GovOps Division of Finance must calculate the non-cash taxable amount of the personal use, including fuel. Then, the payroll team must add the amount to the individual’s gross taxable income.