[Code of Federal Regulations]
[Title 26, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.274-6T]

[Page 635-638]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.274-6T  Substantiation with respect to certain types of listed 
property for taxable years beginning after 1985 (temporary).

    (a) Written policy statements as to vehicles--(1) In general. Two 
types of written policy statements satisfying the conditions described 
in paragraph (a)(2) and (3) of this section, if initiated and kept by an 
employer to implement a policy of no personal use, or no personal use 
except for commuting, of a vehicle provided by the employer, qualify as 
sufficient evidence corroborating the taxpayer's own statement and 
therefore will satisfy the employer's substantiation requirements under 
section 274(d). Therefore, the employee need not keep a separate set of 
records for purposes of the employer's substantiation requirements under 
section 274(d) with respect to use of a vehicle satisfying these written 
policy statement rules. A written policy statement adopted by a 
governmental unit as to employee use of its vehicles is eligible for 
these exceptions to the section 274(d) substantiation rules. Thus, a 
resolution of a city council or a provision of state law or a state 
constitution would qualify as a written policy statement, as long as the 
conditions described in paragraph (a)(2) and (3) of this section are 
met.
    (2) Vehicles not used for personal purposes--(i) Employers. A policy 
statement that prohibits personal use by an employee satisfies an 
employer's substantiation requirements under section 274(d) if all the 
following conditions are met--
    (A) The vehicle is owned or leased by the employer and is provided 
to one or more employees for use in connection with the employer's trade 
or business,
    (B) When the vehicle is not used in the employer's trade or 
business, it is kept on the employer's business premises, unless it is 
temporarily located elsewhere, for example, for maintenance or because 
of a mechanical failure,
    (C) No employee using the vehicle lives at the employer's business 
premises,
    (D) Under a written policy of the employer, neither an employee, nor 
any individual whose use would be taxable to the employee, may use the 
vehicle for personal purposes, except for de minimis personal use (such 
as a stop for lunch between two business deliveries), and
    (E) The employer reasonably believes that, except for de minimis 
use, neither the employee, nor any individual whose use would be taxable 
to the employee, uses the vehicle for any personal purpose.

There must also be evidence that would enable the Commissioner to 
determine whether the use of the vehicle meets the preceding five 
conditions.
    (ii) Employees. An employee, in lieu of substantiating the business/
investment use of an employer-provided vehicle under Sec. 1.274-5T, may 
treat all use of the vehicle as business/investment use if the following 
conditions are met--
    (A) The vehicle is owned or leased by the employer and is provided 
to one or more employees for use in connection with the employer's trade 
or business,
    (B) When the vehicle is not used in the employer's trade or 
business, it is kept on the employer's business premises, unless it is 
temporarily located elsewhere, for example, for maintenance or because 
of a mechanical failure,
    (C) No employee using the vehicle lives at the employer's business 
premises,
    (D) Under a written policy of the employer, neither the employee, 
nor any individual whose use would be taxable to the employee, may use 
the vehicle for personal purposes, except for de minimis personal use 
(such as a stop for lunch between two business deliveries), and
    (E) Except for de minimis personal use, neither the employee, nor 
any individual whose use would be taxable to the employee, uses the 
vehicle for any personal purpose.

There must also be evidence that would enable the Commissioner to 
determine whether the use of the vehicle meets the preceding five 
conditions.

[[Page 636]]

    (3) Vehicles not used for personal purposes other than commuting--
(i) Employers. A policy statement that prohibits personal use by an 
employee, other than commuting, satisfies an employer's substantiation 
requirements under section 274(d) if all the following conditions are 
met--
    (A) The vehicle is owned or leased by the employer and is provided 
to one or more employees for use in connection with the employer's trade 
or business and is used in the employer's trade or business,
    (B) For bona fide noncompensatory business reasons, the employer 
requires the employee to commute to and/or from work in the vehicle,
    (C) The employer has established a written policy under which 
neither the employee, nor any individual whose use would be taxable to 
the employee, may use the vehicle for personal purposes, other than for 
commuting or de minimis personal use (such as a stop for a personal 
errand on the way between a business delivery and the employee's home),
    (D) The employer reasonably believes that, except for de minimis 
personal use, neither the employee, nor any individual whose use would 
be taxable to the employee, uses the vehicle for any personal purpose 
other than commuting,
    (E) The employee required to use the vehicle for commuting is not a 
control employee (as defined in Sec. 1.61-2T(f) (5) and (6)) required 
to use an automobile (as defined in Sec. 1.61-2T(d)(1)(ii)), and
    (F) The employer accounts for the commuting use by including in the 
employee's gross income the commuting value provided in Sec. 1.61-
2T(f)(3) (to the extent not reimbursed by the employee).

There must be evidence that would enable the Commissioner to determine 
whether the use of the vehicle met the preceding six conditions.
    (ii) Employees. An employee, in lieu of substantiating the business/
investment use of an employer-provided vehicle under Sec. 1.274-5T, may 
substantiate any exclusion allowed under section 132 for a working 
condition fringe by including in income the commuting value of the 
vehicle (determined by the employer pursuant to Sec. 1.61-2T(f)(3)) if 
all the following conditions are met:
    (A) The vehicle is owned or leased by the employer and is provided 
to one or more employees for use in connection with the employer's trade 
or business and is used in the employer's trade or business,
    (B) For bona fide noncompensatory business reasons, the employer 
requires the employee to commute to and/or from work in the vehicle,
    (C) Under a written policy of the employer, neither the employee, 
nor any individual whose use would be taxable to the employee, may use 
the vehicle for personal purposes, other than for commuting or de 
minimis personal use (such as a stop for a personal errand on the way 
between a business delivery and the employee's home),
    (D) Except for de minimis personal use, neither the employee, nor 
any individual whose use would be taxable to the employee, uses the 
vehicle for any personal purpose other than commuting,
    (E) The employee required to use the vehicle for commuting is not a 
control employee (as defined in Sec. 1.61-2T(f) (5) and (6) required to 
use an automobile (as defined in Sec. 1.61-2T(d)(1)(ii)), and
    (F) The employee includes in gross income the commuting value 
determined by the employer as provided in Sec. 1.61-2T(f)(3) (to the 
extent that the employee does not reimburse the employer for the 
commuting use).

There must also be evidence that would enable the Commissioner to 
determine whether the use of the vehicle met the preceding six 
conditions.
    (b) Vehicles used in connection with the business of farming--(1) In 
general. If, during a taxable year or shorter period, a vehicle, not 
otherwise described in section 274(i), Sec. 1.274-5T(k), or paragraph 
(a) (2) or (3) of this section, is owned or leased by an employer and 
used during most of a normal business day directly in connection with 
the business of farming (as defined in paragraph (b)(2) of this 
section), the employer, in lieu of substantiating the use of the vehicle 
as prescribed in Sec. 1.274-5T(b)(6)(i)(B), may determine any deduction 
or credit with respect to the vehicle as if the business/investment use 
(as defined in Sec. 1.280F-6T(d)(3)(i))

[[Page 637]]

and the qualified business use (as defined in Sec. 1.280F-6T(d)(2)) of 
the vehicle in the business of farming for the taxable year or shorter 
period were 75 percent plus that percentage, if any, attributable to an 
amount included in an employee's gross income. If the vehicle is also 
available for personal use by employees, the employer must include the 
value of that personal use in the gross income of the employees, 
allocated among them in the manner prescribed in Sec. 1.132-5T(g).
    (2) Directly in connection with the business of farming. The phrase 
directly in connection with the business of farming means that the 
vehicle must be used directly in connection with the business of 
operating a farm (i.e., cultivating land or raising or harvesting any 
agricultural or horticultural commodity, or the raising, shearing, 
feeding, caring for, training, and management of animals) or incidental 
thereto (for example, trips to the feed and supply store).
    (3) Substantiation by employees. If an employee is provided with the 
use of a vehicle to which this paragraph (b) applies, the employee may, 
in lieu of substantiating the business/investment use of the vehicle in 
the manner prescribed in Sec. 1.274-5T, substantiate any exclusion 
allowed under section 132 for a working condition fringe as if the 
business/investment use of the vehicle were 75 percent, plus that 
percentage, if any, determined by the employer to be attributable to the 
use of the vehicle by individuals other than the employee, provided that 
the employee includes in gross income the amount determined by the 
employer as includible in the employee's gross income. See Sec. 1.132-
5T(g)(3) for examples illustrating the allocation of use of a vehicle 
among employees.
    (c) Vehicles treated as used entirely for personal purposes. An 
employer may satisfy the substantiation requirements under section 
274(d) for a taxable year or shorter period with respect to the business 
use of a vehicle that is provided to an employee by including the value 
of the availability of the vehicle during the relevant period in the 
employee's gross income without any exclusion for a working condition 
fringe with respect to the vehicle and, if required, by withholding any 
taxes. Under these circumstances, the employer's business/investment use 
of the vehicle during the relevant period is 100 percent. The employer's 
qualified business use of the vehicle is dependent upon the relationship 
of the employee to the employer (see Sec. 1.280F-6T(d)(2)).
    (d) Limitation. If a taxpayer chooses to satisfy the substantiation 
requirements of section 274(d) and Sec. 1.274-5T by using one of the 
methods prescribed in paragraphs (a) (2) or (3), (b), or (c) of this 
section and files a return with the Internal Revenue Service for a 
taxable year consistent with such choice, the taxpayer may not later use 
another of these methods. Similarly, if a taxpayer chooses to satisfy 
the substantiation requirements of section 274(d) in the manner 
prescribed in Sec. 1.274-5T and files a return with the Internal 
Revenue Service for a taxable year consistent with such choice, the 
taxpayer may not later use a method prescribed in paragraph (a) (2) or 
(3), (b), or (c) of this section. This rule applies to an employee for 
purposes of substantiating any working condition fringe exclusion as 
well as to an employer. For example, if an employee excludes on his 
federal income tax return for a taxable year 90 percent of the value of 
the availability of an employer-provided automobile on the basis of 
records that allegedly satisfy the ``adequate records'' requirement of 
Sec. 1.274-5T(c)(2), and that requirement is not satisfied, then the 
employee may not satisfy the substantiation requirements of section 
274(d) for the taxable year by any method prescribed in this section, 
but may present other corroborative evidence as prescribed in Sec. 
1.274-5T(c)(3).
    (e) Definitions--(1) In general. The definitions provided in this 
paragraph (e) apply for purposes of section 274(d), Sec. 1.274-5T, and 
this section.
    (2) Employer and employee. The terms employer and employee include 
the following:
    (i) A sole proprietor shall be treated as both an employer and 
employee,
    (ii) A partnership shall be treated as an employer of its partners, 
and
    (iii) A partner shall be treated as an employee of the partnership.

[[Page 638]]

    (3) Automobile. The term automobile has the same meaning as 
prescribed in Sec. 1.61-2T(d)(1)(ii).
    (4) Vehicle. The term vehicle has the same meaning as prescribed in 
Sec. 1.61-2T(e)(2).
    (5) Personal use. Personal use by an employee of an employer-
provided vehicle includes use in any trade or business other than the 
trade or business of being the employee of the employer providing the 
vehicle.
    (f) Effective date. This section is effective for taxable years 
beginning after December 31, 1985.

[T.D. 8061, 50 FR 46037, Nov. 6, 1985; as amended by T.D. 8063, 50 FR 
52312, Dec. 23, 1985]