Obama to urge repeal of tax on personal use of work cell phones

Posted1/31/2010 12:01 AM

President Barack Obama will urge Congress to repeal a law requiring workers to pay taxes when they use employer-provided cell phones and similar equipment for personal reasons, a Treasury Department official said.

The reprieve, to be included in Obama's budget outline Feb. 1, is a victory for companies such as Little Rock, Arkansas- based Alltel Corp., Dallas-based AT&T Inc., Overland Park, Kansas-based Sprint Nextel Corp., and New York-based Verizon Communications Inc., which have complained the 20-year-old requirement was outdated.


The budget proposal would end the need for employers to keep detailed records when company-owned cell phones, BlackBerrys or similar telecommunications equipment are used for both business reasons and the personal convenience of employees, the official said. Current law, which is rarely enforced, requires employees to pay income tax on the value of any personal use. The official spoke on condition of anonymity.

Under a law adopted in 1989, employer-provided cell phones, laptop computers, BlackBerrys and similar devices are considered taxable fringe benefits for workers. Determining their use for personal reasons has proven difficult for employers to document and the IRS to enforce.

The proposal solidifies a request made by the Treasury Department in June after the Internal Revenue Service proposed rules that some business groups interpreted as an effort to enforce the rules and collect tax from workers. After some members of Congress complained, the IRS backpedaled and said a better solution would be to repeal the law.

"The passage of time, advances in technology and the nature of communication in the modern workplace have rendered this law obsolete," IRS Commissioner Doug Shulman said at the time.

In his budget proposal, Obama will propose that the fair market value of personal use of a cell phone or similar communications equipment provided primarily for business purposes would be excluded from gross income, the Treasury official said.

Legislation to ease the record-keeping rules has been introduced in the House by Representatives by Earl Pomeroy, a North Dakota Democrat and Sam Johnson, a Texas Republican, and in the Senate by Democrat John Kerry of Massachusetts.