SECTION 12. PAPERWORK — Internal Revenue Bulletin 2001-51

REDUCTION ACT

The collections of information contained in this revenue procedure have been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under control number 1545–1756.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number.

The collections of information in this revenue procedure are in sections 4, 5, and 6. This information is required to comply with the optional simplified methods for determining the value of the use of demonstration automobiles provided to employees by automobile dealerships. This information will be used to satisfy the substantiation requirements of section 274(d) and the regulations thereunder and is required to obtain a benefit under the optional simplified methods. The likely respondents are business or other for-profit institutions.

The estimated total annual recordkeeping burden is 100,000 hours.

The estimated annual burden per recordkeeper varies from 2.5 hours to 7.5 hours, depending on individual circum

2001-51 I.R.B 601 December 17, 2001

Medicare tax on this amount will be withheld from other wages owed to the salesperson.

Restrictions on Use of Demonstration Vehicles

The demonstration vehicle must be available for test drives by customers during the normal working hours of the employee to whom the vehicle is assigned. Personal possessions may not be stored in the vehicle. Any personal possessions must be removed by the beginning of normal working hours.
The demonstrator vehicle is provided so that employees can become familiar with the features of the vehicles we sell. Only the employee to whom the vehicle is assigned may use the vehicle outside of normal working hours. It may not be used by family, friends, or neighbors.
The demonstrator vehicle is part of our inventory and must be available for sale to customers. It may not be used outside the dealership’s sales area or for vacation travel.
Insert any other restrictions the dealer- ship has concerning use or mainte- nance of the vehicle.

Insert the following two paragraphs only if the “out/in” method will be used for full-time automobile salespeople.

The demonstration vehicle may be used only for tests drives by custom- ers or other dealer business, for a daily commute between the employ- ee’s home and the dealership, and for other limited personal use. Per- sonal use is limited to [INSERT NUMBER NO GREATER THAN 10 MULTIPLIED BY THE NUMBER OF DAYS IN THE DETERMINA- TION PERIOD] miles during each

[INSERT LENGTH OF A DETER- MINATION PERIOD WHICH IS NOT MORE THAN ONE MONTH]. In order to minimize recordkeeping, all use during the employee’s normal working hours will be treated as business use, and all use outside the employee’s normal working hours will be treated as commuting or per- sonal use.

The employee must ensure that mile- age on the vehicle at the end of each working day, and at the beginning of the next working day, is properly

[recorded] OR [verified] by

[INSERT NAME, TITLE, OR JOB DESCRIPTION OF THE PERSON

OR PEOPLE RESPONSIBLE FOR RECORDING OR VERIFYING MILEAGE].

Tax Treatment of Use of Demonstrator Vehicles

Insert the next paragraph only if the “out/in” method is being used.

Any full-time automobile salesperson who meets all of the above require- ments, including limiting personal use to [INSERT NUMBER NO GREATER THAN 10 MULTIPLIED BY THE NUMBER OF DAYS IN THE DETERMINATION PERIOD] miles during each [INSERT LENGTH OF A DETERMINATION PERIOD WHICH IS NOT MORE THAN ONE MONTH] will not owe any federal [INSERT STATE OR LOCAL, IF APPROPRIATE] income tax or any Social Security or Medicare tax on the use of the dem- onstrator vehicle.
Any full-time automobile salesperson who meets all of the above requirements [ insert this material only if the “out/in” method is used except for limiting personal use or ensuring that mileage is recorded and veri- fied] will have [INSERT APPROPRI- ATE NUMBER FROM TABLE IN ANSWER 35] dollars per day included in wages for each day on which the salesperson was assigned a demonstrator vehicle. Income tax, Social Security tax, and Medicare tax on this amount will be withheld from other wages owed to the salesperson.
Any full-time salesperson who is provided with the use of a demonstration vehicle but does not comply with the restrictions on storage of personal possessions, use by people other than the employee, use outside the sales area, and vacation travel during a pay period will have the full value of the use of the demonstrator automobile included in wages for the pay period, resulting in [INSERT APPROPRIATE NUMBER FROM ANNUAL LEASE VALUE TABLE UNDER ANSWER 44] dollars per day included in wages for each day on which the salesperson was assigned a demonstrator vehicle. Income tax, Social Security tax, and

Insert the following bullet only if dem- onstration vehicles are provided to employees other than full-time sales- people.

Any other employee who is provided with use of a demonstration vehicle and meets all of the above require- ments [ insert this material only if the “out/in” method is used except for limiting personal use or ensuring that mileage is recorded and veri- fied] will have:

[INSERT APPROPRIATE NUM- BER FROM ANNUAL LEASE VALUE TABLE AT QUESTION AND ANSWER 44] dollars per day included in wages for each day on which the salesperson was assigned a demonstrator vehicle. Income tax, Social Security tax, and Medicare tax on this amount will be withheld from other wages owed to the sales- person.

APPENDIX B

MODEL QUALIFIED WRITTEN POLICY FOR PARTIAL EXCLUSION

[INSERT NAME OF DEALERSHIP]

DEMONSTRATOR VEHICLE POLICY

This policy statement is designed for use by dealers that wish to adopt the par- tial exclusion methods of accounting for use of demonstrator vehicles provided to full-time automobile salespeople.

Material in italics explains how to use the policy and should be deleted from the policy provided to employees and main- tained by the dealership. Material in bold is optional and should be included only if it reflects the choices made by the dealer- ship. Material IN CAPITALS is informa- tion that is specific to the dealership— the dealership should insert the appropri- ate information.

Because the language in this model provides for specifying the amount included in employee income, any dealer adopting that language should review the model annually to determine if inclusion amounts have changed; if the inclusion amounts have changed, the dealer should modify the policy to reflect the change

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and reissue it to employees provided dem- onstration automobiles.

Full-time automobile salespeople at

[INSERT NAME OF DEALERSHIP] may be provided with the use of a demonstration vehicle. We want you to understand the restrictions on use of demonstration vehicles and how full-time salespeople who use demonstration vehicles will be taxed on that use.

Restrictions on Use of Demonstration Vehicles

The demonstration vehicle must be available for test drives by customers during the normal working hours of the employee to whom the vehicle is assigned. Personal possessions may not be stored in the vehicle. Any personal possessions must be removed by the beginning of normal working hours.
The demonstrator vehicle is provided so that employees can become familiar with the features of the vehicles we sell. Only the employee to whom the vehicle is assigned may use the vehicle outside of normal working hours. It may not be used by family, friends, or neighbors.
The demonstrator vehicle is part of our inventory and must be available for sale to customers. It may not be used for vacation travel.
Insert any other restrictions the dealer- ship has concerning use or mainte- nance of the vehicle.

Tax Treatment of Use of Demonstrator Vehicles

Any full-time automobile salesperson who meets all of the above requirements will have [INSERT APPROPRIATE NUMBER FROM TABLE IN ANSWER 35] dollars per day included in wages for each day on which the salesperson was assigned a demonstrator vehicle. Income tax, Social Security tax, and Medicare tax on this amount will be withheld from other wages owed to the salesperson.
Any full-time salesperson who is provided with the use of a demonstration vehicle but does not comply with the

restrictions on storage of personal possessions, use by people other than the employee, and vacation travel during a pay period will have the full value of the use of the demonstrator automobile included in wages for the pay period, resulting in [INSERT APPROPRIATE NUMBER FROM ANNUAL LEASE VALUE TABLE UNDER ANSWER 44] dollars per day included in wages for each day on which the salesperson was assigned a demonstrator vehicle. Income tax, Social Security tax, and Medicare tax on this amount will be withheld from other wages owed to the salesperson.

Social Security Contribution and Benefit Base for 2002

Under authority contained in the Social Security Act (“the Act”), the Commissioner, Social Security Administration, has determined and announced (66 F.R. 54047, dated October 25, 2001) that the contribution and benefit base for remuneration paid in 2002, and selfemployment income earned in taxable years beginning in 2002 is $84,900.

“Old-Law” Contribution and Benefit Base

General

The “old-law” contribution and benefit base for 2002 is $63,000. This is the base that would have been effective under the Act without the enactment of the 1977 amendments. The base is computed under section 230(b) of the Act as it read prior to the 1977 amendments.

The “old-law” contribution and benefit base is used by:

(a) The Railroad Retirement program to determine certain tax liabilities and tier II benefits payable under that program to supplement the tier I payments which correspond to basic Social Security benefits,

(b) The Pension Benefit Guaranty Corporation to determine the maximum amount of pension guaranteed under the Employee Retirement Income Security

Act (as stated in section 230(d) of the Social Security Act),

(d) Social Security to determine a year of coverage (acquired whenever earnings equal or exceed 25 percent of the “oldlaw” base for this purpose only) in computing benefits for persons who are also eligible to receive pensions based on employment not covered under section 210 of the Act.

Domestic Employee Coverage Threshold

General

The minimum amount a domestic worker must earn so that such earnings are covered under Social Security or Medicare is the domestic employee coverage threshold. For 2002, this threshold is $1,300. Section 3121(x) of the Internal Revenue Code provides the formula for increasing the threshold.

Computation

Under the formula, the domestic employee coverage threshold amount for 2002 shall be equal to the 1995 amount of $1,000 multiplied by the ratio of the national average wage index for 2000 to that for 1993. If the resulting amount is not a multiple of $100, it shall be rounded to the next lower multiple of $100.

Domestic Employee Coverage Threshold Amount

Multiplying the 1995 domestic employee coverage threshold amount ($1,000) by the ratio of the national average wage index for 2000 ($32,154.82) to that for 1993 ($23,132.67) produces the amount of $1,390.02. We then round this amount to $1,300. Accordingly, the domestic employee coverage threshold amount is $1,300 for 2002.

(Filed by the Office of the Federal Register on October 24, 2001, 8:45 a.m., and published in the issue of the Federal Register for October 25, 2001, 66 F.R. 54047)

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