October 8, 2009

Earlier this year in June, a new cell phone policy was implemented to bring the University into compliance with Internal Revenue Service (IRS) regulations regarding cell phone use for business purposes. Under that policy, the value of University-provided cell phone service and equipment was treated as a taxable fringe benefit and the University offset the tax with a monthly cash allowance.

Since that time, the IRS has granted permission to the University to suspend implementation of the new cell phone policy, effective October 1, 2009, until January 31, 2010.  The IRS has authorized the University to follow its former cell phone policy published in Business and Finance Bulletin G-46, Guidelines for the Purchase and Use of Cellular Phones and Other Portable Electronic Resources.  The policy may be found at the following address:  http://www.ucop.edu/ucophome/policies/bfb/g46.pdf

The extension, approved by the IRS, is based on the assumption that legislation introduced this year to modernize the tax treatment of employer-provided cell phones will be approved by Congress.  If the legislation is not passed, the IRS has agreed to consider an additional extension for the University.

This change is effective October 1, for October earnings.  Beginning with these earnings, departments are to end distributions in PPS for the cell phone imputed income and cash allowances received by employees with University-provided cell phones and personal digital assistants that are cell phone-enabled.  These distributions should end as of September 30, 2009.  Please make these entries no later than October 22, to be effective for the November 1 Statement of Earnings.

Please note the following:

  * Do NOT go back and delete the distributions from prior payroll periods. The policy exemption is NOT retroactive.

  * Do NOT convert the phones or services to the employee's name.  All University business equipment and services should be in the name of the University. The University no longer processes reimbursements of non-University owned equipment.

If you have any questions, please contact me at x5882 or via email, jim.corkill@accounting.ucsb.edu.