The Honorable Sam Johnson
The Honorable Earl Pomeroy
April 8, 2008
Page 1 of 2
April 8,2008
The Honorable Sam JohnsonThe Honorable Earl Pomeroy
House Committee on Ways and MeansHouse Committee on Ways and Means
1211LongworthHouseOfficeBuilding1501 LongworthHouseOfficeBuilding
Washington, DC20515Washington, DC20515
RE: H.R. 5450, theModernize Our Bookkeeping in the Law for Employee’s Cell Phone Act of 2008
Dear Congressmen Johnson and Pomeroy:
On behalf of the more than 350,000 members of the American Institute of Certified Public Accountants (AICPA), I commend you for introducing H.R. 5450, the Modernize Our Bookkeeping in the Law for Employee’s Cell Phone Act of 2008. We support your efforts to remove cellular phones and similar telecommunications equipment (which we believe includes personal digital assistants “PDAs”) from the definition of “listed property” under Internal Revenue Code section 280F(d)(4)(v).
Congress originally added the listed property rules in 1984 to encourage capital formation but also to discourage the personal use element of the related property, such as luxury automobiles. Similarly, cell phones were added to the definition of listed property in 1989, when the cost of phones was relatively expensive and the use of such devices in daily business activities was far from the norm.
Including cell phones as listed property limits the use of accelerated depreciation and expensing unless the employer and employee substantiate a certain amount of business use of the phone through adequate records. Also, the value of the benefit of personal use is treated as wages for employment tax purposes and reported on Form W-2. In order to quantify the personal use, the regulations require detailed records for every business call, including (1) who was on the call; (2) their relationship to the organization; (3) the business purpose; (4) the date; (5) the time; and (6) the cost of the call.
Today’s technology and business expectations are clearly different. The cost of devices is a small fraction of what it was in 1989. They are often provided at no cost when the buyer agrees to a multiple-year contract. Furthermore, most plans now contain unlimited minutes for a fixed fee, and the use of cell phones and PDAs is expected by business as the norm of connecting to their employees 24/7. H.R. 5450would alleviate the need for onerous recordkeeping requirements under the listed property rules in an area that is no longer considered potentially abusive. Also, taxpayers would no longer be subject to penalties and taxes from not meeting the substantiation requirements under audit. Additionally, the possibility that a tax exempt organization might be subject to intermediate sanctions would be lessened. Finally, the possibility of tax preparers being subject to unnecessary penalties would be reduced.
We appreciate your leadership on this important topic. If you have any questions or would like to meet with us to discuss this matter further, please contact me , Joseph W. Walloch, Chair, AICPA Individual Taxation Technical Resource Panel, at , or Lisa Winton, AICPA Technical Manager, at .