De Minimis Benefits Operational Policy

 

Cash or cash equivalent items provided by the employer are never excludable from income and will not be considered de minimis regardless of amount. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable.

 

 

Special rules apply to allow exclusion from employee wages of certain employee achievement awards of tangible personal property given for length of service or safety. These awards cannot be disguised wages, must be awarded as part of a meaningful presentation, and cannot be cash, cash equivalent, vacation, meals, lodging, theater or sports tickets, or securities.

The university must follow applicable Internal Revenue Service rules that pertain to employer provided clothing as a taxable benefit to employees. This policy applies to clothing that is purchased for a university employee and paid for with university and university-related funds. Clothing provided to a university employee is considered Non-Taxable, a Taxable Employee Benefit, or a De Minimis Benefit as follows:

Non-Taxable:

University purchased and owned employee uniforms and protective clothing that meet all of the following conditions: (1) Wearing the specific clothing is a condition of the employment, or the employee is otherwise required to wear the clothing; (2) The clothing is not suitable for every day, personal wear as generally accepted, or wear in multiple settings; and (3) The clothing is not actually worn for general usage, but for a specific job-related duty, such as where safety and protection is of concern.

Taxable Employee Benefit:

Clothing that is purchased by the University as a business necessity, such as provided to identify the employee’s office, which also may be suitable to wear outside of employment is a taxable benefit valued at the cost to the employer.

De Minimis Benefit:

University purchased clothing that meets either of the following conditions: 1) Value and frequency with which clothing item is provided make it impractical to account for (i.e., the administrative costs of determining the fair market value of, and accounting for, the clothing benefits are more expensive than providing the benefits); or 2) Total value of all clothing items provided to an employee is less than eighty dollars ($80) in a calendar year.

Some examples of benefits that aren’t excludable as de minimis fringe benefits are season tickets to sporting or theatrical events; the commuting use of an employer-provided automobile or other vehicle more than 1 day a month; membership in a private country club or athletic facility, regardless of the frequency with which the employee uses the facility; and use of employer-owned or leased facilities (such as an apartment, hunting lodge, boat, etc.) for personal, non-business use.

In determining whether a benefit is de minimis, the university will consider its frequency and its value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. It also must not be a form of disguised compensation. If a benefit provided to an employee doesn't qualify as de minimis (for example, the frequency exceeds three times per year), then generally the entire benefit must be included in income.

Whether an item or service is de minimis depends on all the facts and circumstances. In addition, if a benefit is too large to be considered de minimis, the entire value of the benefit is taxable to the employee, not just the excess over a designated de minimis amount.