United States General Services Administration

Interagency Telework Issues Working Group Subcommittee DRAFT Reports

United States Office of Personnel Management

From: Cleverdon Edwin E [Edwin.E.Cleverdon@m1.irscounsel.treas.gov]
Sent: Friday, April 28, 2000 3:29 PM
To: Richards John B; 'Wendell Joice'
Cc: Holmes Jerry E; Baker George B
Subject: RE: Federal telework Policy Review/revision

To follow up on the substantiation issue, section 1.274-5T(e) provides rules for substantiating listed property, which includes the computers in this hypothetical.

Number 50-01366
* CC:DOM:IT&A:02, Room 5129
* 202/622-8433
* edwin.e.cleverdon@m1.irscounsel.treas.gov

-----Original Message-----
From: Richards John B

Below is an answer to your question 1.

1. Not entirely. Since the employee is not working at home for the convenience of the employer, the computer would be listed property. But even if the computer is listed property, the value of the use of the computer could still qualify as a working condition fringe if the substantiation requirements are met.

The substantiation requirements are set forth in the regs under section 274. Substantiation issues are within Edwin's jurisdiction, but in general adequate records take on the following forms:

• account books
• diaries
• logs
• documentary evidence
• expense reports
• written records (See Temp Reg. 1.274-5T(c)(2).

Also, a record of business use that is prepared with the aid of a computer memory device with the aid of a logging program will constitute an adequate record. Temp. Reg. 1.274-5T(c)(2)(ii)(C)(2).

If an employer has a policy against personal use, the recordkeeping requirements may be limited. Edwin is probably better able to discuss how such a policy would reduce recordkeeping requirements.

If the 274 requirements are met, then generally the home use of the computer would qualify as a working condition fringe notwithstanding that the computer is listed property.

If the employee has a qualified home office, which requires, among other things, that the home office be for the convenience of the employer, the computer would not be listed property and the 274 substantiation requirements would not apply.

On your other questions dealing with whether the employee is working at home for the convenience of the employer, I don't believe these issues have been considered by Chief Counsel. For example, I don't believe we've considered how an agency directive encouraging tele-work programs would affect the issue of whether the employee is working at home for the employer's convenience. I believe Edwin's office has primary jurisdiction over "convenience" questions; although our office has some experience with this question since section 119 also uses a convenience of the employer test.

John Richards
CC:EBEO:Br.2

-----Original Message-----
From: Wendell Joice [mailto:wjoice@erols.com]
Sent: Monday, April 24, 2000 5:02 PM
To: Richards John B
Cc: Cleverdon Edwin E; Holmes Jerry E; Garland Green; William Michael
Subject: RE: Federal telework Policy Review/revision

OK,
Let me try to comprehend this:

1. An employer allows an employee the option of working at home and the employee opts to do so. Let's assume that in this case, the option is for the convenience of the employee. To enable the employee to work at home, the employer provides the employee a computer which the employer specifies is primarily for business use only. This computer would be a working condition fringe and not listed property and, hence, the value of which would not be considered part of income. Accurate?

2. An employer encourages, but does not require, employees to opt to work at home in order to benefit the environment, traffic congestion, family/worklife balance, etc. It appears that both are convenienced. Does this qualify as for the convenience of the employer?

3. An employer encourages, but does not require, employees to opt to work at home to help reduce employer operating costs (the employer revises the use of the employee's vacated workstations). Is this for the convenience of the employer?

4. An employer encourages, but does not require, an employee to opt to work at home in order to demonstrate/study the utility of telework. Is this for the convenience of the employer?

5. What policy do you follow if it can be shown that the arrangement is for the convenience of both the employer and the employee?

6. What, specifically, is the employer convenience test?

Wendell Joice
Wjoice@erols.com
Fax 202 291 8836
Voice 202 273 4664

-----Original Message-----
From: Richards John B [mailto:John.B.Richards@m1.irscounsel.treas.gov]
Sent: Tuesday, April 04, 2000 12:10 PM
To: 'Wendell Joice'
Cc: Cleverdon Edwin E; Holmes Jerry E
Subject: RE: Federal telework Policy Review/revision

Just a couple of comments FYI on the tax aspects of telework that CC:EBEO:2 handles.

1. The value of an employer-provided computer and other equipment provided to an employee for use at home would generally be includible in income as a fringe benefit unless it fell within an exclusion from income, such as the exclusion for working condition fringes.

2. Whether the employee works at home for the "convenience of the employer" affects whether the computer is "listed property" and thus the substantiation that the employee must provide to the employer. If the computer and peripheral equipment is listed property, the substantiation requirements under section 274 must be met.

3. The "convenience of the employer" test also determines whether the employee make take home-office deductions. This is IT&A:2's issue. But to the extent that the convenience of the employer standard under section 119 is incorporated into the section 280A test, our branch can assist on that issue.

We provided general information to a Federal government agency last year with the assistance of IT&A:2. Attached are a few paragraphs from that letter.

-----Original Message-----
From: Wendell Joice [mailto:wjoice@erols.com]
Sent: Thursday, March 23, 2000 4:50 PM
To: Garland Green; Edwin Cleverdon; John Richards
Cc: William Michael
Subject: Federal telework Policy Review/revision

As you may have noticed, especially with the OSHA controversy, there is, at least for now, some broadening interest in the growth of telework. Confronted by some other telework policy problems last spring, GSA and OPM began looking into Federal telework related policies to determine their adequacy. This has grown into a proposed initiative to review and revise, clarify, and/or establish policies as needed to support the telework environment.

We are still running the correspondence up the chains but I thought I would give some folks a head start. Since we already know a couple of issues that will be directed at IRS, I thought we would approach you now and let you know what we have.

1. For many teleworkers, the home office/home equipment tax issue is hard to decipher. The key issue appears to be the IRS requirement that the work-at-home arrangement be for the 'convenience of the employer'. What does that really mean? Better yet, can we consider a form letter or such that an employer would sign to indicate that the work-at-home arrangement was for that employer's convenience (according to some guidance on this issue)? That way, teleworkers who truly qualify for a tax write-off could be on safe ground.

2. How is the telework home-office issue related to disabled workers whose accommodation allows them to work at home?

3. Finally, as you can see below, are there any boundary/crossing ramifications on teleworkers, taxes, and employers?

Please give this and any other items you can think of some thought. Let me know if you have any questions. We will be back in touch with the formal stuff as soon as we can get the signatures. And also, thanks to Doc Green for setting this up for me.

PS. By the way, the individual below has been waiting for a referral from me. I did not want to refer him to any of you without your permission. Nor do I know if the issue below is relevant to your work. Let me know if you would like to respond to his inquiry. Thanks

I am an attorney with Baker & McKenzie. Currently, I am working on a article for employers who might consider hiring out-of-state employees whose work would involve telecommuting to the employer's principal place of business. The issue that some employers face is tax specific. What happens if the employer is located in Washington D.C. and the employee works from home in Virginia? For Virginia state tax purposes, does the employer have to file income tax, sales and use tax as well as employment related tax returns with Virginia based on its hiring of individual residents of Virginia? Would you refer me to someone who would know?

Wendell Joice
Wjoice@erols.com
Fax 202 291 8836
Voice 202 273 4664

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