Revised: 06/08
FSS/PPS No. 03.09.02
Issue No. 2
Reviewer: Tax Specialist
Effective Date: 05/15/00 (E4Y)
Review Date: 05/12
01. PURPOSE
| 01.01 | To establish responsibility and policy regarding employee discounts for tickets and other University goods and services (including child care). |
| 01.02 | To ensure that policy conforms to the Internal Revenue Code. |
02. POLICY
| 02.01 | Discounts on goods and services (other than child care) are covered by Internal Revenue Code Section 132. This section of the Code limits the non-taxable discount that can be given to employees to 20% of the price offered to the general public. Discounts exceeding the 20% limit are taxable to the employee and the employer is required to withhold taxes on that benefit. | (a) | Employee discounts may not exceed 20% of the price at which the same goods/services (other than child care) are offered to the general public. | | (b) | Quantity and/or volume discounts may be offered to employees provided they are the same as those offered to the general public. For example, if there is a discount to the general public for the purchase of 10 tickets, the same discount can be offered to employees for the purchase of 10 tickets, the same discount can be offered to employees for the purchase of 10 tickets. For a discount on merchandise, the dicount cannot exceed the gross profit percentage of the selling price to non-employees customers. Gross profit percentage must be from the prior year's business, and is calculated based on all merchandise offered. | | (c) | Account managers are responsible for ensuring that discounts offered by their department to employees do not exceed the 20% limit. | |
| 02.02 | Internal Revenue Code Section 129 covers discounts on child care services. | (a) | This section of the Code limits the amount of dependent care assistance that can be excluded from an employee’s wages to $5,000 per year ($2,500 in the case of a separate return by a married individual). The exclusion is based on (1) the fair market value of the services provided and (2) usage. For example, if the fair market value of child care services is $400 per month based on 40 hours per week, and the employee’s child is present 20 hours per week (half-time), the value to the employee is $200 per month. | | (b) | Any amount in excess of the limitation shall be included in the employee’s wages in the taxable year in which the dependent care services were provided. | | (c) | The Child Development Center is responsible for ensuring that discounts offered to employees for child care do not exceed the $5,000 or $2,500 limitation. 02.03 No-additional cost- service provision. The value of a service provided to an emplyoee is not included in the employee's income if the employer does not incur any substantial cost in providing the service. (a) Include lost revenue as a cost. (e.g., tickets to a sold out game) (b) Include as a cost substantial time spent by staff in providing the service, even if after hours. (c) An emplyoee includes a current emplyoee, a former employee, the widow or widower of a former emplyoee, a temporary emplyoee, or a spouse or dependent child of an employee. (d) The service must be offered to customers in the ordinary course of business in which the employee performs substantial services. (e) This provision does not extend to educational services. A University must use its qualified tuition reduction rules in regards to free or reduced tuition for emplyoees. | |
| 02.04 | The Associate Vice President of Financial Services/ will be responsible for publicizing this policy. |
03. MAJOR RESPONSIBILITIES ASSOCIATED WITH THIS PPS
| | Major responsibilities for routine assignments associated with this PPS include the following: | Positions | Section | Date | | AVPFS/ | Review | May (E4Y-00) | | Tax Specialist | Review | May (E4Y-00) | |
04. CERTIFICATION OF STATEMENT
This FSS/PPS has been approved by the following individuals in their official capacities, and represents FSS policy and procedure from the date of this document until superseded.
Tax Specialist, Reviewer
Associate Vice President, Financial Services/Reviewer
Vice President for Finance and Support Services
| Approved: | ____________________________
Reviewer |
| Approved: | ____________________________
Reviewer |
| Approved: | ____________________________
Vice President for Finance
and Support Services |
