Revised: 08/06
FSS/PPS No. 03.09.05
Issue No. 3
Reviewer: Associate VP Financial Services/Treasurer
Effective Date: 05/01 (E5Y)
Review Date: 05/11
01. PURPOSE
| 01.01 | To establish responsibility and policy regarding the provision of meals and housing to Texas State employees. |
| 01.02 | To ensure that policy conforms to the Internal Revenue Code. |
02. POLICY
| 02.01 | Taxable Benefits -
Any fringe benefit that does not qualify for exclusion under the Internal Revenue Code is includible in the recipient's gross income and subject to tax. Generally, excludable fringe benefits must be provided in kind (non-cash). Non-cash benefits become taxable if the employee is paid a cash reimbursement for those benefits. For example, if an employer reimbursed an employee for lunch expenses in addition to providing the employee with lunch on the business premises (for the same lunch), the cash reimbursement would be taxable to the employee. |
| 02.02 | Non-taxable Benefits -
Internal Revenue Code, Title 26, Section 132 excludes seven types of fringe benefits from gross income:
1. no additional cost services;
2. qualified employee discounts; (see FSS/PPS 03.09.02)
3. working condition fringe benefits;
4. de minimus fringe benefits;
5. qualified transportation fringe benefits;
6. qualified moving expense reimbursements; and
7. on-premises athletic facilities provided by an employer. |
| 02.03 | Parking Permits & Fines -
Payment by an employer for an employee's parking permit and/or fines are taxable income to the employee. However, payments are, generally, not allowed at Texas State. |
| 02.04 | Meals & Housing -
IRC Code, Title 26, Section 119 excludes from an employee's gross income the value of certain meals and housing furnished by an employer for the convenience of the employer. If the employee has an option to receive additional compensation in lieu of meals or housing, the benefits are taxable. "For the convenience of the employer" means that the employer has a substantial business reason for providing the meals and housing other than to provide additional compensation to the employee. For example, meals provided at the place of work so that an employee is available for emergencies during his or her lunch period are generally considered to be for the employer's convenience. However, whether meals or housing are provided for the convenience of the employer depends on all the facts and circumstances. A written statement that the meals or housing is for the employer's convenience is not sufficient. | (a) | On-campus Meals
Meals furnished to an employee shall be excluded from the gross income of the employee if the meals are furnished on the business premises of the employer, and they are furnished for the employer's convenience. Each department is responsible for maintaining documentation on meals provided to its employees. The documentation must include the reason for the provision of the meals, a list of the individuals receiving the meals, the cost of the meal and the date on which the meals were provided . This documentation should be kept on file with the applicable Texas State department. | | (b) | Off-campus Meals
Meals furnished to an employee off-campus are not considered to be for the convenience of the employer. However, meals provided to promote goodwill, boost morale, or attract prospective employees may be provided off-campus if the cost of the meal is de minimus in amount. This means that the meal or cash for the meal provided to an employee has so little value that accounting for it would be unreasonable or administratively impracticable. The following items are considered de minimus and are not taxable to the employee: | | | 1) Coffee, doughnuts or soft drinks.
2) Occasional meals or cash for meals provided to enable an employee to work overtime.
3) Occasional parties or picnics for employees and their guests. | | | Employees who are reimbursed for meals off-campus should keep adequate records to document the purpose of the reimbursement, the names of those in attendance and any other details which might be required in an IRS audit. | | (c) | Housing
Complimentary housing must be on the business premises as well as being a condition of employment for it to be excluded from the gross income of the employee. For example, dormitory residence assistants are required to live in the dormitory as a condition of employment; thus, the value of that housing is excluded from the employee's gross income. IRC, Title 26, Section 119(d) provides an additional exception for employees of educational institutions who are provided qualified campus housing. In contrast to other employer-provided housing, campus housing does not have to be furnished for the convenience of the employer or as a condition of employment in order to be excluded from wages. In general, the value of residential housing furnished by a school to one of its employees is excludable from wages, provided the housing is located on or near campus and the employee pays rent during the calendar year that equals or exceeds 5% of the fair market value of the housing. If the employee does not pay rent equal to at least 5% of the housing's fair market value, then the difference between the rent paid and the lesser of (1) 5% of the fair market value of the housing and (2) the average rental paid by individuals (other than students or employees) for comparable housing provided by the school is includable in the employee's taxable wages. | |
03. RESPONSIBILITIES OF RESIDENCE LIFE AND TAX SPECIALIST
| 03.01 | Procedure - | (a) | Residence Life must provide the Tax Specialist (JCK 820), via memo, the name and social security numbers of the employees provided complimentary housing as well as the dollar value and duration of their lodging at Texas State. This memo should be forwarded to the Tax Specialist by the 4th day of the month following the end of each quarter. | | (b) | The Tax Specialist will determine whether the employee's contribution is less than 5% of the fair market value of the housing and thus what portion of the value is subject to tax, if any. This report will be forwarded to the Payroll Office by the Tax Specialist for employees receiving taxable fringe benefits. | |
| 03.02 | Reporting Period -
The reporting period for complimentary housing taxation will be November 1 through October 31. The applicable quarters will be November 1 - January 31 taxed March 1 paycheck; February 1 - April 30 taxed on June 1 paycheck; May 1 - July 31 taxed on September 1 paycheck; and August 1 - October 31 taxed on December 1 paycheck. |
| 03.03 | Housing Report Deadline -
The taxable complimentary housing information should be forwarded to the Payroll Office by the 6th day of the month following the end of each quarter. |
04. PAYROLL OFFICE RESPONSIBILITIES
| 04.01 | Payroll Taxes -
Upon receiving the complimentary housing report, the Payroll Office will add the amount indicated by the Tax Specialist to the employee's taxable income. The employee may pay Federal Withholding, Social Security and Medicare Tax on the taxable portion of the value of the free lodging. All applicable taxes will be reflected on the paycheck following the end of the quarter as outlined in Section 03.02. |
| 04.02 | Annual W-2 Statement -
All income related to the information within this PPS will be reflected on employees' annual W-2 Tax Statements in Boxes 1, 3 and 5. |
05. REFERENCES
| 05.01 | Refer to UPPS 03.01.12 for policies on employer-provided vehicles. |
06. MAJOR RESPONSIBILITIES ASSOCIATED WITH THIS PPS
| | Major responsibilities for routine assignments associated with this PPS include the following: | Positions | Section | Date | | AVPFS/Treasurer | Review | May EY5-01 | | Director, Payroll | Review | May EY5-01 | | Director, Residence Life | Review | May EY5-01 | | Tax Specialist | Review | May EY5-01 | |
07. 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.
Associate Vice President Financial Services/Treasurer, Reviewer
Director of Payroll, Reviewer
Director of Residence Life, Reviewer
Tax Specialist, Reviewer
Vice President for Finance and Support Services
| Approved: | ____________________________
Reviewer |
| Approved: | ____________________________
Reviewer |
| Approved: | ____________________________
Reviewer |
| Approved: | ____________________________
Reviewer |
| Approved: | ____________________________
Vice President for Finance
and Support Services |
