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The de minimis fringe benefit is a popular employer-provided fringe benefit. Treasury Regulations section 1.132-6(e)(1) gives numerous examples of allowable de minimis fringe benefits, including the following:
* Occasional typing of personal letters by a company secretary;
* Occasional cocktail parties, group meals, or picnics for employees or their guests;
* Traditional birthday or holiday gifts of property with a low fair market value (FMV);
* Occasional theater or sporting event tickets;
* Coffee, doughnuts, and soft drinks;
* Local telephone calls; and
* Flowers, fruit, books, or similar property provided to employees under special circumstances.
Treasury Regulations section 1.132-6(e)(2) also provides examples of fringe benefits to which the de minimis rules do not apply. The following benefits fall outside of the de minimis rules:
* Season tickets to sporting or theatrical events;
* Community use of an employer-provided vehicle or other vehicle more than one day a month;
* Membership in a private country club or athletic facility; and
* Use of employer-owned or -leased facilities for a weekend.
In addition, special rules apply for certain categories of de minimis fringe benefits, including group term life insurance on the lives of dependents, employer-operated eating facilities, and public transit passes (or reimbursements) for independent contractors. These special rules are outside of the scope of this article.
According to Treasury Regulations section 1.132-6(d)(4), where the benefit is too valuable or is provided too frequently, then the benefit will not qualify as a de minimis fringe benefit. Typically, in such situations, the value of the entire benefit will be included in an employee's gross income (Treasury Regulations section 1.132-6). In some cases, however, a fringe benefit may be either partially or totally excludible under another Tax Code provision. Examples include no-additional-cost and working-condition fringe benefits. Where most of the value of a benefit is excludible, in some situations the excess may be excludible as a de minimis fringe benefit.
For example, consider an airline employee who is permitted to fly for free on a standby basis. In 2004, the employee flew from Atlanta to Honolulu. The ticket's FMV is $700. The $700 would be excludible from the employee's gross income under the "no additional cost" services rule. This would be true even if the employee received a...