.01 This revenue procedure provides: (1) the maximum value of employer-provided vehicles first made available to employees for personal use in calendar year 2005 for which the vehicle cents-per-mile valuation rule provided under section 1.61-21(e) of the Income Tax Regulations may be applicable is $14,800 for a passenger automobile and $16,300 for a truck or van; (2) the maximum value of employer-provided vehicles first made available to employees for personal use in calendar year 2005 for which the fleet-average valuation rule provided under section 1.61-21(d) of the regulations may be applicable is $19,600 for a passenger automobile and $21,300 for a truck or van.

.01 If an employer provides an employee with a vehicle that is available to the employee for personal use, the value of the personal use must generally be included in the employee’s income and wages. Internal Revenue Code § 61; Treas. Reg. § 1.61-21.

.02 For employer-provided passenger automobiles (including trucks and vans) made available to employees for personal use that meet the requirements of section 1.61-21(e)(1) of the regulations, generally the value of the personal use may be determined under the vehicle cents-per-mile valuation rule of section 1.61-21(e). However, regulations section 1.61-21(e)(1)(iii)(A) provides that for a passenger automobile first made available after 1988 to any employee of the employer for personal use, the value of the personal use may not be determined under the vehicle cents-per-mile valuation rule for a calendar year if the fair market value of the passenger automobile (determined pursuant to regulations section 1.61-21(d)(5)(i) through (iv)) on the first date the passenger automobile is made available to the employee exceeds a specified dollar limit.

.03 For employer-provided vehicles available to employees for personal use for an entire year, generally the value of the personal use may be determined under the automobile lease valuation rule of section 1.61-21(d) of the regulations. Under this valuation rule, the value of the personal use is the Annual Lease Value. Provided the requirements of regulations section 1.61-21(d)(5)(v) are met, an employer with a fleet of 20 or more automobiles may use a fleet-average value for purposes of calculating the Annual Lease Values of the automobiles in the employer’s fleet. The fleet-average value is the average of the fair market values of all the automobiles in the fleet. However, section 1.61-21(d)(5)(v)(D) of the regulations provides that for an automobile first made available after 1988 to an employee of the employer for personal use, the value of the personal use may not be determined under the fleet-average valuation rule for a calendar year if the fair market value of the automobile (determined pursuant to regulations section 1.61-21(d)(5)(i) through (v)) on the first date the passenger automobile is made available to the employee exceeds a specified dollar limit.

.04 The maximum passenger automobile values for applying the vehicle cents-per-mile and the fleet-average value rules reflect the automobile price inflation adjustment of Code section 280F(d)(7). The method of calculating this price inflation amount for automobiles other than trucks and vans uses the “new car” component of the Consumer Price Index (CPI) “automobile component”. When calculating this price inflation adjustment for trucks and vans, the “new trucks” component of the CPI is used. This results in somewhat higher maximum values for trucks and vans. This change reflects the higher rate of price inflation that trucks and vans have been subject to since 1988, and is consistent with the change announced in Rev. Proc. 2003-75, 2003-2 C.B. 1018 for purposes of calculating depreciation deductions. See also Rev. Proc. 2004-20, 2004-1 C.B. 642 and 2005-13, 2005-12 I.R.B. 759. For purposes of this revenue procedure, the term “trucks and vans” refers to passenger automobiles that are built on a truck chassis, including minivans and sport utility vehicles (SUVs) that are built on a truck chassis.

.01 Maximum Automobile Value for Using the Cents-per-mile Valuation Rule. An employer providing a passenger automobile for the first time in calendar year 2005 for the personal use of any employee may determine the value of the personal use by using the vehicle cents-per-mile valuation rule in section 1.61-21(e) of the regulations if its fair market value on the date it is first made available does not exceed $14,800 for a passenger automobile other than a truck or van, or $16,300 for a truck or van. If the fair market value of the passenger automobile exceeds this amount, the employer may determine the value of the personal use under the general valuation rules of regulations section 1.61-21(b) or under the special valuation rules of section 1.61-21(d) (Automobile lease valuation) or section 1.61-21(f) (Commuting valuation) if the applicable requirements are met. See Rev. Proc. 2003-75 for guidance on determining the maximum value of passenger automobiles first made available during calendar year 2003, and Rev. Proc. 2004-20 for guidance on determining the maximum value of passenger automobiles first made available during calendar year 2004.

.02 Maximum Automobile Value for Using the Fleet-Average Valuation Rule. An employer with a fleet of 20 or more automobiles providing an automobile for the first time in calendar year 2005 for the personal use of any employee for an entire year may determine the value of the personal use by using the fleet-average valuation rule in regulations section 1.61-21(d)(5)(v) to calculate the Annual Lease Values of the automobiles in the fleet. The fleet-average valuation rule may not be used to determine the Annual Lease Value of any automobile if its fair market value on the date it is first made available exceeds $19,600 for a passenger automobile other than a truck or van, or $21,300 for a truck or van. If all other applicable requirements are met, an employer with a fleet of 20 or more vehicles consisting of passenger automobiles other than trucks or vans as well as trucks and vans may use the fleet-average valuation rule as long as none exceeds its respective maximum allowable value. If the fair market value of any passenger automobile in the fleet exceeds these amounts, the employer may determine the value of the personal use under regulations section 1.61-21(f) (Commuting valuation) or the general valuation rules of section 1.61-21(b), or may determine the Annual Lease Value of such automobile separately under the automobile lease valuation rule of section 1.61-21(d)(2) if the applicable requirements are met.

This revenue procedure applies to employer-provided passenger automobiles, trucks or vans first made available to employees for personal use in calendar year 2005.

The principal author of this revenue procedure is Frederick L. Wesner of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt & Government Entities). For further information regarding this revenue procedure, contact Frederick L. Wesner at (202) 622-6040 (not a toll-free call).