4.1. ERMUSR 05-12-2009 - Laserfiche WebLink

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. ~, Elk River Municipal Utilities 13069 Orono Parkway • P.O. Box 430 Elk River, MN 55330-0430 April 30, 2009 To: Elk River Municipal Utilities Commission John Dietz Jerry Gumphrey Daryl Thompson From: Troy Adams Subject: Company Vehicle Take-Home Practice 4~1 Phone: 763.441.2020 Fax: 763.441.8099 At the April Commission meeting the agenda item pertaining to ERMU's company vehicle take- home practice was tabled until May to allow for verification of information regarding tax implications. There was a question as to whether or not the employees taking on-call vehicles home would be subject to taxation. The Utilities' interpretation of the tax code had always been that the take-home vehicles were tax exempted as "public safety" vehicles as specified in IRS Publication 15-B. The League of Minnesota Cities had looked into this topic on the Utilities' behalf and concluded that there may be tax implications. They referred staff to IRS Representative Steve Bruzda for a definitive ruling. The IRS representative confirmed that there are tax implications with the exception of the Security on-call vehicle. (Refer to the attached letter and supporting documentation from IRS Representative Steve Bruzda) Even though the Utilities' on-call vehicles are used for emergency response, Utility on-call vehicles are not tax exempt as "public safety" vehicles in the eyes of the IRS. This "public safety" exception is for firefighters, police, emergency responders, and clergy. Based on this, going forward the take-home vehicle benefit will be subject to taxation for the applicable ERMU employees. There are a number of methods to calculate this tax including fair market value, mileage, and commuter rule (see attached spreadsheet of applicable ERMU employees and the different taxations methods). Administered within the limits of the tax code, this taxation will be implemented such that it has the least impact to the employees. Through the investigation into the tax implications of these vehicles, it has been determined that ERMU's policy handbookneeds to be updated with clarifications pertaining to the take-home vehicle on-call practice in order for the practice to meet Minnesota Statute 471.666. This statute deals with publicly owned vehicles and prohibits their personal use. The Utilities' vehicles do not fall under the "public safety" exception as previously interpreted. However, the actual ERMU take-home vehicle on-call practice is still permitted under 471.66 Subd. 3 (1) because the