Cell Phones

Last Update 7/20/2015

Background and Purpose

Management of Cal Poly Corporation (the “Corporation” or “CPC”) has identified that certain employees should have cell phones in order to perform the duties of their respective positions. Certain positions require that the employee be available to contact for work-related purposes during hours when the employee is away from the office or during hours outside of the employee’s normal work schedule. Accordingly, the purpose of this document is to establish policies and procedures for the use of cell phones by CPC employees in the performance of their duties that comply with current IRS tax guidance (specific references can be found at the end of this document).

The policies and general procedures set forth in this document govern the administration of cell phones to CPC employees. This document does not contemplate requests for non-CPC employees. Such requests shall not be approved pursuant to this document. Requests for cell phones for any state employees shall follow policies and procedures established by the university.

Policy

Determination of the need for an employee to have use of a cell phone in order to perform the duties of their position is made by the employee’s manager. The employee’s manager is responsible for determining that substantial non-compensatory business reasons exist requiring the employee to maintain and use a cell phone for work-related purposes.

For example, the manager’s need to regularly contact the employee for work-related purposes during hours when the employee is away from the office or during hours outside of the employee’s normal work schedule, or the need for an employee to be regularly available for service related calls when away from their desk or outside of their normal work schedule.

A cell phone provided to promote the morale or good will of an employee, to attract a prospective employee or as a means of furnishing additional compensation to an employee does not meet this criterion.

Employee use of a cell phone will be governed by one of two options outlined below. Determination of which option to use will be made by the manager.

Option A – Corporation-provided cell phones

  1. Corporation-owned cell phones may be issued to employees for non-compensatory business purposes. Information Technology Services (ITS) is responsible for issuing and managing Corporation-owned cell phones. Cellular service contracts for Corporation-owned cell phones shall be between the University and the service provider (refer to ITS Cellular Telephone Guidelines).
  2. Service plans for Corporation-owned cell phones shall include the type of coverage that is expected based on the needs of the Corporation. Cellular plan options and rates can be found at Service Desk website. Monthly service charges related to the contracted service plans shall be charged back directly to the Corporation.
  3. Corporation-owned cell phones issued to employees may be used for incidental personal use. Any incremental cost above the monthly contracted rate related to personal use shall be reimbursed by the employee. The Corporation shall be reimbursed for incremental costs resulting from personal use, which may include, but is not limited to the following:
    1. The cost of excess minutes at the excess minute rate for calls
    2. The cost associated with personal text usage that exceed the plan set by the Corporation for business purposes
    3. For pay-by-minute or pay-by-text plans, the cost for personal calls and texts at the per minute / text cost
    4. Increased data plan charges as a result of personal use
  4. Corporation department managers/supervisors will establish an internal process for monthly departmental reviews of Corporation-provided cell phone billing statements. Departments are responsible for ensuring the employees make payment at the Corporation’s cashier’s office for the incremental costs associated with personal use of Corporation-provided cell phones. Departments will review and adjust cell phone plans as needed to reflect average business use.
  5. Corporation-provided cell phones remain the property of the CPC. Employees are required to return Corporation-provided cell phones to CPC upon the earlier of (1) termination of employment with the Corporation or (2) discontinuation of a substantial business reason for the employee to maintain and use a cell phone for work-related purposes.

Option B – Reimbursement to employees for the cost of maintaining a personal cell phone and plan for business use

  1. Employees that maintain a personal cell phone and plan that reasonably meets the needs of the Corporation may elect to use such personal cell phone for business purposes. Under this election, the Corporation shall reimburse the employee for the business use of their personal cell phone plan. In addition, the Corporation shall reimburse the employee for the purchase of a cell phone if it is determined the employee’s existing cell phone, if any, is insufficient to meet the needs of the Corporation. The employee is not required to obtain the exact phone or plan that would otherwise be contracted under Option A, nor is the employee required to obtain separate plans for business and personal use. The cell phone plan, when combined with personal use, should not cause the employee to seek a higher reimbursement from the Corporation than they would if they had only a business plan.
  2. Phone plan reimbursements will be made in advance for three months at a time, and at a pre-determined monthly rate that is agreed upon between the employee and their manager. The reimbursement rate must not exceed actual expenses incurred. The reimbursement rate for a combined personal and business plan should not be the full or actual cost of the combined plan. Likewise, for a business plan that is combined with a family/shared plan, the reimbursement rate should be the pro-rata share of business plan expenses. The reimbursement is a set rate, not to exceed the cost of the minimum business plan necessary to accommodate business needs. Further, the reimbursement rate must factor any discounts that reduce the employee’s cost.
  3. If the employee obtains a lesser plan at a lower cost, then the agreed upon reimbursement will either be reduced to a lower regular reimbursement rate, or reimbursements will be suspended if it is determined that the plan is not sufficient to meet business needs. Employees must certify that the cell phone plan reimbursement being submitted is consistent with the business use intention, and that they will notify the approving official should they modify, drop or change cell phone plans below the plan level identified for business needs.
  4. Departments will establish a process whereby approvers of cell phone plan charges have a means of validating the appropriateness of the reimbursement rate for an employee’s personal cell phone plan. This can be accomplished by submitting the face sheet of the latest bill, redacting all specific call usage information, and redacting phone numbers and costs associated with other phones on the plan.

General Procedures

The following procedures shall be followed to implement the policies contained in this document:

  1. The manager of the employee is responsible for determining the need for an employee to have use of a cell phone in order to perform the employee’s duties and/or for work-related purposes based on a substantial non-compensatory business reason(s). Departments are required to document by internal memo the non-compensatory business reason(s) for which the cell phones are to be used.
  2. The manager and the employee will determine which option (Option A or Option B) is appropriate for the employee.

Additional Procedures Under Option A

  1. The manager will submit a cell phone request to the building Telephone Coordinator. The Telephone Coordinator will submit a Cellular Service request form to the ITS department and will retain a copy of the form in the department for as long as the employee is using the cell phone.
  2. Corporation department managers/supervisors will review monthly cell phone billing statements for accuracy and periodically to confirm continued existence of substantial noncompensatory business reason(s).
  3. For incremental costs associated with personal use of the employer-provided cell phone, the employee shall make payment at the Corporation’s cashier’s office.
  4. Departments will review and adjust cell phone plans annually to reflect average business use.

Additional Procedures Under Option B

  1. The manager will assess the adequacy of the employee’s service plan and equipment to satisfy the Corporation’s business needs. If it is determined that the service plan and / or equipment is inadequate to satisfy the Corporation’s business needs, Option B is not permissible until such inadequacies are remedied.
  2. The manager and the employee will determine an appropriate reimbursement rate, utilizing the lowest rates available from service providers, taking into account all available discounts to the employee.
  3. The employee will submit a Cell Phone Reimbursement Pre-Authorization Form, which shall be reviewed and approved by the respective department head. The Cell Phone Reimbursement Pre-Authorization Form shall be retained in the respective department office as a record of approval.
  4. If the employee’s existing cell phone, if any, is insufficient to meet the needs of the Corporation, the employee and the manager will determine an appropriate device to be purchased by the employee. Thereafter, the employee shall submit a CPC Cell Phone Reimbursement Request Form for the actual cost the device (attach invoice) and the first pro-rated bill, assuming there is one.
  5. If the employee already owns a device they previously obtained for their personal plan and usage, there will not be a retroactive reimbursement for that device. New device reimbursements can occur every two years.
  6. Thereafter, and every three months, the employee will submit to their manager a copy of the most recent billing for the phone line and associated service plan, demonstrating that the plan meets the requirements contained in this document.
  7. Departments will review the submitted billing statements to ensure that reimbursement rates are still appropriate and to confirm continued existence of substantial noncompensatory business reason(s).
  8. When a reimbursement rate needs to be adjusted, an updated Cell Phone Reimbursement Pre-Authorization Form shall be submitted, approved and retained.

Additional Considerations

Section 2043 of the Small Business Jobs Act of 2010, Pub.L.No. 111-240, removed cell phones from the definition of listed property for taxable years beginning after December 31, 2009. Further, IRS Notice 2011-72 addresses the tax treatment of employer-provided cell phones for noncompensatory purposes. The notice provides that, for tax years after December 31, 2009, the IRS will treat the employee’s use of employer-provided cell phones for reasons related to the employer’s trade or business as a working condition fringe benefit, the value of which is excludable from the employee’s income. Additionally, any personal use of the employer-provided cell phone will be treated as a de minimis fringe benefit, excludable from the employee’s gross income.

The IRS announced in §§-04-0911-083 a similar administrative approach applies with respect to arrangements that provide cash allowances and reimbursements for work-related use of personally-owned cell phones. Employers that require employees, primarily for noncompensatory business reasons, to use their personal cell phones for business purposes may treat reimbursements of the employees’ expenses for reasonable cell phone coverage as nontaxable. This treatment does not apply to reimbursements of unusual or excessive expenses or to reimbursements made as a substitute for a portion of the employee’s regular wages.


References

  • IRS Notice 2011-72, Tax Treatment of Employer-Provided Cell Phones, defines the tax use of employer-provided cell phones for noncompensatory purposes as excludable from the employee’s income.
  • IRS Field Service Advice Memorandum §§-04-0911-083 provides guidance for reimbursing the business use of a personally owned cell phone, which is not addressed in Notice 2011-72.