Frequently Asked Questions
Who is eligible for the Line of Business Fringe Benefit Election?
Employers who had substantially all employees entitled to discounts in one line of business as of Jan 1, 1984, and wish to extend those tax-free discounts to other lines.
How does the Line of Business Fringe Benefit Election work?
Allows an employer to treat employees from different lines of business as being in one line for purposes of excluding employee discounts from gross income.
What law authorizes the Line of Business Fringe Benefit Election?
The Line of Business Fringe Benefit Election is authorized under IRC §4977 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §4977
Source: Internal Revenue Code, Title 26, United States Code
§ 4977. Tax on certain fringe benefits provided by an employer(a) Imposition of taxIn the case of an employer to whom an election under this section applies for any calendar year, there is hereby imposed a tax for such calendar year equal to 30 percent of the excess fringe benefits.
(b) Excess fringe benefitsFor purposes of subsection (a), the term “excess fringe benefits” means, with respect to any calendar year—(1) the aggregate value of the fringe benefits provided by the employer during the calendar year which were not includible in gross income under paragraphs (1) and (2) of section 132(a), over
(2) 1 percent of the aggregate amount of compensation—(A) which was paid by the employer during such calendar year to employees, and
(B) was includible in gross income for purposes of chapter 1.
(c) Effect of election on section 132(a)If—(1) an election under this section is in effect with respect to an employer for any calendar year, and
(2) at all times on or after January 1, 1984, and before the close of the calendar year involved, substantially all of the employees of the employer were entitled to employee discounts on goods or services provided by the employer in 1 line of business,
for purposes of paragraphs (1) and (2) of section 132(a) (but not for purposes of section 132(h)), all employees of any line of business of the employer which was in existence on January 1, 1984, shall be treated as employees of the line of business referred to in paragraph (2).
(d) Period of electionAn election under this section shall apply to the calendar year for which made and all subsequent calendar years unless revoked by the employer.
(e) Treatment of controlled groupsAll employees treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section.
(f) Section to apply only to employment within the United StatesExcept as otherwise provided in regulations, this section shall apply only with respect to employment within the United States.
(Added Pub. L. 98–369, div. A, title V, § 531(e)(1), July 18, 1984, 98 Stat. 885; amended Pub. L. 99–514, title XVIII, § 1853(c)(1), (2), Oct. 22, 1986, 100 Stat. 2871; Pub. L. 103–66, title XIII, § 13213(d)(3)(D), Aug. 10, 1993, 107 Stat. 474; Pub. L. 104–188, title I, § 1704(t)(66), Aug. 20, 1996, 110 Stat. 1890.)
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