De Minimis Fringe Benefits
VANDERBILT UNIVERSITY HUMAN RESOURCES POLICIES AND PROCEDURES
SUBJECT: De Minimis Fringe Benefits (Reporting Taxable Gifts, Awards, Prizes, and Other "Perks")
EFFECTIVE DATE: January 11, 2021
POLICY STATEMENT/REASON FOR POLICY
As an employer, Vanderbilt must comply with all IRS tax codes, including the taxability of gifts given to employees. Vanderbilt understands that gifts may occasionally be given to employees to recognize outstanding performance, years of service, or personal occasions. The purpose of this policy is to outline when these gifts must be treated as taxable income to the employee recipient.
THIS POLICY APPLIES TO
This policy applies to all Vanderbilt employees involved in the creation, processing, approval, and recording of employee gifts, including procurement requestors, one card holders, business unit/entity approvers, financial unit managers, chief business officers (CBOs), deans, and central office staff in Payroll, Accounting, and Payment Services.
All such individuals are expected to be familiar with this policy and its current associated procedures.
CONSEQUENCES OF NON-COMPLIANCE
Failure to comply with this policy may result in loss of role privileges and enterprise system access, and/or performance action.
In general, a de minimis benefit is one for which, considering its value and the frequency with which it is provided, is so small that accounting for it is unreasonable or impractical. De minimis benefits are excluded from taxable income under Internal Revenue Code section 132(a)(4) and include items which are not specifically excluded under other sections of the Code. These include such items as:
- Coffee and doughnuts provided to employees on business premises
- Traditional holiday gifts (candy, turkey, etc.) of a relatively small value
- Occasional t-shirts or other apparel of small value for special events
- Occasional tickets for entertainment events
- Flowers, fruit, books etc., provided under special circumstances or other similar property provided to employees under special circumstances e.g., on account of illness, outstanding performance, or family crisis.
- Occasional parties or picnics for employees
Cash and cash equivalent items (i.e. gift cards) are never considered de minimis and must be reported as income to the employee.
Meals provided to employees working from home (whether in the form of a gift card, meal delivery service or expense reimbursement etc.) are never considered de minimis and must be reported as income to the employee.
In determining whether a benefit is de minimis, you should always consider its frequency and its value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. For example, if an employer provides a book to an employee weekly, the value of the books will never be considered de minimis with regard to that one employee (because they are provided frequently). However, if the same employer only provides all other employees one book per year, then the gift is considered de minimis to all of those employees (because they are provided infrequently).
Occasional non-cash gifts valued less than $75 are considered non-taxable to the employee as the administrative burden of accounting for them is unreasonable. The $75 threshold is consistent with Vanderbilt’s Travel and Business Expense Policy threshold for providing receipts which is in line with federal substantiation requirements under Treasury Regulation section 1.274-5.
The entire value of all non-cash gifts valued over $75 are considered taxable income to the recipient; not just the excess amount over $75.
While you may choose any payment method e.g., PO, NPO, one card, or expense reimbursement to pay for the gift, all taxable gifts must also be reported to Human Resources.
Achievement Awards (special rules)
Tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement valued at $400 or less, is generally excluded from taxable income.
However, the exclusion from income doesn’t apply to the following awards.
- A length-of-service award if the individual received the award for less than 5 years of service or if the individual received another length-of-service award during the year or the previous 4 years.
- A safety achievement award if the individual is a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year.
Taxable gifts should be submitted through Oracle under award compensation for employees within your department by the manager or the HCM. Details for entering award compensation and a list of elements can be found in Oracle Guided Learning by searching for award compensation. If you are awarding a gift to an employee in another department contact email@example.com for assistance.
Asst Director, Payroll
Laws & Regulations
Internal Revenue Code section 132(a)(4) https://www.irs.gov/government-entities/federal-state-local-governments/de-minimis-fringe-benefits
Internal Revenue Code Section 74(c)(1)
Internal Revenue Code Section 274(j)
Internal Revenue Code Section 119)
Treasury Regulation 1.119-1(a)Treasury Regulation 1.132-6
Treasury Regulation 1.274-5
Chief Counsel Advice Memorandum 200108042
Vanderbilt University Endowment Distribution Utilization Guidelines – contact firstname.lastname@example.org for the latest version
Disclaimer : The policies and procedures that guide employment practices are intended to assist in consistent administration and compliance. Vanderbilt reserves the right to modify its policies and practices, in whole or in part, at any time. Revisions to existing policies and procedures, and the development of new policies and procedures, will be made from time to time at the discretion of the University. When new policies are implemented or existing policies are revised, the University will notify members of the University community as soon as practicable. However, where differences occur, the most recent policy as reviewed and approved by the University will take precedence. The policies and procedures do not create a contract, implied or expressed, with at will employees at Vanderbilt.