Major wireless companies want old cell phone tax abolished

Last June, the IRS began to investigate the 20-year old tax law that treats work-issued mobile phones as a fringe benefit that is subject to income tax. IRS Commissioner Douglas Shulman called the law "Obsolete...burdensome, poorly understood by taxpayers, and difficult for the IRS to administer consistently."

At the time of the Listed Property rule's enactment in 1989, it was seen as "a tax on CEOs and rich people." But now that workplace communication has evolved to the point where practically everyone has a cellular phone, the law needs to be updated and simplified.

Under the rule, employees are required to maintain logs detailing their business use on a mobile device for tax purposes. When expensing a mobile phone call, the employee is expected to keep track of the total amount of the expense, the time and place of the use of the device, the business purpose of the expense, and the business relationship to the taxpayer of the persons using the device.

While the IRS proposed its own solutions to the problem, Senators John Kerry (D-MA) and John Ensign (R-NV), and Representatives Sam Johnson (R-TX), and Earl Pomeroy (D-ND) presented the MOBILE Act (S. 144/H.R. 690) to Congress to fix this complicated rule.

Today, CTIA- The Wireless Association, an industry group consisting of all of the major U.S. network providers (AT&T, Verizon, Sprint Nextel, T-Mobile, U.S. Cellular, etc.) threw its support behind the legislation; dismissing the IRS' proposed alternatives as "either incomplete or inadequate solutions that would continue to subject employees and employers to onerous call log requirements."

"Instead, CTIA and the wireless industry support the MOBILE Act, which would remove mobile devices from the listed property rule and accomplish Secretary Geithner's and Commissioner Shulman's goal of repealing a burdensome and poorly understood tax rule," CTIA President and CEO Steve Largent said today. "There is broad, bi-partisan support for this legislation and we urge the Congress to act on it this year."

The IRS hoped to make the rule easier to follow, but the bill in Congress seeks to completely remove mobile phones from the IRS' list of taxable workplace properties.