On September 14, 2011 the IRS issued Notice 2011-72, intended to provide "guidance on the tax treatment of cellular telephones or other similar telecommunications equipment (hereinafter collectively ‘cell phones’) that employers provide to their employees primarily for non-compensatory business purposes."

The Notice states that when such a cell phone is provided to an employee primarily for non-compensatory business reasons, the IRS will treat use of the cell phone for reasons related to the business as a working fringe benefit, the value of which is excludable from the employee’s income.

Solely for purposes of determining whether the working condition fringe benefit provision of I.R.C. Section 132(d) applies, the substantiation requirements which would have to be met for a deduction under Section 162 to be allowable are deemed satisfied.  Also, the IRS will treat the value of any personal use of the cell phone as excludable from the employee’s income as a de minimis fringe benefit.

The Notice is effective for all taxable years after December 31, 2009 and the rules of the Notice apply to any use of a cell phone provided by an employer after that date.