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Read my lips…

No new taxes on computer gear and Internet service. 5/17 ReleVents hed: dek: By James Mathewson

If a new bill successfully makes it into law, the IRS will be prevented from thwarting efforts to bridge the digital divide and increase telecommuting around the country. The IRS plans to start taxing employees for the computing gear and Internet access they receive from their employers, stating that it is part of their compensation package. But, as reported in a news item on our site today, a bill introduced by Illinois Rep. Jerry Weller would ban the proposed IRS practice.

Weller’s stated reason for the bill is that the IRS proposal would hamper corporate efforts to bridge the digital divide. Several companies, most notably Ford, offer free computers with Internet access to all of their employees. Because nothing teaches computer literacy faster than actually owning and playing around with a PC, the companies view this as a training investment for their employees. This is sound business logic that also happens to equip with computers thousands of people who would not normally be able to afford them, helping to bridge the digital divide without a penny of government money.

But that is not the only reason companies give their employees computers. They also do it because it allows the companies to be eligible for federal tax benefits for promoting telecommuting and reducing burdens on urban infrastructure (traffic, noise, air pollution, etc.). While telecommuting does involve some government aid in the form of tax incentives, it is the best way to reduce auto congestion and all the ills that come with it. And a company is better off giving employees computers than it is owning computers used in home offices, for reasons of maintenance headaches, ease of depreciation accounting, and additional tax benefits (not related to the telecommuting ones).

Suppose my employer is considering giving me a new desktop that would enable me to work from home once a week. Well, under the IRS proposal, it could tax me for its value, which would cost me $500 on my next tax bill. I could instead purchase a $500 machine, charge it to my home-based moonlighting business, and receive a tax shelter as a result. Thus, if the IRS implemented the new tax law, I would decline my employer’s offer and purchase my own machine instead for telecommuting. While my employer would not mind this, it would be a disincentive for me to telecommute. And there is no way around my employer paying for the Internet access that enables me to collaborate with my colleagues while in my home office. If the IRS taxed me for this, which it also is proposing to do, it would cost me more to telecommute than to drive in. So, again, the IRS proposal would be a deterrent to my telecommuting.

Many folks like me would probably take the new rules in stride and decide to telecommute anyway. But others would not. And any new law that hinders telecommuting is a bad thing, as is any law that hinders private efforts to bridge the digital divide. The good new is, the conservative Congress should be very supportive of this new bill, if for no other reason than that it tends to be against new taxes. Time permitting, I expect it to be attached to one of the omnibus budget bills and make its way into law.

James Mathewson is editorial director of and ComputerUser magazine.

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