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The IRS has released final regulations (TD 10043) expanding the Section 274(i) definition of “qualified nonpersonal use vehicles” to include unmarked vehicles used by firefighters, rescue squad members and ambulance crews.
Under the final rules, unmarked vehicles used by firefighters, rescue squad members and ambulance crews are excepted from the heightened substantiation requirements of Sections 274(d) and 280F(d)(4) that generally apply to listed property. As a result, expenses related to these vehicles are not subject to detailed substantiation, and both business and personal use may qualify as a working condition fringe excluded from employee income under Section 132(d).
The final regulations largely adopt the proposed regulations issued in December 2024, which were intended to modernize the rules in light of safety concerns faced by firefighters, rescue squad members and ambulance crews. The IRS acknowledged that governmental units increasingly assign unmarked vehicles to firefighters, rescue squad members and ambulance crews due to harassment, vandalism and security risks associated with clearly marked emergency vehicles.
Prior to this change, the regulations included exceptions for clearly marked police, fire, or public safety officer vehicles, as well as unmarked law enforcement vehicles, if certain conditions were satisfied.
The final regulations apply to tax years ending on or after March 20, 2026. The final regulations do not address the extent to which taxpayers can rely on the guidance in the proposed regulations prior to the applicability date of the final regulations. However, the preamble to the proposed regulations expressly provided that taxpayers could rely on the proposed regulations until the regulations were finalized.
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