rp-98-30.pdf

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# Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.105: Examination of returns and claims for
refund, credit, or abatement; determination of correct
tax liability.

(Also Part I, § 280F; 1.280F-7, 1.61-21.)

## Rev. Proc. 98-30

### SECTION 1. PURPOSE

This revenue procedure provides: (1) limitations on
depreciation deductions for owners of passenger automobiles
first placed in service during calendar year 1998, including
separate limitations on passenger automobiles designed to be
propelled primarily by electricity and built by an original
equipment manufacturer (electric automobiles) ; (2) the
amounts to be included in income by lessees of passenger
automobiles first leased during calendar year 1998, including
separate inclusion amounts for electric automobiles; and
(3) the maximum allowable value of employer-provided
automobiles first made available to employees for personal use
in calendar year 1998 for which the vehicle cents-per-mile
valuation rule provided under $ 1.61-21 (e) of the Income Tax

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Regulations may be applicable. The tables detailing these
depreciation limitations and lessee inclusion amounts reflect
the automobile price inflation adjustments required by
§ 280F (d) (7) of the Internal Revenue Code. The maximum
allowable automobile value for applying the vehicle
cents-per-mile valuation rule reflects the automobile price
inflation adjustment of § 280F (d) (7) as required by
§ 1.61-21 (e) (1) (iii) (A).

SECTION 2. BACKGROUND

For owners of automobiles, $ 280F (a) imposes dollar
limitations on the depreciation deduction for the year that
the automobile is placed in service and each succeeding year.
In the case of electric automobiles placed in service after
August 5, 1997, and before January 1, 2005, § 280F (a) (1) (C)
requires tripling of these limitation amounts. Section
280F (d) (7) requires the amounts allowable as depreciation
deductions to be increased by a price inflation adjustment
amount for passenger automobiles placed in service after
calendar year 1988.

For leased automobiles, § 280F (c) requires a reduction in
the deduction allowed to the lessee of the automobile. The
reduction must be substantially equivalent to the limitations
on the depreciation deductions imposed on owners of
automobiles. Under § 1.280F-7(a), this reduction requires the
lessees to include in gross income an inclusion amount

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determined by applying a formula to the amount obtained from a
table. There is a table for lessees of electric automobiles
and a table for all other passenger automobiles. Each table
shows inclusion amounts for a range of fair market values for
each tax year after the automobile is first leased.

For automobiles first provided by employers to employees
that meet the requirements of $ 1.61-21 (e) (1), the value to
the employee of the use of the automobile may be determined
under the vehicle cents-per-mile valuation rule of
§ 1.61-21 (e). Section 1.61-21 (e) (1) (iii) (A) provides that for
an automobile first made available after 1988 to any employee
of the employer for personal use, the value of the use of the
automobile may not be determined under the vehicle
cents-per-mile valuation rule for a calendar year if the fair
market value of the automobile (determined pursuant to
§ 1.61-21 (d) (5) (i) through (iv) ) on the first date the
automobile is made available to the employee exceeds $12, 800
as adjusted by § 280F (d) (7) .

SECTION 3. SCOPE AND OBJECTIVE

01\. The limitations on depreciation deductions in
section 4.02 of this revenue procedure apply to automobiles
(other than leased automobiles) that are placed in service in
calendar year 1998 and continue to apply for each tax year
that the automobile remains in service.

02\. The tables in section 4.03 of this revenue procedure
apply to leased automobiles for which the lease term begins in

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calendar year 1998. Lessees of such automobiles must use
these tables to determine the inclusion amount for each tax
year during which the automobile is leased.

03\. See Rev. Proc. 96-25, 1996-1 C.B. 681, for
information on determining inclusion amounts for automobiles
first leased before January 1, 1997; Rev. Proc. 97-20, 1997-11
I. R.B. 10, for automobiles first leased during calendar year
1997, including electric automobiles first leased on or after
January 1, 1997, and before August 6, 1997; and Rev. Proc.
98-24, 1998-10 I.R.B. 31, for electric automobiles first
leased after August 5, 1997, and before January 1, 1998.
04\. The maximum fair market value figure in section
4.04 (2) of this revenue procedure applies to employer-provided
automobiles first made available to any employee for personal
use in calendar year 1998. See Rev. Proc. 97-20, for the
maximum fair market value figure for automobiles first made
available in calendar year 1997.

SECTION 4. APPLICATION

01\. A taxpayer placing an automobile in service for the
first time during calendar year 1998 is limited to the
depreciation deduction shown in Table 1 of section 4.02 (2) or,
in the case of an electric automobile, Table 2. A taxpayer
first leasing an automobile in calendar year 1998 must
determine the inclusion amount that is added to gross income
using Table 3 of section 4.03 or, in the case of an electric
automobile, Table 4. Otherwise, the procedures of

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§ 1.280F-7 (a) must be followed. An employer providing an
automobile for the first time in calendar year 1998 for the
personal use of any employee may determine the value of the
use of the automobile by using the cents-per-mile valuation
rule in § 1.61-21 (e) if the fair market value of the
automobile does not exceed the amount specified in section
4.04 (2) . If the fair market value of the automobile exceeds
the amount specified in section 4.04 (2), the employer may
determine the value of the use of the automobile under the
general valuation rules of $ 1.61-21 (b) or under the special
valuation rules of § 1.61-21 (d) (Automobile lease valuation)
or § 1.61-21 (f) (Commuting valuation) if the applicable
requirements are met.

02\. Limitations on Depreciation Deductions for Certain
Automobiles.

(1) Amount of the Inflation Adjustment. Under
§ 280F (d) (7) (B) (i), the automobile price inflation adjustment
for any calendar year is the percentage (if any) by which the
CPI automobile component for October of the preceding calendar
year exceeds the CPI automobile component for October 1987.
The term "CPI automobile component" is defined in

§ 280F (d) (7) (B) (ii) as the "automobile component" of the
Consumer Price Index for all Urban Consumers published by the
Department of Labor (the CPI) . The new car component of the
CPI was 115.2 for October 1987 and 140.6 for October 1997.
The October 1997 index exceeded the October 1987 index by

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25.4. The Internal Revenue Service has, therefore, determined
that the automobile price inflation adjustment for 1998 is
22.05 percent (25.4/115.2 x 100%). This adjustment is
applicable to all automobiles that are first placed in service
in calendar year 1998. The dollar limitations in § 280F (a)
must therefore be multiplied by a factor of 0.2205, and the
resulting increases, after rounding to the nearest $100, are
added to the 1988 limitations to give the depreciation
limitations applicable to passenger automobiles (other than
electric automobiles) for 1998. To determine the dollar
limitations applicable to an electric automobile first placed
in service during calendar year 1998, the dollar limitations
in § 280F (a) are tripled in accordance with § 280F (a) (1) (C)
and are then multiplied by a factor of 0.2205; the resulting
increases, after rounding to the nearest $100, are added to
the tripled 1988 limitations to give the depreciation
limitations for 1998.

(2) Amount of the Limitation. For automobiles
(other than electric automobiles) placed in service in
calendar year 1998, Table 1 contains the dollar amount of the
depreciation limitations for each tax year. For electric
automobiles placed in service in calendar year 1998, Table 2
contains these amounts.

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#### REV. PROC. 98-30 TABLE 1

# DEPRECIATION LIMITATIONS FOR AUTOMOBILES (OTHER THAN ELECTRIC AUTOMOBILES) FIRST PLACED IN SERVICE IN CALENDAR YEAR 1998

REV. PROC. 98-30 TABLE 2

Tax Year

Amount

1st Tax Year

$3,160

2nd Tax Year

$5,000

3rd Tax Year

$2,950

Each Succeeding Year

$1, 775

## DEPRECIATION LIMITATIONS FOR ELECTRIC AUTOMOBILES FIRST PLACED IN SERVICE IN CALENDAR YEAR 1998

Tax Year

Amount

1st Tax Year

$9,380

2nd Tax Year

$15,000

3rd Tax Year

$8,950

Each Succeeding Year

$5,425

### 03. Inclusions in Income of Lessees of Automobiles.

The inclusion amounts for automobiles first leased in
calendar year 1998 are calculated under the procedures
described in § 1.280F-7 (a) . Lessees of automobiles other than
electric automobiles should use Table 3 in applying these
procedures, while lessees of electric automobiles should use
Table 4.

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## REV. PROC. 98-30 TABLE 3

DOLLAR AMOUNTS FOR AUTOMOBILES (OTHER THAN ELECTRIC AUTOMOBILES)
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 1998

Fair Market Value
of Automobile

Tax Year During Lease

Over

Not Over

1st

2nd

3rd

4th

5th and Later

$ 15,800

16,100

1

5

8

12

14

16,100

16,400

4

10

16

22

25

16,400

16,700

6

15

25

31

36

16,700

17,000

9

20

33

41

47

17,000

17,500

12

28

43

53

62

17,500

18,000

16

37

56

70

80

18,000

18,500

20

46

70

85

99

18,500

19,000

24

55

83

101

117

19,000

19,500

28

64

96

117

136

19,500

20,000

32

73

110

133

154

20,000

20,500

36

82

123

149

173

20,500

21,000

40

91

136

165

191

21,000

21,500

45

99

150

181

209

21,500

22,000

49

108

163

197

228

22,000

23,000

55

122

183

221

255

23,000

24,000

63

140

210

252

292

24,000

25,000

71

158

236

285

329

25,000

26,000

79

176

263

316

366

26,000

27,000

88

193

290

348

403

27,000

28,000

96

211

317

380

439

28,000

29,000

104

229

343

412

477

29,000

30,000

112

247

370

444

513

30,000

31,000

120

265

396

476

550

31,000

32,000

128

283

423

508

587

32,000

33,000

137

301

449

540

624

33,000

34,000

145

319

476

571

661

34,000

35,000

153

337

502

604

697

35,000

36,000

161

355

529

635

735

36,000

37,000

169

373

556

667

771

37,000

38,000

178

391

582

699

808

38,000

39,000

186

409

608

731

845

39,000

40,000

194

427

635

763

882

40,000

41,000

202

445

662

794

919

41,000

42,000

210

463

688

827

955

42,000

43,000

218

481

715

859

992

43,000

44,000

227

498

742

891

1,028

44,000

45,000

235

516

769

922

1,066

45,000

46,000

243

534

795

955

1,102

46,000

47,000

251

552

822

986

1,140

47,000

48,000

259

570

849

1,018

1,176

48,000

49,000

268

588

875

1,050

1,213

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## REV. PROC. 98-30 TABLE 3

DOLLAR AMOUNTS FOR AUTOMOBILES (OTHER THAN ELECTRIC AUTOMOBILES)
WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 1998

Fair Market Value
of Automobile

Tax Year During Lease

Over

Not Over

1st

2nd

3rd

4th

5th and Later

49,000

50,000

276

606

901

1,082

1,250

50,000

51,000

284

624

928

1,114

1,286

51,000

52,000

292

642

955

1,145

1,324

52,000

53,000

300

660

981

1,178

1,360

53,000

54,000

308

678

1,008

1,209

1,398

54,000

55,000

317

695

1,035

1,241

1,434

55,000

56,000

325

713

1,062

1,273

1,471

56,000

57,000

333

732

1,087

1,305

1,508

57,000

58,000

341

750

1,114

1,337

1,544

58,000

59,000

349

768

1,140

1,369

1,582

59,000

60,000

358

785

1,168

1,400

1,619

60,000

62,000

370

812

1,207

1,449

1,674

62,000

64,000

386

848

1,261

1,512

1,747

64,000

66,000

403

884

1,313

1,577

1,821

66,000

68,000

419

920

1,367

1,640

1,894

68,000

70,000

435

956

1,420

1,704

1,968

70,000

72,000

452

991

1,474

1,767

2,042

72,000

74,000

468

1,027

1,527

1,832

2,115

74,000

76,000

484

1,063

1,580

1,896

2,189

76,000

78,000

501

1,099

1,633

1,959

2,263

78,000

80,000

517

1,135

1,686

2,023

2,337

80,000

85,000

546

1,198

1,779

2,134

2,466

85,000

90,000

587

1,287

1,913

2,294

2,649

90,000

95,000

627

1,377

2,046

2,453

2,834

95,000

100,000

668

1,467

2,178

2,613

3,018

100,000

110,000

730

1,601

2,378

2,852

3,294

110,000

120,000

812

1,780

2,644

3,172

3,662

120,000

130,000

893

1,960

2,910

3,490

4,031

130,000

140,000

975

2,139

3,176

3,810

4,398

140,000

150,000

1,057

2,318

3,443

4,128

4,767

150,000

160,000

1,139

2,498

3,708

4,447

5,135

160,000

170,000

1,221

2,677

3,974

4,766

5,504

170,000

180,000

1,302

2,857

4,240

5,085

5,872

180,000

190,000

1,384

3,036

4,506

5,404

6,241

190,000

200,000

1,466

3,215

4,772

5,724

6,608

200,000

210,000

1,548

3,394

5,039

6,042

6,977

210,000

220,000

1,630

3,574

5,304

6,361

7,345

220,000

230,000

1,712

3,753

5,570

6,680

7,714

230,000

240,000

1,793

3,932

5,837

6,999

8,082

240,000

250,000

1,875

4,112

6,102

7,318

8,450

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<!-- PageHeader="REV. PROC. 98-30 TABLE 4" -->

DOLLAR AMOUNTS FOR ELECTRIC AUTOMOBILES WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 1998

Fair Market Value of Automobile

Tax Year During Lease

1st

2nd

3rd

4th

5th and Later

Over

Not Over

$ 47,000

48,000

5

11

18

21

23

48,000

49,000

13

29

45

52

60

49,000

50,000

21

47

71

85

96

50,000

51,000

29

65

98

116

134

51,000

52,000

38

83

124

148

171

52,000

53,000

46

101

151

180

207

53,000

54,000

54

119

177

212

244

54,000

55,000

62

137

204

244

281

55,000

56,000

70

155

231

275

318

56,000

57,000

79

172

258

307

355

57,000

58,000

87

190

284

340

391

58,000

59,000

95

208

311

372

428

59,000

60,000

103

226

338

403

465

60,000

62,000

115

253

378

451

520

62,000

64,000

132

289

430

515

594

64,000

66,000

148

325

484

578

668

66,000

68,000

164

361

537

643

741

68,000

70,000

181

396

591

706

815

70,000

72,000

197

432

644

770

888

72,000

74,000

214

468

697

834

962

74,000

76,000

230

504

750

898

1,035

76,000

78,000

246

540

803

962

1,109

78,000

80,000

263

576

856

1,025

1,183

80,000

85,000

291

639

949

1,137

1,312

85,000

90,000

332

728

1,083

1,296

1,496

90,000

95,000

373

818

1,215

1,456

1,681

95,000

100,000

414

908

1,348

1,615

1,865

100,000

110,000

475

1,042

1,548

1,855

2,141

110,000

120,000

557

1,221

1,814

2,174

2,509

120,000

130,000

639

1,401

2,080

2,492

2,878

130,000

140,000

721

1,580

2,346

2,812

3,245

140,000

150,000

803

1,759

2,612

3,131

3,614

150,000

160,000

884

1,939

2,878

3,450

3,982

160,000

170,000

966

2,118

3,144

3,769

4,350

170,000

180,000

1,048

2,297

3,410

4,088

4,719

180,000

190,000

1,130

2,477

3,676

4,406

5,087

190,000

200,000

1,212

2,656

3,942

4,726

5,455

200,000

210,000

1,293

2,835

4,209

5,044

5,824

210,000

220,000

1,375

3,015

4,474

5,364

6,191

220,000

230,000

1,457

3,194

4,740

5,683

6,560

230,000

240,000

1,539

3,373

5,006

6,002

6,928

240,000

250,000

1,621

3,552

5,273

6,320

7,297

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04\. Maximum Automobile Value for Using the Cents-per-
mile Valuation Rule.

(1) Amount of Adjustment. Under

§ 1.61-21 (e) (1) (iii) (A), the limitation on the fair market
value of an employer-provided automobile first made available
to any employee for personal use after 1988 is to be adjusted
in accordance with $ 280F (d) (7). Accordingly, the adjustment
for any calendar year is the percentage (if any) by which the
CPI automobile component for October of the preceding calendar
year exceeds the CPI automobile component for October 1987
(See, section 4.02(1) .) The new car component of the CPI was
115.2 for October 1987 and 140.6 for October 1997. The
October 1997 index exceeded the October 1987 index by 25.4.
The Internal Revenue Service has, therefore, determined that
the adjustment for 1998 is 22.05 percent (25.4/115.2 x 100%) .
This adjustment is applicable to all employer-provided
automobiles first made available to any employee for personal
use in calendar year 1998. The maximum fair market value
specified in § 1.61-21 (e) (1) (iii) (A) must therefore be
multiplied by a factor of 0.2205, and the resulting increase,
after rounding to the nearest $100, is added to $12,800 to
give the maximum value for 1998.

(2) The Maximum Automobile Value. For automobiles
first made available in calendar year 1998 to any employee of
the employer for personal use, the vehicle cents-per-mile
valuation rule may be applicable if the fair market value of

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the automobile on the date it is first made available does not
exceed $15,600.

### SECTION 5. EFFECTIVE DATE

This revenue procedure is effective for automobiles
(other than leased automobiles) that are first placed in
service during calendar year 1998, to leased automobiles that
are first leased during calendar year 1998, and to employer-
provided automobiles first made available to employees for
personal use in calendar year 1998.

DRAFTING INFORMATION

The principal author of this revenue procedure is Bernard
P. Harvey of the Office of the Assistant Chief Counsel
(Passthroughs and Special Industries) . For further
information regarding the depreciation limitations and lessee
inclusion amounts in this revenue procedure, contact Mr.
Harvey at (202) 622-3110; for further information regarding
the maximum automobile value for applying the vehicle cents-
per-mile valuation rule, contact Ms. Janine Cook of the Office
of the Associate Chief Counsel (Employee Benefits and Exempt
Organizations) at (202) 622-6040 (not toll-free calls) .