House Votes to Kill Strict Tax Record Law : Would End Requirement for Detailed Data on Car, Computer Use

The House voted Wednesday to kill a new law that requires taxpayers to keep detailed records on cars and home computers for which they claim a business use.

The House action, by a 426-1 vote, sent the compromise repeal measure to the Senate for final action. The bill kills the record-keeping rule retroactive to the day it took effect--last Jan. 1. Only Rep. Barney Frank (D-Mass.) voted no, offering no reason.

“The people’s voices were heard,” said Rep. Carroll A. Campbell Jr. (R-S.C.), recalling the mass of complaints the record-keeping rule produced.

Must Be Reported

The compromise gives employers the option of not withholding income taxes from the value of non-cash employee fringe benefits, such as personal use of a company car.

However, the value must be reported on the worker’s W-2 form, just like wages, at year’s end. And employers still must abide by another portion of a 1984 law requiring that Social Security taxes be withheld from such benefits, retroactive to Jan. 1.

Congress imposed the record-keeping rule last year after the Internal Revenue Service reported that well over $3 billion in exaggerated claims for tax-deductible business use of automobiles is filed each year.

The lawmakers hoped that the tighter rule would make it more difficult for people to disguise their pleasure trips--and personal uses of home-based computers, company video equipment and the like--as business.

Time Demands Cited

But business people and farmers said that the rules forced them to spend almost as much time keeping records as earning a living.

The rules generally required that each use of a vehicle be logged at the time of use, and that the records include the time, date, mileage and purpose of the trip. Without such a diary, no deduction for use of the vehicle would be allowed.

In doing away with the contemporaneous record requirements, Congress is returning to the pre-1985 law, which simply requires that a taxpayer who claims a deduction for business use of a car, home computer or similar equipment be able to substantiate it with adequate records or other evidence.