Rule2026-05525
Substantiation Requirements and Qualified Nonpersonal Use Vehicles
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 20, 2026
Effective
March 20, 2026
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains final regulations relating to the definition of qualified nonpersonal use vehicles. Qualified nonpersonal use vehicles are excepted from the substantiation requirements that apply to certain listed property. These final regulations add unmarked vehicles used by firefighters or members of a rescue squad or ambulance crew as a new type of qualified nonpersonal use vehicle. These final regulations affect governmental units that provide firefighter or rescue squad or ambulance crew member employees with unmarked qualified nonpersonal use vehicles and the employees who use those vehicles.
Full Text
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<title>Federal Register, Volume 91 Issue 54 (Friday, March 20, 2026)</title>
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[Federal Register Volume 91, Number 54 (Friday, March 20, 2026)]
[Rules and Regulations]
[Pages 13500-13503]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05525]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 10043]
RIN 1545-BQ83
Substantiation Requirements and Qualified Nonpersonal Use
Vehicles
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulation.
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SUMMARY: This document contains final regulations relating to the
definition of qualified nonpersonal use vehicles. Qualified nonpersonal
use vehicles are excepted from the substantiation requirements that
apply to certain listed property. These final regulations add unmarked
vehicles used by firefighters or members of a rescue squad or ambulance
crew as a new type of qualified nonpersonal use vehicle. These final
regulations affect governmental units that provide firefighter or
rescue squad or ambulance crew member employees with unmarked qualified
nonpersonal use vehicles and the employees who use those vehicles.
DATES:
Effective date: These final regulations are effective on March 20,
2026.
Applicability date: Sec. 1.274-5(k)(2)(ii)(S), (k)(7), (k)(9)(v)
and references to Sec. 1.274-5(k)(9) in Sec. 1.132-5(h) apply to
taxable years ending on or after March 20, 2026.
FOR FURTHER INFORMATION CONTACT: Stephanie Caden at (202) 317-4774 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Authority
These final regulations are issued under the authority granted to
the Secretary of the Treasury or his delegate (Secretary) by sections
274(p), 132(o), and 7805(a) of the Internal Revenue Code (Code).
Section 274(p) provides the Secretary with an express grant of
authority to prescribe such regulations as the Secretary may deem
necessary to carry out the purposes of that section. Section 132(o)
provides the Secretary with an express grant of authority to prescribe
such regulations as may be necessary or appropriate to carry out the
purposes of that section. Section 7805(a) authorizes the Secretary to
prescribe all needful rules and regulations for the enforcement of the
Code.
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1) under sections 132 and 274. In general, section 274 limits
or disallows deductions for certain expenditures that otherwise would
be allowable under chapter 1 of the Code, primarily under section
162(a), which allows a deduction for ordinary and necessary expenses
paid or incurred during the taxable year in carrying on any trade or
business.
Section 274(d), as relevant to these final regulations, provides
that a taxpayer is not allowed a deduction or credit for certain
expenses unless the expenses are substantiated by adequate records or
by sufficient evidence corroborating the taxpayer's own statement as to
the amount, time and place, and business purposes of the expenditure,
and the business relationship to the taxpayer of the person receiving
the benefit. These substantiation requirements apply to expenses
incurred in the use of any listed property, as defined in section
280F(d)(4), which includes any passenger automobile and any other
property used as a means of transportation. However, section 274(d)
also provides that qualified nonpersonal use vehicles are excepted from
these substantiation requirements.
Section 274(i) defines a qualified nonpersonal use vehicle as one
which, by reason of its nature, ``is not likely to be used more than a
de minimis amount for personal purposes.'' Current regulations under
section 274 define qualified nonpersonal use vehicles to include
clearly marked police, fire, or public safety officer vehicles that are
owned or leased by a governmental unit and required to be used for
commuting by a police officer, firefighter, or public safety officer
(as defined in section
[[Page 13501]]
402(l)(4)(C)) who, when not on a regular shift, is on call at all
times. Any personal use (other than commuting) of the vehicle outside
the limit of the police officer's arrest powers or the firefighter's or
public safety officer's obligation to respond to an emergency must be
prohibited by the governmental unit. See Sec. 1.274-5(k)(2)(ii)(A) and
(k)(3). The various examples included in Sec. 1.274-5(k)(8) illustrate
that a prohibition on personal use (other than commuting) is intended
to exist in situations where both commuting and only de minimis
personal use, such as personal errands, are permitted.
The current regulations also define qualified nonpersonal use
vehicles as including unmarked law enforcement vehicles owned or leased
by Federal, State, county, or local governmental agencies or
departments that officially authorize the business and personal use of
the vehicle by law enforcement officers whom they employ, provided any
personal use is incidental to law enforcement functions. See Sec.
1.274-5(k)(2)(ii)(R) and (k)(6). The current regulations define law
enforcement officers as individuals who are employed on a full-time
basis by a governmental unit that is responsible for the prevention or
investigation of crime involving injury to persons or property
(including apprehension or detention of persons for those crimes), who
are authorized by law to carry firearms, execute search warrants, and
to make arrests (other than merely a citizen's arrest), and who
regularly carry firearms (except when it is not possible to do so
because of the requirements of undercover work). See Sec. 1.274-
5(k)(6)(ii). Unmarked law enforcement vehicles allow law enforcement
officers to operate inconspicuously, e.g., so that they can conduct
these duties while performing undercover work.
The current regulations do not include unmarked vehicles used by
firefighters, members of rescue squads, or ambulance crews in the
definition of qualified nonpersonal use vehicles. Historically,
firefighters and rescue squad and ambulance crew members were provided
with vehicles that had markings to indicate their status as emergency
response vehicles. More recently, however, the IRS and Treasury
Department have become aware that some governmental units are assigning
these emergency responders unmarked vehicles due to increased incidents
of harassment of first responders and vandalism of clearly marked fire
and emergency vehicles and equipment.
The use of unmarked vehicles allows firefighters and other
emergency personnel who commute and are required to be on call at all
times, even when not on a regular shift, to travel inconspicuously,
thereby reducing risk of harassment and vandalism. Also, unmarked
firefighter and rescue squad or ambulance crew vehicles typically are
specially outfitted with onboard equipment, which is used by
firefighters and emergency personnel to suppress fires, conduct rescue
activities, or provide emergency medical services as part of an
official emergency response system. Because these vehicles are
generally specially outfitted with such equipment, any personal use of
these vehicles is likely to be minimal. Thus, adding unmarked
firefighter, rescue squad or ambulance crew vehicles as a new category
of qualified nonpersonal use vehicle in the regulations is consistent
with the underlying intent of section 274(i).
On December 3, 2024, a notice of proposed rulemaking (NPRM) (REG-
106595-22) was published in the Federal Register (89 FR 95727) that
proposed amending Sec. 1.274-5(k)(2)(ii) to add unmarked vehicles used
by firefighters, members of rescue squads, or ambulance crews to the
list of qualified nonpersonal use vehicles that are exempt from the
substantiation requirements of section 274(d). The NPRM also proposed
amending Sec. 1.274-5(k) to add a new Sec. 1.274-5(k)(7) providing
definitions for the terms ``unmarked firefighter, rescue squad or
ambulance crew vehicles'', ``firefighter,'' and ``member of a rescue
squad or ambulance crew,'' and proposed adding Sec. 1.274-5(k)(9)(v)
(Example 5) illustrating the new provision. Finally, the NPRM proposed
making conforming amendments to Sec. Sec. 1.132-1(g) and 1.132-
5(h)(1).
No public hearing was requested or held. Three comments responding
to the NRPM were received. All comments were considered and are
available for public inspection and copying at <a href="http://www.regulations.gov">http://www.regulations.gov</a> or upon request. The public comments are discussed
in the Summary of Comments section of this preamble.
Summary of Comments
One commenter provided comments on issues that are unrelated to the
Code or tax administration in general and therefore are outside the
scope of these regulations. Another commenter expressed appreciation
that firefighters and members of rescue squads and ambulance crews were
being granted the same tax treatment as other first responders who use
qualified nonpersonal use vehicles. The commenter noted the need for
fire department personnel who maintain 24-hour response capacity to use
unmarked vehicles to travel inconspicuously for security purposes and
reduce the risk of harassment and vehicle damage. The commenter further
noted that including unmarked nonpersonal use vehicles used by
firefighters, members of rescue squads, or ambulance crews on the list
of qualified nonpersonal use vehicles will ensure that those who
respond to emergencies in specially equipped unmarked vehicles will be
able to continue to do so without unreasonable financial burden.
Another commenter asked what the proposed rule would cost in terms
of lost tax revenue. These regulations will not have a significant
economic impact and are not subject to review under section 6(b) of
Executive Order 12866. Accordingly, the Treasury Department and the IRS
have not conducted an analysis of the revenue impact of the rule.
The Treasury Department and the IRS requested comments on whether
the definitions of ``unmarked firefighter, rescue squad or ambulance
crew vehicles,'' ``firefighter,'' and ``member of a rescue squad or
ambulance crew,'' are sufficient to accomplish the intended purpose of
the proposed regulations or whether any of them might lead to potential
abuse. No comments were received regarding these definitions.
After consideration of the comments, these final regulations adopt
all the provisions of the proposed regulations with some minor, non-
substantive changes to certain provisions.
Special Analyses
I. Regulatory Planning and Review--Economic Analysis
These final regulations are not subject to review under section
6(b) of Executive Order 12866 pursuant to the Memorandum of Agreement
(July 4, 2025) between the Treasury Department and the Office of
Management and Budget regarding review of tax regulations.
II. Paperwork Reduction Act
These final regulations do not create new collection requirements,
as defined under the Paperwork Reduction Act (44 U.S.C. 35); and do not
alter any previously approved Office of Management and Budget
information collection requirements and their associated burden.
III. Regulatory Flexibility Act
It is hereby certified that these final regulations will not have a
significant economic impact on a substantial number of small entities
pursuant to the
[[Page 13502]]
Regulatory Flexibility Act (5 U.S.C. chapter 6). This certification is
based on the fact that these final regulations do not impose any new or
different requirements on small entities. These final regulations would
apply only to employers that utilize unmarked firefighter, rescue
squad, or ambulance vehicles and therefore would affect a relatively
small number of entities. In addition, these final regulations would
not affect employment tax reporting or require any additional
substantiation. Rather, these final regulations exempt affected
entities from substantiation requirements and for this reason do not
add any economic burden to affected entities. Therefore, a Regulatory
Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. The Treasury Department and the IRS did not
receive any comments on any impact these final regulations would have
on small entities.
IV. Section 7805(f)
Pursuant to section 7805(f) of the Internal Revenue Code, the NPRM
preceding this regulation was submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on its impact
on small business. No comment was received.
V. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 requires
that agencies assess anticipated costs and benefits and take certain
other actions before issuing a final rule that includes any Federal
mandate that may result in expenditures in any one year by a State,
local, or Tribal government, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. These final regulations do not include any Federal mandate
that may result in expenditures by State, local, or Tribal governments,
or by the private sector, in excess of that threshold.
VI. Executive Order 13132: Federalism
Executive Order 13132 (Federalism) prohibits an agency from
publishing any rule that has federalism implications if the rule either
imposes substantial, direct compliance costs on State and local
governments, and is not required by statute, or preempts State law,
unless the agency meets the consultation and funding requirements of
section 6 of the Executive order. These final regulations do not have
federalism implications, do not impose substantial direct compliance
costs on State and local governments, and do not preempt State law
within the meaning of the Executive order.
Drafting Information
The principal author of these final regulations is Stephanie L.
Caden of the Office of the Associate Chief Counsel (Employee Benefits,
Exempt Organizations, and Employment Taxes). However, other personnel
from the Treasury Department and the IRS participated in their
development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by revising
the entries for Sec. Sec. 1.132-0 through 1.132-8T and Sec. 1.274-5
to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
* * * * *
Sections 1.132-0 through 1.132-8T also issued under 26 U.S.C.
132(o).
* * * * *
Section 1.274-5 also issued under 26 U.S.C. 274(p).
* * * * *
0
Par. 2. Section 1.132-1 is amended by adding a sentence to the end of
paragraph (g) to read as follows:
Sec. 1.132-1 Exclusion from gross income for certain fringe
benefits.
* * * * *
(g) * * * In addition, references to Sec. 1.274-5(k)(9) in Sec.
1.132-5(h) are applicable as of March 20, 2026.
Sec. 1.132-5 [Amended]
0
Par. 3. Section 1.132-5 is amended by, in paragraph (h)(1), removing
the text ``Sec. 1.274-5(k)(3) through (8)'' and adding the text
``Sec. 1.274-5(k)(3) through (9)'' in its place, and removing the text
``paragraphs (k)(3) through (8)'' and adding the text ``Sec. 1.274-
5(k)(3) through (9)'' in its place.
0
Par. 4. Section 1.274-5 is amended by:
0
1. Redesignating paragraph (k)(2)(ii)(S) as paragraph (k)(2)(ii)(T) and
adding new paragraph (k)(2)(ii)(S);
0
2. Redesignating paragraphs (k)(7) and (8) as paragraphs (k)(8) and (9)
and adding a new paragraph (k)(7);
0
3. In newly redesignated paragraph (k)(9), redesignating Examples 1
through 4 as paragraphs (k)(9)(i) through (k)(9)(iv), respectively.
0
4. Adding paragraph (k)(9)(v); and
0
5. Revising paragraph (m).
The additions and revision read as follows:
Sec. 1.274-5 Substantiation requirements.
* * * * *
(k) * * *
(2) * * *
(ii) * * *
(S) Unmarked firefighter, rescue squad, or ambulance crew vehicles
(as defined in paragraph (k)(7) of this section).
* * * * *
(7) Unmarked firefighter, rescue squad, or ambulance crew
vehicles--(i) In general. The substantiation requirements of section
274(d) and this section do not apply to an unmarked firefighter, rescue
squad, or ambulance crew vehicle required to be used for commuting by
the firefighter or member of a rescue squad or ambulance crew, who,
when not on a regular shift, is on call at all times. Personal use
(other than commuting) of the vehicle outside the firefighter's or
rescue squad or ambulance crew member's obligation to respond to an
emergency must be prohibited by the governmental unit, or any agency or
instrumentality thereof, that owns or leases the vehicle and employs
the firefighter, member of a rescue squad, or ambulance crew member.
(ii) Unmarked firefighter, rescue squad, or ambulance crew vehicle
defined. An unmarked firefighter, rescue squad, or ambulance crew
vehicle is an unmarked vehicle used by a firefighter, or member of a
rescue squad or ambulance crew, that is owned or leased by a
governmental unit, or any agency or instrumentality thereof, and that
is specially outfitted to allow firefighters or members of rescue
squads and ambulance crews to travel safely and efficiently to the
scene of an emergency and provide emergency services. Onboard equipment
on the vehicles includes but is not limited to lights and sirens,
medical emergency equipment, life-saving devices such as
defibrillators, and radios that assist firefighters, rescue squads, or
ambulance crews in communicating with a central source or other
emergency response crews regarding, for example, traffic or hospital
capacity. Onboard equipment may also include items such as personal
protective equipment (e.g., helmet, coat, boots), emergency oxygen
tanks, reference manuals, and laptop computers that enable workers to
access important information related to the emergency. A license plate
marking or insignia does not disqualify a vehicle from being an
unmarked firefighter, rescue squad, or
[[Page 13503]]
ambulance crew vehicle for purposes of this paragraph (k)(7).
(iii) Firefighter. The term firefighter means an individual who is
employed by a governmental unit, or any agency or instrumentality
thereof, that is responsible for firefighting, rescue activity, or the
provision of emergency medical care, and other related emergency
services to prevent injury to persons or property and has the official
authority to engage in fire suppression and provide related emergency
services.
(iv) Member of a rescue squad or ambulance crew. For purposes of
this paragraph (k)(7), the term member of a rescue squad or ambulance
crew has the same meaning as in 34 U.S.C. 10284(10)(A).
* * * * *
(9) * * *
(v) Example 5. Emergency medical technician, X, is a member of a
rescue squad employed by City M. X is provided with an unmarked vehicle
(equipped with sirens and medical equipment) for use in responding to
emergencies. X, along with other members of the rescue squad, is
ordinarily on duty for a regular shift and on call during the other
hours of the day. X is required to use the unmarked rescue squad
vehicle to commute to X's home in City M. The rescue squad's official
policy regarding unmarked rescue squad vehicles prohibits personal use
(other than commuting) of the vehicles outside the city limits. When
not using the vehicle on the job, X uses the vehicle only for
commuting, personal errands while commuting, and personal errands
within City M. All use of the vehicle by X conforms to the requirements
of paragraph (k)(7) of this section. Therefore, the value of that use
is excluded from X's gross income as a working condition fringe and the
vehicle is not subject to the substantiation requirements of section
274(d).
* * * * *
(m) Applicability date. This section applies to expenses paid or
incurred after December 31, 1997. However, paragraph (j)(3) of this
section applies to expenses paid or incurred after September 30, 2002,
and paragraph (k) of this section applies to clearly marked public
safety officer vehicles, as defined in paragraph (k)(3) of this
section, only with respect to uses occurring after May 19, 2010. The
rules of paragraphs (k)(2)(ii)(S), (k)(7) and (k)(9)(v) of this section
apply to taxable years ending on or after March 20, 2026.
Frank J. Bisignano,
Chief Executive Officer.
Approved: February 17, 2026.
Kenneth J. Kies,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2026-05525 Filed 3-19-26; 8:45 am]
BILLING CODE 4831-GV-P
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</html>Indexed from Federal Register on March 20, 2026.
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