Page 274 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

260 The Complete Guide to Executive Compensation

(b) the restrictions had lapsed and the amount was included in the executive’s gross income.
Thus, while some companies make educational grants to the children of their executives (with
possible annual dollar limits) to cover tuition, registration fees, books, and/or room and board,
for private secondary education and/or college, they are of limited tax appeal. Importance is
probably moderate to the executive, although appreciated if a tax-free scholarship is awarded
an offspring.
Rather than company scholarships, some executives choose a different route, setting up
a scholarship program in their name for children of company employees. Typically, these are
funded from the executive’s estate after death; however, some create scholarship funds while
still serving as an executive. This puts enormous peer pressure on other executives to do
something, too.

Transportation

A transportation benefit can range from simply reimbursing commuter expenses to provid-
ing access to a company jet. Some companies pay daily commuting expenses where mass
transit systems (e.g., buses and trains) are available. Others facilitate car-pooling through
scheduling or underwriting a portion of the expense. In some situations, company buses are
available for pick up and drop off at designated locations at the company facility.
In urban areas, choice parking space is typically reserved for executives and visitors, with
other sports filled on a first-come, first-served basis. The company may even set aside a
reserved place in the executive area for employee-of-the-month. City locations create a
greater challenge, with some companies providing open or covered parking, but more
typically, individuals are on their own (Section 132(f) of the IRC prescribes the tax-free lim-
itations). Parking facilities range from a designated space in the company parking lot or
garage (normally very close to the office) to public parking off the premises at company
expense. The first is more typical of a suburban site, the latter more representative of a
metropolitan facility. Parking facilities and all-employee transportation programs (although
probably tax free) are of low interest to the executive. However, automobiles and jet aircraft
are another matter.
In addition to equipment provided for the office, cell phones and laptop computers may
be provided for those who work while traveling (whether to and from the office or across the
oceans).
Automobile. Use of a car (and car phone) is a rather common benefit for executives, at least
for business travel (either specifically assigned or on a first-come, first-served basis). A few
CEOs have car and driver privileges that continue after retirement—some even for life.
Many companies go a step further and allow personal use of company cars, which is reim-
bursed by a fixed monthly charge or on a mileage basis. These cars are replaced after a spec-
ified number of years and/or miles driven. The type of car (and its cost) logically lends itself
to the organization level of the individual—the limousine or super-luxury car at the CEO
level and a standard model at the entry level of eligibility. In many instances, the executive is
provided a company-paid chauffeur for business trips.
If the executive is to avoid an imputed income, the company must assess a charge for
personal use of the automobile (and phone). One approach is to maintain records of
personal use and at the end of the year, impute the personal-use portion. Thus, if the
total car expenses were $15,000 and two-thirds were personal use, $10,000 would be the
imputed income.