CLOTHING AND EQUIPMENT ALLOWANCES AND REIMBURSEMENTS
Administrative Rule Adopted by Council
The purpose of this administrative rule is to establish minimum standards for City payment of employee clothing and equipment expenses.
Authority for this administrative rule is established in the City Charter and City Code. This administrative rule has been approved by the City Council.
The Accounting Division of the Bureau of Financial Services of the Office of Management and Finance (Accounting Division) will periodically monitor bureaus to assess compliance with the minimum standards of this rule. As instances of non-compliance are identified, bureaus will be required to develop and implement a corrective action plan. The Accounting Division will provide assistance to bureaus, if requested, to develop this plan. The Controller will report all instances of non-compliance annually to the Chief Financial Officer (CFO) and City Council.
"Allowance" means an amount paid to an employee for business-related clothing, uniforms, or equipment. The recipient may or may not need to account for the funds with receipts for items purchased. When the recipient does not provide receipts for the amount paid, the allowance will generally be taxable in accordance with IRS regulations.
"Reimbursement" means an amount paid to an employee in exchange for receipts for business-related clothing, uniforms, or equipment. In this case the amount paid to the employee is generally not taxable in accordance with IRS regulations.
The City will pay for uniforms, clothing or equipment only if there is a business requirement.
Employee expense allowances or reimbursements will follow the provisions of the relevant labor agreement and/or City Code as appropriate.
The expense must be substantiated to the City with receipts within a reasonable period of time, or the amount received by the employee will be taxable. Substantiation shall include the amount paid, when purchased, where purchased, and the business purpose of the purchase.
If the employee receives an allowance, amounts received in excess of actual expenses shall be returned to the City within a reasonable period of time, or the excess will be taxable. If the employee does not document actual paid expenses with receipts, the full amount of the allowance will be taxable income to the employee in accordance with IRS regulations.
The City will furnish uniforms and/or equipment directly to eligible employees in accordance with applicable labor agreements.
Items allowed to be purchased with clothing or equipment reimbursements or allowances are established by relevant labor agreements.
The following items are included in one or more of the current labor agreements as allowable for reimbursement:
Clothing that is required as a condition of employment, and cannot be worn as ordinary clothing, e.g. uniforms
Shoes that are required for safety purposes
Tools where the employee is required to furnish his/her own tools
Tax Treatment of Allowances
If an employee does not substantiate an allowance or advance to the City, the amount will be treated as taxable wages in accordance with IRS requirements.
Substantiation of expenses must occur within a timely manner, or the amount received is considered taxable income to the employee. This is generally considered to be 60 days within the date the expense is paid or incurred.
If excess amounts are to be returned to the City, this must occur within 120 days after the expense is paid or incurred, or the excess is considered taxable income to the employee.
Resolution No. 36248, originally adopted by Council September 1, 2004.
Revised by Resolution No. 36435, adopted by Council September 6, 2006.