Corporate Vehicle Use Policies for Nonprofits
Corporate vehicle use is common for some for-profit organizations, but nonprofits are also increasing their usage of corporate vehicles. If your nonprofit is considering making corporate vehicles available for employee use, here are some things to consider and tips for creating corporate vehicle use policies.
Understanding organizational risk
Nonprofits that purchase and utilize corporate vehicles assume liability for anything that happens to and from that vehicle’s use. Allowing employees to utilize these vehicles outside of worktime also creates liability for the organization. Organizations may permit an employee to use a corporate vehicle for personal use, or to park the vehicle overnight at the employee’s home as a convenience. But, an employee’s personal use of a corporate vehicle creates additional risks for the organization and the employee. Having the right policies in place to help ensure a clear understanding of how corporate vehicles should be used, can reduce organizational liability if an employee uses the vehicle in a non-approved way.
Understanding risk to the employee
Employees who drive corporate vehicles also assume risk. Employees authorized to personally use a corporate vehicle may have this usage reflected on their W-2 as a taxable benefit. There are several methods the IRS uses to determine if an employee’s personal use of a corporate vehicle will be taxable, this includes an examination of the amount of time the employee is allowed to use the vehicle for personal travel, the mileage of the vehicle at the start of such usage and at the conclusion, or examining the fair market value of leasing a similar vehicle by the employee. Overall, such valuation should be done by the organization’s accountant, but an employee should be aware that this personal use likely will result in additional tax reporting.
Additionally, employees may be held liable for any incidents or accidents that occur during their personal use of the vehicle. The employee should maintain sufficient personal automobile liability coverage to cover any accidents or incidents involving the corporate vehicle.
“If you choose to have a corporate vehicle, it’s necessary to put a corporate vehicle use policy in place.”
Actions for the employer
If you choose to have a corporate vehicle, it’s necessary to put a corporate vehicle use policy in place. The policy should outline who is allowed to drive and ride in the car, as well as when it is acceptable to use the vehicle for personal reasons. This policy should also require employer authorization prior to corporate vehicle use by any employee. Other important elements of the policy may include:
What items are prohibited in the vehicle (guns, medical marijuana, flammable objects, etc.)
Rules around alcohol consumption and use of the vehicle
Rules around cell phone use while driving the vehicle
Rules for transporting children and proper use of car seats, booster seats, etc.
Guidelines for maintenance of the vehicle
These policies will help mitigate risk if there are any accidents involving the corporate vehicle, whether during corporate use or on an employee’s personal time.
Employers need to be aware of when and where the vehicle is being used. Whether they choose to use a check-in/check-out procedure or purchase tracking software for the vehicle, they must know who has the vehicle and how it is being used. This information will also be part of determining if vehicle use is a taxable benefit for the employee. Know whether employees are using the vehicle for personal errands and whether those errands are acceptable quick stops along the route or if they are longer detours away from company business and outside worktime.
Employers should also conduct annual motor vehicle records checks and insurance verification of each employee authorized to drive a corporate vehicle. This should include maintaining a copy of the employee’s valid driver’s license and requiring reverification of an employee’s license as renewed. Employers should check for any violations or suspended licenses that of employees authorized to drive corporate vehicles.
As the vehicle owner, employers are responsible for keeping it in good operating condition. This includes performing routine maintenance, keeping it properly insured, licensed, and registered, and having a plan of action for employees who may experience breakdowns or flat tires. Advance preparation and planning for these items will prevent many issues along the way.
Actions for the employee
The first step in successfully navigating use of a corporate vehicle is to know your employer’s policies on corporate vehicle use. The second step is to read and follow all policies. In particular, pay attention to what is corporate and personal use, who and what are allowed to be in the vehicle, and what authorization must be obtained prior to vehicle use.
Employees should also consider keeping your own records of when and how you use the car. Especially if your employer is not requiring tracking of the vehicle use, your own log of when you use the vehicle, mileage, and where/why the vehicle is being driven can aid in showing you only used the vehicle for corporate use rather than personal usage. If the car is designated as a taxable benefit, your records may help prove your use or lack of use of the vehicle.
Finally, talk with your personal automobile insurance company to ensure your personal insurance coverage will cover you while driving the corporate vehicle. That way, you are fully covered if something occurs on personal time or if an accident exceeds the employer’s insurance coverage on the vehicle. Actively communicating with your employer throughout any vehicle use to ask questions or report issues is also critical.
Final thoughts
Corporate vehicle use by employees is fraught with risks for both nonprofits and employees. Nonprofits need to develop clear use policies prior to vehicles being used with consistent authorization required prior to vehicle use. Allowing employees to personally use corporate vehicles exposes both the nonprofit and employee to additional levels of risk and is another employee benefit that should be monitored, valued, and reported. If a nonprofit permits personal use or just corporate use of a vehicle, the key is ensure having the right corporate vehicle use policy in place to protect the organization and its employees.
