The Times of North Little Rock has an interesting story by Jeremy Peppas this week -- on the jump -- about the widespread practice there and elsewhere of cops getting comped apartments in return for the security they provide by being on-premises. One question: How does it square with off-duty work guidelines? Another: Does it amount to taxable income and are the cops declaring it?
By Jeremy Peppas
While other municipal police departments around the state have taken steps to cut down on off-duty jobs, North Little Rock has not.
It also could cause tax problems for police officers, who might believe they are exempt.
North Little Rock Police Department spokesman Sgt. Terry Kuykendall said Wednesday morning that 13 apartment complexes in the city had officers working as off-duty security officers.
Other police departments around the state allow its officers to live for free or at a reduced rate in an apartment complex in exchange for working security there. It is a fairly common practice among police departments.
David Stell, the IRS spokesman for Arkansas and Oklahoma said free rent or reduced rent for an off-duty police officer would be taxable income under certain conditions.
It can be excluded as income if it meets the following tests:
• The lodging is furnished on your business premises.
• The lodging is furnished for your convenience.
• The employee must accept it as a condition of employment.
So any officer not paying taxes on free rent, would be in violation?
“Generally speaking and not knowing specific details, that would be correct” Stell said. “You might have circumstances that would exclude them.”
It isn’t clear how many officers around the state get free or reduced rent for security guard duties.
Of the state’s largest law enforcement agencies, Little Rock Police Department spokeswoman Sgt. Cassandra Davis said her department allowed the practice. Some apartment complexes in Little Rock advertise that they have officers who work as security guards living in the complex.
“I don’t know if people are living for free,” she said. “But I do know they get a pretty good discount.”
Bill Sadler, spokesman for the Arkansas State Police, said any off-duty job would have to approved by a supervisor and that it would be possible for a trooper to receive free or reduced rent.
“I do not know of anyone,” he said. “But you also have to remember we have 553 troopers, so it is possible.”
Stell was asked if the value of lodging provided to a law enforcement officer at an apartment complex in exchange for “security duties” performed when the officer is not working at a law enforcement job is taxable to the law enforcement officer.
“In the context of the question,” Stell said. “Meeting the first test — furnished on the business premises — is easily met. However, meeting the other two tests are more difficult.”
He cited a 1977 case and what he called a Technical Advice Memorandum that he said dealt with essentially the same issue.
“Because the term ‘convenience of the employer’ is generally understood to mean business necessity, this test and the ‘condition of employment’ test are basically similar, and both tests require substantially similar factual considerations,” according to the tax memo.
“In the instant case, the taxpayer has not shown that he was required to accept the lodging in order to properly perform the duties of his employment as required,” Stell said. “… Since the taxpayer had a job as a city policeman, he could not have been available for duty at all times at the apartment complex.”
So, “assuming the same facts as discussed in this [memo], it appears that a law enforcement officer could not exclude (would be required to report as income on his/her tax return) the value of lodging provided as compensation for “security duties” performed when he/she is not working at his/her law enforcement job.”
Stell added, “it would be something that would come up in an audit. That’s certainly something we would ask: Where do you live? How do you pay your rent or mortgage?”
But, “I don’t know if that is something that is a priority for us.”
Other off-duty jobs also are allowed by North Little Rock.
“We don’t have any kind of cap,” said police Chief Danny Bradley. “Each officer has to get every off-duty job approved and it is up to the supervisor if they stay on it. If the supervisor saw someone who always looked tired, he might tell him to cut back on the off-duty.”
Fort Smith, the Arkansas city most often compared to North Little Rock, does have a cap.
“We have a cut-off of 30 hours,” Risley said. “So we do have policies regarding off-duty jobs.”
While North Little Rock officers are a familiar sight at shopping centers and malls, those officers are generally working off-duty jobs and being paid by the store.
As it stands, public safety officers have an exemption for take-home vehicles, Stell said.
“Authorized use of a take-home law enforcement vehicle is considered to be a non-taxable, ‘working condition fringe benefit’,” Stell said. “Marked and unmarked police vehicles are considered by Treasury Regulation to be ‘qualified non-personal use vehicles’ and, as such, any part of their use is considered to be excludable from the income of the authorized user.”
More simply, “the person who is authorized to use the vehicle and take it home does not have to pay taxes with respect to any use of that vehicle.”
The department has take-home vehicles for those who live in Pulaski County and, for those outside the county, they have to live within a 35-mile radius of the police headquarters building, but that comes with some caveats, according the collective bargaining agreement between the city and the Fraternal Order of Police, the union that serves the department.
One is that an officer needs to be at least a seven-year veteran of the force and the officer has to reimburse the city for mileage at a rate of 40 cents a mile.
Only a handful of officers take advantage of home storage outside the county, said Bob Sisson of the city’s finance department.
“Non-uniformed employees have to pay for the cars they take home,” he said. “It is a taxable benefit and we consider it $3 a day, for the days they take [the car or truck] home. We send out a statement at the end of the year, declaring the total amount as income.”
The same is true for other state employees, such as those of the Game and Fish Commission, who have cars, but are not employed in a law enforcement capacity.
Other departments around the state have ended or are taking steps to end take-home vehicles.
“The city just passed an ordinance,” said Sgt. Levi Risley, a spokesman for the Fort Smith Police Department. “Effective Jan. 1, most of the take-home cars will be parked.”
Previously the department had allowed some officers to have cars at home, such as investigators, and the department had no restrictions on where the cars could be stored..