SECTION 80: Residential Internet Connectivity used for Both Business and Personal Purposes: Expense Procedure Guidelines

NOTE: This Policy assumes that any residential Internet connectivity equipment and service will be regularly used for both business and personal purposes (mixed-use). Mixed-use equipment and service arrangements are to be employee-owned. This policy allows the University to efficiently meet Internal Revenue Service (IRS) regulations regarding business versus personal use of residential Internet connectivity. Specifically, the IRS takes the position that personal use of employer-paid residential Internet connectivity should be taxed to the employee as compensation.

University employees routinely rely on access to Internet communications and network-based electronic information resources to carry out activities of daily life, as well as their University employment responsibilities. Therefore, it is presumed that (a) individuals typically have and maintain residential Internet connections for their personal uses, (b) their individual need for University business-related connectivity can be readily accommodated within those personal connectivity arrangements without imposing additional expense on the employee, and (c) University reimbursement, allowance or provisioning of residential Internet connection expenses therefore is not routinely appropriate.

If an employee requires a level of bandwidth or other services to perform their job responsibilities that materially exceeds the level typically employed for personal use of residential Internet connectivity, an additional pay allowance may be paid to the employee for the incremental portion of the cost of this residential Internet connectivity. Simple convenience is not a criterion for such an allowance. The allowance may be authorized if ALL of the following criteria are met:

• The job function of the employee requires them to be frequently or routinely able to access online systems and services outside of scheduled or normal working hours and while at home;
• The job function requires that the employee respond promptly to the task requiring online access (i.e., the task cannot wait for the employee to travel to her/his place of work);
• The job function requires a level of Internet connectivity in excess of that which the employee or contractor would normally have or maintain in their residence for personal use;
• Appropriate sources of funding are available. The employing unit or project must provide full funding of the allowance. Funding for this purpose generally is not permitted from the budgets of sponsored research projects, but in the rare cases when it may be permitted the principal investigator of the project and Contracts and Grants Administration also must concur with the determination of business need and amount of the allowance.

The appropriate Unit Administrator (Chairperson/Director or delegate) and Dean/Assistant Vice President, may authorize an additional pay allowance for mixed-use residential Internet connectivity service and/or equipment. As verification of business purpose and authorization, a Mixed-Use Residential Internet Connectivity Allowance Agreement must be approved by the Unit Administrator (or higher) and maintained on file in the department.

With appropriate business need and departmental approval (see sections II and III above), expenses for residential Internet connectivity service may be paid via an additional pay allowance as follows:

Additional Pay Allowance – a taxable allowance to pay the business purpose portion of an employee's personal residential Internet connectivity service plan. This (taxable) method allows the University to most efficiently meet IRS regulations regarding business versus personal use of residential Internet connectivity in that it is not necessary to maintain detailed usage substantiation records to support both business and non-business usage of the service. In this case, the residential Internet connectivity service contract is personally owned by the employee and therefore may be used for both personal and business purposes.

Determination of service allowance amount: The dollar amount of the service allowance should approximate the employee's anticipated business-related expenses only. It is not the intent of this allowance to pay employees for their personal use of the residential Internet connectivity. While the exact amount of the allowance paid is to be determined by (and is left to the discretion of) the employee's supervisor, management should use the following guidelines to determine the appropriate allowance:

• The allowance generally should not exceed the differential (incremental) subscription expense for the least expensive service providing the necessary bandwidth incremental to a customary level of bandwidth or service that the employee would typically have for personal use;
• Installation charges, charges for connection equipment required by the employee's residential Internet service provider, other one-time charges, and charges for premium services unrelated to business needs, are NOT eligible for inclusion in the allowance amount or for reimbursement from the University.

Allowances should be submitted to the Payroll Division using an Additional Payments Form for academic employees and a Special Payment Authorization Form for non-academic employees. Forms should be prepared and submitted according to Payroll guidelines with a special designation of “RIC” as the earnings type. The frequency with which a department processes a form for an employee's allowance is at the discretion of the Unit Administrator within the following limits: at a maximum, a department may process an employee's allowance each month; at a minimum, a department may process an employee's annual allowance (allowance per month x 12 months) once per year. Note that once an allowance is paid, it becomes income to the employee and MSU is not entitled to a “refund” in the event of termination or transfer to another University department.

The residential Internet connectivity allowance is included in the employee's paycheck/direct deposit. The allowance shows as a separate line item on the employee's pay stub.

This allowance does not increase the employee's base salary and will not be included in the calculation of any University benefits.

This allowance is subject to all applicable taxes. Because the allowance is taxable, the actual amount that an employee receives may be less than the selected allowance amount.

Employees receiving an allowance are required to maintain an active service contract for the life of the allowance.

NOTE: A University Purchasing Card may not be used to pay for mixed-use residential Internet connectivity service.

Any exceptions to any of the terms of this policy must be approved by the Controller, who may consult with the Vice Provost for Libraries, Computing and Technology.

The employee is generally responsible for the purchase of residential Internet connectivity equipment. Costs for cosmetic or technical residential Internet connectivity extras that have no business purpose are the responsibility of the employee.

A copy of the completed Mixed-Use Residential Internet connectivity Allowance Agreement must at all times be kept on file in the employee's department.

The employee's supervisor is responsible for an annual review of the business need for a residential Internet connectivity allowance to determine if allowances should be changed or discontinued. The supervisor is to initial and date the bottom of the agreement form as evidence of this annual review. If an employee is terminated, resigns, transfers, or is no longer eligible for an allowance, the employee's supervisor is responsible for notifying the appropriate unit administrator to discontinue processing future allowances.

All residential Internet connectivity service arrangements are to be between the employee and the service provider. As such, if prior to the end of a service contract, the employee for any reason needs to change or end the service contract, the employee will bear the cost of any associated contract termination fees.