Spidell's Tax Season Tribune

“Business” autos: The bane of my tax existence

By Mike Giangrande, J.D., LL.M.

Federal Tax Editor

Can we talk frankly about “business” autos? I can’t be the only tax professional who cringes every time a client says they bought a new car for their business that they insist is only used for business purposes.

In the most recent instance in my own practice, a lawyer told me that he bought a new Mercedes G550 in 2024 – a vehicle with a $150,000 price tag. He said he chose the G class because it has a gross vehicle weight rating over 6,000 lbs., therefore he can claim 60% bonus depreciation for the vehicle ($150,000 x 60% = $90,000 expected deduction).

When I informed my client that 60% bonus depreciation is only available for vehicles that have 100% business use, he insisted that he only used the car to commute to and from the office, therefore, the vehicle is 100% business. When I informed him that commuting to and from work is a personal expense and not a business expense, I got the usual “what do you mean commuting to and from work isn’t a business expense?” I’ve only explained this issue to clients a bajillion times.

I know my client’s business and I knew right away that his business mileage, if any, was probably 5% at best. Of course, he also had the firm purchase the vehicle. So now I have to deal with a vehicle owned by the business with 5% business mileage (if I’m lucky) and I’m sure the firm’s credit card will include car payments, gas, maintenance, etc.

This is only one of many, many different variations of business auto issues I encounter on a regular basis that have caused me to pull all my hair out (there’s none left). Do you hate business autos as much as I do? What business auto issues make you want to smash glass? Let me know via e-mail at mikeg@spidell.com.

This 501(c) was not the IRS’s cup of tea

By Kathryn Zdan, EA

Editorial Director

The IRS denied a religious organization tax-exempt status because it served its members ayahuasca while it was awaiting a religious exemption from the Drug Enforcement Agency (DEA).¹

Organizations that want to be classified as tax-exempt under §501(c)(3) have to demonstrate that their activities are legal and consistent with public policy. The organization in this case was a church whose members’ sincerely held beliefs involved the consumption of ayahuasca, a Schedule I controlled substance that contains DMT, which is a strong (and illegal) psychedelic drug.

Under the Controlled Substances Act (CSA), there is a specific process for religious exemptions that allow for the use of controlled substances. To obtain the exemption, a religious organization must apply through the DEA, or a federal court can also issue an exemption.

The Iowaska Church of Healing applied for both tax-exempt status and a DEA religious exemption from the CSA. However, while those applications were still pending, the church conducted Ayahuasca tea ceremonies for its members. The IRS denied the §501(c)(3) exemption because the church engaged in illegal activity without a CSA exemption. The church cited Gonzales v. O Centro Espirita Beneficente União do Vegetal,² claiming that case recognized the use of ayahuasca in religious ceremonies as an exercise of religion under the First Amendment. But the IRS countered, and the court agreed, that the church had misinterpreted O Centro to mean they could use ayahuasca without the CSA exemption. Rather, that case found that an organization does not have to apply for an exemption from the DEA before seeking relief in the courts.

Down the drain

The Environmental Protection Agency’s annual “Fix a Leak Week” is approaching: March 17 through 23, 2025. According to their website, household leaks nationwide waste almost 1 trillion gallons of water a year total. The website provides info on checking for various types of leaks, videos for how to fix simple leaks like leaky faucets, and other resources:

www.epa.gov/watersense/fix-leak-week

The USGS provides a drip calculator so you can get a sense of how much water is actually going to waste. They calculated the volume of one drip to be ¼ milliliter and you can see how that adds up at:

https://water.usgs.gov/edu/activity-drip.html

A few fun facts about this week’s writers:

Mike Giangrande, J.D., LL.M., is an Orange County native, and you can find him around his backyard smoker, working in his garage, or sipping lemonade at either a baseball or soccer game for this three children.

Kathryn Zdan, EA, spends her non-Spidell hours on photography and watching horror films (and then sleeping with the light on). She also enjoys hiking, biking, and watching foreign films.

Never miss an issue

Did a friend forward this to you? To get on the Tax Season Tribune mailing list, visit caltax.com/spidells-tax-season-tribune/ and submit your e-mail address. Past issues of the Tax Season Tribune can be accessed through the Tribune Archives.