Tool allowance payments. This ruling holds that tool allowances paid to employees are not paid under an accountable plan because the substantiation and return of excess requirements are not met. All tool allowance payments under the arrangement must be included in the employees' gross income, reported on the employees' Forms W-2, and are subject to withholding and payment of federal employment taxes.

This notice provides information about additional criteria that will be applied in selecting proposals for the Internal Revenue Service's Industry Issue Resolution (IIR) program regarding application of accountable plan rules to specific industries.