October 2026 Payroll News

O.S. 47 § 156.1, as amended, prohibits the personal use of state-owned motor vehicles but permits the use of the vehicles for commuting in very specific situations. 2007 OK AG Opinion 18 also addresses this issue.

When a state employee is allowed to commute in accordance with the statute or the attorney general opinion, the agency must notify the governor, the president pro tempore of the Senate and the speaker of the House of Representatives. In addition, when an employee is using a vehicle from OMES Fleet Management, the agency must complete OMES CAM FM Form 022, Authorization to Commute in State Vehicle.

The IRS considers commuting to be a noncash taxable benefit to the employee even when the use of the vehicle is for the benefit of the employer. There are very few exceptions to the taxability of commuting. Exceptions are for certain vehicles that are not likely to be used for personal use because of their design. These vehicles are listed in IRS Publication 15-B.

• The method of calculating the taxable fringe benefit is dependent on the employee’s status.
• Commuting Rule: Most state employees may use the Commuting Rule. Under this rule, the value of a vehicle provided to an employee for commuting is computed by multiplying each one-way commute by $1.50. If more than one employee commutes in the vehicle, this value applies to each employee. This amount must be included in the employee’s wages or reimbursed by the employee.
• Cents-per-Mile Rule: A cents-per-mile method may also be used by most state employees.
• Lease Value Rule: Elected officials or employees whose compensation is at least as great as a federal government employee at Executive Level V (for 2026: $184,900) are not allowed to compute taxable income under the Commuting Rule. These officials and employees must use the Lease Value Rule to compute taxable income.
• All valuation methods are described in detail in IRS Publication 15-B.

The employee may choose to have the value included as taxable income or pay the employer for personal use rather than having it treated as wages. When treating the value as wages, the imputed income is subject to FICA and income tax withholding. The taxable amount, if not paid by the employee, must be processed through payroll so that taxes are calculated, and amounts are reported on the employees’ W-2.

The taxable amount will need to be processed through Workday@OK as a one-time payment, a pay input or entered on the timesheet, depending on the agency’s processing policy. The amount will be included as taxable income and will be taxed on the paycheck.

We recommend the vehicle usage be included in the employee’s payroll each pay period to prevent a large sum being included in the employee’s last pay of the calendar year, resulting in a higher-than-normal amount of taxes being withheld. Additionally, up-to-date reporting of vehicle usage will benefit the agency should the employee terminate during the year.

For more information, please email HCM Central Payroll.

If, for any reason, an agency receives a payroll warrant issued in error, the warrant should be returned as soon as possible to HCM Central Payroll for cancellation. Payroll warrants must be accompanied by an OMES Form PWC.

Warrants issued by the state treasurer, which, for any cause, remain outstanding or unpaid for a period of 90 days shall be revoked and canceled under the provisions of O.S. 62 § 34.80. For warrants canceled by statute, the cash is transferred to the canceled warrant fund. Agencies will not be refunded the value of the statutorily canceled warrants.

Agencies should be reviewing the PS Financials Payroll 36-Month Statutory Cancellation Report on a regular basis.

If there is a payroll warrant listed and the employee is entitled to the funds, please complete OMES Form 20R and submit a service request to OMES CAR Transaction Processing. This will allow a replacement warrant to be issued to provide the employee their due pay.

Agencies should be reviewing the PS Financials Payroll 36-Month Statutory Cancellation Report on a regular basis.

If there is a payroll warrant listed and the employee is not entitled to the funds, the issuing agency must notify OMES (O.S. 62 § 34.80). Notification should include the warrant number, warrant date and must be signed by an agency approving authority. Please submit a service request to OMES CAR Transaction Processing stating that the warrant should not be reissued. In addition, the amounts must be removed from the employee’s earning record. Please email HCM Central Payroll.