The battle over the rules for taxing private use of work handsets is raging, with the Internal Revenue Service considering its options and the wireless industry calling for a total repeal of the law in question.

The IRS is taking several proposals into consideration about the tax rules surrounding employer-provided mobile phones, which, although rarely enforced, currently requires workers to report the value of work-related wireless services as part of their gross income. The IRS has offered a compromise where employees would have to report 25 percent of yearly mobile cost as personal income, but many believe that any tax is unfair.

"More than the impact on the industry, we're a lot more concerned about the millions of people who use their mobile devices for business use," said John Walls, vice president of public affairs for CTIA-The Wireless Association, Washington. "This is an arcane law passed when cell phones were a luxury and not the necessity they are today.

"It is extremely burdensome to expect the millions of business users to distinguish between personal and business use, and it is unnecessary," he said. "A complete repeal makes perfect sense and it is the fairest thing the IRS could do."

There are bipartisan-sponsored bills working their way through the U.S. House of Representatives and the Senate.

"I would encourage everyone to contact their federal lawmakers and let them know they support these bills," Mr. Walls said. "That we're looking at taxing at what is a vital link for professionals of all walks of life is way over the top and asking way too much of the American business worker to keep track of.

"Mobile phones are increasing productivity in the work place, and to place unnecessary burdens on workers makes no sense at this time," he said.

One problem stems from the fact that it is impossible to log how much time is spent on the phone that is strictly for business purposes, and how much time is spent talking about one's personal life.

"An example, if I'm a small business owner, maybe I'm in business with a family member, and we talk about various work orders and professional situations then take a minute to ask how their life is going," Mr. Walls said. "How do I divvy up that call?.

"If I use my wireline phone at work to [make] personal calls, I will not be charged one penny, but yet a tool that allows me to communicate with anyone in my professional environment 24 hours a day could be taxed," he said.

"The incongruity is ridiculous, this law is so outdated, so the most rational and sensible thing to do is adopt a complete repeal of this antiquated law."

CTIA and 34 companies and associations have signed a letter in strong support of the Mobile Cell Phone Act of 2009 (S. 144) and its House companion, H.R. 690.

The letter was sent to the leadership of the U.S. House Committee on Ways and Means and the U.S. Senate Committee on Finance.

The CTIA is backing a Congressional bill to impose a five-year moratorium on new discriminatory state and local wireless taxes (see story).

U.S. Senators Ron Wyden (D-OR) and Olympia Snowe (R-ME) introduced the Mobile Wireless Tax Fairness Act (S.1192).

The bill is similar to the Cell Tax Fairness Act (H.R. 1521), which has attracted bipartisan support in the U.S. House.

"Senators Wyden and Snowe have shown their support for wireless consumers across America by sponsoring the Mobile Wireless Tax Fairness Act of 2009," said Steve Largent, president/CEO of CTIA, in a statement. "On behalf of the more than 270 million U.S. wireless subscribers, we thank them for their leadership and commitment to easing the costly and discriminatory tax burden imposed on wireless services.

"It is very troubling that wireless consumers have been taxed four times more than other taxable goods and services over an almost four-year period," he said. "The Wyden-Snowe bill will protect consumers from new discriminatory taxes and fees while preserving existing revenue for states and localities.

"We look forward to working with members of Congress on both sides of the Capitol to get this pro-consumer legislation passed this year."