Can product testing qualify as a working condition fringe benefit?

Qualifying for this tax-free fringe benefit can be a bit trickier than qualifying for other types of fringe benefits. However, although there are exacting requirement for excluding from income the value of the goods that are provided to employees for product testing, they are not complicated.

The fair market value of the use of consumer goods manufactured for sale to nonemployees as a part of an employer's product testing program is excludable from income as a working condition fringe benefit where:

1. consumer testing and evaluation of the product is an ordinary and necessary business expense of the employer;

2. business reasons necessitate that the testing and evaluation of the product must be performed off the employer's business premises by employees;

3. the product is furnished to the employee for purposes of testing and evaluation;

4. the product is made available to the employee for no longer than necessary to test and evaluate its performance and must be returned to the employer at the completion of the testing and evaluation period;

5. the employer imposes limits on the employee's use of the product that significantly reduce the value of any personal benefit to the employee; and

6. the employee submits detailed reports to the employer on the testing and evaluation (the length of the testing and evaluation period must be reasonable in relation to the product being tested).