(a) In general. Section 46(c)(6) provides that the applicable percentage to determine qualified investment under section 46(c)(1) for a qualifying commuter highway vehicle is 100 percent. A qualifying commuter highway vehicle is a vehicle (defined in paragraph (b) of this section)--
(1) Which is acquired by the taxpayer on or after November 9, 1978,
(2) Which is placed in service by the taxpayer before January 1, 1986, and
(3) With respect to which the taxpayer makes an election under paragraph (g) of this section.
(b) Definition of commuter highway vehicle. A commuter highway vehicle is a highway vehicle that meets the following requirements:
(1) The vehicle is section 38 property in the hands of the taxpayer. The rule of section 48(d), allowing a lessor to elect to treat the lessee of new section 38 property as having acquired the property, applies to commuter highway vehicles. If the vehicle is leased and that election is made, the lessee is treated as the taxpayer under this section. However, if that election is not made. the lessor, and not the lessee, is treated as the taxpayer under this section.
(2) The vehicle must meet the seating capacity requirement of paragraph (c) of this section; and
(3) The taxpayer reasonably expects to meet the commuter use requirement of paragraph (d) of this section for at least the first 36 months after the vehicle is placed in service.
(c) Seating capacity. A commuter highway vehicle must have a seating capacity of a least 8 adults in addition to the driver's seat.
(d) Commuter use requirement. A vehicle meets the commuter use requirement only if at least 80 percent of the miles the vehicle is driven are for trips to transport the taxpayer's employees between their residences and their places of employment. A trip for this purpose includes driving the vehicle before or after employees are in the vehicle, so long as the mileage driven is necessary either to pick up or drop off passengers or to park the vehicle in its regular parking space. A trip does not include miles driven solely for maintenance or to refuel the vehicle. A trip is not considered to transport the taxpayer's employees between their residences and their places of employment unless at least one-half the seating capacity (defined in paragraph (c) of this section) is used to seat employees of the taxpayer. In no event is the driver counted as an employee of the taxpayer.
(e) Definition of employee. An employee in this section is the same as in section 3121 (d) (definition of employee for withholding purposes).
(f) Transportation between employee's residence and place of employment. An employee is transported between that employee's residence and place of employment even if that place of employment is not the same as any of the other employees transported, and even if picked up or dropped off at some central point between that residence and place of employment. An employee is not transported between that employee's residence and place of employment if the transportation is of the type for which a deduction would be allowed under Sec. 1.162-2 were the employee providing it, such as the transportation from one work site to another after beginning work for the day.
(g) Election. A taxpayer must elect to have the vehicle treated as a qualifying commuter highway vehicle on the return for the taxable year in which the vehicle is placed in service. The election may be made only if the vehicle actually meets the commuter use requirement under paragraph (d) of this section for that taxable year. It must be made on or before the due date (including extensions) of that return. The election is effective as of that due date. [T.D. 8035, 50 FR 29370, July 19, 1985]