The determination applies to three situations: Class A (principally business use of the phone), Class B (principally private use of the phone), and the De Minimis Class (a reimbursement payment of no more than $5 per week, per employee).
Where there is principally business use of the phone, if the employer reimburses the employee 75% of their total phone bill, the whole reimbursement is exempt income. Alternatively, if they pay 100% of the bill, then 75% can be treated as exempt income of the employee.
For principally private use, if the employer reimburses 25% of the total bill, then the whole amount reimbursed is exempt. Alternatively, if they pay 100% of the bill, then 25% can be treated as exempt income, with 75% taxable.
The De Minims permits a payment of up to $5 per week, amounting to no more than $265 per year, per employee, to be treated as exempt income.
The devil is in the detail and there are a number of conditions that must be met before the above rules can be used, but it should provide employers with an easy rule of thumb to adopt.