SAN FRANCISCO - Hundreds of workers at State Compensation Insurance Fund (State Fund) face a bigger income tax bill next year because their employer didn't understand the law for reporting company vehicle use, according to the Sacramento Bee.

State Fund employees who have been using company vehicles to commute to and from work must now claim the fair market value of the vehicle, the gas, the insurance, and maintenance as income, prorated to the percentage of miles used for business. They'll also have to claim it back to Jan. 1 of this year, the Bee reported.

State Fund manages a 2,000-vehicle fleet, with 1,800 vehicles assigned to staff. Some staff has been allowed to commute in company vehicles and claim the benefit as income at $3 per round trip.

However, after the IRS started auditing state workers at other agencies who take company cars home, State Fund officials recently asked a tax consultant to look at its policy.

Using the $15-per-week method, called the Commuting Valuation Rule, is OK "only if a driver of an assigned vehicle uses the car for business purposes and has a legitimate reason to commute in a State Fund vehicle," Chief Operating Officer Harrison Jerome said in an April 13 e-mail.

Some employees will hand in their keys rather than bear the added tax burden, fund spokeswoman Jennifer Vargen said, reported the Bee.