# Prop. Treas. Reg. § 1.132-4: Line of business limitation.

Proposed regulation, not in force. REG-132805-17, 90 FR 37824, published 2025-08-06 <https://www.federalregister.gov/documents/2025/08/06/2025-14883/determination-of-line-of-business-for-purposes-of-no-additional-cost-service-and-qualified-employee>. Interprets 26 U.S.C. § 132.

Par 2. Section 1.132-4 is amended by revising paragraphs (a)(2) and (3) and adding paragraph (a)(4) to read as follows:

(a) * * *

(2) Definition of line of business —(i) In general. An employer's line of business is determined by reference to the most recent version of the North American Industry Classification System (NAICS), as prepared by Statistics Canada, Mexico's Instituto Nacional de Estadística y Geografía, and the Economic Classification Policy Committee of the United States, acting on behalf of the Office of Management and Budget (OMB) (or successor organizations), that is available on the first day of the taxable year in which the no-additional-cost service or qualified employee discount exclusion is being applied. An employer is considered to have more than one line of business if the employer offers for sale to customers goods or services in more than one four-digit code classification referred to in the NAICS ( i.e., NAICS industry group).

(ii) Examples. Examples of the four-digit industry group classifications are: General Merchandise Stores, including Warehouse Clubs and Supercenters; Traveler Accommodation; Automotive Repair and Maintenance; and Grocery Stores.

(3) Aggregation of four-digit classifications. If, pursuant to paragraph (a)(2) of this section, an employer has more than one line of business, such lines of business will be treated as a single line of business where and to the extent that one or more of the following aggregation rules apply:

(i) If it is uncommon in the industry of the employer for any of the separate lines of business of the employer to be operated without the others, the separate lines of business are treated as one line of business.

(ii) If it is common for a substantial number of employees (other than those employees who work at the headquarters or main office of the employer) to perform substantial services for more than one line of business of the employer, so that determination of which employees perform substantial services for which line of business would be difficult, then the separate lines of business of the employer in which such employees perform substantial services are treated as one line of business. For example, assume that an employer operates a delicatessen ( i.e., a specialty food store) with an attached service counter at which food is sold for consumption on the premises ( i.e., a restaurant or eating place). Assume further that most but not all employees work both at the delicatessen and at the service counter. Under the aggregation rule of this paragraph (a)(3)(ii), the delicatessen and the service counter are treated as one line of business.

(iii) If the retail operations of an employer that are located on the same premises are in separate lines of business but would be considered to be within one line of business under paragraph (a)(2) of this section if the merchandise offered for sale in such lines of business were offered for sale at a general merchandise store, including a warehouse club or super center, then the operations are treated as one line of business. For example, assume that on the same premises an employer sells both specialty foods ( i.e., specialty food retailers) and small kitchen appliances  ( i.e., electronics and appliance retailers). Because, if sold together at a general merchandise store, the operations would be part of the same line of business, the operations are treated as one line of business.

(4) Applicability date. Paragraphs (a)(2) and (3) of this section apply to taxable years beginning on or after [DATE OF PUBLICATION OF THE FINAL RULE IN THE FEDERAL REGISTER ].