Rev. Rul. 58-453

Advice has been requested as to the circumstances under which mileage allowances for travel and per diem allowances in lieu of subsistence paid by an employer to his employee while in travel status will be approved by the Commissioner, in the exercise of his discretion provided in section 1.162-17(b)(4) of the Income Tax Regulations, as constituting reasonable business practices which will be regarded as equivalent to an accounting by the employee to his employer for purposes of section 1.162-17(b) of such regulations.

An extensive study has been made of the rates of mileage allowances and per diem allowances in lieu of subsistence paid employees by a substantial number of employers, including States and municipalities, and the method of accounting for these allowances required of the employees by such employers. On the basis of this study, it has been administratively determined that for purposes of section 1.162-17(b) of the Income Tax Regulations an employee who pays or incurs ordinary and necessary business expenses for travel (including meals and lodging) and transportation for which he is paid by his employer a fixed mileage allowance or a per diem allowance in lieu of subsistence at rates not in excess of 125 percent of the rates authorized to be paid by the Federal Government in the locality in which the travel is performed will be deemed to have been required to account to his employer for such expenses for purposes of such regulations.

The maximum mileage allowance on a fixed scale authorized to be paid by the Federal Government for use of a personal automobile on official travel is 10 cents per mile and the maximum per diem allowance on a fixed scale in lieu of subsistence authorized to be paid while traveling within the continental United States is $12.00 per day. Accordingly, it is held that for purposes of section 1.162-17(b) of the Income Tax Regulations an employee in cases where the rates of mileage allowance or per diem allowance in lieu of subsistence paid by the employer are not in excess of 12 1/2 cents per mile and $15.00 per day, respectively. Whenever the maximum mileage and/or per diem allowance authorized to be paid by the Federal Government is changed, the 12 1/2 cents per mile and/or $15.00 per day will likewise at such time be adjusted to 125 percent of the changed amount.

The maximum per diem allowance in lieu of subsistence authorized to be paid by the Federal Government while traveling outside the continental United States varies depending upon the locality. For purposes of computing the maximum rates of per diem allowance in lieu of subsistence paid an employee by his employer for which the employee will be deemed to have been required to account to his employer, see Standardized Government Travel Regulations, Appendix I, Revised--Maximum Per Diem Rates in Lieu of Subsistence for Travelers Beyond the Limits of the Continental United States, incorporated in this ruling by reference thereto.

If per diem allowances and mileage allowances paid by a particular employer do not fall within the scope of this revenue ruling, the presence of unusual circumstances which account for the variation may, nevertheless, constitute grounds for considering the employees of such an employer to be treated as though they accounted to the employer for their business expenses. In such a case the employer should direct a request to the Commissioner of Internal Revenue, Attention: Tax Rulings Division, Washington 25, D. C., setting forth in detail an explanation of the arrangements under which these particular allowances are paid and the reasons for his belief that his special circumstances justify the same treatment as that accorded allowances falling within the scope of this ruling. The burden will be upon the employer in all such cases to establish to the satisfaction of the Commissioner the reasonableness of the allowances paid under the special circumstances involved. It should be understood that the payment of per diem allowances and mileage allowances by an employer in amounts greater than those specified herein will not, in and of itself, constitute an unusual circumstance and, therefore, requests based solely on such circumstance will not be approved.