Rev. Rul. 72-508

Advice has been requested whether an employee who pays or incurs ordinary and necessary business travel subsistence expenses for which he is paid a per diem allowance in an amount exceeding the $36 per day prescribed in Revenue Ruling 71-412, C.B. 1971-2, 170, but not in excess of the rate authorized to be paid by the Federal Government in such locality, is considered as meeting the substantiation and adequate accounting requirements of section 1.274-5 of the Income Tax Regulations.

The Commissioner of Internal Revenue, under the authority granted by section 1.274-5(f) of the regulations is authorized to prescribe rules governing reimbursement arrangements, or per diem allowances, for ordinary and necessary expenses of an employee traveling away from home (exclusive of transportation costs to and from destination) and mileage allowances for similar transportation expenses. Such arrangements or allowances which are in accordance with reasonable business practices, may be regarded (1) as equivalent to substantiation by adequate records or other sufficient evidence of the amount of such traveling expenses for purposes of section 1.274-5(c) of the regulations, and (2) as satisfying the requirements of an adequate accounting to an employer with respect to such amounts for purposes of section 1.274-5(e) of the regulations.

Pursuant to such authority, it is held as follows: If, in the case of expenses for travel away from home (exclusive of costs of transportation to and from destination), an employer reimburses his employees for subsistence or provides his employees with a per diem allowance in lieu of subsistence in an amount which does not exceed the greater of (1) $36 per day or (2) the maximum per diem rate authorized to be paid by the Federal Government in the locality in which the travel is performed, such reimbursements and allowances shall be regarded, with respect to the amount of such traveling expenses, as satisfying the substantiation requirements of section 1.274-5(c) of the regulations and the adequate accounting to an employer requirements of section 1.274-5(e) of the regulations, provided the rules of Revenue Ruling 71-412 are otherwise met.

Revenue Ruling 71-412, C.B. 1971-2, 170, is hereby modified to the extent it provides that the per diem allowance discussed therein cannot exceed $36 per day.