Rev. Rul. 84-164

The purpose of this revenue ruling is to amplify Rev. Rul. 80-62, 1980-1 C.B. 63, to provide rules for the substantiation of expenditures for ordinary and necessary business expenses for meals of an employee traveling away from home in situations where (1) lodging is provided in kind by the employer, (2) the cost of lodging is paid directly by the employer to the provider of the lodging (hotel) or (3) there are no lodging expenses (as, for example, when an employee stays with friends or relatives, or an over-the-road truck driver sleeps in the cab of a truck).

LAW AND ANALYSIS

Section 274(d) of the Internal Revenue Code and section 1.274-5 of the Income Tax Regulations, provide rules for the substantiation of business expenditures for travel, and for reimbursement arrangements or per diem allowances for ordinary and necessary expenses of an employee traveling away from home (other than transportation costs to and from the destination). Under the authority granted to the Commissioner by section 1.274-5(f) of the regulations, such arrangements or allowances that 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), 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).

Section 1.274-5(h) of the regulations states that the Commissioner may prescribe rules under which a taxpayer may elect to use a specified amount or amounts for meals while traveling in lieu of substantiating the actual costs of meals. The regulation does not relieve the taxpayer of substantiating the actual cost of other travel expenses as well as the time, place, and business purpose of the travel.

Rev. Rul. 80-62, 1980-1 C.B. 63 holds that, for taxable years beginning after 1978, reimbursement arrangements for subsistence, or per diem allowances in lieu of subsistence, not exceeding the greater of (1) $44 a 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, will, under the conditions stated in the ruling, be deemed substantiated within the meaning of section 1.274-5(c) of the regulations. The term `subsistence,` as used in Rev. Rul. 80-62, includes, but is not limited to, reasonable travel expenses for meals and lodging, laundry, cleaning and pressing of clothing, and fees and tips for services.

Rev. Rul. 80-62 does not apply to reimbursement arrangements or per diem allowances intended to cover only employee meal expenses, as when the employer pays for directly or furnishes the lodging, or when there is no lodging expense.

HOLDING

Pursuant to the authority contained in paragraphs (f) and (h) of section 1.274-5 of the regulations, if, in the case of expenses for travel away from home (other than costs of transportation to or from the destination) in the pursuit of a trade or business, an employer reimburses its employees for meal expenses, or provides its employees with a per diem allowance in lieu of meal expenses in the amount of (a) $14 per day for such travel that requires a stay of less than 30 days, or (b) $9 per day for such travel that requires a stay of 30 days or more, these reimbursements and allowances shall be deemed substantiated within the meaning of section 1.274-5(c) if (1) the employer reasonably limits payment of these meal expenses to those that are ordinary and necessary in the conduct of the employer's trade or business, and (2) the elements of time, place, and business purpose of travel are substantiated in accordance with paragraphs (b)(2) and (c) of section 1.274-5.

On the day that an employee begins or ends business travel, the employer will be allowed one-fourth of the applicable allowance specified above for each six-hour quarter of the day during any portion of which the employee is either traveling or is away from home. For purposes of this rule, the quarters of the day are midnight to 6 A.M., 6 A.M. to noon, noon to 6 P.M., and 6 P.M. to midnight.

For purposes of determining the number of days that the employee is required to be in a general locality, brief incidental travel away from the general locality of the employee's away-from-home trade or business activity, such as weekend trips to visit the employee's family at home or for recreation, do not reduce the number of days that the employee is considered to be in that general locality.

A reimbursement or per diem allowance for meal expenses is within the scope of this revenue ruling if (1) the employer either furnishes lodging in kind or pays directly the lodging expenses of the employees, or (2) the employee will incur no lodging expenses, as, for example, when the employee stays in the personal residence of friends or relatives or an over-the-road truck driver sleeps in the cab of the truck. This revenue ruling applies only to reimbursements or allowances during trips that require sleep or rest, since a taxpayer's expenses for meals on trips that do not require sleep or rest are not deductible under section 162 of the Code. See United States v. Correll, 389 U.S. 299 (1967), 1968-1 C.B. 64.

Any reimbursement or allowances within the scope of this revenue ruling are subject to the rules and conditions for reimbursements or allowances for subsistence stated in Rev. Rul. 80-62, except for the modifications described above.

This revenue ruling is effective with respect to expenses paid or incurred after December 31, 1982.

EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 80-62 is amplified.