Rev. Proc. 63-18

SECTION 1. PURPOSE.

The purpose of this Revenue Procedure is to announce additional transitional rules to facilitate compliance with the provisions of section 274 of the Internal Revenue Code of 1954, as added by section 4 of the Revenue Act of 1962, C.B. 1962-3, 111, relating to deductions for travel, entertainment, and gifts, and the regulations promulgated thereunder. Proposed regulations under section 274 of the Code, other than subsection (d), setting forth substantive rules for the deductibility of business expenditures for travel, entertainment, and gifts, were published as Part II of the Federal Register dated March 30, 1963, 28 F.R. 3137. These proposed regulations would be effective beginning January 1, 1963.

SEC. 2. BACKGROUND.

Final record-keeping regulations under subsection (d) of section 274 of the Code are set forth in Treasury Decision 6630, page 58, relating to the substantiation of business expenditures for travel, entertainment, and gifts. Revenue Procedure 63-3, page 473, provides a 90-day transitional period (from January 1, 1963 through March 31, 1963) for businessmen encountering mechanical difficulties in accommodating their record-keeping systems to the new requirements. Taxpayers who established that their accounting systems substantially conformed to the requirements of Revenue Ruling 60-120, C.B. 1960-1, 83, and who also established that they had made a good faith effort to comply, as expeditiously as practicable, with the provisions of section 2-74(d) of the Code and section 1.274-5 of the Income Tax Regulations were allowed up to March 31, 1963, to conform their systems and procedures to the requirements of the new statute and regulations.

SEC. 3. CONCLUSION.

.01 Recognizing that the proposed substantive rules for the deductibility of business expenditures for travel, entertainment, and gifts may require further accounting system and procedure adjustments for some businesses, the period for conforming accounting systems and procedures is extended until July 31, 1963. ¹

.02 Further, with respect to travel, entertainment, and gift expenses incurred between January 1, 1963, and July 31, 1963, ¹ when there have been good faith efforts to apply the new substantive requirements, revenue agents will resolve reasonable doubts in favor of taxpayer.

SEC. 4. EFFECT ON OTHER DOCUMENTS.

Revenue Procedure 63-3, page 473, is modified to extend the transitional period provided in section 3.02 thereof for an additional period to July 31, 1963. /1a/

¹ Based on Technical Information Release 464, dated Mar. 30, 1963.

/1a/ As originally published in I.R.B. 1963-16, 48, dated April 22, 1963, the transitional period of 30 days after the final substantive regulations under section 274 of the Code are issued, was extended to July 31, 1963, by Announcement 63-72, I.R.B. 1963-28, 41, based on News Release IR-613, dated June 25, 1963. The final regulations (T.D. 6659) appear in the Federal Register dated June 25, 1963, 28 F.R. 6499.