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IRS Publishes Special Per Diem Rates for 2017-2018

SEP. 25, 2017

Notice 2017-54; 2017-42 IRB 321

DATED SEP. 25, 2017
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Citations: Notice 2017-54; 2017-42 IRB 321

Superseded by Notice 2018-77

Supersedes Notice 2016-58

2017-2018 Special Per Diem Rates

SECTION 1. PURPOSE

This annual notice provides the 2017-2018 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home, specifically (1) the special transportation industry meal and incidental expenses (M&IE) rates, (2) the rate for the incidental expenses only deduction, and (3) the rates and list of high-cost localities for purposes of the high-low substantiation method.

SECTION 2. BACKGROUND

Rev. Proc. 2011-47, 2011-42 I.R.B. 520, provides rules for using a per diem rate to substantiate, under § 274(d) of the Internal Revenue Code and § 1.274-5 of the Income Tax Regulations, the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Taxpayers using the rates and list of high-cost localities provided in this notice must comply with Rev. Proc. 2011-47. Notice 2016-58, 2016-41 I.R.B. 438, provides the rates and list of high-cost localities for the period October 1, 2016, to September 30, 2017.

Section 3.02(3) of Rev. Proc. 2011-47 provides that the term “incidental expenses” has the same meaning as in the Federal Travel Regulations, 41 C.F.R. 300-3.1, and that future changes to the definition of incidental expenses in the Federal Travel Regulations would be announced in the annual per diem notice. Subsequent to the publication of Rev. Proc. 2011-47, the General Services Administration published final regulations revising the definition of incidental expenses under the Federal Travel Regulations to include only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Transportation between places of lodging or business and places where meals are taken, and the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings, are no longer included in incidental expenses. Accordingly, taxpayers using the per diem rates may separately deduct or be reimbursed for transportation and mailing expenses.

SECTION 3. SPECIAL M&IE RATES FOR TRANSPORTATION INDUSTRY

The special M&IE rates for taxpayers in the transportation industry are $63 for any locality of travel in the continental United States (CONUS) and $68 for any locality of travel outside the continental United States (OCONUS). See section 4.04 of Rev. Proc. 2011-47.

SECTION 4. RATE FOR INCIDENTAL EXPENSES ONLY DEDUCTION

The rate for any CONUS or OCONUS locality of travel for the incidental expenses only deduction is $5 per day. See section 4.05 of Rev. Proc. 2011-47.

SECTION 5. HIGH-LOW SUBSTANTIATION METHOD

1. Annual high-low rates. For purposes of the high-low substantiation method, the per diem rates in lieu of the rates described in Notice 2016-58 (the per diem substantiation method) are $284 for travel to any high-cost locality and $191 for travel to any other locality within CONUS. The amount of the $284 high rate and $191 low rate that is treated as paid for meals for purposes of § 274(n) is $68 for travel to any high- cost locality and $57 for travel to any other locality within CONUS. See section 5.02 of Rev. Proc. 2011-47. The per diem rates in lieu of the rates described in Notice 2016-58 (the meal and incidental expenses only substantiation method) are $68 for travel to any high-cost locality and $57 for travel to any other locality within CONUS.

2. High-cost localities. The following localities have a federal per diem rate of $238 or more, and are high-cost localities for all of the calendar year or the portion of the calendar year specified in parentheses under the key city name.

Key city

County or other defined location

California

Mill Valley/San Rafael/Novato
(October 1-October 31 and June 1-September 30)

Marin

Monterey
(July 1-August 31)

Monterey

Napa
(October 1-October 31 and May 1-September 30)

Napa

Oakland
(October 1-October 31 and January 1-September 30)

Alameda

San Francisco

San Francisco

San Mateo/Foster City/Belmont

San Mateo

Santa Barbara

Santa Barbara

Santa Monica

City limits of Santa Monica

Sunnyvale/Palo Alto/San Jose

Santa Clara

Colorado

Aspen

Pitkin

Denver/Aurora

Denver, Adams, Arapahoe, and Jefferson

Grand Lake
(December 1-March 31)

Grand

Silverthorne/Breckenridge
(December 1-March 31)

Summit

Steamboat Springs
(December 1-March 31)

Routt

Telluride

San Miguel

Vail
(December 1-March 31 and July 1-August 31)

Eagle

Delaware

Lewes
(July 1-August 31)

Sussex

District of Columbia

Washington D.C. (also the cities of Alexandria, Falls Church, and Fairfax, and the counties of Arlington and Fairfax, in Virginia; and the counties of Montgomery and Prince George's in Maryland) (See also Maryland and Virginia)

Florida

Boca Raton/Delray Beach/Jupiter
(January 1-April 30)

Palm Beach and Hendry

Fort Lauderdale
(January 1-April 30)

Broward

Fort Meyers
(February 1-March 31)

Lee

Fort Walton Beach/De Funiak Springs
(June 1-July 31)

Okaloosa and Walton

Key West

Monroe

Miami
(December 1-March 31)

Miami-Dade

Naples
(December 1-April 30)

Collier

Illinois

Chicago
(October 1-November 30 and April 1-September 30)

Cook and Lake

Maine

Bar Harbor
(October 1-October 31 and July 1-September 30)

Hancock

Maryland

Ocean City
(July 1-August 31)

Worcester

Washington, DC Metro Area

Montgomery and Prince George’s

Massachusetts

Boston/Cambridge

Suffolk, city of Cambridge

Falmouth
(July 1-August 31)

City limits of Falmouth

Hyannis
(July 1-August 31)

Barnstable less the city of Falmouth

Martha's Vineyard
(June 1-September 30)

Dukes

Nantucket
(June 1-September 30)

Nantucket

Michigan

Petoskey
(July 1-August 31)

Emmet

Traverse City/Leland
(July 1-August 31)

Grand Traverse and Leelanau

New York

Lake Placid
(July 1-August 31)

Essex

New York City
(July 1-August 31)

Bronx, Kings, New York, Queens, and Richmond

Saratoga and Schenectady
(July 1-August 31)

Saratoga Springs/Schenectady

Oregon

Portland
(October 1-October 31 and March 1-September 30)

Multnomah

Seaside
(June 1-August 31)

Clatsop

Pennsylvania

Hershey
(June 1-August 31)

Hershey

Philadelphia
(October 1-November 30 and April 1-September 30)

Philadelphia

Rhode Island

Jamestown/Middletown/Newport
(October 1-October 31 and June 1-September 30)

Newport

South Carolina

Charleston
(October 1-November 30 and March 1-September 30)

Charleston, Berkeley and Dorchester

Utah

Park City
(December 1-March 31)

Summit

Virginia

Virginia Beach
(June 1-August 31)

City of Virginia Beach

Wallops Island
(July 1-August 31)

Accomack

Washington, DC Metro Area

Cities of Alexandria, Fairfax, and Falls Church; counties of Arlington and Fairfax

Washington

Seattle

King

Vancouver
(October 1-October 31 and March 1-September 30)

Clark, Cowlitz, and Skamania

Wyoming

Jackson/Pinedale
(June 1-September 30)

Teton and Sublette

3. Changes in high-cost localities. The list of high-cost localities in this notice differs from the list of high-cost localities in section 5 of Notice 2016-58.

a. The following localities have been added to the list of high-cost localities: Oakland, California; Lewes, Delaware; Fort Myers, Florida; Hyannis, Massachusetts; Petoskey, Michigan; Portland, Oregon; Vancouver, Washington.

b. The following localities have changed the portion of the year in which they are high-cost localities: Aspen, Colorado; Denver/Aurora, Colorado; Telluride, Colorado; Vail, Colorado; Bar Harbor, Maine; Ocean City, Maryland; Nantucket, Massachusetts; Philadelphia, Pennsylvania; Jamestown/Middletown/Newport, Rhode Island; Jackson/Pinedale, Wyoming.

c. The following localities have been removed from the list of high-cost localities: Sedona, Arizona; Los Angeles, California; Vero Beach, Florida; Kill Devil, North Carolina.

SECTION 6. EFFECTIVE DATE

This notice is effective for per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only, that are paid to any employee on or after October 1, 2017, for travel away from home on or after October 1, 2017. For purposes of computing the amount allowable as a deduction for travel away from home, this notice is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2017. See sections 4.06 and 5.04 of Rev. Proc. 2011-47 for transition rules for the last 3 months of calendar year 2017.

SECTION 7. EFFECT ON OTHER DOCUMENTS

Notice 2016-58 is superseded.

DRAFTING INFORMATION

The principal author of this notice is Elizabeth Binder of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice contact Ms. Binder at (202) 317-7005 (not a toll-free call).

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