TaxNewsFlash-Exempt Organizations

September 25, 2008
No. 2008-91

PRINTABLE VERSION

Updated Rules for Determining Substantiation of Employee Lodging, Meals, and Incidental Expenses

The IRS today released an advance copy of Rev. Proc. 2008-59, which is an update of the rules for determining when the amount of ordinary and necessary business expenses of an employee for lodging, meal, and incidental expenses—or for meal and incidental expenses—incurred while traveling away from home are deemed substantiated under Reg. section 1.274-5 when a payor (i.e., the employer, its agent, or a third party) provides a per diem allowance under a reimbursement or other expense allowance arrangement to pay for the expenses.

Rev. Proc. 2008-59 also provides an optional method for employees and self-employed individuals who are not reimbursed to use in computing the deductible costs paid or incurred for business meal and incidental expenses—or for incidental expenses only if no meal costs are paid or incurred—while traveling away from home.

Rev. Proc. 2008-59 updates and supersedes Rev. Proc. 2007-63.

The IRS reiterated that a taxpayer’s use of a method described in Rev. Proc. 2008-59 is not mandatory. Rather, a taxpayer may use actual allowable expenses if adequate records or other sufficient evidence for proper substantiation is maintained.

Rev. Proc. 2008-59 does not provide rules under which the amount of an employee's lodging expenses will be deemed substantiated when a payor provides an allowance to pay for those expenses, but not meal and incidental expenses.

For an electronic version of today’s 31-page revenue procedure: Rev. Proc. 2008-59

Effective Date

Rev. Proc. 2008-59 is effective for per diem allowances for lodging, meal and incidental expenses—or for meal and incidental expenses only—that are paid to an employee on or after October 1, 2008, with respect to travel away from home on or after October 1, 2008.

For purposes of computing the amount allowable as a deduction for travel away from home, Rev. Proc. 2008-59 is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2008.

Rev. Proc. 2008-59 will appear in Internal Revenue Bulletin 2008-41, dated October 14, 2008.

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084 or rspeizma@kpmg.com

To print a copy of this TaxNewsFlash article, go to: File>Print>Preferences or Properties>Landscape.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

The KPMG logo and name are trademarks of KPMG International.

KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.

The information contained in TaxNewsFlash-Exempt Organizations is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Direct comments, including requests for subscriptions, to US-KPMGWNT@kpmg.com. For more information, contact KPMG’s Federal Tax Legislative and Regulatory Services Group at + 1 202.533.4366, 2001 M Street NW, Washington, DC 20036-3310.

To unsubscribe from TaxNewsFlash-Exempt Organizations, reply to US-KPMGWNT@kpmg.com and type ‘Exempt Organizations: Unsubscribe' in the subject line, then click on the SEND button.

Privacy | Legal