- 30 -
Petitioner observes, correctly, that mileage-based reimbursement
arrangements like those described in the fifth factor (and at
issue here) are expressly recognized in section 1.62-2(d)(3)(ii),
Income Tax Regs., as satisfying, in certain circumstances, the
so-called business connection requirement as necessary for a
reimbursement arrangement to qualify as an accountable plan.22
Therefore, petitioner elliptically concludes, the fifth factor of
section 4.02 of the Revenue Procedures conflicts with section
1.62-2(d)(3)(ii), Income Tax Regs., and is therefore invalid.
Insofar as we are able to understand petitioner’s argument, we
disagree with it.
We perceive no conflict between section 1.62-2(d)(3)(ii),
Income Tax Regs., and section 4.02 of the Revenue Procedures.
21(...continued)
to employees under so-called accountable plans. See sec. 1.62-
2(c)(4), (h), Income Tax Regs. By contrast, reimbursement
payments under nonaccountable plans must be reported as wages to
the employees and are subject to withholding and employment
taxes. See sec. 1.62-2(c)(5), Income Tax Regs.
22 For qualification as an accountable plan, one requirement
(the so-called business connection requirement) is that the
reimbursement arrangement must provide reimbursements only for
business expenses that are allowable as deductions under I.R.C.
pt. VI (secs. 161-197) and that are paid or incurred by the
employee in connection with the performance of services as an
employee of the employer. Sec. 1.62-2(c)(1) and (d)(1), Income
Tax Regs. A per diem allowance arrangement that is “computed on
a basis similar to that used in computing the employee’s wages or
other compensation (e.g., the number of hours worked, miles
traveled, or pieces produced)” will meet the business connection
requirement only in certain circumstances, one of which is that
“a per diem allowance computed on that basis was commonly used in
the industry in which the employee is employed.” Sec. 1.62-
2(d)(3)(ii), Income Tax Regs.
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