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diem allowance under a reimbursement or other expense allowance
arrangement to pay for such expenses.” Rev. Proc. 96-64, sec. 1,
1996-2 C.B. at 427. Section 3.01 of Rev. Proc. 96-64, 1996-2
C.B. at 428 defines a “per diem allowance” as:
a payment under a reimbursement or other expense
allowance arrangement that meets the requirements
specified in � 1.62-2(c)(1) and that is:
(1) paid with respect to ordinary and necessary
business expenses incurred, or which the payor
reasonably anticipates will be incurred, by an employee
for lodging, meal, and incidental expenses or for meal
and incidental expenses for travel away from home in
connection with the performance of services as an
employee of the employer,
(2) reasonably calculated not to exceed the amount of
the expenses or the anticipated expenses, and
(3) paid at or below the applicable Federal per diem
rate, a flat rate or stated schedule, or in accordance
with any other Service-specified rate or schedule.
Under the revenue procedures, if a per diem allowance
includes reimbursement for lodging, in addition to meal and
incidental expenses (M&IE), the amount of expenses deemed
substantiated each day is the lesser of the per diem allowance
for the day or the Federal per diem rate for the locality of
travel for the day. Rev. Proc. 96-64, sec. 4.01, 1996-2 C.B. at
428. If the per diem allowance includes reimbursement only for
M&IE (and not for lodging), the amount of expenses deemed
substantiated each day is the lesser of the per diem allowance
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