Guidelines As to What Constitutes an
Accountable Reimbursement Plan

The Internal Revenue Service today released guidance to employers and employees on the tax treatment of employee business expenses under a reimbursement or other expense allowance arrangement. These new rules are contained in Temporary Regulations and reflect changes to the tax law made by the Family Support Act of 1988.

Under this new law an employee cannot claim an adjustment to income for reimbursed employee expenses unless the expenses are reimbursed under an arrangement that requires substantiation and any excess expenses are returned to the employer. The new rules announced today provide guidance to employers on what constitutes an accountable reimbursement plan.

The temporary regulations will appear in the Federal Register on December 12, 1989.

In addition, the IRS also released today a revenue procedure containing the 1990 standard mileage rates for computing the deductible costs of operating a passenger automobile for business, charitable, medical, or moving expense purposes.

The standard mileage rate for business use of an automobile in 1990 will be 26 cents a mile -- up from the 25.5 cents a mile used in 1989. For charitable activities, the standard mileage rate will remain at 12 cents a mile in 1990. For medical and moving expense purposes, the standard mileage rate for 1990 will stay at nine cents a mile. The special standard mileage rate for business use of an automobile by rural mail carriers will be 39 cents per mile for 1990.

The IRS also said that the substantiation and adequate accounting requirements of the temporary regulations are met for employers that use the 26 cents a mile rate for reimbursing employees business use of an automobile.

The IRS also released today a revenue procedure providing rules for employee travel expenses that will be deemed to meet the substantiation requirements of the temporary regulations.

The substantiation requirements will be satisfied if the travel reimbursement does not exceed the federal per diem rates for the area of travel. Recognizing that there are many different federal per diem rates across the country, the revenue procedure provides for a simplified alternative. Employers may use a per diem rate of $122 per day for 28 high cost areas and $85 per day for all other areas.

Revenue Procedure 89-66 relating to mileage allowances and Revenue Procedure 89-67 relating to per diem and meal allowances will appear in Internal Revenue Bulletin 1989-52, dated Dec. 26, 1989.

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