Rev. Rul. 82-33

Rev. Rul. 82-33

ISSUE

What is the federal income tax treatment of a state legislator's travel expenses if the legislator has elected under section 162(i) of the Internal Revenue Code to have his or her place of residence within the legislative district that he or she represents considered as the tax home?

FACTS

B, a state legislator, has made an election under section 162(i) of the Code to have B's place of residence in the district represented considered as B's tax home. B's residence is located more than 50 miles from the state capitol, where the legislative sessions are held. When the legislature is not in session, B incurs other travel expenses in the pursuit of B's trade or business as a legislator for travel in the district B represents, in the state capitol, and in other cities. B does not receive a per diem allowance for attending legislative sessions.

LAW

Section 162(a) of the Code allows a taxpayer to deduct all the ordinary and necessary expenses paid or incurred during the tax year in carrying on any trade or business, including traveling expenses. Traveling expenses include amounts spent for meals and lodging (other than amounts that are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business.

The Economic Recovery Tax Act of 1981, section 127, 1981-2 C.B. 256, 274, added section 162(i), (originally enacted as section 162(h); subsequently redesignated by section 2146 of Pub. L. 97-35, 1981-2 C.B. 528, 530) relating to state legislators' travel expenses away from home, to the Code, effective for tax years beginning after December 31, 1975. Section 162(i) provides that, for purposes of section 162(a), if an individual who is a state legislator at any time during the tax year makes an election under section 162(i) for the tax year, the individual's place of residence within the legislative district that he or she represented will be considered his or her home. Section 162(i) further provides that the individual will be considered to have spent for living expenses (in connection with his or her trade or business as a legislator) an amount computed in the following way. The number of legislative days of the individual during the tax year is multiplied by the larger of (1) the amount generally allowable with respect to such days to employees of the state of which the individual is a legislator for per diem while away from home, but only up to 110 percent of the amount described in clause (2) below with respect to such days, or (2) the amount generally allowable with respect to such days to employees of the executive branch of the Federal Government for per diem while away from home, but still in the United States.

Section 162(i)(1)(C) of the Code states that the individual will be deemed to be away from home in pursuit of a trade or business on each legislative day.

Section 162(i)(2) of the Code defines the term "legislative day" as any day during the tax year that the legislature is in session (including any day in which the legislature is not in session for a period of 4 consecutive days or less), or any day the legislature is not in session but the physical presence of the individual is formally recorded at a meeting of a committee of the legislature.

Section 162(i)(4) of the Code provides that section 162(i) will not apply for tax years beginning after December 31, 1980, to any legislator whose place of residence within the legislative district he or she represents is 50 or fewer miles from the capitol building of the state.

HOLDINGS

1. Because B elected as the tax home B's place of residence within the legislative district, it will be treated as B's tax home for all legislative travel including travel between sessions.

2. The term "living expenses," as used in section 162(i) of the Code, refers to traveling expenses otherwise deductible under section 162(a), including expenses of meals and lodging, laundry expenses, and other expenses incidental to travel while away from home in pursuit of the individual's legislative trade or business. The term does not include travel fares, costs of telegrams or telephone calls, or local transportation expenses for business purposes.

3. "Legislative days" do not include the days of any recess period of more than 4 consecutive days. The 4-day limit is not extended by Saturdays, Sundays, or holidays.

4. The amount generally allowable to employees of the executive branch of the Federal Government for per diem while away from home but still in the United States, as referred to in section 162(i) of the Code, is the maximum amount allowable to employees of the executive branch of the Federal Government for per diem in the particular city in which the state capitol is located.

5. Any amount deductible by reason of section 162(i) of the Code is in addition to any other deduction allowed under section 162(a) of the Code for the other travel expenses incurred by B while away from home. This includes business expenses incurred when the state legislature is not in session or for travel fares, costs of telegrams or telephone calls, or local transportation expenses for business purposes.

EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 79-16, 1979-1 C.B. 91, relating to the tax treatment under section 604 of the Tax Reform Act of 1976, 1976-3 C.B. (Vol. 1) 1, 51, of travel expenses incurred by state legislators, is superseded for tax years beginning after December 31, 1975.