[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4374 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 4374

To amend the Internal Revenue Code of 1986 to clarify the treatment of 
                     frequent flyer mileage awards.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 16, 2002

   Mr. Meeks of New York (for himself and Mr. Foley) introduced the 
 following bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to clarify the treatment of 
                     frequent flyer mileage awards.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Frequent Flyer Tax-Free Liability 
Act of 2002''.

SEC. 2. FINDINGS.

    Congress finds as follows:
            (1) Individuals should be able to receive and use frequent 
        flyer benefits for business or personal use without incurring 
        tax liability.
            (2) Taxation of frequent flyer benefits would raise a 
        myriad of questions, including questions regarding timing, 
        valuation, and foreign airlines, without obvious answers.
            (3) Taxation of frequent flyer benefits would result in 
        additional paperwork for consumers, airlines, hotels, car 
        rental companies, credit card issuers, and the Internal Revenue 
        Service.
            (4) Clarifying that frequent flyer benefits are not taxable 
        will encourage people to travel and aid the economy of the 
        United States.
            (5) The traveling public pays too much in taxes for travel-
        related services.

SEC. 3. CLARIFICATION OF TREATMENT OF FREQUENT FLYER MILEAGE AND 
              AWARDS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by redesignating section 140 
as section 141 and by inserting after section 139 the following new 
section:

``SEC. 140. FREQUENT FLYER MILEAGE AND AWARDS.

    ``(a) In General.--If an individual receives a frequent flyer 
benefit as a result of the purchase of property or services--
            ``(1) no amount shall be includible in such individual's 
        gross income by reason of receiving such benefit,
            ``(2) no deduction otherwise allowable for the purchase of 
        such property or services shall be reduced by reason of such 
        benefit, and
            ``(3) no deduction shall be allowed for the portion of any 
        travel-related service purchased using such a benefit.
    ``(b) Frequent Flyer Benefit.--For purposes of this section, the 
term `frequent flyer benefit' means any right to receive (or the 
receipt of) travel-related services, including air transportation 
services, lodging, automobile rental services, and passenger cruise 
ship accommodations, for an individual for free or at a reduced cost by 
reason of prior purchases of property or services. Such term shall 
include such a right only if the value of such right is de minimis 
relative to the cost of property or services purchased in order to 
receive such right.''.
    (b) Clarification of Treatment Under Reimbursement Arrangements.--
Subsection (c) of section 62 of such Code is amended by adding at the 
end the following new flush sentence:
``An arrangement shall not be treated as described in paragraph (2) 
merely because it permits the employee to retain a frequent flyer 
benefit (as defined in section 140(b)).''.
    (c) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by striking the last 
item and inserting the following new items:

                              ``Sec. 140. Frequent flyer mileage and 
                                        awards.
                              ``Sec. 141. Cross references to other 
                                        Acts.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.
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