[Congressional Record Volume 142, Number 38 (Tuesday, March 19, 1996)]
[Extensions of Remarks]
[Page E379]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 INTRODUCTION OF LEGISLATION TO CLARIFY THAT FREQUENT FLIER MILEAGE IS 
                              NOT TAXABLE

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                        HON. BARBARA B. KENNELLY

                             of connecticut

                    in the house of representatives

                        Tuesday, March 19, 1996

  Mrs. KENNELLY. Mr. Speaker, today I am introducing legislation to 
clarify that frequent flier mileage is not taxable. I believe that 
frequent flier miles are not taxable under current law. However, in 
light of the Internal Revenue Service's recent advice in technical 
advice memorandum 9547001 and despite the fact that technical advice 
memorandums only apply to a given taxpayer and set of circumstances, I 
feel a clarification is necessary.
  The technical advice memorandum would require employers that permit 
employees to use frequent flier miles for personal trips to report as 
income on workers' W-2 forms the full cost of plane tickets that led to 
the accumulation of the frequent flier miles. This simply makes no 
sense.
  This is one of those areas where taxation would raise a myriad of 
questions for which there is no single correct answer such as 
appropriate timing--would miles be taxed when earned or when used; 
valuation--is mile earned from a credit card equal to a mile earned by 
flying a particular airline--what is the correct value of a ticket or a 
free upgrade in light of the fact that any given flight has a myriad of 
service classes; segregation--do employees have to try and keep track 
of which miles were earned for personal travel, which miles were earned 
for business travel, and which miles are earned from using a credit 
card, or using a particular long-distance carrier. Taxation of frequent 
flier miles would only result in mindless complication and paperwork of 
nightmarish proportions for millions of Americans, the airlines, and 
the Internal Revenue Service. And the Service should realize this.
  At a time when over 15 million Americans are enrolled in frequent 
flier programs and suspicion that the Internal Revenue Code is not fair 
and needless complexity is at an all time high, it would be sheer folly 
for the Service to move in this area. They have opened, closed, and 
reopened several projects to address the tax treatment of frequent 
flier miles over the years, all to no avail.
  I believe that frequent flier miles are not taxable under current law 
and should remain that way. My bill would simply explicitly say that 
frequent flier miles are not taxable. I urge my colleagues' support.

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