[Congressional Record Volume 143, Number 12 (Tuesday, February 4, 1997)]
[Extensions of Remarks]
[Page E130]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




[[Page E130]]



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

                                 ______
                                 

                        HON. BARBARA B. KENNELLY

                             of connecticut

                    in the house of representatives

                       Tuesday, February 4, 1997

  Mrs. KENNELLY. Mr. Speaker, I rise today to introduce 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 position in technical advice 
memorandum 9547001 and despite the fact that technical advice memoranda 
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 flyer 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 a 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 needlessly complex 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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