[Federal Register Volume 68, Number 126 (Tuesday, July 1, 2003)]
[Rules and Regulations]
[Page 39011]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16599]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9064]
RIN 1545-BB20


Substantiation of Incidental Expenses

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final and temporary regulations.

-----------------------------------------------------------------------

SUMMARY: This document contains amendments to regulations relating to 
the requirement under section 274 of the Internal Revenue Code to 
substantiate business expenses for traveling while away from home. The 
regulations affect taxpayers who deduct expenditures for incidental 
expenses while traveling away from home. This document also contains 
amendments to regulations under section 62 to conform cross-references.

DATES: Effective Date: These regulations are effective July 2, 2003.
    Applicability Date: For dates of applicability, see Sec.  1.274-
5(m).

FOR FURTHER INFORMATION CONTACT: Sameera Hasan (202) 622-4930 (not a 
toll free call).

SUPPLEMENTARY INFORMATION:

Background

    This document contains amendments to 26 CFR part 1. On November 12, 
2002, the IRS and Treasury published in the Federal Register (67 FR 
68512) a temporary regulation (TD 9020) relating to the substantiation 
under section 274(d) of the Internal Revenue Code of incidental 
expenses incurred while traveling away from home. On the same day the 
IRS and Treasury published (67 FR 68539) a notice of proposed 
rulemaking (REG-141832-02) cross-referencing the temporary regulations.
    Written comments from two commentators were received. A commentator 
initially requested a public hearing but subsequently withdrew the 
request. No public hearing was held. The comments generally related to 
implementation of these regulations in future guidance and will be 
further considered in connection with that guidance. After 
consideration of the comments, the proposed regulations are adopted by 
this Treasury decision.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866. 
Therefore, a regulatory assessment is not required. It is hereby 
certified that these regulations will not have a significant economic 
impact on a substantial number of small entities. This certification is 
based upon the fact that these regulations do not require a collection 
of information and do not impose any new or different requirements on 
small entities. Therefore, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. 
Pursuant to section 7805(f) of the Internal Revenue Code, the proposed 
regulations preceding these regulations were submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on their impact.

Drafting Information

    The principal author of these regulations is Sameera Hasan, Office 
of Associate Chief Counsel (Income Tax & Accounting). However, other 
personnel from the IRS and Treasury Department participated in the 
development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

0
Par. 2. Section 1.62-2 is amended by removing the last three sentences 
of paragraph (e)(2) and adding two sentences in their place to read as 
follows:


Sec.  1.62-2  Reimbursements and other expense allowance arrangements.

* * * * *
    (e) * * *
    (2) * * * See Sec.  1.274-5(g) and (j), which grant the 
Commissioner the authority to establish optional methods of 
substantiating certain expenses. Substantiation of the amount of a 
business expense in accordance with rules prescribed pursuant to the 
authority granted by Sec.  1.274-5(g) or (j) will be treated as 
substantiation of the amount of such expense for purposes of this 
section.
* * * * *

0
Par. 3. Section 1.274-5 is amended by:
0
1. Revising paragraph (j)(3).
0
2. Adding a new sentence at the end of paragraph (m).
0
The revision and addition read as follows:


Sec.  1.274-5  Substantiation requirements.

* * * * *
    (j) * * *
    (3) Incidental expenses while traveling away from home. The 
Commissioner may establish a method under which a taxpayer may use a 
specified amount or amounts for incidental expenses paid or incurred 
while traveling away from home in lieu of substantiating the actual 
cost of incidental expenses. The taxpayer will not be relieved of the 
requirement to substantiate the actual cost of other travel expenses as 
well as the time, place, and business purpose of the travel.
* * * * *
    (m) * * * However, paragraph (j)(3) of this section applies to 
expenses paid or incurred after September 30, 2002.
* * * * *
0
Par. 4. Section 1.274-5T is amended by revising paragraph (j) to read 
as follows:


Sec.  1.274-5T  Substantiation requirements.

* * * * *
    (j) [Reserved]. For further guidance, see Sec.  1.274-5(j).

Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.
    Approved: June 20, 2003.
Pamela F. Olson,
Assistant Secretary of the Treasury.
[FR Doc. 03-16599 Filed 6-30-03; 8:45 am]
BILLING CODE 4830-01-P