[Federal Register Volume 73, Number 62 (Monday, March 31, 2008)]
[Proposed Rules]
[Pages 16797-16800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-6500]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 301

[REG-119518-07]
RIN 1545-BG92


Travel Expenses of State Legislators

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations relating to travel 
expenses of state legislators while away from home. The regulations 
affect eligible state legislators who make the election under section 
162(h) of the Internal Revenue Code (Code). The regulations are 
necessary to clarify the amount of travel expenses that may be deducted 
by a state legislator who makes the election under section 162(h).

DATES: Written (paper or electronic) comments or a request for a public 
hearing must be received by June 30, 2008.

ADDRESSES: Send submissions to CC:PA:LPD:PR (REG-119518-07), Room 5203, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. Submissions may be hand-delivered Monday through Friday 
between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-119518-07), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, 
NW., Washington, DC. Alternatively, taxpayers may submit comments 
electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-119518-07).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
R. Matthew Kelley, (202) 622-7900; concerning submission of comments or 
a request for a hearing, Kelly Banks, (202) 622-7180 (not toll-free 
numbers).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collection of information should be 
sent to the Office of Management and Budget, Attn: Desk Officer for the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, 
Washington, DC 20224. Comments on the collection of information should 
be received by May 30, 2008. Comments are specifically requested 
concerning:
    Whether the proposed collection of information is necessary for the 
proper performance of the functions of the IRS, including whether the 
information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information;
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    The collection of information in these proposed regulations is in 
Sec.  1.162-24(e). This collection of information will help the IRS 
determine if a taxpayer may make an election under section 162(h). The 
collection of information is required to obtain a benefit.
    The estimated burden is 30 minutes.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
return information are

[[Page 16798]]

confidential, as required by section 6103.

Background

    This document contains proposed amendments to 26 CFR part 1 and 26 
CFR part 301, relating to travel expenses of state legislators while 
away from home.
    Section 162(a)(2) provides that a taxpayer generally is allowed a 
deduction for ordinary and necessary expenses paid or incurred during 
the taxable year in carrying on a trade or business, including 
traveling expenses while away from home.
    Section 162(h) provides that an eligible individual who is a state 
legislator at any time during the taxable year may make an election 
under section 162(h) (an electing legislator). Under section 162(h)(4), 
the election is not available to any legislator whose place of 
residence within the legislative district represented by the legislator 
is 50 or fewer miles from the state capitol building.
    As a result of making the election for a taxable year, under 
section 162(h)(1)(A) an electing legislator's place of residence within 
the district represented by the legislator is treated as the 
legislator's home. In addition, under section 162(h)(1)(B) an electing 
legislator is deemed to have expended for living expenses (in 
connection with the trade or business of being a legislator), on each 
legislative day of the electing legislator, the greater of the amount 
generally allowable for the day (i) to employees of the legislator's 
state for per diem while away from home, to the extent the amount does 
not exceed 110 percent of the amount described in (ii); or (ii) to 
employees of the executive branch of the Federal government for per 
diem while traveling away from home in the United States. Finally, 
under section 162(h)(1)(C) an electing legislator is deemed to be away 
from home in the pursuit of a trade or business on each legislative 
day.
    Section 162(h)(2) defines a legislative day for an electing 
legislator as any day on which (A) 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 (B) the legislature is not in 
session but the physical presence of the electing legislator is 
formally recorded at a meeting of a committee of the legislature.
    Section 301.9100-4T(a) of the Procedure and Administration 
Regulations provides that a legislator makes the election under section 
162(h) by attaching a statement to the legislator's income tax return 
(or amended return) for the taxable year for which the election is 
effective. The statement must include the following information: (1) 
The taxpayer's name, address, and taxpayer identification number; (2) a 
statement that the taxpayer is making an election under section 162(h); 
and (3) information establishing that the taxpayer is entitled to make 
the election. A legislator must make the election by the due date for 
filing the return (including extensions). Under Sec.  301.9100-4T(g), a 
legislator may revoke an election only with the consent of the 
Commissioner. Consent is requested by filing an application with the 
service center where the election was filed. The application must 
include the following information: (1) The taxpayer's name, address, 
and taxpayer identification number; (2) a statement that the taxpayer 
is revoking an election under section 162(h) for a specified year; and 
(3) a statement explaining why the taxpayer seeks to revoke the 
election.
    Rev. Rul. 82-33 (1982-1 CB 28) (see Sec.  601.601(d)(2)(ii)(b)) 
holds that (1) an electing legislator's tax home for all legislative 
travel, including travel between sessions, is the legislator's place of 
residence within the legislative district represented by the 
legislator; (2) the term ``living expenses'' for purposes of section 
162(h) includes expenses for lodging, meals, laundry, and other 
incidental expenses but does not include expenses for travel fares, 
local transportation, or telephone calls; (3) a legislative day 
includes the days of any period for which the legislature is not in 
session for 4 consecutive days or less, without extension for 
Saturdays, Sundays, or holidays; (4) for purposes of section 
162(h)(1)(B)(ii), the amount generally allowable to employees of the 
executive branch of the Federal government for per diem while traveling 
away from home in the United States is the per diem amount for the 
particular city in which the state capitol is located; and (5) any 
amount deductible by an electing legislator for deemed living expenses 
under section 162(h) is in addition to any other amount deductible 
under section 162(a) for other expenses incurred while traveling away 
from home.
    An electing legislator's deduction under section 162(h) for deemed 
living expenses is reduced by the amount of any reimbursement received 
for the expenses that is not included in the legislator's gross income.
    Section 1.62-1T(e)(4) provides rules regarding the allocation 
between meals and lodging of unreimbursed expenses of state 
legislators. Section 274(n) provides rules regarding the limitations on 
the amount allowable as a deduction for expenses for or allocable to 
meals.

Explanation of Provisions

    The proposed regulations incorporate the holdings of Rev. Rul. 82-
33, which will be obsoleted when the proposed regulations are issued as 
final regulations. The proposed regulations further provide that a 
taxpayer becomes a state legislator on the day the taxpayer is sworn 
into office and ceases to be a state legislator on the day following 
the day on which the taxpayer's term in office ends. The proposed 
regulations provide that the legislature of which an electing 
legislator is a member is in session when the members of the 
legislature are expected to attend and participate as an assembled body 
of the legislature, whether or not the electing legislator actually 
attends. The proposed regulations also provide that a legislator's 
legislative days include a day on which the legislator's attendance at 
a meeting of a committee of the legislature is formally recorded. A 
committee of the legislature is defined as a group that consists solely 
of members of the legislature charged with conducting business of the 
legislature. The proposed regulations further provide that a 
legislator's legislative days include any day that is not otherwise a 
legislative day if the legislator's attendance at a session of the 
legislature on that day is formally recorded. An example in the 
proposed regulations illustrates that if the members of the legislature 
are not expected to attend and participate as an assembled body on a 
day, then the legislature is not in session on that day; however, that 
day is a legislative day for those members whose actual attendance on 
that day is formally recorded.
    The proposed regulations incorporate the current rules in Sec.  
301.9100-4T for making and revoking the election under section 162(h). 
The regulations propose to amend Sec.  301.9100-4T by removing these 
rules from that section.

Effective/Applicability Date

    The regulations are proposed to apply to expenses deemed expended 
under section 162(h) after the date the regulations are published as 
final regulations in the Federal Register.

Effect on Other Documents

    When the proposed regulations are published as final regulations, 
Rev. Rul. 82-33 will be obsoleted.

Special Analyses

    This notice of proposed rulemaking is not a significant regulatory 
action as defined in Executive Order 12866.

[[Page 16799]]

Therefore, a regulatory assessment is not required. It also has been 
determined that section 553(b) of the Administrative Procedure Act (5 
U.S.C. chapter 5) does not apply to these regulations and, because the 
regulations do not impose a collection of information on small 
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not 
apply. Pursuant to section 7805(f) of the Code, this notice of proposed 
rulemaking has been submitted to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
with eight (8) copies) or electronic comments that are submitted timely 
to the IRS. Comments are requested on the clarity of the proposed 
regulations and how they can be made easier to understand. All comments 
will be available for public inspection and copying. A public hearing 
may be scheduled if requested in writing by any person who timely 
submits written (including electronic) comments. If a public hearing is 
scheduled, notice of the date, time, and place for the public hearing 
will be published in the Federal Register.

Drafting Information

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

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 301 are proposed to be amended as 
follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
an entry to read in part as follows:

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


Sec.  1.162-24  also issued under 26 U.S.C. 162(h). * * *

    Par. 2. Section 1.162-24 is added to read as follows:


Sec.  1.162-24  Travel expenses of state legislators.

    (a) In general. For purposes of section 162(a), in the case of any 
taxpayer who is a state legislator at any time during the taxable year 
and who makes an election under section 162(h) for the taxable year--
    (1) The taxpayer's place of residence within the legislative 
district represented by the taxpayer is the taxpayer's home for that 
taxable year;
    (2) The taxpayer is deemed to have expended for living expenses (in 
connection with the taxpayer's trade or business as a legislator) an 
amount equal to the sum of the amounts determined by multiplying each 
legislative day of the taxpayer during the taxable year by the greater 
of--
    (i) The amount generally allowable with respect to that day to 
employees of the state of which the taxpayer is a legislator for per 
diem while away from home, to the extent the amount does not exceed 110 
percent of the amount described in paragraph (a)(2)(ii) of this 
section; or
    (ii) The Federal per diem with respect to that day for the 
taxpayer's state capital; and
    (3) The taxpayer is deemed to be away from home in the pursuit of a 
trade or business on each legislative day.
    (b) Legislative day. For purposes of section 162(h)(1) and this 
section, for any taxpayer who makes an election under section 162(h), a 
legislative day is any day on which the taxpayer is a state legislator 
and--
    (1) The legislature is in session;
    (2) The legislature is not in session for a period that is not 
longer than 4 consecutive days, without extension for Saturdays, 
Sundays, or holidays;
    (3) The taxpayer's attendance at a meeting of a committee of the 
legislature is formally recorded; or
    (4) The taxpayer's attendance at any session of the legislature 
that only a limited number of members are expected to attend (such as a 
``pro forma'' session), on any day not described in paragraph (b)(1) or 
(b)(2) of this section, is formally recorded.
    (c) Fifty mile rule. Section 162(h) and this section do not apply 
to any taxpayer who is a state legislator and whose place of residence 
within the legislative district represented by the taxpayer is 50 or 
fewer miles from the capitol building of the state. For purposes of 
this paragraph (c), the distance between the taxpayer's place of 
residence within the legislative district represented by the taxpayer 
and the capitol building of the state is the shortest of the more 
commonly traveled routes between the two points.
    (d) Definitions and special rules. The following definitions apply 
for purposes of section 162(h) and this section.
    (1) State legislator. A taxpayer becomes a state legislator on the 
day the taxpayer is sworn into office and ceases to be a state 
legislator on the day following the day on which the taxpayer's term in 
office ends.
    (2) Living expenses. Living expenses include lodging, meals, and 
incidental expenses. Incidental expenses has the same meaning as in 41 
CFR 300-3.1.
    (3) In session--(i) In general. For purposes of this section, the 
legislature of which a taxpayer is a member is in session on any day 
if, at any time during that day, the members of the legislature are 
expected to attend and participate as an assembled body of the 
legislature.
    (ii) Examples. The following examples illustrate the rules of this 
paragraph (d)(3):

    Example 1. B is a member of the legislature of State X. On Day 
1, the State X legislature is convened and the members of the 
legislature generally are expected to attend and participate. On Day 
1, the State X legislature is in session within the meaning of 
paragraph (d)(3)(i) of this section. B does not attend the session 
of the State X legislature on Day 1. However, Day 1 is a legislative 
day for B for purposes of section 162(h)(2)(A) and paragraph (b)(1) 
of this section.
    Example 2. C, D, and E are members of the legislature of State 
X. On Day 2, the State X legislature is convened for a limited 
session in which not all members of the legislature are expected to 
attend and participate. C and D are the only members who are called 
to, and do, attend the limited session on Day 2, and their 
attendance at the session is formally recorded. E is not called and 
does not attend. Day 2 is not a day described in paragraph (b)(2) of 
this section. On Day 2, the State X legislature is not in session 
within the meaning of paragraph (d)(3)(i) of this section. Day 2 is 
a legislative day as to C and D under section 162(h)(2)(B) and 
paragraph (b)(4) of this section. Day 2 is not a legislative day as 
to C and D under section 162(h)(2)(A) and paragraph (b)(1) of this 
section. Day 2 is not a legislative day as to E under sections 
162(h)(2)(A) and (h)(2)(B) and paragraphs (b)(1) and (b)(4) of this 
section.

    (4) Committee of the legislature. A committee of the legislature is 
any group consisting solely of legislators charged with conducting 
business of the legislature. Committees of the legislature include, but 
are not limited to, committees to which the legislature refers bills 
for consideration, committees that the legislature has authorized to 
conduct inquiries into

[[Page 16800]]

matters of public concern, and committees charged with the internal 
administration of the legislature. For purposes of this section, groups 
that are not considered committees of the legislature include, but are 
not limited to, groups that promote particular issues, raise campaign 
funds, or are caucuses of members of a political party.
    (5) Federal per diem. The Federal per diem for any city and day is 
the maximum amount allowable to employees of the executive branch of 
the Federal government for living expenses while away from home in 
pursuit of a trade or business in that city on that day. See 5 U.S.C. 
5702 and the regulations under that section.
    (e) Election--(1) Time for making election. A taxpayer's election 
under section 162(h) must be made for each taxable year for which the 
election is to be in effect and must be made no later than the due date 
(including extensions) of the taxpayer's Federal income tax return for 
the taxable year.
    (2) Manner of making election. A taxpayer makes an election under 
section 162(h) by attaching a statement to the taxpayer's income tax 
return for the taxable year for which the election is made. The 
statement must include--
    (i) The taxpayer's name, address, and taxpayer identification 
number;
    (ii) A statement that the taxpayer is making an election under 
section 162(h); and
    (iii) Information establishing that the taxpayer is a state 
legislator entitled to make the election, for example, a statement 
identifying the taxpayer's state and legislative district and 
representing that the taxpayer's place of residence in the legislative 
district is not 50 or fewer miles from the state capitol building.
    (3) Revocation of election. An election under section 162(h) may be 
revoked only with the consent of the Commissioner. An application for 
consent to revoke an election must be signed by the taxpayer and filed 
with the submission processing center with which the election was 
filed, and must include--
    (i) The taxpayer's name, address, and taxpayer identification 
number;
    (ii) A statement that the taxpayer is revoking an election under 
section 162(h) for a specified year; and
    (iii) A statement explaining why the taxpayer seeks to revoke the 
election.
    (f) Effect of election on otherwise deductible expenses for travel 
away from home--(1) Legislative days--(i) Living expenses. For any 
legislative day for which an election under section 162(h) and this 
section is in effect, the amount of an electing taxpayer's living 
expenses while away from home is the greater of the amount of the 
living expenses--
    (A) Specified in paragraph (a)(2) of this section in connection 
with the trade or business of being a legislator; or
    (B) Otherwise allowable under section 162(a)(2) in the pursuit of 
any other trade or business of the taxpayer.
    (ii) Other expenses. For any legislative day for which an election 
under section 162(h) and this section is in effect, the amount of an 
electing taxpayer's expenses (other than living expenses) for travel 
away from home is the sum of the substantiated expenses, such as 
expenses for travel fares, telephone calls, and local transportation, 
that are otherwise deductible under section 162(a)(2) in the pursuit of 
any trade or business of the taxpayer.
    (2) Non-legislative days. For any day that is not a legislative 
day, the amount of an electing taxpayer's expenses (including amounts 
for living expenses) for travel away from home is the sum of the 
substantiated expenses that are otherwise deductible under section 
162(a)(2) in the pursuit of any trade or business of the taxpayer.
    (g) Cross references. See Sec.  1.62-1T(e)(4) for rules regarding 
allocation of unreimbursed expenses of state legislators and section 
274(n) for limitations on the amount allowable as a deduction for 
expenses for or allocable to meals.
    (h) Effective/applicability date. This section applies to expenses 
deemed expended under section 162(h) after the date these regulations 
are published as final regulations in the Federal Register.

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 3. The authority citation for part 301 continues to read as 
follows:

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


Sec.  301.9100-4T  [Amended]

    Par. 4. Section 301.9100-4T is amended by removing from the table 
in paragraph (a)(1) section 127(a) and removing paragraph (a)(2)(iv).

Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
 [FR Doc. E8-6500 Filed 3-28-08; 8:45 am]
BILLING CODE 4830-01-P