[Federal Register Volume 75, Number 67 (Thursday, April 8, 2010)]
[Rules and Regulations]
[Pages 17854-17857]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7932]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 301, and 602

[TD 9481]
RIN 1545-BG92


Travel Expenses of State Legislators

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final 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 clarify the 
amount of travel expenses that a state legislator may deduct under 
section 162(h).

DATES: Effective Date: These regulations are effective April 8, 2010.
    Applicability Date: For date of applicability, see Sec.  1.162-
24(h).

FOR FURTHER INFORMATION CONTACT: R. Matthew Kelley, (202) 622-7900 (not 
a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collection of information contained in these final regulations 
has been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)) under OMB Control Number 1545-2115.
    The collection of information in these final regulations is in 
Sec.  1.162-24(e). The information will help the IRS determine if a 
taxpayer may make or revoke an election under section 162(h). The 
collection of information is required to obtain a benefit. An agency 
may not conduct or sponsor, and a person is not required to respond to, 
a collection of information unless the collection of information 
displays a valid control number assigned by the Office of Management 
and Budget.
    The information will be reported on a statement attached to 
individual tax returns. The time needed to complete and file this 
statement will vary

[[Page 17855]]

depending on individual circumstances. The estimated burden for 
individual taxpayers filing this statement is 30 minutes.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, 
SE:W:CAR:MP:T:T:SP, Washington, DC 20224, and 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.
    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 confidential, as required by 26 U.S.C. 6103.

Background

    This document contains final amendments to the Income Tax 
Regulations, 26 CFR part 1, 26 CFR part 301, and 26 CFR part 602, 
relating to travel expenses of state legislators while away from home.
    On March 31, 2008, a notice of proposed rulemaking (REG-119518-07) 
was published in the Federal Register (73 FR 16797). Written comments 
responding to the notice of proposed rulemaking were received. No 
public hearing was requested or held. After consideration of all the 
comments, the proposed regulations are adopted as amended by this 
Treasury decision. The comments and revisions are discussed in the 
preamble.

Explanation of Provisions and Summary of Comments

    Under section 162(a), a state legislator may be entitled to deduct 
expenses paid or incurred in conducting legislative business (for 
example, living, transportation, and miscellaneous expenses) while 
traveling away from home. In addition, section 162(h) allows a state 
legislator to deduct deemed living expenses, but not other deemed 
business travel expenses, on specified legislative days. These 
regulations provide guidance on the special rules for deducting a state 
legislator's deemed living expenses.
    Section 162(h) and the proposed regulations provide that a taxpayer 
who is a state legislator at any time during the taxable year may make 
an election under section 162(h) to treat the taxpayer's place of 
residence within the taxpayer's legislative district as the taxpayer's 
tax home. In addition, as a result of the election the taxpayer is 
deemed to be away from home in the pursuit of a trade or business on 
each legislative day and is deemed to have expended an amount for 
living expenses on that day. Under the proposed regulations, a 
legislative day for a taxpayer includes each day (1) The legislature is 
actually in session, (2) the legislature is not in session for a period 
not longer than 4 consecutive days, (3) the taxpayer's attendance is 
formally recorded at a meeting of a committee of the legislature, or 
(4) the taxpayer's attendance is formally recorded at a session of the 
legislature that only a limited number of members are expected to 
attend, such as a pro forma session.

1. Limitation on Availability of Deduction for Travel Expenses

    Some commentators expressed concerns that the proposed regulations 
might impose new limits on state legislators' deductions for business 
travel expenses and suggested that the proposed regulations should not 
be finalized.
    The final regulations do not adopt this comment because the 
regulations do not impose new limits. The regulations merely clarify 
the existing section 162(h) special rules for deducting state 
legislators' deemed living expenses for each legislative day. The 
regulations do not affect or limit the deduction for actual travel 
expenses under section 162(a). A taxpayer may continue to deduct actual 
substantiated travel expenses, whether or not the taxpayer qualifies 
under the special rule for deducting deemed expenses under section 
162(h).

2. Definitions of In Session and Legislative Day

    Some commentators objected to Federal regulations defining when a 
legislature is in session and what constitutes a legislative day for 
purposes of section 162(h). The commentators expressed concern that the 
proposed regulations would preempt state law governing the conduct of 
legislative affairs. The commentators recommended that the regulations 
not be issued.
    The final regulations do not adopt this recommendation. These 
regulations define in session and legislative day solely for the 
purpose of interpreting the special rules of section 162(h), a matter 
of Federal law. See Morgan v. Commissioner, 309 U.S. 78, 81 (1940) 
(``If it is found in a given case that an interest or right created by 
local law was the object intended to be taxed, the federal law must 
prevail no matter what name is given to the interest or right by state 
law.''). These regulations do not preempt or supersede state laws 
governing the conduct or operation of state legislatures. The 
regulations merely address what amounts (deemed living expenses) state 
legislators may deduct under section 162(h).

3. Definition of a State Legislator

    The proposed regulations provide that a taxpayer is a state 
legislator for purposes of the regulations beginning on the day the 
taxpayer is sworn into office and ending on the day following the day 
on which the taxpayer's term in office ends.
    Commentators noted that some state laws treat a legislator-elect as 
a legislator before the legislator-elect is sworn into office, for 
example, on the date elected, the date the election results are 
certified, or on January 1 following the election. A commentator stated 
that legislators-elect often move to the state capital immediately upon 
election to conduct legislative business, for example, to participate 
in the formation of committees and assignments. Commentators suggested 
that the definition of a state legislator in the final regulations be 
modified to permit legislators-elect to deduct legislative business 
expenses under these circumstances.
    The final regulations do not adopt this suggestion. Although a 
legislator-elect who is present in the state capital on business prior 
to being sworn into office is not eligible to deduct deemed living 
expenses under section 162(h), the legislator-elect may be traveling 
away from home and may be entitled to deduct actual business travel 
expenses under the general rules of section 162(a).

4. Definition of a Committee of the Legislature

    The proposed regulations provide that a committee of the 
legislature is a group consisting solely of legislators charged with 
conducting business of the legislature.
    Commentators noted that it is common practice in a number of states 
for legislative committees to have non-legislative members. 
Commentators suggested that the final regulations modify the definition 
of a committee of the legislature to include groups tasked with 
conducting public policy or other legislative business that have 
legislator and non-legislator members.
    In response to these comments, the final regulations define a 
committee of the legislature as a group that includes one or more 
legislators and is charged with conducting business of the legislature.

[[Page 17856]]

5. Effective/Applicability Date

    A commentator expressed concern that an effective date for the 
final regulations that falls in the middle of a taxable year would 
create confusion about expenses paid or incurred in the part of the 
year before the effective date. To eliminate confusion, the final 
regulations apply to expenses paid or incurred, or deemed expended 
under section 162(h), in taxable years beginning after April 8, 2010, 
the date of publication of this regulation.

Effect on Other Documents

    Rev. Rul. 82-33 (1982-1 CB 28) is obsolete as of April 8, 2010.

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 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, the notice of proposed 
rulemaking that preceded these final regulations was submitted to the 
Chief Counsel for Advocacy of the Small Business Administration for 
comment on its impact on small business.

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 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.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

0
Accordingly, 26 CFR parts 1, 301, and 602 are amended as follows:

PART 1--INCOME TAXES

0
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 * * *
    Section 1.162-24 also issued under 26 U.S.C. 162(h). * * *


0
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 determined by multiplying the number of legislative days of the 
taxpayer during the taxable year by the greater of--
    (i) The amount generally allowable with respect to those days 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 those days 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 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. Thus, on Day 2 the legislature is not in 
session within the meaning of paragraph (d)(3)(i) of this section, 
and Day 2 is not a legislative day under paragraph (b)(1) of this 
section. In addition, Day 2 is not a day described in paragraph 
(b)(2) of this section. 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. Therefore, 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 E.

    (4) Committee of the legislature. A committee of the legislature is 
any group that includes one or more legislators and that is 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

[[Page 17857]]

consideration, committees that the legislature has authorized to 
conduct inquiries into 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 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 
paid or incurred, or deemed expended under section 162(h), in taxable 
years beginning after April 8, 2010.

PART 301--PROCEDURE AND ADMINISTRATION

0
Par. 3. The authority citation for part 301 continues to read in part 
as follows:

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


Sec.  301.9100-4T  [Amended]

0
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).

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

0
Par. 5. The authority citation for part 602 continues to read as 
follows:

    Authority:  26 U.S.C. 7805.


0
Par. 6. In Sec.  602.101, paragraph (b) is amended to add in numerical 
order an entry for ``1.162-24'' to read as follows:


Sec.  602.101  OMB Control numbers.

* * * * *
    (b) * * *

------------------------------------------------------------------------
                                                             Current OMB
     CFR part or section where identified and described      control No.
------------------------------------------------------------------------
 
                                * * * * *
1.162-24...................................................    1545-2115
 
                                * * * * *
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Linda M. Kroening,
(Acting) Deputy Commissioner for Services and Enforcement.
    Approved: August 27, 2009.
Michael Mundaca,
(Acting) Assistant Secretary of the Treasury (Tax Policy).

    Editorial Note: This document was received in the Office of the 
Federal Register on April 2, 2010.

[FR Doc. 2010-7932 Filed 4-7-10; 8:45 am]
BILLING CODE 4830-01-P