Prior to this year, business travel was always defined by the IRS under code section 162. In addition, under Reg 1.262-1(b)(5) the IRS defined business travel as travel away from home, and if you were not away from home, these expenses were not allowed.
However, the IRS has changed its stance in new Proposed Reg 1.162-31(b), which would allow for business travel expenses while you are not away from home if all the conditions are met:
1. The lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function.
2. The lodging is for a period that does not exceed five calendar days and does not recur more frequently than once per calendar quarter.
3. If the individual is an employee, his employer requires him to remain at the activity or function overnight.
4. The lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation or benefit.
It is important to note that the IRS has also included specific examples whereby travel expenses would be allowable under the new Proposed Regulations. Some of these examples show important determinations by the IRS, with just as important implications. One example is particularly interesting:
In the example the employer has a large project with a tight deadline. This employer has requested that the employee stay at a nearby hotel for the night to work longer on the project, and also to alleviate the 2 hour commute this employee would have had to incur. This example is interesting because the IRS allows the employer to take the expense, but the employee also has to include the amount of the hotel stay as compensation. The IRS contends that the employee has received a benefit by avoiding the long commute.
However, the IRS has changed its stance in new Proposed Reg 1.162-31(b), which would allow for business travel expenses while you are not away from home if all the conditions are met:
1. The lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function.
2. The lodging is for a period that does not exceed five calendar days and does not recur more frequently than once per calendar quarter.
3. If the individual is an employee, his employer requires him to remain at the activity or function overnight.
4. The lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation or benefit.
It is important to note that the IRS has also included specific examples whereby travel expenses would be allowable under the new Proposed Regulations. Some of these examples show important determinations by the IRS, with just as important implications. One example is particularly interesting:
In the example the employer has a large project with a tight deadline. This employer has requested that the employee stay at a nearby hotel for the night to work longer on the project, and also to alleviate the 2 hour commute this employee would have had to incur. This example is interesting because the IRS allows the employer to take the expense, but the employee also has to include the amount of the hotel stay as compensation. The IRS contends that the employee has received a benefit by avoiding the long commute.
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