The Treasury Department has released proposed regulations relating to the changes to IRC §274 made as part of the Tax Cuts and Jobs Act.[1]

The Tax Cuts and Jobs Act (TCJA) repealed the rule that allowed a deduction for entertainment expenses if the taxpayer established that:

• The entertainment was directly related to the active conduct of the taxpayer’s trade or business (directly related exception), or

• In the case of an item directly preceding or following a substantial and bona fide business discussion (including business meetings at a convention or otherwise), the item was associated with the active conduct of the taxpayer’s trade or business (business discussion exception).

Thus, following the TCJA, no deductions are allowed for entertainment expenses unless they meet one of the exceptions found at IRC §274(e).

On the last day of 2019, the IRS released the updated auto mileage rates for 2020 in Notice 2020-05.[1]

The standard mileage rates for 2020 are:

• Business use: 57.5 cents per mile;

• Charitable mileage rate: 14 cents per mile; and

• Medical care and limited cases where moving expenses are still deductible: 17 cents per mile.

With Revenue Procedure 2019-48[1] the IRS has updated the rules regarding the use of per diem rates to substantiate, under IRC §274(d) and Reg. §1.274-5, the amount of ordinary and necessary business expenses paid or incurred while traveling away from home.  The update incorporates the revisions made as part of the Tax Cuts and Jobs Act (TCJA), including the temporary suspension of the deduction for miscellaneous itemized deductions under IRC §67(g).

The IRS has released the 2019 automobile mileage numbers in Notice 2019-02.

The standard rate for transportation or travel expense is 58 cents per mile for business use in 2019.  The standard rate for 14 cents per mile for use of an automobile for providing gratuitous services to a charitable organization and 20 cents per mile for medical expenses.  The 20 cent rate would also apply to moving expenses under §217, though for most taxpayers such a deduction is not available for 2019.

The IRS in Notice 2018-77 provided updated special per diem effective for the period from October 1, 2018 to September 30, 2019.  These special rates include the rate for the special transportation industry meals and incidental expenses (M&IE) rate, the rate for the incidentals-only deduction and the rates and list of high-cost localities for purposes of the high-low substantiation method.

The special transportation industry rates for 2018-2019 are $66 for any locality of travel in the continental United States and $71 for any locality of travel outside the continental United States.  These rates are the same as applied in the prior year.  The general rules for qualifying to use these rates and how to use them are found in Section 4.04 of Revenue Procedure 2011-47.

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In Revenue Ruling 2018-10 the IRS has announced the rates and terminal charges for noncommercial flights for the first half of 2018.  These numbers may be used under IRC §1.61-21(g)(5) to determine the value of such flights on employer-provided aircraft for compensation purposes.

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The Tax Court refused to go along with the IRS’s view of strictly interpreting the provisions under IRC §274(n)(2)(B), allowing a full deduction for meals provided by the Boston Bruins NHL hockey team to players and employees traveling with the team at away games in the case of Jacobs v. Commissioner, 148 TC No. 24.

In order to get a 100% deduction for meals provided to employees, rather than only 50%, IRC §274(n)(2)(B) provides a full deduction is allowed “in the case of an expense for food or beverages, such expense is excludable from the gross income of the recipient under section 132 by reason of subsection (e) thereof (relating to de minimis fringes)…”

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The “anti-Cohan” rule found in IRC §274(d) cost the taxpayer a deduction for expenses related to use of an Aston Martin in the case of Roy v. Commissioner, TC Summary Opinion 2016-77.

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The IRS in Notice 2016-58 provided updated special per diem effective for the period from October 1, 2016 to September 30, 2017.  These special rates include the rate for the special transportation industry meals and incidental expenses (M&IE) rate, the rate for the incidentals-only deduction and the rates and list of high-cost localities for purposes of the high-low substantiation method.

The special transportation industry rates for 2016-2017 are $63 for any locality of travel in the continental United States and $68 for any locality of travel outside the continental United States.  The general rules for qualifying to use these rates and how to use them are found in Section 4.04 of Revenue Procedure 2011-47.

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The IRS in Notice 2015-63 provided updated special per diem effective for the period from October 1, 2015 to September 30, 2016.  These special rates include the rate for the special transportation industry meals and incidental expenses (M&IE) rate, the rate for the incidentals-only deduction and the rates and list of high-cost localities for purposes of the high-low substantiation method.

IRC §274(d) provides additional documentation requirements for a taxpayer to obtain a deduction for certain items, including travel related to listed property—which, in the case at hand, was an airplane.  The decision in the case of Peterson v. Commissioner, TC Memo 2015-1 deals with the fact that it’s not enough to have records—those records also have to support the deduction in question.