On Wednesday, the IRS released Revenue Procedure 2009-47, which is its annual update to the substantiation rules for business travel expenses when an employer provides a per diem reimbursement allowance. It sets the per diem rate for travel to high-cost localities and for travel to other localities in the continental United States.
The revenue procedure covers situations in which an employee incurs lodging, meal and incidental expenses or just meal and incidental expenses (M&IE) while traveling away from home on business. It does not cover situations in which an employer provides an allowance to pay for the employee’s lodging expenses but not meal and incidental expenses.
The revenue procedure sets the general federal M&IE rate at $59 for the continental U.S. (CONUS) and at $65 for locations outside the continental U.S. (OCONUS).
For taxpayers using the high-low substantiation method, which includes lodging, the per diem rate is $258 for travel to any “high‑cost locality” (as defined in the revenue procedure) or $163 for travel to any other locality within CONUS.
The new high-cost localities (at least for certain dates) this year are Monterey, Calif.; Denver/Aurora, Colo.; Bar Harbor, Maine; Conway, N.H.; Glens Falls, N.Y.; Lake Placid, N.Y.; and Hershey, Pa. The following localities have been removed from the list: Crested Butte/Gunnison, Colo.; Silverthorne/Breckenridge, Colo.; and Palm Beach, Fla. The complete list of high-cost localities is in section 5.03 of Revenue Procedure 2009-47.
Taxpayers do not have to use the methods described in the revenue procedure if they maintain adequate records to substantiate actual expenses. The revenue procedure is effective for per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only that are paid to an employee on or after Oct. 1, 2009, for travel away from home on or after Oct. 1, 2009. However, a payor who used the substantiation method of section 4.01 of Revenue Procedure 2008-59 (which is superseded by Revenue Procedure 2009-47) for an employee during the first nine months of 2009 may not use the high-low substantiation method in Revenue Procedure 2009-47 for that employee until Jan. 1, 2010. Also, a payor who used the high-low substantiation method of Revenue Procedure 2008-59 for an employee during the first nine months of calendar year 2009 must continue to use the high-low substantiation method for the remainder of calendar year 2009 for that employee.