Use of standard mileage rate, other rules are updated for TCJA

The IRS issued guidance on Thursday updating prior standard mileage rules to reflect provisions of the law known as the Tax Cuts and Jobs Act (TCJA), P.L 115-97 (Rev. Proc. 2019-46). The TCJA suspended miscellaneous itemized deductions under Sec. 67 and deductions for moving expenses under 217(a) (except for members of the armed forces on active duty who move pursuant to a military order and incident to a permanent change of station). The suspension is effective for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026 (“suspension period”).

Specifically, the revenue procedure adds new provisions and modifies existing provisions (Rev. Proc. 2010-51) concerning use of the optional standard mileage rate during the suspension period for business purposes (58 cents per mile for 2019) and moving purposes (20 cents per mile for 2019). The earlier revenue procedure also provides guidance on use of the standard mileage rate for charitable purposes (14 cents per mile).

In the latest revenue procedure, the IRS also provided rules for substantiating the amount of an employee’s ordinary and necessary expenses of local travel or transportation away from home that an employer or agent reimburses using a mileage allowance.

The use of the standard mileage rates is optional, and taxpayers may instead substantiate actual allowable expenses by other adequate records or sufficient evidence.

The revenue procedure clarifies that, during the suspension period, taxpayers may not claim a miscellaneous itemized deduction for parking fees and tolls attributable to employee use of an automobile for business purposes or under a fixed and variable rate allowance.

The revenue procedure also clarifies that, during the suspension period, taxpayers may not use the business standard mileage rate to:

• Claim a miscellaneous itemized deduction under Sec. 67; or
• Claim a miscellaneous itemized deduction under Sec. 67 for unreimbursed travel expenses.

Also, during the suspension period, employees may not claim an itemized deduction for the excess of their actual expenses over those that are substantiated, the revenue procedure clarifies.

However, taxpayers who pay or incur unreimbursed employee travel expenses, including during the suspension period, that are deductible not as miscellaneous itemized deductions but in determining gross income, may use the business standard mileage rate for that purpose, the revenue procedure clarifies. These expenses are described in Sec. 62(a)(2)(A): expenses an employee pays or incurs in performing services as an employee under a reimbursement or other expense allowance arrangement with the employee or other payer. In addition, specified other employees paying or incurring certain business expenses as employees, in some cases including auto expenses, may deduct those expenses “above the line” under Secs. 62(a)(2)(B) through (E): qualified performing artists, fee-basis state or local government officials, eligible educators, and armed forces reservists.

Under Sec. 1016(a)(2), taxpayers must reduce the basis of an automobile used in business by the greater of the amount of depreciation either claimed or allowable for the auto. The revenue procedure provides that, for any year in which a taxpayer uses the business standard mileage rate, a per-mile amount (which the IRS publishes separately each year) is treated as both the depreciation claimed by the taxpayer and the depreciation allowable for that year.

The revenue procedure is effective for deductible transportation expenses paid or incurred, or mileage allowances or reimbursements paid, on or after Nov. 14, 2019.

— Paul Bonner (Paul.Bonner@aicpa-cima.com) is a JofA senior editor.