Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 67-29

1967-1 C.B. 42

Section 163 -- Interest Deduction

Sec. 162

Sec. 274

Full Text

Rev. Rul. 67-29

An employer utilizes the following practice to reimburse his employees for ordinary and necessary local transportation expenses incurred while using their privately owned automobiles for business purposes. Nonmanagement employees are reimbursed at the rate of 15 cents per mile for the first 100 miles driven each week and 6 cents per mile for all mileage in excess of 100 miles. In areas subject to extremely high liability and collision insurance rates (such as major metropolitan areas), resulting in an increase in the fixed costs attributable to each automobile, nonmanagement employees are reimbursed at the rate of 15 cents per mile for the first 125 miles driven each week and 6 cents per mile for all mileage in excess of 125 miles. Management employees are reimbursed at the rate of 9 cents per mile irrespective of the number of miles driven.

Although nonmanagement employees drive substantially more business miles than management employees, experience has shown that the yearly reimbursement rate for all employees averages approximately 9.6 cents per mile. The employer requires all employees to submit vouchers showing time, place, and business purpose of the local transportation, as well as business miles traveled. The employer reviews these vouchers and adjusts reimbursement rates when it is determined that transportation costs have increased or decreased.

Revenue Ruling 63-13, C.B. 1963-1, 69, to the extent here relevant, provides rules under which mileage allowance practices used by employers to pay expenses of employees for local transportation may be regarded as satisfying the requirements of an accounting to the employer, with respect to the amount of such expenses for purposes of section 1.162-17(b) of the Income Tax Regulations. Specifically, the Revenue Ruling holds that where a fixed mileage allowance not exceeding 15 cents per mile is used by an employer in payment of an employee's ordinary and necessary transportation expenses not involving travel away from home, such an arrangement shall be considered to be an accounting to the employer within the meaning of section 1.162-17(b) of the regulations.

Even though the employer in this case uses more than one measure of reimbursement for local transportation expenses, the allowance practice is considered to be a fixed mileage allowance not exceeding 15 cents per mile within the meaning of Revenue Ruling 63-13. Held , the employees are deemed to have made an adequate accounting to their employer, with respect to such local transportation expenses, for purposes of section 1.162-17(b) of the regulations. Where such an allowance practice is used by an employer in payment of his employees' ordinary and necessary expenses of transportation while traveling away from home and the time, place, and business purpose elements of the travel are substantiated in accordance with paragraphs (b)(2) and (c) (other than subdivision (iii)(a) of subparagraph (2) thereof) of section 1.274-5 of the regulations, the arrangement will also be considered to satisfy the rules of Revenue Ruling 63-13 and the employees shall be deemed to have substantiated and adequately accounted to the employer, with respect to such travel amounts, for purposes of section 1.274-5 of the regulations.