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California State University, Long BeachCalifornia State University, Long Beach

Appendix D

TRAVEL OF LESS THAN 24 HOURS - MEALS & INCIDENTALS EXPENSE REIMBURSEMENTS

The IRS Taxable Fringe Benefit Guide (“IRS Guide”) states that in order for the reimbursement of meals and incidental expenses (M&IE) to be excludable from a traveler’s income, the individual must be “away from home” in the pursuit of business on a temporary basis.  Merely working overtime or at a great distance from an employee’s residence does not create excludable reimbursements for travel expenses if the employee returns home without spending the night or stopping for substantial “sleep or rest.”

Section V.C., Travel of Less Than 24 Hours, does not allow for the reimbursement of meal expenses for travel of less than 24 hours unless the traveler is away from his/her home overnight as supported by a lodging receipt or other evidence explaining why the traveler was unable to obtain a receipt.

The following examples from the IRS Guide illustrate the application of the “overnight rule”:

Example 1: A consulting engineer works with clients in a three-state area by making one-day trips to each client.  She frequently leaves home at 6:30 a.m. and does not return until midnight.  During the day, she stops in a rest area and closes her eyes for 20 minutes to refresh herself for the drive.  She cannot deduct the cost of her meals on these trips because she is not away from home long enough to obtain substantial sleep or rest.

Example 2: An employee is required to travel from Milwaukee to Madison to work on a project.  She leaves home at 11:00 a.m. on Monday, with plans to return home the same day.  She is unable to complete the project on Monday, so she spends the night in Madison.  After completing the project the next day, she returns to Milwaukee by 10:30 a.m.  Even though the employee had not planned to spend the night and is gone for less than 24 hours she has met the “away from home” rule because she spent the night away from her tax home on business.

Example 3: An employee is required to travel from Dallas to Houston to work for the day.  The employee leaves home at 6:30 A.M. and returns that night at 10:00 P.M.  On the trip home the employee stops for dinner and rests in the car for two hours.  Even though the employee has been away from home for substantially longer than his/her normal work day, the employee is not considered to be in travel status.  Courts have ruled that stopping for a meal or a rest in a car does not meet the substantial "sleep or rest" rule.

Example 4: A government agency supplies office equipment to all agencies within the state.  An employee drives a tractor-trailer with equipment from the warehouse in Sacramento to an agency in San Diego.  After 10 hours the driver stops and rents a room at a rest stop for a four hour nap before completing the round trip.  Since the driver rented a room in order to sleep, he/she is considered to have met the "sleep and rest" rule.  Reimbursements for meals and lodging are not taxable to the employee.