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Tax Treatment of Away From Home Expenses of State Legislators, February 17, 2005 1 (February 17, 2005)

handle is hein.tera/crstax0091 and id is 1 raw text is: Order Code RS20330 Updated February 17, 2005 CRS Report for Congress Received through the CRS Web Tax Treatment of Away From Home Expenses of State Legislators Louis Alan Talley Specialist in Taxation Government and Finance Division Summary In general, taxpayers are permitted a deduction for traveling expenses, including meals and lodging, while away from their tax home in pursuit of a trade or business. State legislators have unusual problems with the determination of their tax home.' Accordingly, Congress addressed these problems through enactment of a special tax code provision which allows state legislators to treat as their tax home the district which they represent. State legislators are allowed an away-from-home expense deduction equal to the number of legislative days times a per diem amount. The legislator is deemed to be away from home on each legislative day, is not required to attend the legislature for each day counted, and is allowed to include four or fewer consecutive days of legislative recess in the number of days away from home. The per diem amount is the greater of the federal or state per diem amount for employees away from home. The state per diem amount may not exceed 110% of the federal rate. Revenue losses from this provision appear to remain low because of the limited number of state legislators. This report will be updated as developments warrant. Legislative History and Rationale Beginning with the passage of the Tax Reform Act of 1976 (P.L. 94-455) a special provision (only for taxable years that began before 1976) was added to the Internal Revenue Code (IRC) for state legislators. The provision provided that a state legislator may elect to treat the residence located within the legislative district which he or she represents as his or her tax home. Accordingly, the legislator was permitted an away- Federal legislators are limited to a $3,000 per year deduction for expenses incurred while away from home and living in Washington, D.C. The law provides that a Member of Congress is deemed to reside in the state, congressional district, or possession which he represents in Congress. The away-from-home deduction is subject to the 2% miscellaneous itemized deductions limitation (i.e. subtract 2% of the taxpayer's adjusted gross income from the total amount of expenses). Congressional Research Service **** The Library of Congress

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