2 1 and necessary business expenses) is amended by inserting 2 therein the following new subsection: "(h) SPECIAL RULE FOR CONSTRUCTION WORK "(1) DEFINITION OF TEMPORARY JOB SITE.For purposes of applying subsections (a)(1) and (a)(2) to travel and transportation expenses incurred by construction workers, a job at a site located more than 30 miles from a construction worker's principal place of residence "(A) shall be deemed to be temporary for the first 2 years that the worker is employed at that job, and "(B) shall be determined to be temporary or not temporary with respect to periods following the first 2 years of employment based on an ex amination of all the facts and circumstances, sub ject to the rules set forth in subparagraphs (2), (3), and (4). "(2) EFFECT OF FIRST YEARS ON SUBSEQUENT DETERMINATION.-In determining whether or not a job is temporary under subparagraph (1)(B), the worker's employment at the job during the period spec ified in subparagraph (1)(A) shall not be taken into account. HR 700 IH 3 1 2 3 4 5 6 7 8 9 10 11 "(3) INDEFINITE EMPLOYMENT.-No deduction shall be disallowed, by reason of section 262 or any other provision of law, solely because a construction worker's employment at a job site is of indefinite dura tion. "(4) PROHIBITION ON APPLICATION OF 1 YEAR RULE.—In making the determination specified in subparagraph (1)(B), no length of time shall be deemed, either automatically or presumptively, to make the job other than temporary. The '1-year' rule set forth is Revenue Ruling 59-371, or in any similar ruling or 12 regulation, is expressly disapproved as a grounds for disallowing deductions. 13 34 14 15 16 17 18 19 20 “(5) DEFINITION.-For purposes of this subsection, the term 'construction worker' means any individual employed, whether as a skilled, semiskilled, or unskilled laborer, in the building or construction industry, but does not include clerical or management employees.". (b) TECHNICAL AMENDMENT.-Subsection 162(h) of 21 the Internal Revenue Code of 1954 is amended by striking 22 out "(h)" and inserting therefor “(j)”. 23 SEC. 2. EFFECTIVE DATE. 24 This section shall be effective upon enactment. HR 700 IH SUMMARY AND DESCRIPTION PRESENT LAW Present law allows a deduction for ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business (Code sec. 162). Traveling expenses which meet these general requirements are deductible if incurred by the taxpayer while he or she is away from home in the pursuit of a trade or business. For these purposes, traveling expenses include transportation fares as well as amounts expended for meals and lodging, other than amounts which are lavish or extravagant under the circumstances (sec. 162(a)(2); Treas. Reg. sec. 1.1622(a)). No deduction is allowed for personal, living, or family expenses, including the cost of commuting to and from work (sec. 262; Treas. Reg. sec. 1.262-1(b)(5)). Traveling expenses are considered to be incurred while away from home in several different situations. One such situation is when the traveling expenses are incurred in connection with temporary employment and the taxpayer has a regular or principal place of business (or, in its absence, a regular place of abode) away from which the temporary employment takes place. The term temporary from this purpose generally is defined by the Internal Revenue Service and the majority of courts to mean employment which can reasonably be expected to last only for a short period of time. By contrast, traveling expenses incurred in connection with employment which is considered to be of indefinite or indeterminate duration generally are not deductible. On numerous occasions, the courts have considered the issue of whether a particular taxpayer's employment is temporary or indefinite in nature. EXPLANATION OF THE BILL The bill would provide that a job at a site located more than 30 miles from the principal place of residence of a construction worker shall be deemed to be temporary for the first two years the worker is employed at that job. Accordingly, even if the employment could be considered to be of indefinite duration, the worker would be allowed to deduct travel and transportation expenses (including meals and lodging) for the first two years at a job site which is located more than 30 miles from his or her home. The bill also would provide that after a construction worker's first two years at such a site, the determination of whether the job was temporary (so that travel and transportation expenses would still be deductible) is to be made on the basis of all the facts and circumstances, subject to three special rules set forth in the bill. First, the fact the job had already lasted two years could not be considered in determining whether or not it was temporary. Second, the mere fact that a construction worker's employment at a job site was of indefinite duration could not result in treating the job as other than temporary. Third, no length of time could be deemed, either automatically or presumptively, to make the job other than temporary. The special traveling expense rules in the bill would apply to any individual employed in the building or construction industry (other than clerical or management employees), whether as a skilled, semi-skilled, or unskilled laborer. EFFECTIVE DATE The provisions of the bill would be effective on enactment. REVENUE EFFECT The provisions of the bill are estimated to decrease fiscal year budget receipts by $64 million in 1985, $432 million in 1986, $477 million in 1987, $524 million in 1988, and $571 million in 1989. STATEMENT OF THE AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS The AFL-CIO is pleased to have an opportunity to comment on the "Miscellaneous" tax bills before this subcommittee. We will limit our comments to H.R. 700 and H.R. 907 because those measures have an immediate and direct effect on workers. Both of these measures would make the tax code fairer and neither measure involves revenue losses of any signifi cance. H.R. 700 defines the circumstances under which construction workers may deduct travel and transportation expenses. The bill would have the effect of permitting con struction workers to deduct their ordinary and necessary business expenses just like other taxpayers. Under current law, the constraints and limitations on travel and business expenses do not adequately reflect the unique circumstances in the construction industry and as a result many workers are unfairly treated. Under present law traveling expenses (including meals and lodging) are deductible if incurred while away from home in the pursuit of a trade or business. Such employment however, must be temporary and expected to last a short period of time. Traveling expenses incurred in connection with employment whch is considered to be of indefinite or indeterminate duration generally are not deductible. Construction workers are frequently employed on sites that are much too far from home to be considered within daily commuting distance. Further, construction work does not lend itself to the distinction between travel expenses resulting from temporary employment and from employment of "indefinite" duration. Thus, there is much uncertainty and much potential for inequity in denying workers deductions for legitimate costs of earning income. H.R. 700 would provide that a job would be considered "temporary" for two years in the sense of permitting workers to deduct travel and transportation expenses if the site were located more than 30 miles from the principal place of residence. After the first two years, determination of "temporary" or "indefinite" would be based on actual facts and circumstances without automatic linkage to any particular length of time. We believe H.R. 700 establishes a sensible, administrable and fair set of rules to deal with the unique circumstances of many workers in the construction industry. H.R. 907 would clear up another longstanding problem in the law concerning the tax treatment of meals furnished to an employee for the convenience of employer. Under the just enacted 1984 tax law the value of meals provided to an employee at a subsidized eating facility operated by the employer is excluded from income and wages as de minimis fringes if (1) the facility is located on or near the employer's business premises, (2) revenue from the facility equals or exceeds direct operating costs, and (3) in the case of certain highly compensated employees, nondiscrimination requirements are met. H.R. 907 would extend the definition of "de minimis" (and therefore not taxable) fringes to meals off the premises if certain conditions are met. Specifically: (1) the employer is unable to justify economically the operation of on-premise eating facilities, giving due consideration to capital and operating costs, (2) on-premise eating facilities are not provided at the actual place of employment of affected employees, (3) the meals are provided in kind, not in cash, and (4) the meals are furnished within a time frame with the employer's established meal schedule. The bill is however unclear as to whether the "nondiscrimination" requirements that apply to other fringes defined as de minimus would also apply to “off the premises" facilities. Nondiscriminatory requirements should be clearly stated to assure against abuse. If nondiscriminatory language is included we believe the measure is appropriate and consistent with the intent of Congress in excluding "de minimis" fringes from taxation. We therefore, support the enactment of H.R. 700 and H.R. 907 with appropriate nondiscriminatory language. UNITED BROTHERHOOD OF CARPENTERS AND JOINERS OF AMERICA, Mr. JOHN J. SALMON, Chief Counsel on Ways and Means, DEAR SIR: I would like to go on record in support of the above captioned bill. I am a union member of the United Brotherhood of Carpenters & Joiners of America. It has been necessary for me to travel in order to maintain my trade. I have incurred great expense as a result. It is very unfair for the IRS to disallow our expenses when other people such as insurance salesmen, CPAs, and congressmen are considered temporially employed, and their expenses are allowed. I am personally pursuing my own court case through the U.S. District Court in Birmingham with a trial by jury fighting this unfair practice. I feel this is the only way to win in this type of situation. I hope this legislation (H.R. 700) will become law soon to correct this unjustifiable dilemna that the IRS has put on the American construction industry and its people. Sincerely, STANLEY RAY JONES. [From the Shelby County (AL) Reporter, Aug. 18, 1983] EDITORIAL-CONSTRUCTION WORKERS GET SHORT END FROM IRS Letter to the Editor: The Internal Revenue Service is unfair to construction workers in the allowance of reasonable and necessary travel expenses. It becomes necessary at times in a construction worker's life to travel to locations outside his local area of employment. This person may have lived in a given community for years. He has a home there, his children attend school there, he votes there and pays taxes there. His wife probably has a job in the same community. All construction work is temporary in nature. If a construction worker takes a job a long distance from his home, he must either move his home and family to that job or incur substantial additional expense, either by traveling several miles each day or by renting temporary lodging near the job. It is sometimes impossible or contrary to good business judgment to move near the job because of housing shortages, or the high costs of such housing. More important, construction work is inherently uncertain. Workers can be laid off with just two hours' notice. Furthermore, the worker in this situation intends to work closer to his traditional work area as soon as a job is available. The worker has only two choices: remain unemployed, or incur travel expenses in order to practice his trade. The IRS uses the so called "one year rule," (60-189) to disallow travel expenses, along with Rev. Rule 76-453 and 83-83. These rulings do not take into consideration all pertinent factors in dealing with each case. The result is harassment, loss of income and needless worry to many deserving workers. Congress has in the past disallowed implementation of some of these Rev. Rulings (76-453). Why should construction workers not be able to claim the same "out of town" expenses that attorneys, CPA's, insurance salesmen and many others can claim that relate to business and mileage expenses? Even Congressmen and Senators are considered temporarily employed and are allowed expenses. There are currently five bills in Congress that will alleviate this problem. These are S-1352, S-1353, S-1219, H.R. 700 and H.R. 98. These bills, if passed, will settle the issue and correct the injustice the IRS has put on the construction worker. I feel this situation has been around long enough, and workers of all construction crafts should band together and support the current legislation that's before Congress. Time is very short. Write or call your Congressman and Senator at once. Yours sincerely, STANLEY RAY JONES, Shelby, AL. |