Individuals Urge IRS to Retain High-Low Method for Substantiating Travel Expenses

From: Chris Arsement [carsement@cpa-arm.com]

I am a CPA from South Louisiana who's been practicing public accounting for over 30 years. I am strongly in favor of keeping the High-Low per Diem Method. I have many clients who use this method to reimburse their employees for expenses incurred away from home overnight. The Oil & Gas Industry is very active here. Our clientele consists of many companies that service the Industry. The nature of this Industry requires many workers to be away from home overnight on a regular basis. The High-Low Method is simple and easy to use. Both employer and employee seem to like the arrangement and it works well. On behalf of our clients and their employees I request that you do not discontinue this Method.

Let me first express my gratitude for your reconsidering the High-Low method. I must admit, I wasn't paying attention when you first requested comments.

Eliminating it will make things a lot more complicated for some of my clients. Being able to generalize a reimbursement practice based on two potential rates is so much more administrable than having to look up a separate rate for every city. Although there may be more inaccuracies as far as estimating the costs, the nature of per diem reimbursements is that we are sacrificing precision for administrative practicality. Where an employer has several employees moving through several states, having to look up each local per diem rate is really burdensome.

In addition, where a taxpayer receives accountable plan reimbursements from its customers for amounts paid to its employees (as in Rev. Rul. 2008-23, for example), the complication multiplies.

The high low method has been a great idea to help taxpayers comply with the law without unnecessarily burdensome calculations. I hope that you will choose to continue it.

I would like to continue the use of this method as it has been in place for several years within our company. The locality method involves a lot more work to determine and validate which rates should be used.

Please do not discontinue the high-low substantiating method for lodging, meals, and incidental expenses.

I support the continuation of the high-low per diem rate method of accounting for business travel and hope that the IRS will reconsider its position on this matter.

Forbes Energy Services, Ltd. ("Forbes") appreciates the opportunity to provide comments regarding the IRS's evaluation of the continuing need for the high-low method provided in Section 5 of Rev Proc. 2010-39, even though the initial comment period ended on December 31, 2010 and the IRS announced in Ann. 2011-42 that it would soon be discontinuing the method for substantiating lodging, meal, and incidental expenses incurred in traveling away from home due to a lack of feedback from the public. Our failure to comment on Rev. Proc. 2010-39 during the initial comment period was not from a lack of enthusiasm for the method. We simply did not see the request until there was publicity around the method's discontinuance. Forbes has used the high-low method for per diems uniformly for all employees annually and it has proved to be the most time and cost-effective method of administering these per diems. We respectfully request that the method be continued.

Forbes is a publicly traded company that provides well servicing and fluid logistic services to the oil and natural gas industry. As is customary in our industry, Forbes pays a flat rate to employees who are away from home on business if the trip is likely to cause them to incur expenses for meals and/or lodging We have determined that a distance of 60 miles away from home necessitates the employee to incur additional expenses that satisfy the requirements to be reimbursable business expenses.

Many of our employees who are incurring business expenses while away from home on business are laborers and they do not have the financial means to pay the expenses in advance of Forbes reimbursement at a later date. Due to the immediacy of dispatching workers and the associated per diem advances, the actual disbursement of funds takes place in several locations. Accordingly, we provide cash advances to the workers from various home locations when they are assigned to or deliver a rig to an away from home job site. We have many controls in place to properly account for the advances, reconcile the days per diem provided to each worker to the job log, and to return to the employer any advances that exceed the number of days away from home.

Since these funds are disbursed in the field, any method that helps Forbes standardize the determination of the appropriate per diem and the disbursement process is very valuable to ensure compliance with our procedures and proper taxation to the employee. While we want to be sure that our employees do not incur any out of pocket expenses while conducting our business, we do not want to generate additional taxable income by exceeding the allowable per diem rates.

The IRS's proposed revocation of the high-low method would require the use of the IRS-approved general services administration per-diem rate paid by the federal government to its workers on travel status. This rate varies from locality to locality and requires tracking of the employee's locale while away from home on business. The high-low method removes the need to track an employee's actual location in order to determine the per diem rate for that locality Instead, employers can apply one uniform per-diem rate for all "high-cost" areas within the continental US, and another per-diem rate for all other areas within continental US.

Without the high-low method, our field supervisors would need constant information regarding the current rates applicable to the geographic location of the drilling operation to which we are dispatching workers. In addition to the increased likelihood of error and a lack of understanding by the workers as to why the per diems vary from day to day, keeping our field supervisors up to date on these rates would be a considerable administrative burden. We strongly recommend that IRS continue to offer the high-low method in order to promote administrative efficiency and accuracy in reporting by those employers who rely on it.

Please do not discontinue the "high-low" method per-diem rates for business travel. This has been an easy way for taxpayers to keep up with their business travel expenses.