The IRS has updated the simplified per diem rates that employers (or their agents or third parties) can use to reimburse employees for lodging, meals and incidental expenses incurred during business travel away from home without the need to produce receipts. The update applies to per diem allowances paid for travel on or after October 1, 2006. The simplified "high-low" per diem rates have increased to $246 for high-cost localities and to $148 for low-cost localities. The incidental expense per diem remains at $3 per day.

Some locations have been added to the list of high-cost localities, some have been dropped, and some have been redefined. The more detailed Government Services Administration (GSA) per diem rates for each locality within the U.S. may be used instead of the simplified high-low rates.

While the new rates may be used starting October 1, 2006, a taxpayer may opt to continue using the "old" 2005 rates for the last three months of 2006. Under transition rules, however, a payor cannot switch methods prior to January 1, 2007. For example, if the high-low method is used during the period from January 1 through September 30, 2006, the employer may not switch to the GSA per diem or actual cost method for the balance of 2006.

The high-low method, which is a simplified method for determining a lodging plus M&IE per diem, can be used under accountable plans to compute per diem allowance for travel within the continental U.S. (CONUS). The high-low method, however, is prohibited if a plan is not designed to cover lodging --that is to say, it cannot be used when the allowance is designed to reimburse (1) meals and incidental expenses only (M&IE only), or (2) incidental expenses only.

The new per diem rate is $246 for travel to any high-cost locality or $148 for travel to any other locality within CONUS. For purposes of applying the high-low substantiation methods and the 50-percent limitation on meal expenses, the federal M&IE rate is treated as $58 for a high-cost locality and $45 for any other locality within CONUS.  Please read the following article from CCH Incorporated for more information: Rev.Proc.2006_42.pdf.

House Ways and Means Committee Chairman William M. Thomas, R-Calif., released an October 2 letter that he sent to the National Collegiate Athletic Association (NCAA) that questions the organization's tax-exempt status.

The five-page letter, which seeks a response from the NCAA by October 30, 2006, requests that NCAA President, Myles Brand, defend the organization's primary tax-exempt purpose of maintaining "intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body." Thomas charged that the exempt purpose of intercollegiate athletics is less apparent, particularly in the context of major college football and men's basketball programs. He said that the line between professional and student athletes is blurring due to corporate sponsorships, multimillion dollar television deals, highly paid coaches with no academic duties and the dedication of inordinate amounts of time by athletes to training.

Thomas also questioned what specific benefits that the NCAA provides taxpayers in exchange for the tax-exempt benefits that college athletic programs enjoy. "From the standpoint of a federal taxpayer, why should the federal government subsidize the athletic activities of educational institutions when that subsidy is being used to help pay for escalating coaches' salaries, costly chartered travel, and state-of-the-art athletic facilities?" Thomas asked.

In addition, Thomas questioned the curriculum and graduation rate for college athletes and made a point of inquiring whether the number of games played in a season would harm a student's academic progress. He also questioned the amount of revenues collected from college sports and whether colleges generate a net profit from sports activities.

"According to NCAA expenditure reports, public universities spent as much as $600,000 per men's basketball player during the 2004-05 school year," Thomas said. "How does spending hundreds of thousands of dollars on each men's basketball player further the educational mission of universities?"


For further information on the items above contact: Catherine Bonnes at 269.567.4557 or Forrest Lewis at 517.336.7522.