13988 Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Rules and Regulations

§ 622.32 Prohibited and limited harvest

species.

* * * * *

(b) * * *

(2) * * *

(iii) Red drum and Nassau grouper

may not be harvested or possessed in or

from the Gulf EEZ. Such fish caught in

the Gulf EEZ must be released

immediately with a minimum of harm.

* * * * *

§ 622.37 [Amended]

7. In § 622.37(d)(4), the word

‘‘Nassau,’’ is removed.

8. In § 622.40, paragraph (a)(2) is

revised to read as follows:

§ 622.40 Limitations on traps and pots.

(a) * * *

(2) Gulf EEZ. A fish trap in the Gulf

EEZ may be pulled or tended only by a

person (other than an authorized officer)

aboard the vessel with the fish trap

endorsement to fish such trap. If such

vessel has a breakdown that prevents it

from retrieving its traps, the owner or

operator must immediately notify the

nearest NMFS Office of Enforcement

and must obtain authorization for

another vessel to retrieve and land its

traps. The request for such authorization

must include the requested effective

period for the retrieval and landing, the

persons and vessel to be authorized to

retrieve the traps, and the point of

landing of the traps. Such authorization

will be specific as to the effective

period, authorized persons and vessel,

and point of landing. Such

authorization is valid solely for the

removal of fish traps from the EEZ and

for harvest of fish incidental to such

removal.

* * * * *

9. In § 622.42, paragraph (a)(3) is

revised to read as follows:

§ 622.42 Quotas.

* * * * *

(a) * * *

(3) Shallow-water groupers, that is, all

groupers other than deep-water

groupers, jewfish, and Nassau grouper,

including scamp before the quota for

shallow-water groupers is reached,

combined—9.8 million lb (4.4 million

kg), round weight.

* * * * *

§ 622.43 [Amended]

10. In § 622.43(b)(1), the words

‘‘bartered, traded, or’’ are removed.

11. In § 622.48, paragraph (d)(1) is

revised to read as follows:

§ 622.48 Adjustment of management

measures.

* * * * *

(d) * * *

(1) For a species or species group:

Target date for rebuilding an overfished

species, TAC, bag limits, size limits,

vessel trip limits, closed seasons or

areas, gear restrictions, reopening of a

fishery prematurely closed, and quotas.

* * * * *

Appendix A to Part 622 [Amended]

12. In Table 3, under the family

Sparidae—Porgies, the scientific name

for Red porgy is revised to read ‘‘Pagrus

pagrus’’ and in Table 4, under the

family Sparidae—Porgies, the scientific

names of Saucereye porgy and Red

porgy are revised to read ‘‘Calamus

calamus’’ and ‘‘Pagrus pagrus’’,

respectively.

[FR Doc. 97–7528 Filed 3–24–97; 8:45 am]

BILLING CODE 3510–22–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 8715]

RIN 1545–AT98

Substantiation of Business Expenses

for Travel, Entertainment, Gifts and

Listed Property

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final and temporary

regulations.

SUMMARY: This document contains

amendments to temporary regulations

relating to the requirement that business

expenses for travel, entertainment, gifts,

or listed property be substantiated by

documentary evidence (such as a

receipt). The regulations affect persons

making or receiving reimbursements for

travel, entertainment, gifts, or listed

property. The text of these temporary

regulations also serves as the text of the

proposed regulations cross-referenced in

the notice of proposed rulemaking in

the Proposed Rules section of this issue

of the Federal Register.

DATES: These temporary regulations are

effective March 25, 1997.

Applicability: These temporary

regulations are applicable to expenses

paid or incurred after September 30,

1995.

FOR FURTHER INFORMATION CONTACT:

Donna M. Crisalli at (202) 622–4920 (not

a toll-free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

These regulations are being issued

without prior notice and public

comment pursuant to the

Administrative Procedure Act (5 U.S.C.

553). For this reason, the collection of

information contained in these

regulations has been reviewed and,

pending receipt and evaluation of

public comments, approved by the

Office of Management and Budget

(OMB) under control number 1545–

0771. Responses to this collection of

information are required for a taxpayer

to deduct certain business expenses or

to substantiate certain reimbursements

of business expenses.

An agency may not conduct or

sponsor, and a person is not required to

respond to, a collection of information

unless the collection of information

displays a valid control number.

For further information concerning

this collection of information, and

where to submit comments on the

collection of information and the

accuracy of the estimated burden, and

suggestions for reducing the burden,

please refer to the preamble in the crossreference notice of proposed rulemaking

published in the Proposed Rules section

of this issue of the Federal Register.

Books or records relating to a

collection of information must be

retained as long as their contents may

become material in the administration

of any internal revenue law. Generally,

tax returns and tax return information

are confidential, as required by 26

U.S.C. 6103.

Background and Explanation of

Provisions

Receipt Threshold

Section 274(d) disallows a trade or

business deduction under section 162

for any traveling (including meals and

lodging), entertainment, gift, or listed

property expense, unless the taxpayer

substantiates the elements of the

expense by adequate records or by

sufficient evidence. Under § 1.274–5T(c)

of the temporary Income Tax

Regulations, a taxpayer must maintain

two types of records to satisfy the

‘‘adequate records’’ requirement: (1) a

summary of expenses (account book,

diary, log, statement of expense, trip

sheets, or other similar record),

sometimes called an expense account or

expense voucher, and (2) documentary

evidence (such as receipts or paid bills).

Together, these records must establish

the elements of amount, time, place, and

business purpose (and for gifts and

entertainment, business relationship of
Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Rules and Regulations 13989

recipient or persons entertained) for

each expenditure or use.

Section 1.274–5T(c)(2)(iii) generally

requires that a taxpayer have a receipt

or other documentary evidence to

substantiate (A) any expenditure for

lodging and (B) any other expenditure of

$25 or more. In Notice 95–50 (1995–2

C.B. 333), the IRS announced that it

would raise the receipt threshold of

§ 1.274–5T(c)(2)(iii)(B) from $25 to $75,

effective for expenses incurred on or

after October 1, 1995. The temporary

regulations effect this amendment by

changing ‘‘$25’’ in § 1.274–

5T(c)(2)(iii)(B) to ‘‘$75.’’ This change is

applicable to both deductions and

reimbursement arrangements and is

expected to reduce the recordkeeping

burden on affected taxpayers, including

individuals and small businesses.

Definition of an ‘‘Adequate Accounting’’

to the Employer

An employee who is reimbursed

under a reimbursement or other expense

allowance arrangement for expenses

covered by section 274(d) must make an

‘‘adequate accounting’’ to the employer

for the reimbursed expenses. Section

1.274–5T(f)(4) specifies that, as part of

an adequate accounting, the employee

must submit substantiation to the

employer that satisfies the requirements

of § 1.274–5T(c). Notice 95–50 also

solicited comments on whether changes

should be made to the substantiation

requirements of the adequate accounting

rules in § 1.274–5T. Comments received

related primarily to the adequate

accounting rules and the substantiation

requirements in general.

1. Submission and Retention of

Documentary Evidence

A number of commentators,

particularly federal government

agencies, complained of the

administrative burden and cost of

storing large quantities of paper

receipts. Some comments proposed that

the employer should be allowed to

dispose of the documentary evidence

after an employee has made an adequate

accounting, or return the documentary

evidence to the employee for retention.

Other comments suggested that

submission by an employee of an

expense voucher alone, without

documentary evidence, should be

considered an adequate accounting.

With the increase in the receipt

threshold to $75, and the use of

electronic document transmission and

retention (discussed below), the

necessity for storing large quantities of

paper records is significantly reduced.

Nonetheless, the temporary regulations

respond to the concerns expressed by

these comments by amending § 1.274–

5T(f)(4) to authorize the Commissioner

to prescribe rules modifying the

substantiation requirements for an

adequate accounting by an employee to

an employer. Under the amendment, the

Commissioner could publish rules

defining the circumstances (including

the use of specified internal controls)

under which an employee may make an

adequate accounting to his employer by

submitting an expense account alone,

without the necessity of submitting

documentary evidence (such as

receipts). This change is expected to

reduce the recordkeeping burden for

employers and employees. These rules

would not change the substantiation

requirements of § 1.274–5T(c) for

deductions.

2. Maintenance of Adequate Records in

Electronic Form

Some commentators suggested that

taxpayers should be permitted to obtain

and maintain records substantiating

expenses under section 274(d) in

electronic form. The temporary

regulations make no change to the

current regulations, which do not

require that the records be in paper

form. Rev. Proc. 91–59 (1991–2 C.B.

841), provides procedures for

maintaining tax records in electronic

form. Section 3.08 of Rev. Proc. 91–59

states that the procedures apply to

documentation required by section

274(d).

3. Types of Records That Constitute

Acceptable Documentary Evidence

Some commentators suggested that

credit card charge records should be

considered acceptable documentary

evidence of travel expenses, including

lodging. They noted, however, that

§ 1.274–5T(c)(2)(iii) requires that

documentary evidence of lodging must

show separate amounts for charges such

as lodging, meals, and telephone calls.

A credit card statement or record of

charge, unlike a hotel bill, normally will

not segregate lodging and other

expenses, such as meals and

entertainment subject to the section

274(n) partial deduction disallowance,

or personal expenses (such as personal

phone calls or gift purchases) that may

not be deducted. Therefore, such a

credit card statement or record of charge

alone will not constitute acceptable

documentary evidence of a lodging

expense.

The commentators proposed

addressing this problem by using

statistical sampling, conducted either by

the IRS or by taxpayers, to establish a

breakdown of expenses on hotel bills.

One comment suggested that sampling

could form a basis for a ‘‘safe harbor’’

percentage or percentages (e.g., by

industry or size of company) of hotel

bills that would be deemed to represent

the various types of possible expenses.

Another comment suggested that the

IRS adopt a mechanical test based on

statistical sampling to make a

reasonable allocation of the total hotel

charge to meals.

The temporary regulations make no

change to the current documentary

evidence requirements for lodging

expenses. Because of the large number

of expenses that can be charged to hotel

bills, and extensive variation from

traveler to traveler in the types of

expenses charged to hotel bills, any

attempt to establish percentages for

allocating hotel bills to lodging and

other fully deductible business

expenses, meals and entertainment, and

personal expenses is considered

impracticable.

A comment requested that the IRS

clarify whether statements provided to

travelers by airlines in lieu of tickets can

constitute documentary evidence of

travel. The current regulations are

sufficiently flexible to permit use of a

variety of forms of documentary

evidence.

Other Comments in Response to Notice

95–50

1. Substantiation of Business Purpose

A commentator suggested that the

regulations be revised to permit an

employee to initially substantiate

business purpose to the employer orally,

for later entry into the expense

processing system. The current

regulations do not preclude an initial

oral substantiation of business purpose

which is reduced to writing no later

than the time of the employee’s final

accounting to the employer.

2. Post-Expenditure Verification

Procedures

A comment suggested that the

regulations be revised to permit an

employer to conduct a post-expenditure

review of only a statistical sampling, as

opposed to 100%, of expense vouchers.

Section 1.274–5T(f)(5)(iii) states that

an employee who makes an adequate

accounting to his employer will not

again be required to substantiate such

expenses, unless the employer’s

accounting procedures are not adequate

or it cannot be determined that such

procedures are adequate. The district

director will determine whether the

employer’s accounting procedures are

adequate by considering all the facts

and circumstances, including the

employer’s use of internal controls. The
13990 Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Rules and Regulations

employer’s accounting procedures

should include a requirement that an

expense account be verified and

approved by a reasonable person other

than the person incurring the expense.

To the extent the employer fails to

maintain adequate accounting

procedures, the district director may

require the employee to separately

substantiate his expense account

information.

Section 1.274–5T(f)(5)(iii) cites postexpenditure review of employees’

expense accounts as an internal control

that should normally be employed.

However, whether the employer’s postexpenditure review procedures are

appropriate is a matter within the

discretion of the district director, based

on a review of all the facts and

circumstances.

3. De Minimis Exception to

Substantiation Requirements

A comment proposed that employees

receiving $1000 or less per year in

reimbursed expenses be exempted from

the requirement to substantiate the

elements of the expenses, other than

business purpose, to the employer. In

view of the other changes made by the

temporary regulations that will lessen a

taxpayer’s recordkeeping burden, such

as the increase in the receipt threshold,

the temporary regulations do not

incorporate this suggestion.

4. Department of Labor Substantiation

Requirements for Plan Trustees

A comment requested the IRS to

coordinate with the Department of

Labor to establish common

substantiation requirements under

ERISA for travel by multi-employer plan

trustees. Modifications to conform the

substantiation requirements under

ERISA to those provided in the

temporary regulations are outside the

scope of the section 274(d) regulations.

5. Increase in Limit on Deduction for

Gifts

A comment requested that the $25

limit on the deduction for gifts

contained in section 274(b) be increased

to $75. The IRS has no discretion to

raise this statutory limit.

6. Use of Full Federal Per Diem Method

to Substantiate Travel for Deduction

Purposes

A comment suggested that selfemployed individuals and

unreimbursed employees should be

entitled to substantiate lodging expenses

for deduction purposes by means of the

‘‘high-low’’ per diem method. Rev. Proc.

96–64 (1996–53 I.R.B. 52), permits this

substantiation method for employee

reimbursements only. This suggestion is

outside the scope of this revision to the

temporary regulations.

Special Analyses

It has been determined that these

temporary regulations are not a

significant regulatory action as defined

in EO 12866. Therefore, a regulatory

assessment is not required. It is hereby

certified that these regulations do not

have a significant economic impact on

a substantial number of small entities.

This certification is based on the fact

that, by increasing the receipt threshold

from $25 to $75, these regulations

reduce the existing recordkeeping

requirements of taxpayers, including

small entities. The regulations do not

otherwise significantly alter the

reporting or recordkeeping duties of

small entities. Therefore, a Regulatory

Flexibility Analysis under the

Regulatory Flexibility Act (5 U.S.C.

chapter 6) is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, these temporary regulations will

be submitted to the Chief Counsel for

Advocacy of the Small Business

Administration for comment on their

impact on small business.

Drafting Information

The principal author of these

regulations is Donna M. Crisalli, Office

of the Assistant Chief Counsel (Income

Tax and Accounting). However, other

personnel from the IRS and Treasury

Department participated in their

development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and

recordkeeping requirements.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 1 is

amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation

for part 1 is amended by adding an entry

in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *

Section 1.274–5T also issued under

26 U.S.C. 274(d). * * *

Par. 2. An undesignated

centerheading is added immediately

following § 1.280H–1T to read as

follows:

Taxable Years Beginning Prior to

January 1, 1986

§ 1.274–5 [Redesignated as § 1.274–5A]

Par. 3. Section 1.274–5 is

redesignated as § 1.274–5A and added

immediately following the undesignated

centerheading ‘‘Taxable Years

Beginning Prior to January 1, 1986’’.

Par. 4. Section 1.274–5T is amended

by:

1. Revising the first sentence of

paragraph (c)(2)(iii)(B).

2. Redesignating the text of paragraph

(f)(4) as paragraph (f)(4)(i).

3. Adding a paragraph heading for

paragraph (f)(4)(i).

4. Adding paragraphs (f)(4)(ii) and

(f)(4)(iii).

The revisions and additions read as

follows:

§ 1.274–5T Substantiation requirements

(temporary).

* * * * *

(c) * * *

(2) * * *

(iii) * * *

(B) Any other expenditure of $75 or

more ($25 or more for expenditures

incurred before October 1, 1995) except,

for transportation charges, documentary

evidence will not be required if not

readily available, provided, however,

that the Commissioner, in his

discretion, may prescribe rules waiving

such requirements in circumstances

where he determines it is impracticable

for such documentary evidence to be

required. * * *

* * * * *

(f) * * *

(4) * * * (i) In general. * * *

(ii) Procedures for adequate

accounting without documentary

evidence. The Commissioner may, in his

discretion, prescribe rules under which

an employee may make an adequate

accounting to his employer by

submitting an account book, log, diary,

etc., alone, without submitting

documentary evidence.

(iii) Employer. For purposes of this

section, the term employer includes an

agent of the employer or a third party

payor who pays amounts to an

employee under a reimbursement or

other expense allowance arrangement.

* * * * *

PART 602—OMB CONTROL NUMBERS

UNDER THE PAPERWORK

REDUCTION ACT

Par. 5. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 6. In § 602.101, paragraph (c) is

amended by:

1. Removing the following entry from

the table:
Federal Register / Vol. 62, No. 57 / Tuesday, March 25, 1997 / Rules and Regulations 13991

CFR part or section where

identified and described

Current

OMB control No.

* * * * *

1.274–5 ..................................... 1545–0139

1545–0771

* * * * *

2. Adding an entry in numerical order

to the table to read as follows:

CFR part or section where

identified and described

Current

OMB control No.

* * * * *

1.274–5A ................................... 1545–0139

1545–0771

* * * * *

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: February 14, 1997.

Donald C. Lubick,

Acting Assistant Secretary of the Treasury.

[FR Doc. 97–7095 Filed 3–24–97; 8:45 am]

BILLING CODE 4830–01–U

MINE SAFETY AND HEALTH

ADMINISTRATION

30 CFR Part 3

OMB Control Numbers Under the

Paperwork Reduction Act

AGENCY: Mine Safety and Health

Administration, Labor.

ACTION: Final rule; technical

amendment.

SUMMARY: The Mine Safety and Health

Administration (MSHA) is amending its

regulations to display the control

number approved by the Office of

Management and Budget (OMB) for

information collection required in the

final rule for the Approval, Exhaust Gas

Monitoring, and Safety Requirements

for the Use of Diesel-Powered

Equipment in Underground Coal Mines.

The Paperwork Reduction Act requires

agencies to display OMB control

numbers for information collections.

This notice fulfills MSHA’s obligation.

EFFECTIVE DATE: March 24, 1997.

FOR FURTHER INFORMATION CONTACT:

Patricia W. Silvey , Director, Office of

Standards, Regulations, and Variances,

Mine Safety and Health Administration,

4015 Wilson Boulevard, Arlington, VA

22203–1984; 703–235–1910 (voice);

psilvey@msha.gov (internet e-mail); or

703–235–5551 (facsimile).

SUPPLEMENTARY INFORMATION: MSHA

published a final rule presenting the

OMB control numbers in a new table

format which was codified in 30 CFR

Part 3 on June 29, 1995 (60 FR 33719).

This fulfilled the requirements of 44

U.S.C. 3507(f) of the Paperwork

Reduction Act which prohibits an

agency from engaging in a collection of

information without displaying the

control number obtained from OMB.

The table lists the part and section

numbers with information collection

requirements and the corresponding

OMB control numbers.

MSHA submitted new information

collection requirements contained in

parts 7 and 75 of the final rule on the

approval, exhaust gas monitoring, and

safety requirements for the use of dieselpowered equipment in underground

coal mines for OMB review on October

22, 1996. The final rule was published

on October 25, 1996. OMB approved the

paperwork requirements under control

number 1219–0119 on November 26,

1996.

MSHA has determined that public

notice and comment is unnecessary in

this technical amendment to

rulemaking. Information collection

requirements go through the public

review process as part of the rule to

which it applies. Likewise, the renewal

of an OMB control number also requires

public review. As a result, MSHA finds

that there is ‘‘good cause’’ under 5

U.S.C., 553 (b)(B) of the Administrative

Procedure Act (APA) to issue this

amendment to Table 1 in 30 CFR Part

3 without prior public notice and

comment. MSHA has determined there

is no need to delay the effective date

because the technical amendment

contains no new requirements for which

the public would need time to plan

compliance beyond that provided for in

the regulation itself. MSHA finds,

therefore, that there is ‘‘good cause’’ to

except this action from the 30-day

delayed effective date requirement

under 5 U.S.C. 553 (d)(3) of the APA.

List of Subjects in 30 CFR Part 3

Reporting and recordkeeping

requirements.

Dated: March 12, 1997.

J. Davitt McAteer,

Assistant Secretary for Mine Safety and

Health.

Accordingly, under the authority of

30 U.S.C. 957, chapter I of title 30, Code

of Federal Regulation is amended as set

forth below.

PART 3—OMB CONTROL NUMBERS

UNDER THE PAPERWORK

REDUCTION ACT

1. The authority citation for part 3

continues to read as follows:

Authority: 30 U.S.C. 957; 44 U.S.C. 3501–

3520.

2. Table 1 in 3.1 is amended by

adding the following sections and

corresponding control numbers in

numerical order:

30 CFR citation OMB control No.

7.83 ........................................... 1219–0119

7.90 ........................................... 1219–0119

7.97 ........................................... 1219–0119

7.105 ......................................... 1219–0119

75.363 ....................................... 1219–0119

75.371(r), (kk), (ll), (mm), (nn),

(oo), and (pp) ........................ 1219–0119

75.1901(a) ................................. 1219–0119

75.1904(b)(4) ............................ 1219–0119

75.1911(i) and (j) ...................... 1219–0119

75.1912(h) and (i) ..................... 1219–0119

75.1914(f), (g)(5), and (h) ......... 1219–0119

75.1915(a), (b)(5), and (c) ........ 1219–0119

[FR Doc. 97–7480 Filed 3–24–97; 8:45 am]

BILLING CODE 4510–43–P

DEPARTMENT OF THE INTERIOR

Minerals Management Service

30 CFR Parts 250 and 254

RIN 1010–AB81

Response Plans for Facilities Located

Seaward of the Coast Line

AGENCY: Minerals Management Service

(MMS), Interior.

ACTION: Final rule.

SUMMARY: This final rule revises the

current interim final rule governing

response plans for facilities located

seaward of the coast line. The rule will

bring MMS regulations into

conformance with the Oil Pollution Act

of 1990 (OPA). Revisions to existing

rules will delete previous MMS

requirements that are similar to

requirements of this rule. The final rule

will combine MMS requirements for oilspill contingency plans for facilities in

both State and Federal waters seaward

of the coast line.

EFFECTIVE DATE: June 23, 1997.

FOR FURTHER INFORMATION CONTACT:

Lawrence H. Ake, Engineering and

Research Branch, at (703) 787–1567.

SUPPLEMENTARY INFORMATION:

Background and Purpose

In August 1990, Congress passed OPA

which, among other things, amended

section 311(j) of the Federal Water

Pollution Control Act (FWPCA) by

strengthening provisions concerning oilspill prevention efforts and spillresponse capability.