[Federal Register Volume 62, Number 57 (Tuesday, March 25, 1997)]
[Proposed Rules]
[Pages 14051-14052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7094]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-209785-95]
RIN 1545-AT97


Substantiation of Business Expenses for Travel, Entertainment, 
Gifts and Listed Property

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary 
regulations.

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SUMMARY: In the Rules and Regulations section of this issue of the 
Federal Register, the IRS is issuing temporary regulations relating to 
the substantiation requirements for business expenses for travel, 
entertainment, gifts, or listed property. The text of those temporary 
regulations also serves as the text of these proposed regulations.

DATES: Written or electronically generated comments and requests for a 
public hearing must be received by June 23, 1997.

ADDRESSES: Send submissions to CC:DOM:CORP:R (REG-209785-95), room 
5228, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. In the alternative, submissions may be hand 
delivered between the hours of 8 a.m. and 5 p.m. to CC:DOM:CORP:R (REG-
209785-95), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue NW., Washington, DC, or electronically, via the IRS Internet 
site at: http://www.irs.ustreas.gov/prod/tax__regs/comments.html.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, contact 
Donna M. Crisalli, (202) 622-4920; concerning submissions, contact 
Christina Vasquez, (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION

Paperwork Reduction Act

    The collection of information contained in this notice of proposed 
rulemaking has been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507). Comments on the collection of information should be sent 
to the Office of Management and Budget, Attn: Desk Officer for the 
Department of the Treasury, Office of Information and Regulatory 
Affairs, Washington, DC 20503, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, T:FP, Washington, DC 
20224. Comments on the collection of information should be received by 
May 27, 1997.
    Comments are specifically requested concerning: Whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the Internal Revenue Service, including 
whether the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information (see below);
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of service to provide information.
    The collection of information in this notice of proposed rulemaking 
is in Sec. 1.274-5T(c)(2) and (f)(4). This information is required by 
the IRS as a condition for a taxpayer to deduct certain business 
expenses or exclude from income certain reimbursed business expenses of 
employees. This information will be used to determine whether a 
taxpayer properly qualifies for a deduction or exclusion. The 
collection of information is required in order to deduct certain 
business expenses or exclude from income certain reimbursed business 
expenses of

[[Page 14052]]

employees. The likely respondents and recordkeepers are individuals, 
business or other for-profit institutions, state or local governments, 
federal agencies, and nonprofit institutions.
    Estimated total annual reporting and recordkeeping burden: 
36,920,000 hours.
    The estimated annual burden per respondent or recordkeeper varies 
from 10 minutes to 20 hours, depending on individual circumstances, 
with an estimated average of 1.3 hours.
    Estimated number of respondents and recordkeepers: 28,400,000.
    Estimated annual frequency of responses: On occasion.
    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.
    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.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
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 are expected to reduce the existing recordkeeping 
requirements of taxpayers, including small entities, from 49,375,000 
hours to 36,920,000 hours. 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, this notice 
of proposed rulemaking will be submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business.

Comments and Requests for a Public Hearing

    Before adopting these proposed regulations as final regulations, 
consideration will be given to any comments that are submitted timely 
(and in the manner described in ADDRESSES portion of this preamble) to 
the IRS. The IRS is considering publishing a revenue procedure 
implementing Sec. 1.274-5T(f)(4)(ii) of the temporary regulations (that 
is, prescribing rules under which an employee may make an adequate 
accounting to his employer by submitting an expense voucher or 
equivalent without submitting documentary evidence such as receipts) 
for federal government agencies that use the published procedures. In 
addition, the IRS is considering whether there are circumstances or 
conditions under which the IRS could extend these procedures beyond 
federal government agencies, and requests comments in this regard. The 
IRS also requests comments on what procedures (such as internal 
controls) should be required in any rules that permit a taxpayer to 
satisfy the substantiation requirements of section 274(d) for purposes 
of deducting business expenses reimbursed to employees who have 
accounted for their expenses only by means of an expense voucher or 
equivalent without documentary evidence such as receipts. All comments 
will be available for public inspection and copying. A public hearing 
will be scheduled and held upon written request by any person who 
submits written comments on the proposed rules. Notice of the time and 
place for the hearing will be published in the Federal Register.

Drafting Information

    The principal author of these proposed regulations is Donna M. 
Crisalli, Office of the Assistant Chief Counsel (Income Tax and 
Accounting). However, personnel from other offices of the IRS and 
Treasury Department participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
an entry to read in part as follows:

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

    Section 1.274-5 also issued under 26 U.S.C. 274(d). * * *
    Par. 2. Section 1.274-5 is added to read as follows:


Sec. 1.274-5  Substantiation requirements.

    (a) through (c)(2)(iii)(A) [Reserved]. For further guidance, see 
Sec. 1.274-5T.
    (c)(2)(iii)(B) [The text of paragraph (c)(2)(iii)(B) is the same as 
the text in Sec. 1.274-5T published elsewhere in this issue of the 
Federal Register].
    (c)(2)(iv) through (f)(3) [Reserved]. For further guidance, see 
Sec. 1.274-5T.
    (f)(4) through (f)(4)(iii) [The text of paragraphs (f)(4) through 
(f)(4)(iii) is the same as the text in Sec. 1.274-5T published 
elsewhere in this issue of the Federal Register].
    (f)(5) through (1) [Reserved]. For further guidance, see 
Sec. 1.274-5T.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 97-7094 Filed 3-24-97; 8:45 am]
BILLING CODE 4830-01-U