I
107TH CONGRESS
2D SESSION
H. R. 4374
To amend the Internal Revenue Code of 1986 to clarify the treatment of
frequent flyer mileage awards.
IN THE HOUSE OF REPRESENTATIVES
APRIL 16, 2002
Mr. MEEKS of New York (for himself and Mr. FOLEY) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to clarify
the treatment of frequent flyer mileage awards.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Frequent Flyer Tax-
Free Liability Act of 2002’’.
SEC. 2. FINDINGS.
Congress finds as follows:
(1) Individuals should be able to receive and
use frequent flyer benefits for business or personal
use without incurring tax liability.
(2) Taxation of frequent flyer benefits would
raise a myriad of questions, including questions re-
garding timing, valuation, and foreign airlines, with-
out obvious answers.
(3) Taxation of frequent flyer benefits would re-
sult in additional paperwork for consumers, airlines,
hotels, car rental companies, credit card issuers, and
the Internal Revenue Service.
(4) Clarifying that frequent flyer benefits are
not taxable will encourage people to travel and aid
the economy of the United States.
(5) The traveling public pays too much in taxes
for travel-related services.
SEC. 3. CLARIFICATION OF TREATMENT OF FREQUENT
FLYER MILEAGE AND AWARDS.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended
by redesignating section 140 as section 141 and by insert-
ing after section 139 the following new section:
‘‘SEC. 140. FREQUENT FLYER MILEAGE AND AWARDS.
‘‘(a) IN GENERAL.—If an individual receives a fre-
quent flyer benefit as a result of the purchase of property
or services—
‘‘(1) no amount shall be includible in such indi-
vidual’s gross income by reason of receiving such
benefit,
‘‘(2) no deduction otherwise allowable for the
purchase of such property or services shall be re-
duced by reason of such benefit, and
‘‘(3) no deduction shall be allowed for the por-
tion of any travel-related service purchased using
such a benefit.
‘‘(b) FREQUENT FLYER BENEFIT.—For purposes of
this section, the term ‘frequent flyer benefit’ means any
right to receive (or the receipt of) travel-related services,
including air transportation services, lodging, automobile
rental services, and passenger cruise ship accommoda-
tions, for an individual for free or at a reduced cost by
reason of prior purchases of property or services. Such
term shall include such a right only if the value of such
right is de minimis relative to the cost of property or serv-
ices purchased in order to receive such right.’’.
(b) CLARIFICATION OF TREATMENT UNDER REIM-
BURSEMENT ARRANGEMENTS.—Subsection (c) of section
62 of such Code is amended by adding at the end the fol-
lowing new flush sentence:
‘‘An arrangement shall not be treated as described in
paragraph (2) merely because it permits the employee to
retain a frequent flyer benefit (as defined in section
140(b)).’’.
(c) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 of such Code
is amended by striking the last item and inserting the fol-
lowing new items:
‘‘Sec. 140. Frequent flyer mileage and awards.
‘‘Sec. 141. Cross references to other Acts.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
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