This annual notice provides the 2016–2017 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home, specifically (1) the special transportation industry meal and incidental expenses (M&IE) rates, (2) the rate for the incidental expenses only deduction, and (3) the rates and list of high-cost localities for purposes of the high-low substantiation method.
Rev. Proc. 2011–47, 2011–42 I.R.B. 520, provides rules for using a per diem rate to substantiate, under § 274(d) of the Internal Revenue Code and § 1.274–5 of the Income Tax Regulations, the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Taxpayers using the rates and list of high-cost localities provided in this notice must comply with Rev. Proc. 2011–47. Notice 2015–63, 2015–42 I.R.B. 723, provides the rates and list of high-cost localities for the period October 1, 2015, to September 30, 2016.
Section 3.02(3) of Rev. Proc. 2011–47 provides that the term “incidental expenses” has the same meaning as in the Federal Travel Regulations, 41 C.F.R. 300–3.1, and that future changes to the definition of incidental expenses in the Federal Travel Regulations would be announced in the annual per diem notice. Subsequent to the publication of Rev. Proc. 2011–47, the General Services Administration published final regulations revising the definition of incidental expenses under the Federal Travel Regulations to include only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Transportation between places of lodging or business and places where meals are taken, and the mailing cost of filing travel vouchers and paying employer-sponsored charge card billings, are no longer included in incidental expenses. Accordingly, taxpayers using the per diem rates may separately deduct or be reimbursed for transportation and mailing expenses.
SECTION 3. SPECIAL M&IE RATES FOR TRANSPORTATION INDUSTRY
The special M&IE rates for taxpayers in the transportation industry are $63 for any locality of travel in the continental United States (CONUS) and $68 for any locality of travel outside the continental United States (OCONUS). See section 4.04 of Rev. Proc. 2011–47.
The rate for any CONUS or OCONUS locality of travel for the incidental expenses only deduction is $5 per day. See section 4.05 of Rev. Proc. 2011–47.
1. Annual high-low rates. For purposes of the high-low substantiation method, the per diem rates in lieu of the rates described in Notice 2015–63 (the per diem substantiation method) are $282 for travel to any high-cost locality and $189 for travel to any other locality within CONUS. The amount of the $282 high rate and $189 low rate that is treated as paid for meals for purposes of § 274(n) is $68 for travel to any high-cost locality and $57 for travel to any other locality within CONUS. See section 5.02 of Rev. Proc. 2011–47. The per diem rates in lieu of the rates described in Notice 2015–63 (the meal and incidental expenses only substantiation method) are $68 for travel to any high-cost locality and $57 for travel to any other locality within CONUS.
2. High-cost localities. The following localities have a federal per diem rate of $236 or more, and are high-cost localities for all of the calendar year or the portion of the calendar year specified in parentheses under the key city name.
Key city | County or other defined location |
---|---|
Arizona Sedona (March 1-April 30) | City Limits of Sedona |
California Los Angeles (January 1-March 31) | Los Angeles, Orange, Ventura, Edwards AFB less the city of Santa Monica |
Mill Valley/San Rafael/Novato (October 1-October 31 and June 1-September 30) | Marin |
Monterey (July 1-August 31) | Monterey |
Napa (October 1-October 31 and May 1-September 30) | Napa |
San Francisco | San Francisco |
San Mateo/Foster City/Belmont | San Mateo |
Santa Barbara | Santa Barbara |
Santa Monica | City limits of Santa Monica |
Sunnyvale/Palo Alto/San Jose | Santa Clara |
Colorado Aspen (December 1-March 31 and June 1-August 31 | Pitkin |
Denver/Aurora (October 1-November 30 and February 1-September 30) | Denver, Adams, Arapahoe, and Jefferson |
Grand Lake (December 1-March 31) | Grand |
Silverthorne/Breckenridge (December 1-March 31) | Summit |
Steamboat Springs (December 1-March 31) | Routt |
Telluride (December 1-March 31 and June 1-August 31) | San Miguel |
Vail (December 1-August 31) | Eagle |
District of Columbia Washington D.C. (also the cities of Alexandria, Falls Church, and Fairfax, and the counties of Arlington and Fairfax, in Virginia; and the counties of Montgomery and Prince George’s in Maryland) (See also Maryland and Virginia) | |
Florida Boca Raton/Delray Beach/Jupiter (January 1-April 30) | Palm Beach and Hendry |
Fort Lauderdale Broward (January 1-April 30) | Broward |
Fort Walton Beach/De Funiak Springs (June 1-July 31) | Okaloosa and Walton |
Key West | Monroe |
Miami (December 1-March 31) | Miami-Dade |
Naples (December 1-April 30) | Collier |
Vero Beach (December 1-April 30) | Indian River |
Illinois Chicago October 1-November 30 and April 1-September 30) | Cook and Lake |
Maine Bar Harbor (July 1-August 31) | Hancock |
Maryland Ocean City (June 1-August 31) | Worcester |
Washington, DC Metro Area | Montgomery and Prince George’s |
Massachusetts Boston/Cambridge | Suffolk, city of Cambridge |
Falmouth (July 1-August 31) | City limits of Falmouth |
Martha’s Vineyard (June 1-September 30) | Dukes |
Nantucket (October 1-December 31 and June 1-September 30) | Nantucket |
Michigan Traverse City/Leland (July 1-August 31) | Grand Traverse and Leelanau |
New York Lake Placid (July 1-August 31) | Essex |
New York City | Bronx, Kings, New York, Queens, and Richmond |
Saratoga Springs/Schenectady (July 1-August 31) | Saratoga and Schenectady |
North Carolina Kill Devil (June 1-August 31) | Dare |
Oregon Seaside (July 1-August 31) | Clatsop |
Pennsylvania Hershey (June 1-August 31) | Hershey |
Philadelphia (October 1-November 30, April 1-June 30, and September 1-September 30) | Philadelphia |
Rhode Island Jamestown/Middletown/Newport (July 1-August 31) | Newport |
South Carolina Charleston (October 1-November 30 and March 1-September 30) | Charleston, Berkeley and Dorchester |
Utah Park City (December 1-March 31) | Summit |
Virginia Virginia Beach (June 1-August 31) | City of Virginia Beach |
Wallops Island (July 1-August 31) Washington, DC Metro Area | Accomack |
Washington, DC Metro Area | Cities of Alexandria, Fairfax, and Falls Church; counties of Arlington and Fairfax |
Washington Seattle | King |
Wyoming Jackson/Pinedale (July 1-August 31) | Teton and Sublette |
3. Changes in high-cost localities. The list of high-cost localities in this notice differs from the list of high-cost localities in section 5 of Notice 2015–63.
a. The following localities have been added to the list of high-cost localities: Sedona, AZ; Los Angeles, California; Mill Valley/San Rafael/Novato, California; Vero Beach, Florida; Kill Devil, North Carolina; Seaside, Oregon.
b. The following localities have changed the portion of the year in which they are high-cost localities: Denver/Aurora, Colorado; Vail, Colorado; Fort Lauderdale, Florida; Naples, Florida; Chicago, Illinois; Philadelphia, Pennsylvania; Jamestown/Middletown/Newport, Rhode Island; Jackson/Pinedale, Wyoming.
c. The following localities have been removed from the list of high-cost localities: Mammoth Lakes, California; Midland, Texas.
This notice is effective for per diem allowances for lodging, meal, and incidental expenses, or for meal and incidental expenses only, that are paid to any employee on or after October 1, 2016, for travel away from home on or after October 1, 2016. For purposes of computing the amount allowable as a deduction for travel away from home, this notice is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2016. See sections 4.06 and 5.04 of Rev. Proc. 2011–47 for transition rules for the last 3 months of calendar year 2016.
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