Notice 2011-81

This annual notice provides the 2011-2012 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 rates (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. , 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.

The special M&IE rates for taxpayers in the transportation industry are $59 for any locality of travel in the continental United States (CONUS) and $65 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 section 4.01 of Rev. Proc. 2011-47 (the per diem substantiation method) are $242 for travel to any high-cost locality and $163 for travel to any other locality within CONUS. The amount of the $242 high rate and $163 low rate that is treated as paid for meals for purposes of § 274(n) is $65 for travel to any high-cost locality and $52 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 section 4.02 of Rev. Proc. 2011-47 (the meal and incidental expenses only substantiation method) are $65 for travel to any high-cost locality and $52 for travel to any other locality within CONUS.

2. High-cost localities. The following localities have a federal per diem rate of $202 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.

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 5.03 of Rev. Proc. 2010-39 (changes listed by key cities).

a. No localities have been added to the list of high-cost localities.

b. The portion of the year for which the following are high-cost localities has been changed: Yosemite National Park, California; and Chicago, Illinois.

c. The following localities have been removed from the list of high-cost localities: Phoenix/Scottsdale, Arizona; South Lake Tahoe, California; Silverthorne/Breckenridge, Colorado; Riverhead/Ronkonkoma/Melville, New York; and Stowe, Vermont.

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, 2011, for travel away from home on or after October 1, 2011. 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, 2011. See sections 4.06 and 5.04 of Rev. Proc. 2011-47 for transition rules for the last 3 months of calendar year 2011.

The principal author of this notice is Eric D. Brauer of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Mr. Brauer at (202) 622-4970 (not a toll-free call).