Discussion:Not-for-profit mileage reimbursement

Neil

Neil

The charity can reimburse at whatever rate it sees fit. But any amount over the .14 cents per mile would be taxable income to the volunteer. There were exceptions to this for Hurricane Katrina relief volunteers. See IRS pub 4492 link below.

It seems that there have been a number of bills before congress to allow increased mileage reimbursements to be tax free to the volunteers, but they don't seem to make it into law.

http://www.irs.gov/pub/irs-pdf/p4492.pdf (see page 4 regarding mileage reimbursements.

Some various light reading below:

http://www.taxlinks.com/rulings/1980/revrul80-99.htm

http://www.irs.gov/pub/irs-wd/00-0049.pdf

http://feingold.senate.gov/~feingold/releases/07/01/20070126.html

Several people have told me that I am wrong about my position, and sometimes I have wondered if I am. I know I have just reiterated most of what you said in your post,but it's nice to see that I am not the only one who takes this position and uses these same arguments. As you pointed out, these bills generally don't make it into law,but they help me to reinforce my position by the fact they are even introduced at all.

The 00-0049.pdf article is one I have not found before in my research. I have added it to my resource list to support my position.

Thanks for your help.

I do a considerable amont of volunteer work for AARP Taxaide preparing tax returns for seniors and low income for free. Our program is supported by IRS ,in fact, they provide the tax software and many lap tops . We are reimbursed the business mileage rate (currently .585 per mile ) for local transportation by AARP Foundation.

At a national meeting 3-4 years ago this question came up and we were told by a high up IRS employee we did not have to report the difference between the business rate reimbursed and the volunteer rate on our tax return.

We ask employees and nonemployees alike to travel for various business reasons. We reimburse all business miles under an accountable plan at the standard business mileage rate (or less depending on budget) whether the reimbursee's are employees or not. Further, the question of how to account for this "excess" Reimbursement as taxable comes up: if we treat as taxable wages, the nonemployee would start earning wages for services and qualify for the 58.5 cents/mile. IF we treat them as independant contractors, they would have a 1099-misc with $0 (reimbursements are not included if accounted for, see: [1]).

Rwineland, I would not be comfortable advising a client based on verbal advice from an IRS employee over the phone, without an accompanying citation from some reasonably authoritative source. Did they give you a cite? Or just what they "think"?

The rules on reimbursements are different according to whether the volunteer is treated as an employee or a non-employee. This is determined, of course, by how much "control" the organization has over the volunteer. If the volunteer is an employee, then the accountable plan rules would apply. See p 72 of the IRS fringe benefit guide: http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf, thanks to D&T for pointing out this pub on another thread.

Volunteers that do not meet the definition of an employee can receive reimbursements that are not included in gross income as long as the substantiated reimbursements do not exceed ACTUAL EXPENSES. Excess reimbursements are reportable to the volunteer on a 1099-MISC. See Rev Rul 67-30 and Rev Rul 80-99. The act of paying a volunteer may not necessarily turn them into an employee and make the accountable plan available to them, according to the fringe benefit guide.

As has been observed by Marezidotes in a post above, if volunteers could exclude reimbursements above the .14/mile from gross income, then there would be no need for special rules concerning same for Hurricane Katrina relief volunteers, nor would there be special exceptions for volunteers under the Domestic Volunteer Service Act, nor would there be any need for the Feingold bill as referenced in my earlier post.

In what appears to be some kind of letter ruling or official IRS response to a questioner here: http://www.irs.gov/pub/irs-wd/00-0049.pdf , the IRS explains that the charitable mileage rate does not include an allowance for reimbursement for the following components: depreciation, maintenance, reparis, tires, insurance, licenses, and fees, and notes that these are generally not costs incurred by the volunteer on behalf of the charity and should not be subject to reimbursement.

If reimbursements above the .14 per mile are excluded from gross income, what's to stop the charity from reimbursing them at $15 per mile? That would be a great way to attract "volunteers," would it not?

If anyone has another take on this (with cites please) I'd love to hear it. I regularly make mistakes. Right now it seems pretty cut and dried.

Please note I think the below is in contradiction to the conclusions in the foregoing discussions. In that the reimbursement of at a rate equal to or less than the federal standard rate is not income.

Note, this applies to reimbursements and not to just the use of a vehicle as a volunteer. The treatment is different if you get reimbursed from that of not getting reimbursed.

If this pub is correct, why would it not also apply to other organizations?

Pub 1828

One common business expense reimbursement is for AUTOMOBILE MILEAGE. If a church or religious organization pays a mileage allowance at a rate that is less than or equal to the federal standard rate, the amount of the expense is deemed substantiated. (Each year, the federal government establishes a standard mileage reimbursement rate.) There are no income or employment tax consequences to the reimbursed individual provided that the employee substantiates the time, place, and business purposes of the automobile mileage for which reimbursement is sought. Of course, reimbursement for automobile mileage incurred for personal purposes is includible in the individual's income.

If a church or religious organization reimburses automobile mileage at a rate exceeding the standard mileage rate, the excess is treated as paid under a non-accountable plan. This means that the excess is includible in the individual's income and is subject to the withholding and payment of income and employment taxes, if applicable.

In addition, any mileage reimbursement that is paid without requiring the individual to substantiate the time, place, and business purposes of each trip is included in the individual's income, regardless of the rate of reimbursement.

To throw another kink in, we give the volunteers a $20 gift card at Christmas for volunteering. This is wages. Now that they're paid $20 per year for their volunteer service, do they qualify as an employee to receive 58.5 cents?

"In addition, any mileage reimbursement that is paid without requiring the individual to substantiate the time, place, and business purposes of each trip is included in the individual's income, regardless of the rate of reimbursement." Note business purpose is used to mean the non-profit's "business".

CPADavid logic is good, but falls short of a complete explanation.

(i) Standard mileage rate for use of passenger automobile

     For purposes of computing the deduction under this section for
   use of a passenger automobile, the standard mileage rate shall be
   14 cents per mile.

This sentence is very clear and only applies to a charitable deduction for mileage.

I see no application to mileage reimbursements. I know that sometimes the IRS has taken the position that rate in Section 170 applies to reimbursements, however, not always.

Otherwise, what would be the need for Sec. 304 of the Katrina Emergency Tax Relief Act of 2005, which allows, for a limited time, reimbursements at the standard business mileage rate for Katrina related relief volunteers:

SEC. 304. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS EXCLUDED FROM

           GROSS INCOME.

   (a) In General.--For purposes of the Internal Revenue Code of 1986, 

gross income of an individual for taxable years ending on or after August 25, 2005, does not include amounts received, from an organization described in section 170(c) of such Code, as reimbursement of operating expenses with respect to use of a passenger automobile for the benefit of such organization in connection with providing relief relating to Hurricane Katrina during the period beginning on August 25, 2005, and ending on December 31, 2006. <<NOTE: Applicability.>> The preceding sentence shall apply only to the extent that the expenses which are reimbursed would be deductible under chapter 1 of such Code if section 274(d) of such Code were applied--

           (1) by using the standard business mileage rate in effect 
       under section 162(a) at the time of such use, and
           (2) as if the individual were an employee of an organization 
       not described in section 170(c) of such Code.

Page 119 STAT. 2025

   (b) Application to Volunteer Services Only.--Subsection (a) shall 

not apply with respect to any expenses relating to the performance of services for compensation.

   (c) No Double Benefit.--No deduction or credit shall be allowed 

under any other provision of such Code with respect to the expenses excludable from gross income under subsection (a).

Further, what would be the purpose of Feingold introducing his Bill (similar to other bills, none of which have passed): "January 26, 2007

Washington, D.C. -- U.S. Senator Russ Feingold today reintroduced the Volunteer Mileage Reimbursement Act to help charitable organizations attract and retain volunteers by making it less costly for those who travel while volunteering. Under current law, volunteers who use their cars for charitable purposes may be reimbursed up to 14 cents per mile for their donated services without triggering a tax consequence for either the organization or the volunteers. "

I don't think the fact that they have received compensation necessarily makes them an employee. They may have received "compenation," but is it "wages?" As I wrote earlier, whether or not someone is an employee rests on how much control the organization has over the volunteer. This isn't an area that I have much experience with, so don't take my word for it. I am simply referring to the IRS Fringe Benefit Guide's guidance on the treatment of payments to volunteers as employees vs nonemployees. http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf

I think there is misunderstanding on the need/purpose for Sec. 304 of the Katrina Emergency Relief Act of 2005 related to mileage reimbursement.

This act DID NOT allow reimbursements at the then existing standard business rate, but rather 70% of the standard business rate. ( where congress got 70 % who knows) . As a result, the rate for reimbursement after August 31,2005 was 34 cents per mile for Katrina related volunteer work which was different than the business rate. Keep in mind also that there are many taxpayers who don't request reimbursement but are allowed to take a itemized deduction on Schedule A based on the unique Katrina mileage rate.

How does this change the conclusion I came to? The need/purpose for the act is clear: to provide an incentive for volunteers above and beyond the .14 per mile statutorily provided, whether it be an increased reimbursement or an increased charitable deduction. The only reason to enact such a provision is because it did not exist before.

The point is that the Katrina ERA of 2005 temporarily INCREASED the amount that could be reimbursed to volunteers to some amount above the .14 per mile charitable rate without tax consequences to the volunteer.

It also increased, as you say, the amount that could be deducted by volunteers who were not reimbursed, but that isn't the question we are trying to answer, so I didn't comment on that.

• If paid: under an accountable plan, it is excludable from the income of the employee; IRC §62(a)(2)(A); Reg. §1.62-2(c)(2)

under a nonaccountable plan, it is included in the income of the employee and subject to Federal income tax, social security, and Medicare taxes. IRC § 62(c)(1)&(2) Reg. §1.62-2(c)(3)

Definition of Employee All of the following are considered employees for purposes of working condition fringe benefits: Reg. 1.132-1(b) • Current employees • Partners • Directors of the employer • Independent contractors • Volunteers

Notice, that in the guide two different positions are taken.

1. Volunteers are employees Reg 1.132-1(b), and 2. Volunteer does not meet the definition of an employee.

Excerpts, again

Government employees often use their personal automobiles for official use. An employer's reimbursement of an employee's business automobile expenses is excludable from the employee's income, if it is made under an accountable plan.

As of January 1, 2008, the standard mileage rate is 50.5 cents per mile.

Why is the rate of 50.5 cents per mile used? Because, the mileage is "business" for official use.

Excerpt....

"Reporting Payments to Volunteers If a volunteer meets the definition of an employee, the reporting rules are the same as for other employees. Therefore: • Stipends and other payments for services are wages. • Reimbursements paid under an accountable plan are not taxable and not reportable.....

If the volunteer does not meet the definition of an employee, no reporting is necessary if the only payments are reimbursements for substantiated expenses." Substantiation rules require the employee to record the date, business purpose, and place of each trip. Reg. §1.274-5T(c)(1)-(2); Reg. §1.274-5A(f)(3)

Conclusion:

A volunteer to a local government is able to exclude from income reimbursement payments made under an accountable plan for mileage, per the guide.

Mileage reimbursements to charitable volunteers for Katrina was allowed at the standard business mileage rate. Page 4 Pub 4492. Note: some rules are attached.

The following is posted from this article on the IRS website "http://www.irs.gov/newsroom/article/0,,id=151226,00.html."

"Special Rates for Katrina-Related Charitable Miles

Congress this year also approved special rates in connection with miles driven in service of charities providing Hurricane Katrina relief.

For the period Aug. 25 to Aug. 31, 2005, the rate for miles driven for charities providing Hurricane Katrina relief is 29 cents, for deduction purposes, and 40.5 cents, for reimbursement purposes. For the months of September through December 2005, the special Katrina-related rates are 34 cents for deductions and 48.5 cents for reimbursements.

For 2006, these Katrina-related charitable rates will be 32 cents per mile for deduction purposes and 44.5 cents per mile for reimbursement purposes."

Please note that there is a difference between what Katrina volunteers could deduct as a charitable deduction and what organizations could reimburse them for their volunteer mileage (which was the standard business mileage rate at the time.) Again, if the volunteer organization could already reimburse them the standard business mileage rate (the 48.5 and 44.5 cents per mile) without there being other repercussions (i.e., taxable income to the volunteer), then why would there need to be special legislation to allow it?

And why do Feingold and other members of the House of REpresentatives keep introducing legislation that will allow organizations dependent on volunteers to pay their volunteers the standard business mileage rate without having to recognize income? Go to the Thomas Legislative website and do a search on this and you will see this has been popping up at least since 2003, if not before. And remember, as others have already pointed out, there are already specific exceptions to this rule. Those are not the ones we are talking about here.

"In addition, this revenue procedure provides optional standard mileage rates for computing the deductible costs of operating an automobile in providing donated services to charity for the provision of relief related to Hurricane Katrina and for determining the amount that may be excluded from income by taxpayers who are reimbursed for such use."

".10 Section 303 of KETRA provides that the standard mileage rate for purposes of computing the amount allowable as a charitable contribution deduction for the cost of operating an automobile for the provision of relief related to Hurricane Katrina during the period beginning on August 25, 2005, and ending on December 31, 2006, shall be 70 percent of the business standard mileage rate in effect. Section 304 of KETRA provides that taxpayers may exclude from income an amount computed at the business standard mileage rate received from a charity as reimbursement for the cost of operating an automobile for the provision of relief related to Hurricane Katrina during the period beginning on August 25, 2005, and ending on December 31, 2006. Sections 2.01 and 7.01 of this revenue procedure are revised to include these special charitable contribution standard mileage rates for 2006. For the period beginning on August 25, 2005, and ending on August 31, 2005, the charitable contribution standard mileage rate is 29 cents for deduction purposes and 40.5 cents for reimbursement purposes. For the period beginning on September 1, 2005, and ending on December 31, 2005, the charitable contribution standard mileage rate is 34 cents for deduction purposes and 48.5 cents for reimbursement purposes."

Again, why would there need to be a distinction?

Oddly enough, when I started researching this, I was wanting to make sure a charity or non-profit could reimburse their volunteers the standard BUSINESS mileage rate without any repercussions, but the more I read, the more it looked as if the volunteers would have to recognize income. Please note that most articles dealing with this state that charities and non-profits can pay the "applicable mileage rates' (something to that effect), not the "business standard mileage rates" that we want them to say.

I have provided a reference to IRS Pub which allows business standard mileage rate for churches, and others have provided the local government guide that allows the business standard rate for substantiated business mileage.

"Again, why would there need to be a distinction?" Well, because of the news and political ratings, and "look we are doing something".

There, were some changes, however, that did not change the then current law for other purposes.

Please note that the mileage must be the equivalent of business mileage for the charity.

Then why is the Feingold bill called "Volunteer Mileage Reimbursement Act" instead of the "Volunteer Mileage Deduction Act"? And if what Feingold is "really talking about" is the amount a volunteer can deduct, why does the senate press release say "The legislation would raise the level of allowable mileage reimbursement for volunteers to 40.5 cents per mile, making it equal to the reimbursement rate of businesses"?

Legislation like this doesn't get proposed in a vacuum. Feingold and others must have been bombarded over a period of years by complaints from charities from all over the country regarding the restrictive reimbursements as they relate to volunteers. A multitude of CPA's and lawyers that specialize in this kind of law must have been consulted and it seems unlikely that it is all a result of a misunderstanding. However, I reserve the right to be wrong.

This has been an interesting discussion. The fact that half-a-dozen educated, intelligent, CPAs / EA's / Atty's can read the same guidance and come up with such differing conclusions about something as mundane as a mileage reimbursement speaks to the insane complexity of the tax laws.

I'm shutting this computer down and going to the beach for the rest of the day. Is it Friday yet?

Pub 4492, page 4, just reiterates what we have been saying about the special reimbursements that could be made to Hurricane Katrina volunteers without recognizing income. Is that the pub your referencing in your latest post about the business standard mileage rate for churches? Looking back, that's the only reference I see you made to a pub (other than the guide for local governments). OF course, I glanced quickly and may have missed another post.

Is the fact that most of the directives treat volunteers as an employee not important?

A number of questions about various situations are about non-authoritative sources, and therefore are just that, non-authoritative.

Can someone point to an official authoritative source that says volunteers are to be reimbursed at $.14 per mile?

The local governmental guide states that voulunteers are employees, and that employees of the local government can be reimbursed at the standard business mileage rate for their business mileage.

The Pub on churches clearly state that employees can be reimbursed at the stardard business mileage rate for their business mileage. And if voulunteers are employees it follows that they also should be treated the same.

The 0.14 per mile is the amount that a deduction can be taken for volunteer miles, and I have not find, but one time that 0.14 was the rate to use for reimbursement.

However, I maintain that volunteers that are non-employees can only exclude from income mileage reimbursements up to .14 /mile.

Volunteers often have considerable control over the days and hour they choose to work. I happened to be talking to my cousin several weeks ago, who has much experience managing volunteers. He remarked that it is very different from managing employees. "You can't just order volunteers around like you can employees. They'll tell you to take a hike."

But I also know of many instances when volunteers agree to abide by rules of control that would likely qualify them as employees.

So I think exempt organizations need to carefully consider the issue of whether their volunteers are EE's or non-EE's, if the reimbursement issue is important to them.