Per diem rates, substantiation of employee lodging, meals, incidentals (2015-2016)

IRS Notice 2015-63

The IRS today released an advance copy of Notice 2015-63 as the annual notice providing the 2015-2016 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home.

Related content

Notice 2015-63 [PDF 25 KB] provides:

  • The special transportation industry meal and incidental expenses rates
  • The rate for the incidental expenses-only deduction
  • The rates and lists of high-costs localities for purposes of the high-low substantiation method

Summary

The IRS historically issued revenue procedures as an annual update of the rules for determining when the amount of ordinary and necessary business expenses of an employee for lodging, meal, and incidental expenses incurred while traveling away from home were deemed substantiated under Reg. section 1.274-5 when a per diem allowance under a reimbursement or other expense allowance arrangement was provided.

The annual revenue procedure also provided an optional method for employees and self-employed individuals who were not reimbursed to use in computing the deductible costs paid or incurred for business meals and incidental expenses while traveling away from home.

In 2011, the IRS announced that it intended to discontinue the high-low substantiation method. In response to comments from a number of taxpayers that they in fact used the high-low substantiation method. Thus, the IRS issued Rev. Proc. 2011-47 stating that it would publish an annual notice that provides the special per diem rates (with the list of high-cost localities to be updated only as necessary). Rev. Proc. 2011-47 also provides the rules for using a per diem rate to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home.

With today’s release, Notice 2015-63 states that taxpayers using the rates and list of high-costs localities must comply with Rev. Proc. 2011-47.

Today’s notice also states that the rates and list of high-cost localities for the period October 1, 2014, to September 30, 2015, is included in last year’s annual notice, Notice 2014-57 [PDF 27 KB].

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