Law and Criminal Justice

INFORMATION ALERT: Legislative Business Expenses of State Legislators

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The Internal Revenue Service (IRS) proposed a new rule last week that will preempt State definitions of a “legislative day” for the purposes of Legislator per diem tax deductions. If this proposed rule is finalized, a State “legislative day” will be defined by the IRS and may prohibit the deduction of certain types of sessions, meetings, or events.

NCSL policy supports the current 162(h) of the Internal Revenue Code, which is silent as to the definition of a “legislative day.” NCSL maintains that definitions of “legislative day” should be defined by state law, not by federal statute or regulation.

National Conference of State Legislatures is concerned about the proposed regulation because it excludes state specific legislative events where valid legislative business is conducted pursuant to state law but does not fall under the proposed provisions. NCSL opposes the promulgation of this regulation and will be submitting formal comments to the record.

NCSL also encourages individual legislators to submit comments to the record which can be done electronically at:

http://www.regulations.gov/

Or in writing to:

CC:PA:LPD:PR

Room 5203

Internal Revenue Service

P.O. Box # 7604

Ben Franklin Station

Washington, DC 20044

Dates: Comments must be received by June 30, 2008

The proposed regulation can be located at:

Federal Register

March 31, 2008

Volume 73, Number 62

Pg. 16797-16800

http://frwebgate.access.gpo.gov/cgi-bin/getpage.cgi?dbname=2008_register&position=all&page=16797

Summary: The IRS has issued proposed regulations regarding when a state legislator may claim his or her federal per diem amounts. It seeks to impose uniform standards on when this per diem would be allowed. It preempts state laws and policies currently in place in every state which provide for instances in which the per diem may be claimed. This document contains proposed amendments to 26 CFR part 1 and 26 CFR part 301, relating to business expenses of state legislators while away from home.

Background: The Internal Revenue Code (IRC) permits State legislators to deduct certain expenses incurred while conducting business as a State Legislator during each taxable year. You can view the relevant IRC provision at:

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=browse_usc&docid=Cite:+26USC162

Deductions are permitted under federal law for business conducted during “legislative days.” The term “legislative day” means days that the legislature was in session, including any day that the legislature was not in session for a period of 4 consecutive days or less OR the legislature was not in session but the physical presence of the individual was formerly recorded at a meeting of a committee of such legislature. Congress provided no more specificity or limitations as to the definition of a “legislative day.”

Explanation of Provisions: The proposed regulations state:

The definition of “State Legislator” is limited to their term of office (date sworn in until the day after term ends);
The legislature is in session when the members are expected to attend and participate;
The legislature is in session whether or not the electing legislator actually attends;
So-called "pro forma" sessions would be accepted as a "legislative day" as long as the presence of the legislator is recorded;
A formally recorded committee meeting may be claimed;
The definition of a “committee” as a group that consists solely of members of the legislature charged with conducting business of the legislature;
Other informal sessions may be accepted as long as the presence of the legislator is recorded.

Effective/Applicability Date: Applies to all expenses after the publication of the final regulations. There is no retroactivity provision.

What you can do: NCSL encourages individual legislators to submit comments to the record which can be done electronically at:

http://www.regulations.gov/

Or in writing to:

CC:PA:LPD:PR

Room 5203

Internal Revenue Service

P.O. Box # 7604

Ben Franklin Station

Washington, DC 20044

Dates: Comments must be received by June 30, 2008

For more information, please contact Susan Parnas Frederick (susan.frederick@ncsl.org) or Emily Taylor (emily.taylor@ncsl.org) at 202-624-5400.

Updated April 7, 2008