CCA 200115033: School bus driver expense reimbursements and accountable plans

Plain-English summary

Chief Counsel reviewed proposed advice about whether Louisiana school bus driver reimbursements for bus operating costs were wages reported on Form W-2. It found no legal error in the proposed advice but recommended further factual development and discussion of court decisions on the accountable plan rules in section 62(c). The memorandum said those decisions supported the proposed conclusion that the reimbursements did not meet section 62(c)'s requirements. It also explained that favorable small tax case decisions involving similar reimbursements could not serve as precedent or be appealed, and suggested considering removal of the small tax case designation where a broader precedent was needed.

Ruling snapshot

• Question: What additional analysis should accompany proposed advice on bus driver expense reimbursements under section 62(c)?
• Outcome: Advice given
• Key authorities: IRC §§ 62(c), 7463(b)

Full text (IRS public release)

DEPARTMENT OF THE TREASURY
I N T E R N AL R E V E N U E S E R V I C E WASHINGTON, D.C. 20224

OFFICE OF
CHIEF COUNSEL
February 14, 2001

Number: 200115033
Michael A. Swim
Release Date: 4/13/2001
CC:TE/GE:EOEG:ET1:JSpires
UILs: 62.00-00, 62.02-01, 62.02-02, 62.02-03 TL-N-100-01

MEMORANDUM FOR ASSOCIATE AREA COUNSEL, AREA 3, NEW ORLEANS Small Business/Self Employed, CC:SB:3:NO Attn: Scott Welch, Senior Attorney

FROM: Michael A. Swim
Chief, Employment Tax Branch 1
Tax Exempt and Government Entities, CC:TE/GE:EOEG:ET1

SUBJECT: I.R.C. § 62(c) - Louisiana School Bus Driver - Reimbursements
for Bus Operating Expenses

This responds to your request that this office review your proposed memorandum providing advise regarding a nondocketed case involving a Louisiana school bus driver.
We have reviewed your proposed memorandum that addressed § 62(c) of the Internal Revenue Code (Code) and whether amounts paid by the State of Louisiana to a school bus driver as reimbursements of the driver’s bus operating expenses are wages to be included on the Form W-2 provided to the employee. We did not find any legal errors in the proposed advice. However, we recommend that your memorandum be revised to address: (1) recent federal district and circuit court decisions regarding application of §
62(c); (2)
; and (3) additional
factual development in this case.

RECENT FEDERAL DISTRICT AND CIRCUIT COURT DECISIONS ADDRESSING § 62(c)

We recommend that you add a discussion of recent case law to the advice memorandum. The rules regarding accountable plans under § 62(c) have been addressed by federal district and circuit courts in several recent decisions. Specifically, it would be helpful if you addressed in the memorandum in the cases of Trucks, Inc. v.
United States, 234 F.3d 1340 (11th Cir. 2000) (commercial truck drivers); Trans-Box Systems, Inc. v. United States, 84 A.F.T.R.2d (RIA) 6479 (N.D. Cal. 1998), aff’d without published opinion, 86 A.F.T.R.2d (RIA) 5015 (9th Cir. 2000) (courier service drivers); and Shotgun Delivery, Inc. v. United States, 85 F. Supp. 962 (N.D. Cal. 2000) (courier service drivers). These cases support your conclusion that the requirements of § 62(c) are not met in your case.

REMOVAL OF SMALL TAX CASE DESIGNATION

In several small tax cases the Tax Court has held in favor of Louisiana school bus drivers who excluded similar reimbursements from wages. We note that under § 7463(b) of the Code, a decision of the Tax Court entered in any small tax case shall not be treated as a precedent for any other case and shall not be reviewed in any other court. Thus, small tax cases are not precedent for any future cases and cannot be appealed.

While the small tax case designation turns chiefly on the amount in dispute, the government has succeeded in having the small tax case designation removed in cases where a decision in the case will provide a precedent for the disposition of a substantial number of other cases or where an appellate court decision is needed on a significant issue. See, Kallich v. Commissioner, 89 T.C. 676, 681 (1987), (“Petitioners' option to elect the small tax case procedure is not unlimited, even when the jurisdictional maximum for a small tax case has not been exceeded, as the election must be concurred in by the Court.”); Page v. Commissioner, 86 T.C. 1, 13 (1986) (Petitioner’s option to elect small tax case treatment was denied because the issues were common to other cases pending before the Court).

We hope you find the foregoing information helpful. If you have any additional questions, please contact Joe Spires (Identification No. 50-17971) of my staff at (202) 622-6040.