RRA complicates charitable deduction status of travel expenses.

• Author: Crawford, Charles T.

Several provisions of the Revenue Reconciliation Act of 1993 (RRA) raise questions on how to handle travel expenses incurred in helping charitable organizations. Sec. 170(j), added to the Code by the Tax Reform Act of 1986 (TRA), limits the deduction of such expenses: "No deduction shall be allowed under this section for traveling expenses (including amounts expended for meals and lodging) while away from home, whether paid directly or by reimbursement, unless there is no significant element of personal pleasure, recreation, or vacation in such travel." This language is in substance identical to a limitation on the deduction for medical travel expenses added to the Code in 1984 (Sec. 213(d)(2)(B)). The committee reports on Sec. 170(j) commented that travel does not involve "pleasure or recreation" merely because the taxpayer enjoys doing good.

Several provisions relating to charitable travel expenses incurred after Dec. 31, 1993 raise questions.

* New Sec. 170(f)(8) requires substantiation in writing by the charity of charitable contributions of $250 or more. Taxpayers must obtain such substantiation by the time their tax returns are filed.

* Revised Sec. 274(n)(1) lowers the deduction on meal and entertainment expenses from 80% to 50%.

* Does the Sec. 213(d)(2)(B) limit of $50 a night on lodging expenses apply to charitable activities?

Substantiation of contributions

of $250 or more

The initial question is the extent that travel expenses must be aggregated to determine if a contribution is $250 or more. The RRA committee reports seem to support aggregating the expenses for each trip separately; that is, if the deductible expenses on a trip to, say, a board of directors meeting total $250 or more, the expense must be substantiated. On the other hand, the committee reports also support treating separate trips (e.g., January and September board meetings) as separate contributions. The committee reports state that "[s]eparate payments generally will be treated as separate contributions and will not be aggregated...." While there may be an argument that separate expenses are separate contributions, and a trip involving a $200 plane ticket and a $200 hotel bill need not be substantiated, it seems prudent to aggregate such items until there is authority to the contrary.

The other question is how substantiation should be handled. A practical way is for taxpayers to gather and identify their receipts, submit them to the charity and receive a...