Tax Rules and Rulings Specifically Applicable to Members of Congress
CRS Report for Congress
Tax Rules and Rulings
Specifically Applicable to
Memb ers Of Congress
Upda ted Octobe r 1 , 2003
American Law Division
Congressional Research Service ˜ The Library of Congress
Tax Rules and Rulings Specifically Applicable to
Members Of Congress
This report ex amines provisions of federal l aw, and interpretations thereof,
which provide tax rules with speci fic applicability to Members of C ongress. Thes e
incl ude rules applicable only t o M em bers and rules that , while generally applicable,
appl y i n s om e s peci fi c way t o Mem b ers. Topics covered i nclude: immunity from
cert ai n S t at e and l o cal i n com e and p ersonal p ropert y t ax es; s peci fi c rul es for cert ai n
items which m ust be i ncluded i n gross income for federal tax p u r p o s es (including
honorarium and official allowances); rules allowing certain amounts t o b e ex cluded
fro m gross income; and rules regarding allowable d eductions. This l ast t o p i c
i n cludes d iscussion of deduction o f: a M em ber's living ex p en ses i ncurred i n t h e
Washingt on metropolitan; other busines s ex penses; charitable contributions; and
moving ex penses.
ImmunityFrom Stateand Local Taxes .................................1
What Constitutes Income ............................................2
Official Allowances ............................................3
OrdinaryandNecessaryBusiness Expenses .........................8
CertainOtherBusiness Expenses ............................14
Moving Expenses ............................................15
Contributions Returned to Donors ................................15
W ithholding .................................................16
Ex cise Tax o n Acts o f S elf-Dealing with Private Foundations ..........16
Tax R ules and Rulings Specifically
Applicable to Members Of C ongress
This report ex amines provisions of federal l aw, and interpretations thereof,
which provide tax rules with speci fic applicability to Members of C ongress. Thes e
incl ude rules applicable only t o M em bers and rules that , while generally applicable,
appl y i n s om e s peci fi c way t o Mem b ers.
Immunity From State a nd Local Taxes
The Rule: A Member of Congress does not have to pay i ncome t ax es to any o f t he
S t at e or l ocal jurisdictions in the D.C. m et ropolitan area, unles s s uch M em ber
represent s such S t at e o r a di st ri ct i n such S t at e. 1
Explanati o n : A provision of federal l aw (not part of the Internal R evenue Code
(IRC)) p rovides t hat n o S tate (or any politi cal subdivision thereof, such as a county)
in which a Member of Congress "maintains a place of abode for purposes of
attending sessions of Congress" is permitted, for purposes of any i ncome t ax imposed
by the S tate (or political subdivision), t o t r eat t h at Member as a resident or
domiciliary of the S tate (or political subdivi sion) or to treat any compensation p aid
by the United S tates t o t hat M em ber as i ncome s ubject to any s uch i ncome t ax . This
provision does not grant immunity to a M ember w h o r e presents such State o r a
di st ri ct i n such S t at e. For purposes of t h i s ru le, t he term "S tate" i s s peci ally defined
to incl ude the District of C olumbia.2 Consequently, a Member of Congress does not
have to pay any income tax imposed by any o f t he jurisdictions that co n s t i t ute t he
great er Washingt on, D.C., m et ropolitan area un l ess t he Member repres ents that
jurisdiction or t he Stat e or congressional district imposing t he tax .
This tax ex emption does not ex tend to a M ember's s pouse o r d ependents who
earn i ncome i n t he W ashingt on, D.C., m etropolitan area. This fact might necessitate
a M ember and spouse filing s eparate s tate returns even t hough t hey h ad filed a joint
1 4 U.S.C. §113(a).
2 4 U.S.C. §113(b)(2).
3 See , D.C. Code Ann. § 47-1805.01, Md. Code Ann., T a x-Gen § 10-807, and 58.1 V a . Code
Personal P roperty Taxes
The Rule: A Member of Congress does not have to pay p ersonal p roperty t ax es to
any of t he Stat e or l ocal jurisdictions in the D.C. m et ropolitan area, unless such
Mem b er represent s such S t at e o r a di st ri ct i n such S t at e. 4
Explanation : M embers o f C o n g ress are ex empt from S tate or local personal
property t ax es imposed by the j urisdictions comprising the greater Washingt on, D.C.,
metropolitan area. Agai n, a p rovision of federal l aw (not part of the IRC) provides
that no State (or any political subdivision thereof) in which a Member of Congress
(other than a M em ber who repres ents the S tate or a congressional distri c t l o cated
within the State) "maintains a place of abode for purposes of attending sessions of
Congress" is allowed t o "impose a p ersonal p roperty t a x with respect to any m otor
vehi cl e o wned by such Mem b er." For p u r p o ses o f t hi s rul e, t h e t erm "S t at e" i s
specially defined t o i nclude the District of C olumbia.5 Consequently, a Member of
Congress is immune from t he personal p roperty t ax which Virgi nia co u n t i e s and
cities impose on m otor vehicl es. This immunity ex tends ex plicitly to such tax es on
motor v ehicles o wned by the s pouse o f a Member.
W hat Constitutes I ncome
The IRC defines t he term "gross inco m e " t o m ean "all income from whatever6
source derived." The t erm i s b road enough t o i nclude any economic or financial
benefit conferred o n an employee as com pensation, whatever the f o r m o r m ode by7
whi ch i t i s effect ed and al l accessi ons t o weal t h cl earl y real i z ed, ove r w h i ch t h e
tax p ayer has complete domination. 8 Because of t h e b readt h of t h i s defi n ition, in
addition t o t he salary a M em ber of C ongress is paid as compensation for performing
official duties, certain other amounts which may b e received from o t h e r sources
d u r ing t he tax able year have ex plicitly been held to be incl udable i n t he Member's
i n com e for federal t ax purposes. M any o f t he rul i n gs di scussed were i ssued pri o r t o
the enactment or passage o f a p rohibition against receiving that particular type of
C e r t a i n s peci al t ypes o f recei pt s col l ect ed by a M em ber o f C ongress have
ex plicitly been held to be “i ncome” for federal income tax purposes . These types of
recei pt s are cert ai n ex cess o r unsubst ant i at ed o ffi ci al al l o wances for t ransport at i o n
and certain amounts received from p rivate sources -- such as, honoraria; t hird-party
p a ym ent s for cert ai n offi ce-rel at ed ex p enses (i . e. t h e cost s associ at ed wi t h
newsl et t ers, t he ex pense o f operat i n g i nt ern p rogram s, and t he cost s o f o ffi ci al t ravel
4 Pub. L. 99-190, as amended by Pub. L. 100-202, codified as a note t o 4 U.S.C.§ 113.
6 26 U.S.C. § 61.
7 Commissioner v. Smith, 324 U.S. 177 (1945).
8 Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955).
to the ex t en t n o t reimbursed from o ffici al sources); and campaign contributions
converted to personal u se.
Official Allow ances
The Rule: Official allowances generally are not includable i n a Membe r 's gr o s s
i n com e because t h ey do not generat e an accessi on t o t h e M em ber's p ersonal weal t h
and b ecause t h e M em ber does n o t have com p l et e dom i n i o n over t hem . C ert ai n
ex cess p aym ent s o f t ravel rei m bursem ent s can gi ve ri se t o i n com e.9
Explanation: R ev. R ul 77-323 does find t hat certain travel allowance or
reimbursement paym ents are includable i n i ncome. The first instance is the case o f
allowances or reimbursements received b y a Member in ex cess o f amounts actually
paid as ordinary and n ecessary ex penses for o fficial transportation t hat was not "away
from home" ( e.g., al l o wances or rei m bursem ent s t he Mem b er recei ved t hat w ere i n
ex cess o f amounts t he Member actually spen t for such ex penses as tax i fares for10
travel within the W as hington, D.C., m et ropolitan area). Citing 26 C .F.R. § 1.162-
... an e m p l o ye e n eed not report o n t he tax return ex p enses for travel,
transportation, entertai nment, and s imilar purposes paid or incurred s olel y
for t he benefit o f an employer i f s uch employee i s required t o account and
does account to the employer. The ex p ense involved ar e t h ose t hat are
charged directly or indirectly to the employe r o r f o r which t he em ployee
is paid through advances, reimbursements, or otherwise, provided t he total
amount is equal t o s uch ex p enses. In such a c a s e , when reporting, the
tax p ayer need only s tate that the t otal of amounts charged directly or
i ndi rect l y t o t h e em p l o yer and recei ved from t he em pl oyer as advances or
rei m bursem ent s d i d not ex ceed t h e o rdi n ary and necessary bu s i n ess
ex penses paid or incurred b y t he employee.
Section 1.162-17(b)(2) o f t he regu lations provides t hat i f t he total o f
amounts charged direct l y or indirectly to the employer as advances,
r e i m b u r s e m e n t s, or otherwise, ex ceeds t h e o r d i n a r y an d n eces s a r y b u s i n es s
ex penses paid or incurred b y t he empl oyee and t he employee is required
to and does account to the employer for such ex penses, t he tax p ayer must11
include such ex cess i n i ncome and so state o n t he return.
9 Rev. Rul. 77-323. While this ruling i ncludes descriptions of various types of allowance
payment s chemes that are no l onger used by the House of Representatives, its approach
generally, and conclusions as to the t axability of travel expense r eimbursements specifically,
reflect current law.
10 For purposes of rule s r e l ating t o t rave l while not "away from home," t he tax " home" of
a M ember of Congress is the place where t he Member pursues their t rade or business, i.e.
11 Rev. Rul. 77-323.
Therefore, i t i s onl y t he ex cess, i f any, of recei pt s (i n t h e form o f o ffi ci al al l o wances
or reimbursements) over a m o u nts act ually spent for local travel , t ransportation,
entertai nment, and s imilar purposes , t hat m ust be i ncluded i n a Member's income.
The o t h er ex cept i o n t o t he general rul e t hat o ffi ci al al l o wances are not
includable i n a Member's gross i ncome i nvolved a llowances or reimbursements t o
a M em ber for t ravel ex penses i n curred i n connect i o n w i t h t ravel whi l e "away from
home" (e.g., travel away from t he Con g ressional District which the M ember
represents in Congress).12 W ith respect to r e i m b u r s ement of such ex penses, t he
ruling noted that IR C § 274(d) and a re gu lation p rescribed t hereunder13 disallow any
business-ex pense d eduction under IRC § 162 for away-from-home t ravel ex p enses
unless t he tax p ayer substantiates t he amount of the ex p enses and the time, p lace, and
busines s purpose of t he travel . Drawing on those res trictions on the deductibility of
away-from-home t ravel ex p enses, the ruling concluded t hat f a i l u r e to substantiate
relevant ex penses would render t he total amount of reimbursement collected by the
Member during t he tax able year includable i n h is or her gross income. The ruling
wen t o n to note i n t his connection t hat, in lieu of det ailed documentation, a
r e cogn i z ed per d iem allowance or fix ed mileage allowance could be u s e d t o
determine t he amou n t of relevant ex pens es. However, t he ruling also pointed out
that , i f a standard fix ed mileage allowance higher t han t hat recognized by the IRS for
other t ax paye r s is used for reimbur sement purposes, t hen any portion o f t he
al l o wance col l ect ed by t h e M em ber i n ex cess o f ex p enses act ual l y pai d or i n curred
must be incl uded i n gross income.14
Illegal or Prohi bi ted Payments
Generally th e l egality of the activity producing i ncome i s not relevant to the
tax ation of t he income. The IR S has ruled on t he incl usion of i ncome15 to a M ember
of funds from m any s ources which are now prohib i t e d b y s t a t u te or rule. The
viability of the rulings is not affect ed by the s ubsequent prohibition or limitation. 16
12 For ordinary t axpayers, " home" for t ax purposes is de e me d to be the principal place of
business. T hus, f or an ordinary indivi dual who works i n Washington, D.C., a nd lives in one
of the s urrounding j urisdictions, " home" is Was hington. Howeve r, solely for purposes of
the deduction t hat i s a llowed under IRC §162 for t he expenses of busine s s r elated travel
while "away from home," a Member of Congr e ss is subj ect to a s pecial rule according t o
which a Member’s tax " home" is deemed to be the District or State he or she r epresents i n
Congres s . T his special rule is discussed i n significantly gr eater detail elsewhere i n t his
13 26 C.F.R. § 1.274-5.
14 Rev. Rul. 77-323.
15 It should be noted that where t he IRS has ruled on t he includability of income it has also
recognized the deductibility of expenses incurred i n obtaining the f unds.
16 T he f ocus of t his section i s on t he tax i mplications of receipt of illegal or prohibited
payments. For a discussion on the limitations, see, C R S Congressional Distribution
Memorandum: Ou t s i d e Income Limitations On Senators and M embers of the House of
Representatives, by J ack Maskell ( February 27, 2003).
The Rule: Illegal and/or prohibited p ayments are includable i n gross income under
Explanation : P aym ent s recei ved as a resul t of ki ckbac k s , 17 ex tortion,18
em bez z l em ent , 19 and b ribery20 have been found to result in income to the recipient.
A t ax abl e event h as occur r e d s o l o n g as t he reci pi ent h as ex erci sed com m and and
dominion over t he funds.
The IRS has held t hat, if a contributor receives from a "political officeholder"
a promise t hat i s not of a "traditional and legitimate political nature" t o perform some
service (for ex ample, a promise t o "direct the app ro p r i a t e governmental office to
renew t he business license of the contributor") i n ex change for a paym ent from t he
contributor to a political campaign s pecifi ed by the o fficeholder, then the amount of
the p ayment concerned m ust b e i ncluded i n t he officeholder's gross income.21
There are criminal prohibitions specifica lly on Members receiving certain types
of paym ent s . M em bers m ay not recei ve ei t h er earned 22 income or unearned 23income
deri ved from cont ract s w i t h t h e federal governm ent . M em bers m ay not recei ve any
compensation for repres entation of private parties b efore any agency or department
of the federal government. 24 Mem b ers, as “federal offi ci al s,” are prohi bi t ed b y t he
Constitution from receiving compensation for services from any foreign government
or offi ci al forei gn i nt erest . 25
Federal s tatute prohibits a m ember from converting ex cess campaign funds to
personal u se. 26 Fo r m any years relevant t ax law h as required a Member who converts
campaign funds to personal u se to include the amount so converted in his o r h er gross
income. C ase l aw to t h is effect dates at l east as far back as 1934. 27 Statutory l aw
which implies t hat converted campaign funds must be i ncluded i n gross income is
currently set out at IR C § 527(d), which specifies certain dispositions of campaign
funds that are not treated as income to a candidate (and thus suggests t hat o ther
17 Lydon v. Commissioner , 351 F. 2d 539 (7th Cir. 1965).
18 Rutkin v. United States, 343 U.S. 130 (1952).
19 Jame s v. United States, 366 U.S. 213 (1961).
20 United Statesv.Comme r f or d , 64 F. 2d 28 ( 2d Cir. 1933).
21 Rev. Rul.75-103.
22 18 U.S.C. § 431.
23 18 U.S.C. §§ 431 and 433.
24 18 U.S.C. § 203.
25 Ar ticle I, Section 9, cl. 8.
26 2 U.S.C. § 439a.
27 Paschen v. United States, 70 F.2d 491 (7th Cir, 1934).
dispositions must be so treated). Current regu lations p r e s c r i b e d under IRC § 527
ex plicitly require converted campaign funds to be included i n gross income.28
The rules of the House and Senate and t he Ethics Reform Act o f 1989 29 pl ace
limits and/or prohibitions on certain types of i ncome. Prohibited i ncome i ncludes:
honoraria;30 i n com e for s ervi ce on boards o f d i rect ors; 31 income from practice of a
profession; 32 and i ncome for affiliating with a firm.33 The primary limit on a t ype of
inco me is a cap on outside earned i ncome. 34 The fact that the payment is illegal,
prohibited, or beyond a limit does not affect its incl usion i n gross income for federal
The rules of the House and the S enate p rohibit t he main t a i n ing o f “unofficial
office accounts.”35 In the p ast, the IRS has ruled donations to these t yp es of accounts
for s uch purposes as newsletters, 36 intern programs (not all i ntern p rograms are
considered “unoffici al office accounts), 37 and t rust s t o fi n ance offi ci al t ravel 38 were
28 See , 2 6 C.F.R.. § 1.527-5.
29 Pub. L. 101-194.
30 Although t he s t atutory honoraria ban of t he Ethics Reform Act of 1989 was declared
unconstitutional by t he Supreme Court i n United States v. National Treasury Employees
Uni o n , 513 U.S. 454 (1995), both t he House a nd the S enate have adopted internal rules t hat
prohibit a ny Member from r eceivi ng such payments. House Rule 25, cl.1(a)(2) a nd Senate
31 5 U.S.C. a pp. § 502(a)(4); House Rule 25, cl. 2(d); Senate Rule 37, cl. 6(a), (b).
32 5 U.S.C. a pp. § 502(a)(3); House Rule 25, cl. 2(c); Senate Rule 37, cl. 5(b)(3).
33 5 U.S.C. a pp. § 502(a)(1, ( 2)); House Rule 25, cl. 2(a), (b); Senate Rule 3 7 , cl. 5(b)(1),
34 5 U.S.C. a pp. § 501(a); House Rule 25, cl. 1(a)(1); Senate Rule 36.
35 House Rule 24; Senate Rule 38.
36 Rev. Rul.73-356 held that subscription ch a rges or solicited donations received by a
Member of Congress for use solely to defr a y p u b l i c ation and distribution costs of
news lette r s and other constituent r eports or questionnaires have been held by the Internal
Reve nue Service t o be i ncludable i n t h e Member's gr oss i ncome. IRC § 527(g) allows
news letter f und of Members t o be t axed as “political organization.” House Rule 24
explicitly includes IRC § 527(g) news letter f unds in “unofficial office accounts which are
prohibited by t he rule. Senate Rule 38 i s explicit but ne ve r t heless appears t o hold s uch
accounts t o be prohibited.
37 Rev. Rul. 75-146 held that donations solicited by a Member of Congress to defray t he
expenses of maintaining at l east one type of intern program have been held by the Internal
Reve nue Service t o be i ncludable i n t he Member's gr o s s i ncome. One f eature of t he
program described in the r uling was that participating i nterns spent part of t heir time i n t he
Member's office performing servi ces identical to those performed by the Member's r egular
compensated s taff personnel.
38 Rev. Rul.76-276 held that contributions to a t rust esta b l i s h e d t o f inance travel by a
Member of Congress and t hat M ember's s taff in pe r f ormi ng official duties are not
excludable " gi fts" within the meaning of IRC §102 but rather mu s t b e included i n t he
includable i n t he Member’s income. The fact that these accounts are now prohibited
does not effect the reasoning underlyi ng these rulings .
As to honoraria, t here are t wo areas of regu lation which could affect a M ember’s
t ax es. Fi rst , act ual and necessary ex penses i n curred b y a Mem b er i n t h e course of an
honorarium event may b e p aid o r r e i m b ursed b y another p erson, and are not
considered part of an “honorarium.” 39 These p ayments o r reimbursements would b e
t reat ed for t ax purposes general l y i n t h e s am e m anner as al l o wances, d i s cussed
Second, a M ember m ay direct an honorariu m p ayment be made to a charitable
organiz ation o n t he Member’s behalf an d not be in violation o f t he honorarium b an 40
or be required t o i nclude the honorarium i n i ncome. 41 Formerly,whenaMember
directed the p arty offering an honorarium t o p ay the amount concerned t o a charity,
the M ember was required t o i nclude the amount in gross i n c o m e and then the
Member could d educ t t he amount as a cha ritable contribution, if the M ember
itemiz ed deductions. Now, IRC § 7701(k) states the following rule:
TREAT MENT OF C ERT A IN AMOUNT S P AID T O C HARIT Y. -- In t he case
of any p ayment which, ex cept for section 501(b) of the Ethics i n
G o vernment Act o f 1978 [ i.e., 5 USC Appendix 7 §501(b)] , might b e
made to any o fficer or employee of the Federal Government but which i s
made instead on behalf of such officer or employe e t o an organiz ation
described i n s ection 170(c) [ i.e., a public charity] --
(1) s uch p aym ent shal l not be t reat ed as recei ved b y s u ch
offi cer o r employee for all purposes of this title and for al l
purposes o f an y t ax law of any State or political subdivision
(2) n o d eduction s h a l l be allowed under any provision of
this title (or of any tax law of a S tate or political subdivision
t h ereof) t o such offi cer o r em pl oyee by reason of havi ng such
paym ent m ade t o s uch o rgani z at i on.
Fo r p urposes of this subsection, a S enator, a Representative i n, or a
Delegate or Resident Com m i ssi oner t o, t h e C ongress shal l b e t reat ed as an
officer or employee of the Federal Government.
The E thics i n Government Act i s m ore res trictive t h a n t he IR C provision. The
amount of the honorarium which may b e p ai d t o a charity on a M ember’s behalf is
limited t o $2,000 and a qualified charity does n o t i n cl ude any organization from
Member's gr oss i ncome.
39 House Rule 25, cl. 1(a)(2); Senate Rule 36.
40 5 U.S.C. a pp. § 501(c).
41 IRC § 7701(k) .
which the Member or a M ember’s parent, s ib ling, spouse, child, o r d ependent relative
derives any financial b enefit.
A deat h gratuity paid from t he contingent fund of the House o f R epresentatives
or the S enat e has been held to be a "gi ft" which the reci pient was entitled t o ex clude
from gross income.42
There are some deductions which t he In ternal Revenue Code allows generally
i n t h e case o f any t ax p ayer but whi ch can have a s peci fi c appl i cat i o n i n t he case o f
a M em ber of C ongress. The discussion immediat el y bel o w focuses on s uch
Ordinary and Necessary Business Expenses
A d eduction for ordinary and n ecessary business expenses paid or incurred
during t he tax able year is allowed under IRC §162. There are s e v eral t yp es of
busi n ess ex p enses whi ch Mem b ers o f C ongress i n cur t hat are di fferent , o r are t reat ed
differently, t han t hose o f o ther tax p ayers.
A Member's Capital Area Living Expenses.
The Rule: S ome (n o t a l l ) M embers o f C ongress are allowed a deduction o f u p t o
$3,000 for p ersonal living ex p enses t hey i ncur while residing in the W ashington,
D.C., m et ropolitan area.
Explanation : All tax p ayers are allowed t o claim business-ex pense d eductions under
section IRC § 162(a)(2) for unreimbursed t raveling ex p enses (for ex ample, t he costs
of l odgi n g, m eal s, and i nci d ent al ex p anses s uch as d ry cl eani n g)43 which t hey i ncur
while “away from home” in the pursuit of a t rade or business. To qualify, ex penses
must be incurred at, go ing t o, or returning from a place that is distant enough from
the t ax payer’s “home” as t o r e q u i r e a s top for sleep or rest. For purposes of this
section, the “home” of a t ax payer i s t h a t t a x payer’s principal p lace of business,
which m ay be different from h is or her p lace of abode (for ex ample, s omeone who
lives in New J ersey but who commutes daily to New York t o work, New York i s t he
individual’s “home” for purposes of this de duction). Absent any specific rule t o t he
contrary, t he “home” of a M ember o f C ongress for purposes of this deduction would
be W ashingt on, D.C. ( i.e., h is or her p rincipal place of business). Generally, a
42 Rev. Rul. 55-609.
43 Interest and t axes payable i n connection with ownership of r eal and personal property are
not contemplated expenses under t his provi sion. In ot h e r words, deductions for t hose
expenses are n o t subj ect to the $3,000 ceiling and may be claimed to the f ull extent t hey
mi ght be claimed by any other taxpayer.
tax p ayer’s unreimbursed t raveling ex p ense s i ncurred while away from t he principal
place of business are deductible without limit.
However, t h ere i s a speci fi c rul e for t reat m ent of t h ese ex p enses for Mem b ers
of Congress contained i n IRC § 162(a). The first s entence o f t his s ection s ets out the
general rule, ex plicitly designating "traveling ex penses (including amount s e x p e n d e d
for m eals and lodging o ther than amounts w hich are l avish o r ex t ravagant under t he
circumstances) while away from home i n t he pursuit of a t rad e o r b u s i n e s s" to be
among the o rdinary and necessary business ex p enses for which a deduction m ay be
claimed. The s econd sentence provides t he specific rule for treatment of Member’s
ex penses, stating:
For purposes of t h e p recedi n g s ent ence, t h e p l ace o f r esi dence o f a
Member of Congress (including any D e l e g a t e a n d R e s i d e n t C o m m i s s i o n e r )
within the S tate, congressional district, or possession which he represents
in Congress shall b e considered his home, but amounts ex p ended b y s uch
Mem b e r s wi t h i n each t ax abl e year for l i v i n g ex p enses s hal l not be
deductible for i ncome t ax purposes in ex cess o f $3,000. 44
This rule differs from t he more general i n t w o i m p o rtant respects: (1) a Member's
"hom e" for rel evant p u r p o s e s i s not t h e M em ber’s regu l ar o r p ri nci p al pl ace of
busines s but rather is the S tate or congressional district t he Member repres ents in
Congress and (2) unreimbursed t raveling ex p enses i ncurred whi l e a w a y from t he
"home" design ated by t h e s tatute are not deductible without limit but rather are
subject to a $3,000 ceiling.
This rule means t hat while a M ember o f C ongress is residing in the W ashington,
D.C., m et ropolitan area t o p erform offici al dut i es, the M em ber m ay deduct u p t o
$3,000 worth o f ex p ense s f o r m eals and lodging (and i ncidental ex p enses) if they
otherwise qualify as "traveling ex penses." That i s, so long as the M ember's "home"
is far enough from W ashington, D.C., t hat a trip there would require a s top for rest
or sleep. A Member whose "home" is nearer than that is not eligible to deduct any
living ex penses i ncurred i n t he Washingt on, D.C., m et ropolitan area.45
In connec t i o n w i t h l o d g i n g e x p e n s e s , t h e IR C ge n e r a l l y d i sallows all d eductions,
including deductions un d e r IRC § 162(a), with respect to any "dwelling unit" used
by a t ax payer during t he tax able year as a "residence."46 Fo r purposes of this
disallowance, a "dwelling unit" (such as a house, an apartment, o r a condominium)
i s consi d ered used a "resi dence" i f i t i s us ed "for personal purposes by the t ax payer
44 IRC § 162(a)(2).
45 It should be noted that the s pecial designation of a Member's tax " home" only applies f or
purposes of living e xpense s i n c u r r e d by the M ember , not those i ncurred by t he Member's
spouse or any other r elative r esiding with the M ember i n his or her Washington-area abode.
T his observa tion c omplicates comput a t i o n of t he amounts of both t ypes of expenses.
Another complicating f actor in the case of e xpenses incurred f or meals i n t he Washington,
D. C. , me t ropolitan area i s t hat s uch expenses appear to be subj ect to the 50 per c e n t
limitation i mposed under IRC § 274(n).
46 IRC § 280A
... or by an y m em bers of the family of the t ax payer" for m ore t han fourteen days in
t h e t ax abl e year. 47 There i s an ex cept i o n t o t hi s rul e whi ch st at es:
Nothing i n t his s ection s hall be construed t o disallow any deduction
allowable under s ection 162(a)(2) ... by reason of the t ax payer's b eing away
from home i n t he pursuit of a t rade or business ... .48
Since i t i s p recisely "b y reason of the t ax payer's b eing away from home i n t he pursuit
of a t rade or business" that a M ember's ex p enses for lodging i n t he W ashingt on area
gi ve rise to a " d e d u c t i o n allowable under s ection 162(a)(2)," t he ex ception would
apply and the general rule under which personal u se of a d welling unit would render
such ex penses nondeductible is disregar ded. Consequent l y, i n t he case o f any
Member of Congress who i s "away from home" while re s i ding in the W ashington,
D.C., m et ropolitan area, lodging expenses are deductible even if the M em ber's family
occupies the s am e dwelling unit.
If living ex p enses are deducted under IRC §162, those s ame ex p enses m ay not
also be deducted under s ome o ther sectio n o f t he In ternal Revenue Code. Thus, for
ex am ple, the Internal R evenue Service has ex plicitly ruled t hat a Member of
Congress is not permitted t o deduct t he same item s imultaneously as both a "t raveling
ex pense" under IRC §162 and a "m oving ex pense" under IRC §217. 49
Substantiation And Use Of A P er Diem Rate.
No deduction s u n d er IR C §162 for t raveling ex p enses are allowed unless
subs t a n t iated b y adequate records o r s ufficient corroborating evidence as t o t he
amount, time and p lace, and business purpose o f s uch ex p ense. 50 Purs uant to a51 52
statutory m andate, which was subsequently repealed, t h e S ecret ary o f t he Treasury
i s s u e d t e m p o r a r y r e gu l a t i o n s p r e s c r i b i n g amounts deductible (without substantiati o n )53
pursuant t o t he Member’s rule of IR C § 162(a)." Those t emporary regulations have
not been rescinded. The various typ e s of living ex penses contem plat ed in the
t em porary regul at i ons are:
Meals i ncl u d e t h e actual cost o f food and ex p enses i ncident t o t he
preparation and serving t hereof. Lodging i ncludes amounts p aid for rent,
care o f p remises, u tilities, insurance and depreciation o f household
furnishings owned by the M em ber. In the cas e of a Member who lives in
a residence owned b y h im in the W ashington, D.C. area, the cost o f
lodging also i ncludes d ep reciation on such residence. Other i ncidental
47 IRC § 280A(d)(1) & (2).
48 IRC § 280A(f)(4).
49 Rev. Rul. 73-468.
50 IRC § 274(d).
51 Pub. L. 97-119, § 113(b).
52 Pub. L. 97-216, § 215(b).
53 47 F.R. 2986-2988 (J anuary 21, 1982). Codified at 26 C.F.R. § 5e.274-8.
ex penses incl u d e laundry, cleaning, and l ocal transportation. Lo cal
transportation i ncludes t ravel within a 50 mile radius of Washingt on, D.C.,
whet her by private automobile, t ax i cab or other t ransportation for hire. 54
These t emporary regulations set out two d ifferent methods which m ay be used
to determine t he amount of relevant living ex p enses a Member of Congress may
deduct without substantiation. One m et hod can only b e u sed b y a Member who both
owns the res idence occupied in the W as hington, D.C., m et ropolitan area and deducts
interest and t ax es with respect to that residence. Using t his m ethod, the s um of living
ex penses deductible without s ubstantiation i s computed by multiplying t wo-thirds of
a speci fied dai l y rate times t he number of "Congressional days" falling within the
t ax abl e year. 55
The other method is for use by two t ypes of Members: (1) a Member who does
not own the residence occupied and (2) a Member who, though an owner of the
residence o ccupied, for some reas on does not deduct either interest (e.g.,ifthe
residence i s not mortgaged) or ta x e s with respect to that residence. Under t his
method, the s um of living ex p enses d eductible without substantiation i s computed
by multiplying t he full amount of the s ame s pecified daily rate times t he number o f
"C ongressional days" falling wi t h i n t he t ax able year. 56 Fo r purposes of both
methods, all days during t he tax able year are considered "C ongressional d ays" ex cept
thos e i n p eriods lasting five o r m ore consecutive d ays (including Saturdays and
Sundays ) during which the p articular ch amber i n which the M ember s erves was not
in session.57 Of course, i f a Mem b er el ect s not t o u s e e i t h e r of t h e t wo speci al
methods just described, relevant deductions may s till be claimed. However, in such
a case, the amounts o f d eductible ex penses must be substantiated. 58
The statute59 and underlyi ng regu lations60 set out a rather complex formula for
coming u p wit h t he amount of relevant living ex p enses which may b e d educted
without substantiation. As a p ractical matte r, gi ven t hat t he daily rate greatly ex ceeds
$30 and t here are at l east 100 "C ongressional d ays" duri n g a part i cul ar year, i t i s s afe
to say t hat t he entire allowed d eduction o f $3,000 may, absent unusual circu mstances,
54 26 C.F.R.. § 5e.274-8(b).
55 26 C.F.R.. § 5e.274-8(c)(1)(i).
562 6 C.F.R.. § 5e.274-8(c)(1)(ii).
5726 C.F.R. § 5e.274-8(d).
58 For guidance i n s uch cases, s ee Rev. Rul. 80-62, as modified by Rev. Rul. 87-93.
59 T he t emporary r egulations refer t o “the ma x i mu m amount of actual s ubsistence f or
Washington, D.C. paya ble pursuant t o 5 U.S .C. § 5702(c)." At the time t h e temporary
regula t i ons were drafted, that provisi on, 5 U.S.C. § 5702(c), conferred authority to
prescribe, by regulation, conditions under which a Government e mployee's " actual a nd
necessary expenses of official travel" would be r eimbursed when s uch expenses exceeded
the amount of the " maximum per diem allowance" otherwise made available. T hat authority
to prescribe s uch r egulations is presently conferred under s ubsection ( a)(1)(B) of 5 U.S.C.
§ 5702, rather than under s ubsection ( c).
60 41 C.F.R. subpart 301-11.
be taken under t hese regulations wi t hout substantiation. However, if a Mem ber
l eave s o f f i c e rel at i v el y earl y i n a t ax abl e year (by v i rt u e o f ret i rem ent , deat h,
resign ation, or ex pulsion), i t might be necessary to as certain the ex act daily rate and
number o f C ongressional d ays s erved i n t he year.
The Two-Percent Floor On Miscellaneous Itemized Deductions And
The Inte raction Between It And The $3,000 Ceiling On Living E xpenses.
The IRC contains a s o-called "two-percent f l o or" on miscellaneous itemized61
deductions. Thes e "miscellaneous itemized deductions" are allowed t o be deducted
onl y t o t he ex t ent t h ey ex ceed, i n t he aggregat e, t w o p ercent o f t he t ax p ayer's adj u st ed
gross i ncome. Fo r ex ample, i f a Member of Congress has adjusted gross income of
$200,000 for a particular taxable year, t hen the first $4,000 of his or her otherwise
deductible miscellaneous itemiz ed deductions cannot be claimed.
The Rule: The living ex p enses which are s ubject to the $3,000 ceiling are
"miscellaneous itemized deductions” s ubject to the “two-percent floor.” In applyi ng
the “ceiling” and t he “floor,” the “floor” i s applied t o all the "miscellaneous itemized
deductions” first and t hen t he “ceiling” is applied t o t he living ex penses.
Explanation: The t erm "miscellaneous item i z ed deductions" m eans itemized
deductions other t han certain listed s pecified deductions. 62 The list does not include
deductions allowed under IRC § 162. Therefore, living ex p enses d e d u c t a ble b y
Members o f C ongress under IRC § 162(a) are "miscellaneous itemiz ed deductions"
subj ect t o t h e t wo-percent fl oor.
IR C § 67 ex plicitly stat es that “t his s ection s hall be applied before t he
application of t he dollar limitation of t he last sentence of section 162(a) (relating t o63
t rade o r busi n ess ex p enses)."
The "dollar limitation o f t he last sentence of section 162(a)" i s, the $3,000 ceiling o n
deductible l i v i n g ex p enses i ncurred b y a Member of Congress in the W ashington,
D.C., m etropolitan area. An ex ample o f t he i n t e r - w orking of the “ceiling” and
“floor”is as follows:
... assume that a M ember with AGI (i.e., a d justed gross i ncome) of
$100,000 has $5,000 of away-from-home ex p ense s qualifyi ng for t he
deduction (disregarding application of the $3,000 limit and t he two-percent
floor, but after application o f t he 50 - p e r c ent rule for m eal and
ent ert ai nm ent ex p enses) and $ 5 , 000 of other miscellaneous itemiz ed
deductions , f o r a t otal of $10,000 of potential d eductions subject to the
two-percent floor. Application of t he two-percent floor would limit thes e
deductio n s t o $8,000, and t he amount disallowed b ecause of the t wo-
percent floor would b e d isallowed p roportionately. Thus, after application
61 IRC § 67(a).
63 IRC § 67(f).
of the t wo-percent floor, t he Member could d educt $4,000 of the away-
from-home ex p ens es and $4,000 of the [ other] miscellaneous itemiz ed
deduct i ons. The former amount (i.e., the away-from-home ex p enses) is
further limited t o $3,000 because of the s pecial limitation o n d educting
Member's ex penses in sec. 162(a). T hus , t he Member could d educt a total
of $7,000 of miscellaneous itemiz ed deductions. 64
Other Aw a y-From-Home "Traveling E xpenses".
In ad d i t i on to those living ex p enses i ncurred i n t he W ashingt on, D.C.,
metropolitan area which are t reat ed as "t raveling ex penses" by virtue of the s econd
sentence of IR C §162(a), a Member may als o d educt u nreimbursed "traveling
ex penses" i ncurred for business t ravel t hat i s not only "away" from t hat M ember's t ax
"home" (i.e., the S tate or congressional d istrict rep resented ) but is al so "away" from
W ashingt on. Ordinarily, s ubstantiation of t he amounts concerned i s required. In this
regard, t he IR S h as ruled t hat t he per d iem al l o wance s peci fi ed i n t h e Federal Travel
Regu lations for t he locality involved and the mileage allowances specified by the IRS
itsel f will satisfy the s ubstantiation and adequate accounting requirements of R eg. §§
1.162-17(b) and 1.274-5.65 There i s n o limitation o n t he amount of these ex p enses
which m ay be deducted.
Ente rtainment E xpenses.
Determining t he ex tent to which e n t ert ainment ex penses are deductible is a
multi-step process. As an initial m atter, the ex pense must qualify as an ordinary and
necessary business ex p ense within the general meaning o f IRC § 162. If it is, t hen
the d eduction m ust not be specifically d i s a l l o w e d under any of the s pecial rules o f
IR C § 274(a). In a relevant ruling, 66 t h e IR S described t hree ex amples of
entertainment ex p enses i ncurred b y a hypot hetical Member of Congress and h eld t hat
only one of them would b e d eductible. The situation i nvolving the ex pense held to
be deductible was des cribed as follows:
A, a M em ber of C ongres s , p a ys for t he lunch of a constituent whom A
takes t o a restaurant i n order t hat A might have the time and opportunity
to discuss a problem the constituent i s having with an agency of the
Government. A had no other time to discuss t he constituent's problem .
According t o t he ruling, the discussion of the constituent's problem was evidence of
the business-relatedness of the ex pense. The ruling conclude d t h a t , s o long as the
surroundings where the l unch was furnis hed were conduc ive t o t he discussion of
business, the ex ception s pecified under IRC § 274(c)(1) applied and the ex p ense was
64 See , H.Rept. 100-795 at page 9, footnote 7; S.Rept. 100-445 at page 10, footnote 9. For
further examples, see, 26 C.F.R. § 1.67-1T (d).
65 Rev. Rul. 80-62.
66 Rev. Rul. 78-373.
By contrast, i n t he case o f ex p enses i ncurred b y a Member of Congress for a
cocktail party and buffet t o which a few constit u e n t s were i nvited but at which t he
surroundings were not conducive t o t he discussion of business, the ruling disallowed
any d eduction, citing 2 6 C .F.R. § 1.274-2(c)(7) t o t he effect that an ex pense cannot
qualify as directly related t o t h e t ax payer's trade or busines s i f t he entertai nment
concerned o ccurs under circumstances where t here is little or no possibility of
engagi ng in the active conduct o f t rade or business.
The t hird ex ample i nvolved ex p enses i ncurred b y a Member of Congress for a
part y for hi s s t aff m em b ers, secret ari es, and ai d es, al l of whom were com p ensat ed out
of his annual congressional h iring allowance. The ruling h eld t hat s uch ex p enses
were not deductible. The rational e was t hat t he ex cept i o n t o t he general d isallowance
rule of IR C § 274(a) that is set out at § 274(e)(5) and that co v e r s e x p e nses for
recreational, soci al , and similar activities primarily for t he benefit o f employees
would not apply s ince Congress, rather than the i ndivi d u al Member, was the
em p l o ye r of those attending the p arty and t hus the requisite employer-employee
relationship bet ween the i ndividual i ncurring the ex pense and t hose benefitting from
Ce rtain Other Business Expenses.
Amounts p aid from a Member's personal funds to defray t he costs o f reasonable
salaries for s taff em ployees who were i n addition t o t hose pai d from offici al
congressiona l a l l o w a nces and who were needed to handle an unusually heavy
workload have been held to be deductible business ex p e n s e s i ncurred as an
em pl oyee. 67 That same ruling also hel d, however, t hat costs similarly i ncurred for
ex tra office eq u i p m en t could only be recovered over time through deductions for
depreciation (under IRC §§ 167 and 168) rather than all at once i n t he year in which
they were act ually paid.
A lat er ruling68 amplified R evenue Ruling 73-464 to make clear that, under
appropriate circumstances, not only s taff salaries, but also office rent and "supplies"
(i.e., items consumed within the t ax ab le year) are deductible under IRC § 162(a).69
Legal ex penses i ncurred by a Member of Congress in connection with litigation
relating t o congressional red istricting h ave b een held to be nondeductible "p ersonal"
ex penses of the k ind cont emplated by IR C § 262 rather than deductible business
ex penses within the m eaning o f IRC §162. 70
67 Rev. Rul. 73-464.
68 Rev. Rul. 84-110.
69 See , Frank v. United States, 577 F.2d 93 (9th Cir. 1978), which held that expenses
incurred by a Senate staff employee in performing official duties were deductible under IRC
§ 162 even though t he sum of t hese expenses consistently exceeded that employee's a nnual
70 Rev. Rul. 67-457.
Char i t abl e Contr i buti ons
Li ke any o ther tax p ayer, a Member of Congress is allowed a d e d u c t i o n under
IR C § 170 for charitable contr i b u t i o n s made during t he tax able year. T here have
been a few rul i n gs , however, whi ch have speci fi cal l y focuse d o n c hari t abl e
contributions made by Members o f C ongress. Several h ave confirmed t he allowance
of deductions for certain types o f contributions. For ex ample, a 1956 ruling h eld t hat
a M em ber's r et urn of a portion of his salary to the Treas ury was a deductible
charitable contribution. 71
A d eduction h as been disallowed for th e donation o f a Member's congressional
papers to a university. The essential rationale was t hat t he Member had a z ero basis
in the m aterials donated.72
A d eduction i s allowed under IRC § 217 for m oving ex penses incurred during
t h e t ax abl e year i n connect i o n w i t h t h e com m encem ent o f w ork b y t he t ax p ayer at a
new "principal p lace of work." The IRS has s peci fi cal l y r u l e d t hat a cl ai m o f a
deduction under IRC § 217 by a new Membe r o f Congress for t he ex penses of
moving to the W as hington, D.C., m et ropolitan area i s not inconsistent with a claim
of a d eduction under IRC § 162 for t he s a me tax able year for living ex p enses
incurred while residing in the W as hington area. 73 The ruling did go on to point out,
however, t hat t he same expenses could not be deducted under both s ections.
Contr i buti ons Retur ned to Donor s
The IR S has rul ed t h at cont ri but i ons col l ect ed by a t rust est abl i s hed t o fi n ance
travel by a M ember o f C on gr e s s t h at remained unspent as of the d ate t he trust was
t erm i n at ed and t hat w ere s ubsequent l y returned to donors could b e d educted b y t he74
Mem b er as a busi n ess l oss.
71 Rev. Rul. 56-126.
72 See , James H. M orrison, 71 T . C. 64 ( 1979), affirmed sub. nom. M orrison v.
Commissioner , 611 F.2d 98 (5th Cir. 1980).
73 Rev. Rul.73-468.
74 Rev. Rul.76-27 6 . T his ruling had also held that contributions to a t rust established t o
finance t ravel by a Member of Congress and t hat M ember 's s taff in performing official
duties a re not excludable " gi fts" within the meaning of IRC §102 bu t r ather must be
included i n t he Member's gr oss i ncome. See , discussion of illegal or prohibited payments.
Subchapter A o f t he IR C 75 relates t o "withholding from wages." Fo r purposes
of the rules regarding withholding, IRC § 3401(a) defines t he term "wages" t o m ean,
in pertinent part, "all remuneration ... fo r s ervi ces perform ed by an em pl oyee for h i s
employer. In its turn, IRC § 3401(c) then defines t he term "em p l o ye e " to include,
inter alia, an ... el ect ed offi ci al of t h e U ni t ed S t at es." T hus , federal i n com e t ax es
must be withheld from congressional s alaries.
Exci se Tax on Acts of S el f-Deal i ng w i t h P r i vate Foundati ons
If a M em ber o f C ongress part i ci p at es i n any act of "sel f-deal i n g" wi t h a p ri vat e
foundation , the M ember i s s ubject to the h eavy ex cise t ax imposed under IRC §
4941. Various acts o f s elf-dealing are described under s ubsection (d) of IR C § 4941
and under 2 6 C .F.R. § § 53.4941(d)-1 and 53.4941(d)-2. All involve transactions or
other d ealings between a p rivate foundation and a s o-called " d i s q ualified p erson."
Fo r relevant purp o s e s , t he term "d isqualified person" is defined s peci fically to
include an individual holding "a n e l e ctive public office in the ... legi slative branch
of the Government of the United S tates."76
75 IRC §§ 3401 et seq.
76 IRC §§ 4946(a)(1)(I) and 4946(c)(1)).