Once I labored in downtown Washington D.C. I had a 50+ minute commute from my dwelling in Wheaton Md.  However I didn’t must drive.  I walked quarter-hour to Wheaton metro, had a 30+ minute metro experience to Federal Triangle, after which a 5 minute stroll to my workplace.  That was a beautiful commute.  Longish however low-stress.

Now I work at Texas Tech College in Lubbock.  This isn’t a city for strolling.  So I drive to work.  However it’s solely 4-6 minutes from my dwelling.  Candy!  I actually can not complain. 

A lot of of us, nonetheless, have the worst of each worlds: they’ve an extended commute they usually must drive it.  That may be aggravating.  And costly.

It isn’t shocking that people with actually lengthy drive commutes may assume they need to have the ability to deduct their commuting prices, particularly if they’re at a job the place continued employment could also be unsure.  To them, their work appears momentary as a result of they understand it may finish at any time.  However in Joseph Michael Ledbetter and Ashley Jones Ledbetter v. Commissioner, T.C. Summ. Op. 2023-19 (Might 25, 2023) (Choose Paris), we study that simply because work may finish at any time doesn’t make it momentary.  It makes it indefinite.  And whereas journey to a short lived work location exterior the realm the place the taxpayer lives could also be deductible, journey to an indefinite work location shouldn’t be.  Particulars under the fold.

Regulation: Deductible Journey vs. Non-Deductible Commute
Part 162(a) permits deductions for “touring bills…whereas away from dwelling within the pursuit of a commerce or enterprise.”  That’s a part of the final Congressional coverage to tax revenue after allowing taxpayers to first deduct the prices of manufacturing the revenue.  When enterprise makes a taxpayer journey away from dwelling, that may be a deductible expense.

Taken actually, §162(a) would allow deduction for the price of going to work every day.  Particularly now that extra employers are allowing distant work, you’ll be able to perceive why many taxpayers may see the prices of preventing rush hour as an expense that’s incurred “away from dwelling” so as to produce revenue.

However §162(a) has by no means been learn actually.  That’s as a result of §262 denies deductions for “private, residing, or household bills.”  The selection of the place to stay is a private selection.  That makes the bills of attending to work from your own home private bills.  That’s the reason Treas. Reg. 1.262-1(b)(5) says: “The taxpayer’s prices of commuting to his workplace or employment are private bills and don’t qualify as deductible bills.”  And that’s the reason the Supreme Courtroom has informed us to not take §162 actually. “Greater than a dictionary is…required to grasp the supply right here concerned, and no enchantment to the `plain language’ of the part can obviate the necessity for additional statutory building.” United States v. Correll, 389 U.S. 299, 304 (1967).

Should you can not take §162 actually, then you need to distinguish between non-deductible commuting and deductible journey away from dwelling.  Through the years the IRS and courts have constructed up a strong physique of steerage on that topic.  Over 24 years in the past the IRS issued Rev. Rul. 99-7 that synthesized a lot of the prior regulation.  I believe it is nice steerage and is price your time to learn and grasp.  Although it doesn’t have the identical authority as a statute or regulation, it has turned out to be very influential on the Tax Courtroom’s method to the difficulty and its ideas have develop into embedded in Tax Courtroom precedent.

One recurring subject is what occurs when a taxpayer’s work location modifications however they don’t transfer their private residence.  The IRS and the courts cope with that by a timing idea: if the change in work areas is momentary, and to a spot exterior of the realm the taxpayer lives, then these prices might be deductible journey away from dwelling.  I like how Choose Panuthos framed this subject in Hirsch v. Commissioner, T.C. Summ. Op. 2016-37: “the aim for permitting deductions for journey to and from a short lived enterprise location is to help a taxpayer who should briefly be away from his residence for an employment-based want, when it could be unreasonable to count on him to maneuver indefinitely.”

The trick is to attract the road between “momentary” and “indefinite.”  Short-term work generates the deduction.  Indefinite work doesn’t.  That’s, as soon as you’re working someplace for lengthy sufficient, your choice to not transfer any nearer turns into a private selection, reworking the bills of attending to work from “journey away from dwelling” to “commuting.” See e.g. Walker v. Commissioner, 101 T.C. 537, 549-550 (1993).  We acquired a lesson on that in Lesson From The Tax Courtroom: How A New Work Location Turns into A Tax Residence, TaxProf Weblog (July 29, 2019).

How lengthy is lengthy sufficient?  Rev. Rul. 99-7 adopts a 1-year “lifelike expectation” take a look at:

“If employment at a piece location is realistically anticipated to final (and does in truth final) for 1 12 months or much less, the employment is momentary within the absence of information and circumstances indicating in any other case. If employment at a piece location is realistically anticipated to final for greater than 1 12 months or there isn’t any lifelike expectation that the employment will final for 1 12 months or much less, the employment shouldn’t be momentary…. If employment at a piece location initially is realistically anticipated to final for 1 12 months or much less, however at some later date the employment is realistically anticipated to exceed 1 12 months, that employment will likely be handled as momentary (within the absence of information and circumstances indicating in any other case) till the date that the taxpayer’s lifelike expectation modifications, and will likely be handled as not momentary after that date.”  (emphasis equipped).

As alert readers will see from the emphasised language, the 1-year rule shouldn’t be a tough and quick rule however is as an alternative extremely contingent on the taxpayer’s specific information and circumstances.

So let’s check out the information and circumstances related to Mr. and Ms. Ledbetter.

Details:
The tax years at subject are 2015 and 2016.  Throughout these years Mr. Ledbetter, a union craft sheet metallic employee, was employed by an organization known as Day & Zimmermann.  His employer had a contract to supply companies for the Tennessee Valley Authority’s Browns Ferry Nuclear Plant in Alabama.  It isn’t completely clear from the opinion however apparently the contract was a year-to-year deal.  Plus, the companies supplied by the employer could not all the time require sheet metallic employees.  Thus, “Day & [Zimmermann] didn’t rent sheet metallic employees on a everlasting foundation.  Somewhat, the size of employment different with the dimensions of the challenge and the supply of funds.” Op. at 2.  And Mr. Ledbetter’s contract with Day & Zimmermann explicitly supplied that  “[a]ll contract work is taken into account momentary assignments.”  Op. at 7.

Mr. Ledbetter needed to drive 92 miles to get to his job: an 184 mile round-trip.  In 2015 he labored at Browns Ferry 235 days. In 2016 he labored there 252 days.  Mr. Ledbetter additionally needed to drive whereas on website.

For each 2015 and 2016 the Ledbetters took deductions for each (1) Mr. Ledbetter’s mileage driving to Browns Ferry and (2) his on-site driving.  On audit, the IRS disallowed the deduction for (1) however allowed a deduction for (2).

The Ledbetters well timed filed a petition in Tax Courtroom which takes us to ….

Lesson: Indefinite is Not Short-term
Mr. Ledbetter pointed to the language in his Day and Zimmermann contract to argue that his work assignments at Browns Ferry have been momentary assignments to a location exterior of his dwelling space.  He defined that the TVA contractors had modified over time and that between 2012 and 2019 he had been employed by 5 completely different contractors, the final one being Day and Zimmermann.  Op. at 7.  The assignments have been all the time contingent on funding and there was all the time the potential for work stoppages.

Choose Paris was not persuaded.  She notes that Mr. Ledbetter had labored at Browns Ferry steadily from 2012 by 2019.  Throughout all that point there was just one 4 month layoff and after 2014 there was “no substantial break in his employment.” Op. at 7.  Furthermore for the 2 years at subject “the longest break between workdays was 9 days.”  Op. at 3.

These information and circumstances made it unrealistic for Mr. Ledbetter, in 2015 and 2016, to assume his employment at Browns Ferry would final lower than one 12 months.  Writes Choose Paris: “Whereas it’s true that Mr. Ledbetter’s work assignments have been indefinite in size, it can’t be stated that his employment on the Browns Ferry Nuclear Plant was momentary as that time period is outlined by the caselaw. *** The Courtroom due to this fact concludes that Mr. Ledbetter’s employment…was indefinite and never momentary.” Op. at 7.

Backside Line: Indefinite work is when you don’t have any cause to assume the work will finish at any specific time.  In distinction, momentary work is when you’ve gotten a practical expectation that it will finish, and finish inside one 12 months.  Sure, all employment is momentary, however solely in the identical sense that life itself is momentary.  Realizing that you’ll die sometime is sort of completely different than being identified with a deadly illness and being informed that you just can not realistically count on to stay greater than a 12 months.

Coda: Mr. Ledbetter’s one-way journey was 92 miles.  That’s positively an extended commute however nothing in comparison with Hector Baca’s 300 mile journeys from El Paso to Midland, TX, which journeys Choose Holmes discovered to be a non-deductible commute, utilizing a lot the identical method as Choose Paris right here.  See Baca v. Commissioner, T.C. Memo. 2019-78. 

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Bryan Camp is the George H. Mahon Professor of Regulation at Texas Tech College Faculty of Regulation.  He invitations readers to return every Monday (or Tuesday if Monday is a federal vacation) to TaxProf Weblog for an additional Lesson From The Tax Courtroom.

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