In Howard v. Commissioner, T.C. Memo. 2015-38, the U.S. Tax Court concluded that truck stop electrification expenses were deductible, but travel expenses and a traffic ticket were not deductible.
Facts & Procedural History
Mr. Howard was a long-distance truck driver for a Nebraska trucking company in 2009. He logged business travel for 358 days out of the year.
Mr. Howard was not required to return to his employer’s principal location to receive his next assignment; he received his new driving assignment at the end point of the previous assignment.
Mr. Howard listed his mother’s address in Kansas City on his commercial driver’s license.
Mr. Howard did not maintain a residence in 2009. He stayed with his mother’s house for three days in 2009 and was in Kansas City another five days in 2009.
Mr. Howard deducted the following amounts on his income tax return:
- state and local income taxes of $1,442;
- unreimbursed employee business expenses of $27,108 on Schedule A, Itemized Deductions, which included per diem expenses while on the road, a hotel expense, and other minor costs incurred while on the road and service fees of $7,383 for truck stop electrification (TSE) (such as “IdleAire”) at truck stops and truck rest locations; and
- the cost of a traffic ticket he paid in 2009 for a mud flap that was missing when Mr. Howard picked up the assigned trailer.
The IRS disallowed these deductions and Mr. Howard asked the tax court to redetermine his tax liability.
The issues are whether Mr. Howard was entitled to an itemized deduction for unreimbursed employee business expenses in 2009; whether he was able to deduct his unreimbursed traveling expenses, and whether he could deduct the traffic ticket resulting from a trucking equipment violation.
Unreimbursed Employee Business Expenses
The IRS conceded that the per diem expenses, a hotel expense, and the IdleAire expenses were incurred in Mr. Howard’s trade or business.
With respect to the IdleAire expenses, the IRS argued that truck stop electrification or TSE is analogous to a hotel and thus should be deemed an unreimbursed travel expense. This expense relates to TSE purchased at various truck stops and rest stops along Mr. Howard’s routes in 2009. The court did not agree with the IRS. The court concluded that TSE is analogous to a diesel fuel substitute and not a hotel and is a trade or business expense.
The court also considered whether the expenses were related to Mr. Howard’s truck, which was not listed property. The law provides heightened recordkeeping standards for expenses associated with listed property. Listed property does not include “property substantially all of the use of which is in a trade or business of providing to unrelated persons services consisting of the transportation of persons or property for compensation or hire.” The court found the TSE expenses to be related to the truck–and not subject to the heightened recordkeeping requirements.
Since IdleAire provided a detailed billing system that segregates the personal use items (such as membership fees and movies) from the invoice total, the court found that Mr. Howard was entitled to deduct the non-personal portion of this business expense.
Unreimbursed Travel Expenses
Mr. Howard asserted that his other reported unreimbursed employee expenses (per diem expenses and a hotel expense) were deductible because they were incurred while petitioner was traveling away from his home for business purposes.
Traveling expenses incurred while away from home in the pursuit of a trade or business are deductible, such as lodging, meals, travel fares, and other expenses incident to travel. The question is whether the expenses are incurred while away from home. The courts have interpreted a taxpayer’s “home,” for purposes of section 162(a), as the city or location of his principal place of business and not where his personal residence is located.
In instances when a taxpayer does not have a principal place of business, a permanent place of residence may be considered a tax home. An employee without a principal place of business may treat as his tax home a permanent place of residence at which he incurs substantial continuing living expenses. A taxpayer has a home for this purpose only when he has incurred substantial continuing living expenses at the permanent place of residence.
When the taxpayer has neither a principal place of business nor a permanent residence, he has no tax home from which he can be away. Thus, the taxpayer will not be entitled to a business deduction for traveling expenses under Section 162 as he does not have a tax home.
The court concluded that Mr. Howard did not have a principal place of business in 2009. It considered whether he had a principal residence in Kansas City with his mother. The court described Mr. Howard’s residence as follows:
Whether petitioner had a tax home and whether his mother’s house was indeed his permanent residence are factual questions resolved by the fact that petitioner made only one visit to stay with his mother during the year in question and the visit lasted three days while he served jury duty. On the five other occasions on which petitioner visited the Kansas City area, he slept in his truck parked in a casino parking lot. Additionally, petitioner kept no belongings at his mother’s house; instead, he kept them in a rented storage locker. Most significantly, petitioner bore no expenses in maintaining a home. He paid no money for rent, utilities, or any other household expenses during 2009.
Considering these facts, the court concluded that Mr. Howard did not meet the threshold requirements for his mother’s house to be deemed his permanent residence. Thus, Mr. Howard was not entitled to deduct his travel expenses.
Traffic Ticket Expense
Section 162(f) provides that no deduction shall be allowed for any fine or similar penalty paid to a government for the violation of any law. The court concluded that the traffic ticket was a fine and not deductible.