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Transportation Brief: The Tax Law and Motor-Carrier-Sponsored Per Diem Plans

by Kelli M. Block, Steven A. Pletcher

March 5, 2018

The Act suspended the ability of employee truck drivers from itemizing deductions related to meal and incidental expenses they incur while on the road. But the Act did not affect a motor carrier’s ability to treat the amount of an over-the-road driver’s compensation that accounts for those expenses as nontaxable under a properly structured per diem plan. As a result, some pundits are encouraging motor carriers to make more aggressive use of per diem programs to increase interest among potential new hires. 

While the Act’s suspension of itemized deductions renders sponsorship of a per diem program more attractive on some levels, caution is warranted! The IRS has traditionally taken a dim view of these plans and may perceive the change in the deductibility of per diem expenses by individual employee drivers as a means to undercut the ongoing viability of such plans.

Caution is also warranted on the wage and hour front. A driver’s participation in a properly structured per diem program does not impact the motor carrier’s obligation to comply with federal minimum wage laws and pay the driver a proper rate.  The plaintiffs’ bar has doggedly pursued motor carriers in an effort to prove otherwise.  The Firm anticipates that some will view the Act’s changes as an opportunity to revisit the impact of per diem plan participation on minimum wage law compliance.     

While the Act did not change the motor carrier’s side of the balance sheet when it comes to properly structured per diem plans, motor carriers must ensure their per diem plans are carefully structured to withstand increased scrutiny by adversaries.

 

Scopelitis’ Transportation Brief® is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.


 

Also in this issue:
  • Transportation Brief: The New Tax Law Overview
    by Kelli M. Block , Elizabeth M. Bolka , Steven A. Pletcher
    The Tax Cuts and Jobs Act (the Act) resulted in the most sweeping tax overhaul in decades. This offers overview of the changes in the Act that may have the most significant impact upon the transportation industry. Read Scopelitis' more here.
  • Transportation Brief: Business Income Tax Rates
    by Ronald J. Morelock
    The centerpiece of the Act is a permanent reduction to the corporate income tax rate.  Read Scopelitis' insight here. 
  • Transportation Brief: Temporary 100% Expensing
    by Ronald J. Morelock
    For qualified property acquired and placed in service after September 27, 2017, and before 2023, the Act temporarily increases the additional first-year bonus depreciation percentage from 50% to 100% with the percentages phasing down annually through 2026.  Read Scopelitis' insight here. 
  • Transportation Brief: Like-Kind Exchange
    by Elizabeth M. Bolka , Ronald J. Morelock
    Under the prior tax law, owners of investment and business property could defer paying tax on gains if they exchanged property held as an investment or use in the taxpayer’s trade or business for property of a “like-kind” (1031 exchange). The Act retains like-kind treatment for real estate exchanges. Read Scopelitis' insight here. 
  • Transportation Brief: Spotlight on Taxation Practice Area
    When federal laws took effect at the beginning of 2018, Scopelitis attorneys acted quickly to assist with federal compliance issues, and with the subsequent issues that continue to arise as states readjust to align with the new tax environment. Each member of Scopelitis’ Taxation Practice offers a unique set of experiences and thought leadership. Read more about them here.
  • Transportation Brief: For the Record
    We are pleased to announce that Jerry Cooper, a Partner in the Firm’s Chicago office, has been reappointed as a member of the Illinois Workers’ Compensation Commission Self-insurance Advisory Board effective through January 1, 2022.
  • On the Road
    Scopelitis attorneys are often invited to participate in meetings with transportation industry leaders. Learn more about their trips this quarter.
  • Dispatches
    Transportation Industry News & Trends