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Mileage and Per Diem Allowances for Members of the General Assembly Policy

In the case of members of the General Assembly, two different sets of rules apply. There is a set of rules for members that live within 50 miles of Raleigh and a set of rules for members that live more than 50 miles from Raleigh. This tax treatment is due to IRC 162(h) that used the arbitrary mileage cutoff of 50 miles in establishing tax reporting policy for State legislators.

1. For members living 50 miles or less from the capital city, per diem allowances, mileage allowances, and expense allowances must be included as wages on Form W-2, subject to all applicable tax withholding. Those members who live 50 miles or less from the capital are not considered to be away from home overnight and the reimbursement of these expenses is not effectively connected with the conduct of a trade or business.
2. For members living more than 50 miles from the capital city, the per diem allowance does not need to be included in wages because IRC Section 162(h) states that these payments are to be deemed to have been incurred in the course of ones trade or business. There is also the presumption that the expenses incurred while away from ones tax home since 162(h) states that the legislators personal residence is to be considered his/her tax home. The mileage allowance is not included as income if the members substantiate their mileage to the employer.