Letter Ruling 99916011
Background. A securities firm employs investment consultants who incur travel and other employee business expenses in connection with the performance of services for their employer. The company adopted a plan to provide for the reimbursement of employee business expenses incurred by the investment consultants. It contains the following features:
- The plan is mandatory for all investment consultants within the company.
- Investment consultants are reimbursed for employee business expenses that would be deductible as business expenses on their personal tax returns.
- Prior to the start of a calendar year, each investment consultant's manager determines the amount, if any, to be excluded from the consultant's commissions in the next year. If the manager reduces a consultant's commissions, such amount is not less than $600 and not more than the reimbursement "cap." The reimbursement cap equals the greater of $10,000 or 2.5% of the consultant's commissions in the prior year. The amount of reimbursement that a consultant may receive under the plan in a calendar year may not exceed the lesser of the actual expenses or the reimbursement cap.