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Reimbursing Business Expenses Through Salary "Restructuring"

The IRS reconsiders its position

The IRS reconsiders its position - Letter Ruling 99916011

Article summary. The tax code prohibits employers from paying for the reimbursement of their employees' business expenses under an "accountable" arrangement through salary reductions. In a 1993 ruling, the IRS extended this prohibition to salary "restructuring" arrangements. Since such arrangements were a common church practice, this ruling had a significant impact on churches. The IRS recently issued a new ruling addressing salary restructuring arrangements. The new ruling repudiates the 1993 ruling, and suggests that salary restructuring arrangements may be used in the context of accountable plans.

In a surprise development, the IRS has issued a private letter ruling suggesting that some salary "restructuring" arrangements may be used in connection with accountable business expense reimbursement arrangements. This is a very significant ...

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  • September 1, 1999

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