In order for travel advances and reimbursements of travel and business expenses to be excluded from an individual’s taxable income, the University’s policies must meet the IRS definition of an “accountable plan” with the following three requirements:

• Advances and reimbursements must be made for business expenses only and must be reasonable and necessary.  A necessary and reasonable expense is one for which a clear business reason exists and for which the cost is not excessive.
• Travelers must provide a Travel and Business Expense Report substantiating the amount, time, and business purpose of expenses within ten working days after the expenses are incurred. Original receipts must be submitted with the Expense Report.
• Employees must return any advance amount in excess of substantiated expenses within ten working days after the completion of the trip.

To meet these requirements, individuals must properly complete a Travel and Business Expense Report and provide documentation to substantiate the expenditures.  The documentation must provide:

• Detailed documentation of the purchase
• Documentation of the business purpose of the purchase
• Proof of payment

Federal Guidelines for Travel

The Federal Government will not reimburse certain expenses and has set forth guidelines prohibiting these costs from being charged to Federal grants and contracts, either directly or indirectly.  In order to meet these requirements, University travelers must be aware of the following:

• Federal regulations regarding air travel:  Travelers on federal grants must comply with the US Flag Carrier Rule.  With very limited exceptions, travel must occur on US air carriers
• Segregation of costs:  Certain costs must be segregated to subcodes in the  “8500” range to ensure proper exclusion from Indirect Cost Rate calculations..  Subcodes in this range cannot be charged to government grant accounts.  This applies to costs the government deems unrelated to University business (flowers, alcohol, entertainment) or excessive costs (business/first class travel, luxury hotels)

Questions as to which travel or related business expenditures are reimbursable under a particular grant or contract should be directed to the appropriate Research Administration project officer.

Expectations of a 501(c)3 organization

The IRS grants the University exemption as a 501(c)3 organization in order to accomplish our mission, which exempts the University from paying its share of taxes.  Since the University is directly supported by students and donors, and indirectly by the taxpaying public, we must be a careful steward of these funds.  It may help to remember the “front page test” – will the expense seem appropriate to others if reported on the front pages of a local newspaper?