SECTION 3. DEEMED

SUBSTANTIATION FOR RIG- RELATED EXPENSES

Q-8. What is the amount of rig- related expenses that can be deemed substantiated under this revenue proce- dure?

A-8. If an eligible employer either provides fuel or separately reimburses fuel expenses, expenses of up to $8 per hour for welding rigs or mechanics rigs may be deemed substantiated if the other requirements in this revenue procedure are met. If an eligible employer does not provide fuel or separately reimburse fuel expenses, rig-related expenses of up to $13 per hour for welding or mechanics rigs may be deemed substantiated if the other requirements in this revenue procedure are met.

Q-9. For what types of vehicles may rig-related expenses be deemed substan- tiated?

A-9. Under this revenue procedure, rig-related expenses may be deemed substantiated only with respect to welding rigs and mechanics rigs. For purposes of this revenue procedure, welding rigs are ¾ ton or heavier trucks equipped with a welding machine and other necessary equipment, such as tanks and generators. For purposes of this revenue procedure, mechanics rigs are heavy trucks equipped with a permanently installed mechanics bed and other necessary equipment that is used to repair and maintain heavy machinery on a job site. As explained in Answer 11, mechanics rigs and welding rigs are qualified nonpersonal use

vehicles. The rule in this revenue procedure is not available for any other vehicles.

Q-10. May expenses be deemed sub- stantiated for pickup trucks under this revenue procedure?

A-10. No. Expenses for pickup trucks may not be deemed substantiated as rigrelated expenses under this revenue procedure unless the pickup truck is part of a welding rig as described in Answer 9. (See Rev. Proc. 2001–54 for rules under which the amount of ordinary and necessary expenses of local travel or transportation incurred by an employee will be deemed substantiated under § 1.274–5 when an employer provides a mileage allowance under an accountable plan.)

Q-11. Are welding rigs and mechanics rigs qualified nonpersonal use vehicles?

A-11. Under the authority of § 1.274– 5T(k)(2)(ii)(S), the Commissioner, solely for purposes of applying the deemed substantiation rule in this revenue procedure, designates the welding rigs and mechanics rigs as described in Answer 9 as qualified nonpersonal use vehicles.

Q-12. For which employees may an eligible employer deem rig-related expenses substantiated under this rev- enue procedure?

A-12. An eligible employer may deem rig-related expenses substantiated only for employee rig welders and heavy equipment mechanics who are required, as a condition of employment, to provide a welding or mechanics rig for use in providing personal services as an employee.

Q-13. Under what circumstances may an eligible employer anticipate that an employee would incur rig-related expenses while performing services as an employee for an eligible employer under the deemed substantiation rule?

A-13. An eligible employer’s reimbursement will meet the business connection requirement of § 1.62–2(d) if the eligible employer reasonably anticipates that the employee will incur rig-related expenses in connection with the performance of services for the employer. It would not be reasonable for an eligible employer to anticipate that an employee would incur rig-related expenses for hours that it actually knew the employee’s rig was not used (such as during a work stoppage for inclement weather).

2002–23 I.R.B. 1101 June 10, 2002

Q-18. May an employee treat pay- ments made under a nonaccountable plan as if they were made under an accountable plan by voluntarily substan- tiating expenses and returning any excess to the employer?

A-18. No. An employee cannot create an accountable plan. Under § 1.62– 2(c)(3), if an employer provides a nonaccountable plan, an employee who receives payments under the plan cannot compel the employer to treat the payments as paid under an accountable plan by voluntarily substantiating the expenses or returning any excess to the employer.

Q-19. May an employee deduct any rig-related expenses that exceed those reimbursed by an employer and deemed substantiated under this revenue proce- dure on Schedule C, Profit or Loss From Business?

A-19. No. Expenses incurred in connection with the trade or business of being an employee may not be deducted on Schedule C.

Q-20. May an employee deduct any rig-related expenses that exceed those reimbursed by an employer and deemed substantiated under this revenue proce- dure on Schedule E, Supplemental Income and Loss?

A-20. No. Expenses incurred in connection with the trade or business of being an employee may not be deducted on Schedule E.

Q-21. May an employee deduct expenses that an eligible employer has already reimbursed under an account- able plan?

A-21. No.