SECTION 5. SPECIAL RULES FOR

EMPLOYERS

Q-22. May an eligible employer estab- lish an accountable plan to reimburse rig welders or heavy equipment mechan- ics for non-rig-related business ex- penses?

A-22. Yes. An employer may establish a separate accountable plan to reimburse non-rig-related employee business expenses incurred by rig welders or heavy equipment mechanics in addition to the arrangement provided under this revenue procedure. For example, Rev. Proc. 2001–47 provides rules under which an employer may establish an accountable plan for which the amount of ordinary

and necessary business expenses of an employee for lodging, meal, and incidental expenses or for meal and incidental expenses incurred while traveling away from home will be deemed substantiated under § 1.274–54.

Q-23. May an eligible employer sub- stitute a rig-related reimbursement for a portion of wages otherwise payable to an employee?

A-23. This revenue procedure is not intended to permit the recharacterization of wages otherwise payable to an employee. For example, if an employer normally pays an employee $35 per hour in wages and does not provide a rig reimbursement in the event of inclement weather, the employer may not recharacterize a portion of the $35 hourly wage into rig reimbursement during inclement weather. If an employer’s reimbursement or other expenses allowance arrangement evidences a pattern of abuse of the accountable plan rules, then all payments made under the arrangement will be treated as paid under a nonaccountable plan.

Q-24. What are the tax consequences if an employer that uses the deemed sub- stantiation rule in this revenue proce- dure provides an additional reimburse- ment of rig-related expenses?

A-24. If an employer that uses the deemed substantiation rule separately reimburses an employee for any rigrelated expenses, the additional payment is treated as paid under a nonaccountable plan. Thus, the additional payment is reported as wages or other compensation of the employee’s Form W–2, and is subject to withholding and payment of income and employment taxes.

For example, employee A is reimbursed for rig-related expenses deemed substantiated under this revenue procedure, and A incurs expenses for cleaning the rig and an oil change. The employer pays employee A an additional $25 per week to cover cleaning and the oil change. Because the employer also pays a rig reimbursement under this revenue procedure, the $25 paid by the employer is treated as paid under a nonaccountable plan. Thus, the additional payment is reported as wages or other compensation of the employee’s Form W–2, and is subject to withholding and payment of income and employment taxes.