SECTION 5. HIGH-LOW

SUBSTANTIATION METHOD

.01 General rule. If a payor pays a per diem allowance in lieu of reimbursing actual expenses for lodging, meal, and incidental expenses incurred or to be incurred by an employee for travel away from home and the payor uses the high-low substantiation method described in this section 5 for travel within CONUS, the amount of the expenses that is deemed substantiated for each calendar day is equal to the lesser of the per diem allowance for such day or the amount computed at the rate set forth in section 5.02 of this revenue procedure for the locality of travel for such day (or partial day, see section 6.04 of this revenue procedure). Except as provided in section 5.06

of this revenue procedure, this high-low substantiation method may be used in lieu of the per diem substantiation method provided in section 4.01 of this revenue procedure, but may not be used in lieu of the meals only substantiation method provided in section 4.02 or 4.03 of this revenue procedure.

.02 Specific high-low rates. Except as provided in section 5.06 of this revenue procedure, the per diem rate set forth in this section 5.02 is $207 for travel to any “high-cost locality” specified in section 5.03 of this revenue procedure, or $126 for travel to any other locality within CONUS. Whichever per diem rate applies, it is applied as if it were the federal per diem rate for the locality of travel. For purposes of applying the high-low substantiation

Key city County or other defined location

California

Napa Napa (April 1–November 15) Palm Springs Riverside (January 1–May 31) San Francisco San Francisco Santa Monica City limits of Santa Monica Tahoe City Placer

Colorado

Aspen Pitkin (January 1–April 30) Silverthorne/Keystone Summit Telluride San Miguel (December 20–September 30) Vail Eagle (December 1–March 31)

District of Columbia

Washington, D.C. (also the cities of Alexandria, Fairfax, and Falls Church, and the counties of Arlington, Fairfax, and Loudoun,

in Virginia; and the counties of Montgomery and Prince George’s in Maryland)

Florida

Key West Monroe (January 1–April 30) Naples Collier (December 16–April 15)

Idaho

Coeur d’Alene Kootenai (June 1–September 30) Sun Valley City limits of Sun Valley

Illinois

Chicago Cook and Lake

2003-45 I.R.B. 1041 November 10, 2003

Key city County or other defined location

Louisiana

New Orleans/St. Bernard Orleans, St. Bernard, (January 1–May 31) Plaquemine, and Jefferson Parishes

Maine

Kennebunk/Kittery/Sanford York (June 15–October 31)

Maryland

(For the counties of Montgomery and Prince George’s, see District of Columbia) Baltimore Baltimore Ocean City Worcester (June 15–October 31)

Massachusetts

Boston Suffolk Cambridge Middlesex (except Lowell) Martha’s Vineyard Dukes (June 1–October 15) Nantucket Nantucket (June 15–October 15)

Michigan

Mackinac Island Mackinac Traverse City Grand Traverse

Montana

Big Sky Gallatin (except West Yellowstone)

Nevada

Stateline Douglas

New Jersey

Atlantic City Atlantic (June 1–November 30) Cape May Cape May (except Ocean City) (June 1–November 30) Edison Middlesex (except Piscataway) Newark Essex, Bergen, Hudson and Passaic Ocean City City limits of Ocean City (June 15–September 15) Piscataway/Belle Mead Somerset; and the city limits of Piscataway Princeton/Trenton Mercer

New York

The Bronx/Queens The boroughs of The Bronx and Queens Brooklyn The borough of Brooklyn Manhattan The borough of Manhattan Nassau County/Great Neck Nassau Staten Island Richmond Suffolk County Suffolk White Plains City limits of White Plains

November 10, 2003 1042 2003-45 I.R.B.

Key city County or other defined location

Pennsylvania

Hershey City limits of Hershey (June 1–September 15) King of Prussia/Ft. Washington/Bala Cynwyd Montgomery Philadelphia Philadelphia

Utah

Park City Summit (December 15–March 31)

Virginia

(For the cities of Alexandria, Fairfax, and Falls Church, and the counties of Arlington, Fairfax, and Loudoun, see District

of Columbia) Wintergreen Nelson

Washington

Seattle King

same manner as applied under the Federal Travel Regulations, 41 C.F.R. Part 301–11 (2003), except as provided in sections 6.02 through 6.04 of this revenue procedure.

.02 Federal per diem rate. A receipt for lodging expenses is not required in determining the amount of expenses deemed substantiated under section 4.01 or 5.01 of this revenue procedure. See section 7.01 of this revenue procedure for the requirement that the employee substantiate the time, place, and business purpose of the expense.

.03 Federal per diem or M&IE rate. A payor is not required to reduce the federal per diem rate or the federal M&IE rate for the locality of travel for meals provided in kind, provided the payor has a reasonable belief that meal and incidental expenses were or will be incurred by the employee during each day of travel.

.04 Proration of the federal per diem or M&IE rate. Pursuant to the Federal Travel Regulations, in determining the federal per diem rate or the federal M&IE rate for the locality of travel, the full applicable federal M&IE rate is available for a full day of travel from 12:01 a.m. to 12:00 midnight. The method described in section 6.04(1) of this revenue procedure must be used for purposes of determining the amount deemed substantiated under section 4.03 or 4.05 of this revenue procedure for partial days of travel away from home. For purposes of determining the amount deemed substantiated under section 4.01, 4.02, 4.04 or 5 of this revenue procedure for partial days of travel away from home, either of the following methods may be

.04 Changes in high-cost localities. The list of high-cost localities in section 5.03 of this revenue procedure differs from the list of high-cost localities in section 5.03 of Rev. Proc. 2002–63. (1) The following localities (listed by key cities) have been added to the list of high-cost localities: Naples, Florida; and Coeur d’Alene, Idaho.

(2) The portion of the year for which the following are high-cost localities (listed by key city) has been changed: Santa Monica, California; and King of Prussia/Ft. Washington/Bala Cynwyd, Pennsylvania.

(3) The following localities have been removed from the list of high-cost localities: San Mateo/Redwood City, California; Sunnyvale/Palo Alto/San Jose, California; Ogden/Layton/Davis County, Utah; Provo, Utah; and Salt Lake City, Utah.

(4) The borough of Brooklyn is now separately listed as a high-cost locality and is no longer combined with the boroughs of The Bronx and Queens.

.05 Specific limitation. (1) Except as provided in section 5.05(2) of this revenue procedure, a payor that uses the high-low substantiation method with respect to an employee must use that method for all amounts paid to that employee for travel away from home within CONUS during the calendar year. See section 5.06 of this revenue procedure for transition rules.

(2) With respect to an employee described in section 5.05(1) of this revenue procedure, the payor may reimburse actual expenses or use the meals only per diem

method described in section 4.02 of this revenue procedure for any travel away from home, and may use the per diem substantiation method described in section 4.01 of this revenue procedure for any OCONUS travel away from home.

.06 Transition rules. A payor who used the substantiation method of section 4.01 of Rev. Proc. 2002–63 for an employee during the first 10 months of calendar year 2003 may not use the High-Low Substantiation Method in section 5 of this revenue procedure for that employee until January 1, 2004. A payor who used the High-Low Substantiation Method of section 5 of Rev. Proc. 2002–63 for an employee during the first 10 months of calendar year 2003 must continue to use the High-Low Substantiation Method for the remainder of calendar year 2003 for that employee. A payor described in the previous sentence may use the rates and high-cost localities published in section 5 of Rev. Proc. 2002–63, in lieu of the updated rates and high-cost localities provided in section 5 of this revenue procedure, for travel on or after November 1, 2003, and before January 1, 2004, if those rates and localities are used consistently during this period for all employees reimbursed under this method.