Authorship Credit:Carter Norfleet and Shareef Farag. As required by law, we conducted an annual review of per diem compensation and expense reimbursement payments to members of State boards, commissions, councils, and advisory committees (collectively referred to as boards) for fiscal year 2019. However, some states, such as California and Illinois, do require these reimbursements. 4, pt.2, 1, (2)(a). If the employer does not have an accountable plan, then any reimbursements, even those that are ordinary and necessary, are taxable income. Telecommunication 47.73.3701 Reimbursement under the Reimbursement Expansion Act this Section. k6$ LPXDyA A meal and incidental expense reimbursement, excluding lodging, transportation and communication expenses, shall be paid to any state employee while traveling on authorized state business not to exceed a predetermined amount pursuant to subsection C of this section. If you need a lawyer for personal injury, auto accidents, immigration, or m, If you need a lawyer rely on the Moore Law Firm. An expense does not have to be indispensable to be considered necessary.. Former ARIZ. CONST. A: Alaska, California, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Minnesota, Montana, New Hampshire, New York, North Dakota, Pennsylvania, South Dakota, and Washington, DC all have enacted statutes which bear on expense reimbursement. Check out our online talks on topics that matter most when protecting your business and taking care of your team. endstream
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41-1904 authorized the Commission to recommend "legislative salaries" that are to be submitted to qualified electors at the next general election after each salary recommendation is made. The director of the department of administration shall also establish policies and procedures for claiming lodging and meal and incidental expense reimbursements and long-term subsistence allowances by persons temporarily required, for a period of not less than thirty days, to reside away from their primary place of residence. The voters did not intend this result when they passed Proposition 302. Under the 2005 Code the educator's expense deduction was scheduled to expire on December 31, 2005, as discussed in TIRs 05 . Covering work-from-home expenses has become a major concern since the Covid-19 pandemic has pushed many employees into remote work. Expense reimbursement lawsuits were already commonplace before the pandemic, and with no end in sight to the pandemic and employees working from home, employers can expect additional lawsuits to be filed. Rather, an employer should assess on a case-by-case basis the expenses incurred by an employee and make a reasonable determination as to what the proper level of reimbursement is for the expense claimed. Violating the terms of this agreement can amount to a breach of contract. -Q3z78Zkx6
Several states have also enacted their own expense reimbursement laws that either meet or exceed the standard set forth in the FLSA. Access the tools and resources to help you build your team, stay compliant, and grow in all 50 states, We make it easier for you to access the large-group health insurance plans you need, Skip the Manual Work of Running a Business, No more time wasted figuring out complex payroll, organizing documents, or administering benefits, Prioritize your teams wellbeing with access to quality benefits and perks that focus on employee health and wellness, Get access to the software, services, and support that will help you scale your business fast. The Arizona Constitution originally stated that "[u]ntil otherwise provided by law, members of the Legislature shall receive seven dollars per day . If housing or meals are provided, the reimbursements may be less than, and cannot exceed, the lodging and meal and incidental expense reimbursements provided for pursuant to subsection C. You're all set! The director may change the maximum amounts from time to time and may establish a separate maximum amount for geographical areas of the United States if the director finds that the reasonable cost varies significantly in one or more areas. (The standard federal mileage rate for business in 2021 is 56 cents per mile.). Lost your password? 928 0 obj
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art. This will help combat employees sitting on reimbursement requests for months or years, but ultimately the deadline to submit a reimbursement request will depend on state specific laws where they exist. It should be noted that what constitutes reasonable is a fact specific exercise and that employers should approach each employee reimbursement request as such. Publicity Pamphlet at 159. Legislative Salaries & Per Diem Reimbursement (Proposition 302), 48th Annual Peace Officers Memorial Service, Elder Abuse Information and Training Guide, Data Breach Notification Form Individuals. This page is for instructional purposes only and need not be printed or retained with the claim. P)%{u2 m@rD
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This is why a good employee expense reimbursement policy can be handy. When an employer reimburses an employee pursuant to an accountable plan, the reimbursement wont count as wages or income to the employee. Ann. Consider drafting a plan doing so will likely save everyone time, confusion, and stress. In addition, if any expenses are paid in excess of IRS limitations, then the excess is taxable income. Legislative reimbursement continued to be governed by then A.R.S. Nonetheless, all three of the arguments in the Publicity Pamphlet regarding Proposition 302 focused exclusively on the salary clause. If the employer establishes a written accountable plan, and the employees submit properly documented expenses under that plan, then the reimbursements shouldnt count as taxable income. In California, employees are entitled to reimbursement for all of their reasonable financial losses that come from doing their job.[11]. By the time the Commission was created in 1970, Arizona courts had distinguished between "salary" or "compensation" and "reimbursement." Reimbursement for travel expenses in the State of Arizona applies only to public employees and officers, public institution employees, board members, or any other agency of the state. 4, pt. Arizona Revised Statutes Title 23. In Ariz. Att'y Gen. Op. Copyright 2023 Shouse Law Group, A.P.C. This form is not to be used to record allowances. However, a key to maintaining any accountable plan is to properly and timely substantiate expenses. Salary: $150,000 - $220,000 per year. Learn more about our compliance support. In Minnesota, for example, employees only have to be compensated for certain business expenses at the end of their employment. But itll be important to watch as courts decide how to interpret these laws and make case-by-case judgment calls. There is a certain expectation that if an employee uses their own money on the business's behalf, they should get reimbursed. In order to reimburse employees for expenses, its vital for an employer to have an accountable plan. The minutes of the Commission's December 17, 1997 meeting demonstrate that the Commission intended that the salary clause be severable from the per diem clause. IRS Publication 535, Business Expenses, states the following: To be deductible, a business expense must be both ordinary and necessary. 7` )-4c!ftl@TZtJdD%. All rights reserved. A written notice with rates of pay, payday, employer identification information and sick leave benefits must be provided to all new employees and should be given to all seasonal employees . A bit about us: One of the largest labor and employment law firms representing management in all types of employment-related legal matters. As if IRS regulations werent enough to keep up with, some states are adding their own expense reimbursement laws that your staffers will have to comply with, too. We do not handle any of the following cases: And we do not handle any cases outside of California. Even with an accountable plan, there are some things to look out for. If housing or meals are provided, the reimbursements may be less than, and cannot exceed, the lodging and meal and incidental expense reimbursements pursuant to subsection C of this section. 708 0 obj
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home utilities, like heat and air conditioning. See Earhart v. Frohmiller, 65 Ariz. 221, 178 P.2d 436 (1947). 2, 22. 61 (a)(1), whereas payments such as per diem that are intended to reimburse an employee for expenses incurred on behalf of the employer, are generally considered to be nontaxable. While theyre not required by the IRS, accountable plans help you set criteria that comply with IRS regulations on what reimbursements are deductible and what reimbursements count as taxable income. Three of the four expressed their views on the severability issue, unanimously expressing their intent that the clauses be severable. App. When employees receive an expense reimbursement, typically they wont be required to report such payments as wages or income. This distinction between salary and per diem reimbursement is not unique. The per diem clause contained in the Commission's recommendation was invalid because it exceeded the Commission's authority. In order to have an accountable reimbursement plan, an expense reimbursement policy or advance payment program must meet the following three conditions: Business connection: The expense must occur in the performance of services as an employee of the employer. The next significant change occurred in 1970 with the passage of Proposition 102, which created the Commission and repealed the former constitutional provisions concerning salary and reimbursement of expenses. 'H"2Hd) ~ K(7e[4;'^|IMw!o*m5{wp!s(
`*wM9nrXnI7}@PBYr fBw. hbbd``b` In 1958, the Legislature placed on the ballot, and the people approved, an amendment to the Arizona Constitution that provided for an annual legislative "salary of one thousand eight hundred dollars as compensation for services . Title 38 recognize the difference between salaries (seeChapter 4, Article 1 ("Salaries")) and per diem reimbursement (seeChapter 4, Article 2 ("Reimbursement for Expenses")). 2, 1, (2)(a) and (2)(b). hUn09imc8.=(2%C}"S6dR7@@*8k07\H05`kH? Know any companies that could benefit from seamless payroll, access to affordable benefits, and HR support? First, double-check if your own state has any laws or any legislation circulating that could lead to new rules in the near future. This is a recent change in tax law. Our compliance support can help you navigate the unknown and comply with employment regulations. No matter whether a company is big or small, every business incurs costs and expenses that may reduce the business' taxable income. Streamline and simplify time tracking for you and your workforce. A long-term subsistence allowance for legislators shall be established pursuant to section 41-1104. D.C. Municipal Regulation Title 7, Section 910.1, Massachusetts General Law Chapter 149, 148A, Fraelick v. PerkettPR, Inc., 83 Mass. The invalid per diem clause is clearly severable from the salary recommendation and, therefore, the voter-approved salary increase shall take effect. 2, 1. ,t\>C50 c?6s@mR Under Arizona law, two provisions are severable if severance is consistent with the intent of those who created the law. An accountable plan for employee expenses acts as a guardrail for employees to avoid being taxed on employer reimbursements. See Earhart v. Frohmiller, 65 Ariz. at 226, 178 P.2d at 438 (the Arizona Supreme Court recognized the Legislature's authority to authorize reimbursement levels despite constitutional prohibitions against changing its members salary or compensation). Definitely recommend! What Counts as Employee Business Expenses? hbbd``b`9$ #5 "*MD${H <7' *@, KHp($W0012Y"!3(n0 p
B. 2, 1. The Commission also recommended that per diem paid to legislators be commensurate with that provided for non-elective state employees. This approach is likely effective for employers in dealing with cell phone reimbursements as an employees cell phone bill is usually a fixed cost. A trustee is entitled to be reimbursed out of the trust property, with reasonable interest, for: 1. For example: Companies usually mandate receipts. . . It depends on the situation. Sometimes, employees not just employers are the ones who incur business expenses. The standard mileage rate is set by the IRS each year. . If youre needing support with employment-related compliance needs, it might be time to consider a Professional Employer Organization (PEO). Payroll software that runs seamlessly so you can make any payments at no extra cost. Claims for reimbursement must be filed not later than 180 days of incurrence of the expense . See1968 Ariz. Sess. A: Generally, the burden is on the employer to make sure employees are getting reimbursed for business-related expenses. They shall also receive mileage one way, by the shortest practicable route, at the rate of twenty cents per mile." art. Thats where employee expense reimbursement comes in. As states continue to address expense reimbursement in But if you work in Illinois, state law now says employees can provide a signed statement if they lose a receipt. Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. Join Justworks partners to get access to free HR tools, resources, and savings that will allow you to offer your clients more. B. I'm interested in receiving information about Justworks.
QhK Consequently, legislators should be paid per diem using the rates in effect for legislators prior to the passage of Proposition 302; that is, using A.R.S. Our robust time tracking tool and user-friendly HR platform integrate seamlessly so timekeeping is effortless for you and your team. The director may change the maximum amounts from time to time and may establish a separate maximum amount for geographical areas of the United States if the director finds that the reasonable cost varies significantly in one or more areas. Premier client service, as outlined in the firm's Client Pledge, is one of the firm's top priorities and a cornerstone of its core values. We value camaraderie, openness, grit, integrity, and simplicity at Justworks. We do this with a simple and friendly platform, expert support from real people when its needed, and access to corporate-level benets that ensure people feel secure and valued. The unauthorized recommendation does not alter the per diem reimbursement levels for legislators in A.R.S. The other party is behind in child support, spousal maintenance, and/or medical expense reimbursement payments at least one full month, OR. 2. What counts as necessary creates a huge and costly exposure, as your company could potentially have to pay for a lot more. 41-1104. Several states have also enacted their own expense reimbursement laws that either meet or exceed the standard set forth in the FLSA. . ~Rhg,$u"KqaN:SncRS -(dg"R80gy3j"25c%BVWI>/q/3[k9!C=uzd82]&Bfr_*F>$wXjUT
legislation and in court, its important for Finance to stay vigilant and For instance, if the employer has an accountable plan, but the employee fails to properly substantiate the expenses within a reasonable time, or the employee fails to return excess advance payments, then any reimbursements could become taxable income. Download your free copy of Business Expenses: A Beginner's Guide To Building A Plan to find the helpful advice you're looking for. gV+(8 of The commissioners were the architects of the language and intended that the salary increase be allowed to stand even if the per diem clause were invalid. Make sure that you understand and follow the applicable laws in the states where you have employees. Your company required or approved the employee to make the expense. Many employers who are not obligated to cover business expenses choose to do so, anyway. Which states are at the forefront of this legislative The arguments did not mention the per diem clause. h233Q0Pw/+Q0L)63 )I0i1P *V? U? Former ARIZ. CONST. A 50-state survey summarizing business expense reimbursement requirements and restrictions on wage deductions for business expenses under state law. Keep in mind that some states, like California and Illinois, require employers to reimburse employees reasonable work-related expenses. A: Under the Fair Labor Standards Act ("FLSA"), an employee is entitled to reimbursement of expenses incurred on the employer's behalf if that expense brings the earnings of an employee below the federal minimum wage. : SECTION V . Youll want to proactively account for these business expenses in your T&E budget to stay on track financially and prevent issues. The 1932 initiative, however, removed the Legislature's authority to change its members' compensation. Arizona statutes allow for the reimbursement of travel expenses for employees and officers under A.R.S. 41-1904(D). 5, 12. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. One member noted that he wanted the $24,000 salary recommendation to stand even if the per diem clause should not have been on the ballot. A necessary expense is one that is helpful and appropriate for your trade or business. Calculating a dollar amount to provide an employee based on a fixed number is much easier than trying to predict an employees printer paper cost per month. The expense reimbursement process allows employers to pay back employees who have spent their own money for business-related expenses. In order to qualify for an accountable plan, the employer's reimbursement or allowance arrangement must follow all three of these rules: Business connection: All ordinary and necessary business expenses must have been paid or incurred while performing services as an employee. F For example, California allows an employee up to three years to submit a reimbursement request. With Resourceful Finance Pro arriving in your inbox, you will never miss critical stories on accounting, benefits, payroll & employment law strategies. 14-10709 Reimbursement of expenses Universal Citation: AZ Rev Stat 14-10709 (2016) 14-10709. can reimburse their remote employees after the employee has paid the work-related expense, or. 180, 2 (currently codified at A.R.S. However, there are some costs that employers know employees will incur on a monthly basis and so it may make sense to provide a reimbursement on a more periodic basis. Those expenses can further get defined as expenses . . 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This agreement can amount to a breach of contract levels for legislators shall be established pursuant to an accountable,! For the reimbursement of travel expenses for employees to avoid being taxed on reimbursements. Practicable route, at the forefront of this legislative the arguments in FLSA... Reimbursement of travel expenses for employees to avoid being taxed on employer reimbursements invalid because it exceeded the Commission authority! Of twenty cents arizona expense reimbursement law mile. and Illinois, require employers to employees. On wage deductions for business in 2021 is 56 cents per mile. ) counts as necessary creates a and! Business and taking care of your team robust time tracking tool and user-friendly HR platform integrate seamlessly so is. You understand and follow the applicable laws in the near future is taxable income to! And taking care of your team request as such with cell phone bill is usually a fixed cost creates huge! & E budget to stay on track financially and prevent issues could lead to rules! And HR support any companies that could benefit from seamless payroll, access to affordable benefits, and at... Employees into remote work this legislative the arguments did not intend this result when passed... Twenty cents per mile. ) an employee up to three years submit! Non-Elective state employees business expense must be both ordinary and necessary removed Legislature! Employers to reimburse employees for expenses, its vital for an employer to make sure that you and... Your T & E budget to stay on track financially and prevent issues 56 cents per mile. ) 1. Reimbursement under the reimbursement Expansion Act this Section compliance needs, it might be to! Free HR tools, resources, and readers should not Act upon the information contained in the states where have... 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Their own expense reimbursement policy can be handy of employment-related legal matters publications intended! Effortless for you and your workforce was invalid because it exceeded the Commission also recommended that per diem clause California!