USA Non-Profit Mileage Reimbursement

[Jodie]

Hello, I am looking for some feedback in relation to the following scenario -

2 personal passenger vans are being borrowed for charitable purposes, but are not being driven by the vehicle owners. 1 driver is an employee, the other is a volunteer.

How should we reimburse for the gas expense?

- reimbursefor actual gas expense based upon receipts provided (each van departs with a full tank of gas and mileage form is used to support that gas used was only for charitable purposes)

- reimburse the employee for mileage (business rate) and the volunteer for mileage (charitable rate)

- reimburse the employee for mileage (business rate) and the volunteer for actual gas expense

- should vehicle owners be notified that the drivers were reimbursed (charitable mileage is not deductible)

- is mileage reimbursement to both employee and volunteer taxable since they are not the vehicle owners?

Am I overthinking this?! Any insights would be appreciated.

 

[Dave In Capital]

I think we first want to confirm that your goal is to determine which expenses are allowable for you to deduct as charitable contributions expenses for your business. Also, this scenario assumes that the charitable organization is a qualified organization.

Since the vehicles are not owned by these individuals, a mileage reimbursement is not applicable. The mileage reimbursement formula takes into account depreciation on the vehicle itself. So, since these individuals do not own the vehicles, depreciation expense does not apply to them.

However, for tax filing purposes, the IRS Pub 526 states that you can elect either when claiming charitable contributions expense.

Also, travel reimbursements for business-related activities are not considered a fringe benefit by the IRS. So, it is not taxable as part of compensation. https://www.irs.gov/publications/p15b

 

[Jodie]

Thank you, Dave. We are a qualified 501c3 (a church) that is trying to understand how to best reimburse the drivers for their out-of-pocket expense (gas) when they aren't the owners of the vehicles. My first inclination is to reimburse the drivers for the actual gas expense based upon receipts provided, with the understanding that the vehicles start off with a full tank of gas so that any gas purchased to/from is clearly related to the specific trip and we would have a simple form for each vehicle that would confirm starting/ending mileage, etc. But if we did this, are the vehicle owners still eligible to claim the mileage as a charitable deduction, if desired?

 

[Dave In Capital]

IRS Pub 526 states that the value of services provided to a qualified charitable organization cannot be deducted as charitable contributions expense. So, the value which would be attached the act of lending the vans would not be deductible.

However, you raise a good question about whether or not the mileage could be claimed by the owner. Since IRS Pub 526 states that any unreimbursed expense can be claimed as either actual expense or mileage, then it looks like the owners could claim mileage since the gas expense to the drivers is being reimbursed by the charitable organization.

 

[Jodie]

Thanks, Dave. It makes sense to me that we could reasonably reimburse the van drivers for their out-of-pocket gas expense (based upon receipts provided) and that this would not be considered taxable income or private inurement; and then the vehicle owners could also claim the mileage as a charitable deduction, if desired, since this would effectively be helping to offset the vehicle ownership costs.

I am not inclined to reimburse the drivers for mileage (business or charitable) since they do not own the vehicles. To me, this seems pretty straight-forward based upon the facts of the scenario, but others have pushed-back a bit having business scenarios in mind whereby an employer reimburses employees for qualified business mileage without questioning whether the vehicle used is actually owned by the employee.

 

[Dave In Capital]

but others have pushed-back a bit having business scenarios in mind whereby an employer reimburses employees for qualified business mileage without questioning whether the vehicle used is actually owned by the employee.

When making your case, you could use vehicle rentals as a parallel. If a business sends an employee on a business trip requiring the use of a rented vehicle, it wouldn't make any sense at all to reimburse the employee's mileage in lieu of reimbursing the rental and fuel expense. Nor would it make sense to reimburse rental, the related fuel, and the mileage. Rather, it is customary to reimburse only the rental and related fuel.