Monday, February 14, 2011
So, Do Congressmen Who Sleep in Their Offices Receive a Taxable Fringe Benefit?. Citizens for Responsibility and Ethics in Washington thinks so. In a press release summarizing a letter to the Office of Congressional Ethics, CREW concludes, “[U]nder the Internal Revenue Code, members who sleep in their offices are receiving a taxable benefit.”
I’m not so sure. CREW could be correct, but it requires tax analysts to answer several difficult questions in particular ways to reach the same conclusion.
First, CREW contends that members of Congress are receiving lodging, and that it is taxable because it is not provided as a condition of employment, as required by § 119 for the lodging to qualify for exclusion from gross income. CREW points out that no member of Congress is required to live in their offices. Though this conclusion is debatable – certainly when Congress meets late into the evening or overnight, as sometimes happens, one might reasonably infer that members are required to remain on the premises – the difficulty with the analysis is that it presupposes that the government is providing “lodging” when a member of Congress stays overnight. But does an office constitute “lodging” simply because someone falls asleep therein? Or because someone takes a nap therein?
In Union Pacific Corp. v Commissioner, 91 T.C. 32 (1988), a case involving the lodging exception for the § 48(a) investment credit, the Tax Court agreed with the IRS that the term “lodging” means “any place where a person lives.” The Court accepted the dictionary definition of lodging. Does a person “live” in their office if they sleep there from time to time, when they have available other residential facilities? Does that conclusion depend on the distance to the other residential facilities? In PLR 6908291119A, the IRS noted that the dictionary definition of lodging means “a place to live” and “sleeping accommodations.” Does the government furnish beds in the Congressional offices? I doubt it. If someone brings a sleeping bag or futon into the office, is it the employer who is providing the lodging? Certainly the Capitol and the various Office Buildings are not lodging facilities. If those buildings are not lodging facilities, can the rooms in those facilities be considered lodging? If not, then the employer – namely, the U.S. government – is not providing lodging.
Second, if the answer to the first question is that the government is not providing lodging, § 119 does not apply. This requires tax analysts to turn to § 132, which deals with fringe benefits generally.
Does whatever it is that the government is providing qualify for the working condition fringe exclusion? It does if the member of Congress would be allowed a deduction if he or she paid for whatever it is that is being provided. If the employer government charged for the “bedroom” use of the office and for use of the shower in the gym (which is what the members of Congress are doing), would it be deductible? If so, then the use of the office for sleeping purposes is an excludable working condition fringe. As for the deductibility, if the member of Congress paid rent for an apartment, that would be deductible – to a limited extent – as travel away from home overnight in pursuit of a trade or business under § 162(a)(2). Clearly the members are away from home, because their tax homes do not shift to Washington, D.C., according to the first sentence of flush language of § 162(a). However, the deduction is limited to $3,000, an amount inserted into the Code decades ago and never adjusted for inflation. Arguably, the exclusion is limited to $3,000. But how much is the value of what is being provided? That leads to the second step in the § 132 analysis.
Does whatever it is that the government is providing qualify for the de minimis fringe exclusion? In other words, what is the value of being permitted to put a sleeping bag or even simply one’s body on the office floor? What is the value of using a shower? Surely it is not the thousands of dollars suggested by CREW. Among the factors to be considered in putting a value on using six square feet of floor space, with no room service or linen cleaning, is what could be called the “security valuation discount,” which reflects the reduced security of a building far more vulnerable to the risk of an anthrax or other terrorist attack than is a room at Motel 6. If the conclusion is “something more than de minimis,” that does not mean it is necessarily more than $3,000. Perhaps it is, but that is not something for which CREW or anyone else at the moment can give a definitive answer.
Overshadowing the analysis is a question of consistency. If the shower use isn’t taxed when the member of Congress uses the gym, or showers after jogging on the Mall, why should it be taxed when it is used after the member of Congress arrives late in the morning from home or after being up all night in a filibuster session or after taking a long nap in the office?
Yet, though the answer well might be that the tax law does not require taxing members of Congress when they sleep in their offices because they are working 16 hours a day, or that even if the tax law requires taxation, administrative impediments prevent the IRS from doing so, there is a part of me that “feels right” taxing members of Congress on the many fringes and perks they have appropriated unto themselves. Compared to some of the other things they get, “free” use of a sofa or the floor, and “free” use of a shower pale in comparison, both in terms of dollar amounts and in terms of the message it sends. Somehow, sleeping on an office floor during long sessions doesn’t spark the same outrage as does access to high-end health care plans and retirement plans far more generous than what all but the wealthiest Americans enjoy.
Somehow, I doubt these tax issues will ever be litigated. Nor do I think they’ll ever be the direct object of legislative tax changes.