Conference 7.286::digital

    My understanding of the current policy (not that I've actually seen
    the latest policy, but from talking with the Corporate Travel folks)
    is that Digital employees *are* allowing to accept frequent flyer
    bennies with the strict provision that a particular airline flight
    does not cost more just because you chose your favorite airline.
    For example, you cannot schedule a flight from Boston to Chicago
    routing thru Anchorage, obviously.  But slightly more obscure, if
    Delta and TWA both have flights from Boston to Chicago, and the
    Delta flight is cheaper, then you are supposed to choose the Delta
    flight.  But given that same scenario, if both flights are equally
    priced, you could choose one over the other to gain ffp points in
    your particular program.
    
    The Corporate Travel folks have the *ability* to look at employees
    ffp mileage, but being the monumental task that it would be to monitor
    that activity for all travelling employees, they don't.
    
    For what it's worth...
    Jon

>    My understanding of the current policy (not that I've actually seen
>    the latest policy, but from talking with the Corporate Travel folks)

Moderator speaking:  I don't like seeing statements like this, especially
with the policy available from the ZK VTX server:

	Travel Incentives - Many airlines, hotel chains, and car rental 
	companies offer traveler incentives through promotional programs, 
	individual gifts and frequent flyer bonus plans which provide for 
	upgraded and free/reduced travel.  Employees may not intentionally 
	increase the cost of travel to the Company in order to accummulate 
	bonus points or any other incentives.

	Employees are reminded that rewards and other inducements such as 
	denied boarding compensation, (cash, reduced costs for future 
	travel, free tickets) and discount coupons received in conjunction 
	with business travel are Company property and, as such, must be 
	properly accounted for.

That's the policy.  It's up to you and your manager to interpret it.

/john

    My S.O. works for a large publisher and travels a lot.  They used
    to have a policy that is the same as DEC's (at least, as posted
    by John in .2).  This policy changed in January; they must now turn
    in all airline bonuses, whether they are frequent flyer tickets
    or anything else.  The standing joke is what the company is going
    to do with the umbrellas and "Flying NOSH"es given out by some
    airlines.
    
    Discussions with friends that work at other companies shows that
    a lot of companies are moving in this direction.  Right now, the
    ones I know about that require employees to turn in all bonuses
    are: Raytheon and its subsidiaries, Wang, Honeywell, and GTE.  Maybe
    DEC is next?

Please tell me what the difference is between "must be turned in" and "are
company property and must be properly accounted for."

People seem to read the first paragraph of the DEC policy and not the second.

/john

    Most DECtravelers belong to FFPs, and our travel agencies are often
    cooperative.  These are not necessarily the same as "bonus coupons"
    (whatever they are) as the miles accumulate in a non-transferrable
    account.  Airlines get upset when people broker, trade or sell "free"
    FFP tickets.
    
    Given the amount of overtime many of us put in while flying (ever
    work (only) an 8-hour day on the road?  Ever fly Sunday?), many
    of our managers would be taken out back and shot (by the employees)
    if they tried to take away such trivial bennies.  Spending a week
    at the Podunk Holiday Inn, flying down Sunday and back Friday night,
    is not exactly a boondoggle.  FFPs are hardly compensation!  (Most
    of us don't take full comp time, either.)
    
    So Do The Right Thing.  If you want to see a list of FFPs and what
    airline and hotel contributes to each, see DELNI::ON_THE_ROAD.
        fred
        moderator, ON_THE_ROAD, the notesfile for the frequent flier

    so, what do they do when you've accumulated some miles on personal
    travel?
    
    For example:  I just returned from a personal trip to europe.  The
    mileage was 3750 each way to Zurich on Swissair( which counts as
    a united flight)  How does DEC then determine that the miles on
    my United card came from my swissair flight and not the business
    trip that I went to Chicago last month?
    
    
    -bill

>    so, what do they do when you've accumulated some miles on personal
>    travel?

    When you think about it, the mileage isn't transferrable, the awards
    generally aren't transferrable, and often the Corporate Travel people
    couldn't access the information that the airlines keep track of
    even if they wanted to, which I doubt.  Sounds like taking a firm
    stand on FFP benefits is a fairly unenforceable policy anyway.
    Maybe that's why DEC doesn't.
    
    Unless someone is abusing the system, costing the company money,
    who cares?  The FFP's were DESIGNED for business travellers in the
    first place.  I suppose it does drive some bureaucratic corporate
    bean counter crazy to think somebody gets an extra goodie out of
    all those business trips to Montana.
    
    tim
       
    

    My $0.02 ...
    
    My sister is a Senior Programmer at a *MAJOR* airline and, in fact,
    spent 3 years of her career working on their Frequent Flyer
    application.   She started as a Project Member and finished up as
    the Project Manager so I honestly do not doubt her understanding
    of the purpose of Frequent Flyer programs.
    
    She expressed *COMPLETE* shock at the realization that a company
    like Digital would make any claim to Frequent Flyer bonuses or credits
    earned by business travelers.  Each and every single Frequent Flyer
    program offered by every airline in business today is designed to
    attract the business traveler.   The business traveler keeps the
    airlines in business.  In some cases, barely.
    
    Her question was ... "What does Digital *DO* with the credits??"
    
    Just a side note ... My sister is now working on a application to
    help track down lost luggage.  Maybe there is hope for mankind yet.
    
    Bob Hunt

Please tell your sister that the U.S. Government requires its employees to
use the credits for free or reduced price travel only when travelling on
government business.

Credits for upgrades may be used for personal travel.

I know one government employee who is simply accumulating all the mileage
he can, to be used *after* he retires next year.

/john

           Travelling a lot, I've applied for these clubs two times,
    called four times, and never received any card, "trip bank statement";
    nil! But that's another story...
      If you actually receive the coupons, free tickets, ... Digital,
    at least in Colorado, can use the credit. The point is, if you're
    to receive no compensation, you aren't likely to bother with it.
    And DEC doesn't get the credits. Unless you did it purely to save
    the company money (makes sense, can you say "Stock"?)
    
      If it becomes taxed as income, and the employee pays it, and it
    doesn't cost DEC extra for you to use a certain airline to build
    up your "trip bank", it clearly should go to the employee.

     But who can say what airline will be cheaper at any given time.
    You'd have to join 13 airline clubs (which will merge into 3 airlines
    within 6 mos. :-)
                                                rick

    But with a "beni" like a free ticket to Hawaii, isn't it possible
    that people will be encouraged to take extra or marginally justifiable
    trips?   Trips taken by those enrolled in frequent-flyer clubs should
    always be thoroughly justified. Yet, since the employee is otherwise
    not reimbursed for their inconvenience, risk, wear and tear, and
    time away from their family, using the "credits" for their own use
    seems like a minor compensation. I think DEC Policy is quite correct.
    
    	Rick
    	Merrill
    

> using the "credits" for their own use seems like a minor compensation.
> I think DEC Policy is quite correct.

Are you people unable to read????  DEC Policy says that the bonuses
belong to DEC and must be properly accounted for.

/john

    Sorry, John, but I read it very differently.
    
>	Travel Incentives - Many airlines, hotel chains, and car rental 
>	companies offer traveler incentives through promotional programs, 
>	individual gifts and frequent flyer bonus plans which provide for 
>	upgraded and free/reduced travel.  Employees may not intentionally 
>	increase the cost of travel to the Company in order to accummulate 
>	bonus points or any other incentives.

    This one says that you can't take more expensive flights, etc, in
    order to get more credits.  Fine.

>	Employees are reminded that rewards and other inducements such as 
>	denied boarding compensation, (cash, reduced costs for future 
>	travel, free tickets) and discount coupons received in conjunction 
>	with business travel are Company property and, as such, must be 
>	properly accounted for.

    Frequent flier miles are neither cash nor coupons.  They may be
    exchanged, by the owner, for certain bennies, but they are not discrete
    rewards -- they are not tranferrable.  Cash, coupons and free tickets
    can be handed to others, unlike frequent flier miles.  Thus they
    are the company's.

>>	Employees are reminded that rewards and other inducements such as 
>>	denied boarding compensation, (cash, reduced costs for future 
>>	travel, free tickets) and discount coupons received in conjunction 
>>	with business travel are Company property and, as such, must be 
>>	properly accounted for.
>
>    Frequent flier miles are neither cash nor coupons.  They may be
>    exchanged, by the owner, for certain bennies, but they are not discrete
>    rewards -- they are not tranferrable.  Cash, coupons and free tickets
>    can be handed to others, unlike frequent flier miles.  Thus they
>    are the company's.

Denied Boarding Compensation in the form of reduced costs for future travel or
free tickets is not transferable, and it is clearly stated to be company
property!  FF miles are converted into coupons for reduced costs for future
travel or free tickets.  FF miles are a reward or inducement.  According to
this policy (which says nothing about transferrability) they are Company
property.

BTW, I called up an airline recently and said the following:  "This is ABC;
Shipping Company.  We'd like to check on one of our employee's frequent flier
mileage total.  His FFB ID number is <my number>."  I was given the info, no
questions asked.

/john

    
    So can I use FF mileage to bring my wife to the US next trip? It
    would seem not...

    re: .15
    
    How does the company know the employee's ID number?  Even if they have
    the ID number, there is no way for them to determine how much of the
    mileage was personal travel and how much was business. 

>    How does the company know the employee's ID number?  Even if they have
>    the ID number, there is no way for them to determine how much of the
>    mileage was personal travel and how much was business. 

The ID number for many airlines will be known because it has to be given to
the corporate travel agency to be used for those programs (American Advantage,
for example) where the number is put into the PNR.

The business mileage is known from corporate travel records.

/john

    re .18
    
    You don't have to give your ffp number to Crimson (or other travel
    agency) in order to receive ffp credit for the flight.  Just present
    your AAdvantage/WorldPerks/etc number on check-in.
    
    Jon

This sounds like a rather silly discussion.  Regardlesss of what the manual
says or how people interpret it, many employees who travel accumulate frequent
flyer miles.  Furthermore, they collect the benefits and use them for personal
travel.  This occurs at all levels of the corporation so I don't see why it's
even being discussed. 

Now if one wanted to start a discussion around a double standard around the
policies, that's be different...

-mark

    The policy says that these bonus' belong to DEC and must be 
    accounted for. That does not necessarily mean that the employee
    can't use them. The policy seems to leave the disposition of
    the bonus at loose ends. In practice at DEC, I'd not be surprised
    if the usual 'accounting' for them consists of a manager asking
    what happened to the credits and the employee says s/he took 
    their spouse to Hawaii with them. The credits are 'accounted'
    for.
    
    			Alfred

Re .15:

>According to this policy (which says nothing about transferrability) they
>are Company property.

Don't forget, the fact that some secret ("INTERNAL USE ONLY") Digital
policy claims something is not proof that a court would agree.
				/AHM

    re "accounted for":
    
    About four years ago I got a rather large denied boarding compensation
    (over $200) while traveling on company business.  Feeling rather
    righteous, I tried to turn it over to DEC, since the flight I got
    bumped to wound up arriving at my destination BEFORE my original
    flight.
    
    After looking around for a couple of weeks, the group FA told me to
    keep the money, 'cause the way the internal financial system was set
    up, there was no way to accept "windfall" money from outside without
    fouling things up more than the money was worth.  Maybe this was
    just a peculiarity of the financial system in manufacturing at the
    time, but it was an interesting comment.

    Has anybody out there actually tried to "properly account" for FFBs
    or other forms of travel compensation?
    
    	/Dave

I used an FFB award to reduce the price of some tickets -- nobody complained
about the low cost of the tickets.

/john

    If the company should get the FF awards, then the company should
    take the initiative to enroll Everybody that flies [airplanes] in
    every airline's club.  
    
    	RMM
    

>        If the company should get the FF awards, then the company should
>    take the initiative to enroll Everybody that flies [airplanes] in
>    every airline's club.  
    
 
    If this was the case the company could save lots of money on business
    travel. So maybe the airlines should report to corporate the awards
    instead of awarding them to the people flying.
    
    	- Ramani
    

      DEC already gets lower fares for corporate travel. Every itinerary
    I get from the travel agent list the amount saved compared to
    "Y" travel, whatever that is. It is usually around $300, Colorado
    to Boston. It includes hotel and rental car savings I believe,
    but that would only account for approx. $100. I'm not sure DEC
    would be eligible to apply for FF awards given that they already
    receive a discount. 
                                      rick

The savings over "Y" travel are the savings over full-fare.

Almost noone pays "Y" fares in the U.S. anymore; fares are almost always
discounted M or B fares.

DEC gets no discounts that individuals can't get.  Frequent flier mileage
is awarded at all fares (except free travel).

/john

    Not only does DEC not get discounts that any individual cannot get,
    but often an individual doing his own booking can substantially
    improve on it even further!
    
    DEC has never been in the business of encouraging people to reduce
    travel costs regardless of what the policies say. (When I was in
    Reading I offered to reduce the group's travel costs by 50% - noone
    was remotely interested.)
    
    Gavin
    
    John - do you read "Business Traveller", by the way?

> but often an individual doing his own booking can substantially
> improve on it even further!
    
    Not sure I agree with that, but it probably depends on the particular
    travel agency doing your bookings.  In Merrimack, we are encouraged
    (mandated?) to use Crimson Travel, and over the past 6 months, they
    have improved dramatically.  They even go in for the "trick" routings;
    ie, Boston to London is $xxx, but Boston to Glasgow VIA London costs
    $xxx - $yyy, so they book the latter, then you just don't fly the
    London-Glasgow leg.  They don't HAVE to do it that way, and since
    the cost is cheaper, so is their commission from the airline, so
    I have to give them credit.  And I have yet to find a cheaper fare
    (typically Q fares if booked enough in advance) by looking around
    on my own.
    
    Jon

    Sorry, I was referring more to Europe than the US. In the US the
    travel trade is unfettered by archaic competition laws (such as
    those in France or Germany).
    
    A travel agency selling a discounted ticket faces an automatic fine
    of DM5000,- per ticket. This law is currently under attack in the
    European Court. The law means that whatever Lufthansa say the price
    is, that's the price even if you can buy it cheaper going through
    Holland! Crazy.
    
    Gavin

>    They even go in for the "trick" routings; ie, Boston to London is $xxx,
>    but Boston to Glasgow VIA London costs $xxx - $yyy, so they book the
>    latter, then you just don't fly the London-Glasgow leg.

Better watch out on that sort of stuff.  Any of the following can occur:

	1. Airline notices you didn't take one of the flights and
	   cancels your reservation for the rest of the itinerary.
	2. Bags may have to be checked through to final destination.
	3. In the event of lost bags they will be sent to final destination.
	4. Check-in on return may not be allowed.
	5. Immigrations official may not let you in (or out).

/john

    Our travel agent is inclined to pull this one for international
    trips. I had no idea that the practice was so well established as
    to justify being given a name (cross-border ticketing). My ticket
    was business class round trip -- Boston, London, Morocco (yes,
    Morocco), London, Boston. No one said anything about the expense
    claim, and I often wonder what would have happened if I'd taken
    the side trip (a strip search at UK and US customs, most likely).
    
    Richard.

>    _Business Traveller_, incidentally has saved me several times the
>    subscription price in good advice alone. 

	Is this publication available in the US??  
	Please post publications address and subscription cost.

Thanks,
Frank

I'm inclined to believe that Digital doesn't necessarily get the best
airfares.  For my job interview trip in '81, I was booked on Eastern(?)
from Newark to Boston at $57, and Creature Distress from Boston to Newark
for $27.

The Eastern flight was cancelled, and I was transferred to a C.D. flight
at around the same time for, you guessed it, $27.

I suppose they could have booked me on the $57 flight both ways.
				/AHM

probably wanted you to be in a good mood when you arrived.

    I was on a flight Wednesday to Detroit.  The passenger next to me
    was going to Birmingham, Alabama.  His Ticket was $150 LESS than
    mine.
    
    

Are you sure that wasn't because of advance purchase rather than destination?

    
    If company should get the ff awards, then the company should pay
    me for using my Certificate ( I BOUGHT WITH MY OWN MONEY FROM 
    CITIBANK VISA) to reduce my fair for about $800. (Trip to Ireland
    and Holand).
    
    D.F
    

    AAA magazine recently advocated (well, suggested) using the domestic
    version of "cross border ticketing".  They mentioned such cost
    reductions as noticed by .39 (...going to AL at $150 less...). 
    They also stated something about carry on baggage...

    Corporate travel had me do that last November.  I needed to go to
    Nashville.  They booked me to New Orleans with an intermediate stop
    in Nashville.  The Boston--Nashville--New Orleans flight was ~$200 less than
    the same flight booked  Boston__Nashville.  I carried on my bag
    and got off in Nashville.
    
    ---Av

From AP reports:

The IRS has just issued a memorandum to an unnamed business which allows
its employees to accrue frequent flier miles on business travel, informing
them that their business reimbursement policy is "unaccountable" and that
as a result, business reimbursements for air travel are to be considered
_income_ for the full amount of the business ticket.

----------------------------------------

To be exactly clear about what this means:

If you are going to DECUS next week,
and you fly on an airline which grants you frequent flier miles,
then
Digital must declare the reimbursement for the full value of your
ticket to be taxable income.
and
must report it as such on your W-2 form.

You will be taxed on the full value of the ticket to DECUS.

You can deduct the price of the ticket
minus the value of the frequent flier miles,
but to do that, you'll have to show what the value of
the frequent flier miles are.

Until then, the entire value of the ticket is income.

Furthermore, assuming Digital pays you $50,000 and your wife's employer
pays her $50,000, and you file jointly.

Then, only business air travel above $2,000 per year will be deductible.

/john

    So, does this supposedly mean that a person accepting FF miles, having
    them credited to an account, but not utilizing them, is going to be
    charged tax for "income" not yet received?
    
    Does it further mean that the IRS is going to acquire the records of
    all the airlines who issue FF miles?  And just how is the IRS going to
    associate my FF credit at Delta, when Delta does not have my Social
    Security number anywhere on its files?  
    
    Also, who at Digital is going to record the fact that I was or was not
    granted FF miles on any account I might have with an airline I fly with
    on business?  The fact that a FF number is recorded on the ticket stub
    could reference me, but that information is only printed on the stub IF
    I present the FF information to the agent at booking... and NOT if I
    present my FF info at the Gate.
    
    Also, if changes of such magnitude are emminent, wouldn't you think a
    memo (at least from Thomas Cook /aka AMEX) would be circulating?
    
    
    Too many questions for me.
    
    tony
    (who doesn't for one minute put it past the IRS and DEC to *do*
    something like this...)
    

	Frequent Flyer programs will disappear if that crap is actually
	true. Most FF'ers are business travellers.

							mike

Re: .44

I heard this story as well but alot of details are missing.

>    -< Suggestion: don't accept frequent flier miles on business travel >-

Insist that tickets are direct billed to Digital, then you won't have to be
reimbursed!  Seriously.  I know that this is easier said than done, but it is
possible and *should* be norm.

>You can deduct the price of the ticket
>minus the value of the frequent flier miles,
>but to do that, you'll have to show what the value of
>the frequent flier miles are.

This is almost trivial (albeit a pain) since the fine print of most FF
programs states the miles accrued have no cash value.  If you don't exchange
them for flights/upgrades they're worthless!  When you do exchange them,
you're *supposed* to declare the fair market value as income and get taxed
accordingly ... everyone does this ... right?

I'll be interested to see how this one develops.  For many frequent travelers,
mileage programs are an incentive when chosing one airline over another -
something I suspect the airlines may have an interest in preserving.

Bob

>Suggestion: don't accept frequent flier miles on business travel
>
>Insist that tickets are direct billed to Digital, then you won't have to be
>reimbursed!  Seriously.  I know that this is easier said than done, but it is
>possible and *should* be norm.

That won't stop the IRS; the cost of the tickets will still have to be
included in your W-2.

/john

    
    	Let us get some facts on the table.
    
    	First, the IRS issued a research memorandum on this frequent flyer
    mileage at the request of said unnamed company. This is a totally
    non-binding "opinion". The memo has been forwarded to the IRS
    "rules" committee because it has "policy implications".
    
    	Over the past five years this exact same issue has died every
    single time it went to Washington. The IRS does not want to even begin
    to deal with this type of paperwork. ie. "what about mileage credit
    granted for using a charge card?", or better yet, "Awarded for travel
    by a *foreign* carrier to a US participant" Get the drift. Not going
    to happen. Forget it. Enjoy your travel. Think Christmas.
    
    
    		the Greyhawk 

>That won't stop the IRS; the cost of the tickets will still have to be
>included in your W-2.

Sorry, this is a bit too draconian for me.  Please explain how air travel
expenses incurred directly by a corporation to carry out its business
activities translate into individual taxable compensation.  Not just
"oh, they can do it", but real tax code sort of reasons.  Also, how does
this differ from other business expenses?  ("Gee Bob, if you had to pay for
that toilet paper it would have cost you ten cents!  We'll just add that to
your W-2 and let you flush things out with the IRS next April ...")

Bob

    I guess that the airlines deduct the amount of frequent flier miles
    they give out.  Probably at the highest cost per seat per mile, and
    probably whether the tickets are ever used or not.  Since the IRS will
    not dare to fight the airline lobby, or the corporate lobbies, they
    managed to find an inappropriate enforcement mechanism.  
    
    I haven;t red (pun) the Orange book in a while, but it used to say that
    frequent flier miles belonged to Digital.  Therefore we should be okay
    unless the IRS makes Digital enforce the Orange book.
    

re .49

The news articles call it a "technical advice memorandum" and state that
for the moment it only applies to the one company to which it was addressed.

The difference between the past rumblings and this one is that the IRS seems
to have finally figured out how to collect the money.  The IRS has always
stated that FFB benefits taken by individuals as a result of business travel
would be taxable, but had never figured out how to separate the taxable FFB
benefits from those which were a result of personal travel and thus not
taxable.

They've finally figured out how: collect the tax on the full value of the
ticket used by the employee, and make the employee sort out the deductible
portion later.

re .50

Exactly the same way that moving expenses paid directly by the company
(to the van line, for example) are included on your W-2.  You then have
to file the appropriate forms to obtain the moving deduction.  

The difference that makes the airline ticket business less fair is the
2% threshold before deductions can be taken.  But they may work around
that one if they can make it accountable.

/john

RE: .52

>They've finally figured out how: collect the tax on the full value of the
>ticket used by the employee, and make the employee sort out the deductible
>portion later.

The full value of *which* ticket?  The one used to accumulate the FF points,
or the one you get when you use the FF points?

Assume I take trips of 1000 miles each way from here to Boston and back,
which earn me 2000 FF points each trip.  While there I rent a car which
earns me another 500 points.  Since sometimes I pay $950 for the ticket
(fly mid-week with no advance purchase) and other times I pay $350 for
the ticket (since I bought it 21 days in advance and stay over a Saturday),
what is my "taxable income" for the FF points?

Now assume I took 8 flights and earned 20000 points, and cashed them in for
a free ticket to Boston.  Is the value of that $950 or $350?  Is that my
taxable income?  Now suppose that I use those FF points the way I should,
to pay for a business trip, not a personal one.  In this case do I get hit
with a tax bill for a benefit which accrued to Digital?

Bottom line, if my tax bill goes up with no increase in my pay stub, I will
resign from all FF plans.  I won't stop travelling (my job requires it).

But in the absence of any substantive message directly from either the IRS
or from Digital Travel, I am going to agree with the Greyhawk: don't sweat
the small stuff until it happens.

Today's paper...IRS retreats from its position, says it's opinion was
"only targeting one specific corporation", not a general ruling. 
Apparently, they've been trying for years how to get this pushed
through, but have been unable to.  I find it appalling they would
"target" a single company with a single rule.  I also find it
unbelievable, somewhat like the "Temporary Income Tax Act".

								Tex

The "which ticket" question is slightly more complex.

The IRS is requiring the tax to be collected _initially_ on the full value
of the ticket which resulted in the frequent flier credit to your personal
account.

The $500 price of that ticket is _initially_ considered to be income because
you received the full benefit of the $500 towards your frequent flier account.

The IRS hasn't gone any further than this yet w.r.t. how the individual
employee deals with this.  And they don't necessarily have to right away.
For now, the benefit received is the full value of the ticket, since you
received $500 worth of frequent flier miles, which may be worth more or
less than $500 when cashed in.  (More?! you say?  Yes.  I can show you
a case where a personal trip I took costing about $400 earned me enough
miles in a special promotion to be worth two $500 tickets.  It was a personal
trip that obtained the miles, so it was a non-taxable promotion, but if it
had been a business trip it would have been taxable.  There are other cases
where the benefits received are the same or greater: fly now and get a
companion ticket to use later, for example.)

The tax lawyers who were commenting on this indicated that the employee
would be able to take a business tax deduction (subject to the 2% of AGI
threshold) for the difference between the price of the ticket used to
accumulate the miles and the value of the ticket obtained from the miles.

But can this be done at the end of the year (with the IRS now notified in
some way that FF miles have been accumulated, requiring later reconciliation
with some new form not yet designed) or can it not be reconciled until those
miles are actually used some years later, requiring the filling out of
amended tax returns for previous years?  That hasn't been determined yet.

And once you get around to computing the difference, what is the taxable
value of the ticket received?  The last time I received a pair of round-trip
tickets to Europe from TWA was about eight years ago, and summer excursion
fares were about $800 per ticket.  But the FFB ticket did not have the
restrictions of the $800 tickets: it was fully refundable (for the same
number of miles used to obtain it) and didn't have a 30-day restriction
(I stayed five weeks) and didn't have a no changes restriction.  Such a
ticket bought on the open market probably would have cost about $1800.

/john

Logically speaking, how much would it cost to collect this "revenue"?  I
thought our pols promised a "simplified tax system", wherein we could
file on a postcard or no filing would be necessary if you owed nothing.

Sigh. Each year gets worse, with no end in sight.

More from the AP:

IRS spokesman Frank Keith emphasized the memo applied to only one company
and didn't mean federal tax-gatherers had changed policy. But he also noted  <--
that the IRS had always said taxes were due on frequent-flyer miles earned   <--
on business trips but converted to personal use.                             <--

Early Tuesday evening, after the memo became public, the IRS issued a
statement aimed at calming companies' concerns.

The agency said it had "no special enforcement program for frequent flyer
miles" and was reconsidering the advice given in the memo about adding the
price of air tickets to employees' W-2 statements.

"It does not establish precedent for any other case involving any other
employer," the agency said. "The IRS does not want other employers to be
misled by applying the analysis ... to their (employee reimbursement)
plans."

    re: .56
    
<For now, the benefit received is the full value of the ticket, since you
<received $500 worth of frequent flier miles, which may be worth more or
<less than $500 when cashed in.  (More?! you say?  Yes.  I can show you
    
    so, if *I* happened to pay, say 600 bucks for the same flight (maybe I
    was sitting right next to you?)... and got the same number of FF miles
    credited to my account... using this logic, I'd be responsible for more
    tax liability.
    
    the flaw, as I see it, is that we are granted FF miles based on the
    number of MILES we fly... not on the cost of the ticket we purchased. 
    I get the same number of miles if I fly a non-refundable coach ticket
    as I do if I fly full fare.  ANd those who fly 1st class, are
    *sometimes* given double miles.
    
    By the way... I often get junk mail, including coupons and offers
    which, if redemed, could result in a cash benefit to me.  The junk mail
    is directly attributed to my having a Corporate Charge card, or to
    USING that card while on trips... does the IRS intend to tax me on any
    of that? 
    
    tony

>Exactly the same way that moving expenses paid directly by the company
>(to the van line, for example) are included on your W-2.  You then have
>to file the appropriate forms to obtain the moving deduction.  

This is apples and thems is oranges!  Company paid moving expenses are
indirect compensation to the employee and business air travel is not.
You may or may not, depending on distance and frequency, be able to deduct
moving expenses even if you pay them all yourself.

I frankly don't expect this to go anywhere, as several followups to the
original story have indicated.  Not that its not possible, mind you, but
the collective accounting and record keeping on the part of corporations,
the airlines, the IRS, and individuals would cost billions and have
enforcement gaps you could drive a truck through.

What I sincerely do believe will come to pass is the taxability of employer
paid benefits and the like.  Unlike FF miles, these are already thoroughly
accounted for and would be relatively easy to implement and enforce.  I
don't like the idea of this, but I do fear its time is near ... :-(

Bob

>I frankly don't expect this to go anywhere, as several followups to the
>original story have indicated.  Not that its not possible, mind you, but
>the collective accounting and record keeping on the part of corporations,
>the airlines, the IRS, and individuals would cost billions and have
>enforcement gaps you could drive a truck through.

Never stopped 'em before.  No better way to keep your IRS job than to
come up with a complicated scheme entailing enforced compliance of a
poorly formed, poorly understood statute and base job performance,
hiring, etc. on the metrics of increasing compliance.

Flat tax or sales tax, the current nonsense should be ended.

								Tex

G'Day,

	This is already happening in Australia.  When you join a FF plan over
here you have to declare that either you will use all the tickets that are
awarded under the plan or that a family member may use them.  If it is only you
then there is (currently) no fringe benefits tax payable.  If you decide to
allow family members to use them then all of your FF activity is automatically
sent to the Australian Taxation Office.  Fringe benefits tax is payable on the
value of the awarded tickets at the rate or 48.4%.

	It is up to the individual to declare this on the tax return.  If they
do not, they may get away with it.  If the ATO computer picks it up and you get
audited then you would have to pay the avoided tax as well as a penalty.

	I will be testing this myself soon as I now have 160,000 points, most of
which was earned on business trips.  My plan was to get to 200k and then get two
free tickets to the US.  With the above rules my ticket would be OK but I would
have to pay FBT on my wife's ticket.  The value of the ticket would be about
$1500 which would mean a tax bill of $726.  Still cheap for two tickets to the
US but not as cheap as it should be.

David.

    I don't suppose this would work:
    
    	Digital buys ticket for $500.
    	IRS gets withholding on $500 from your salary.
    	You price ticket around time of purchase or use and find it is
    	worth maybe $400.
    	You use ticket for business.
    	You use frequent flyer miles to get another ticket.
    	You price ticket around time of issuance or use and find it is
    	worth maybe $200.
    	You use ticket for business.
    	On your taxes, you deduct $400 for first ticket and $200
    	for second ticket.
    	IRS refunds to you taxes on $100.
    
                                                         
    				-- edp
    
    
Public key fingerprint:  8e ad 63 61 ba 0c 26 86  32 0a 7d 28 db e7 6f 75
To find PGP, read note 2688.4 in Humane::IBMPC_Shareware.

    
    	It seems quite simple to me. Say you take 10 business trips that
    Digital pays for. During these 10 trips you earn FF miles. You now
    have enough FF miles for an 11th trip.
    
    	If you use the FF miles for a business trip, there should be no taxes.
    	Digital paid for the first 10 flights. Digital should benefit on the
        11th business trip. With a free flight.
    
    	If you use the FF miles from business trips for a personal trip.
    	You should have to pay taxes on the amount of the ticket for the
        11th trip. You didn't pay for the first 10 plane tickets that earned
     	the FF miles. So you you should pay tax, if you use the FF miles.
    
    	Here is an example of Why. You have 2 co-workers who work together.
    Worker A goes on frequent business trips. While worker B goes on
    zero business trips. A and B decide to go on vacation together. A uses
    his FF miles to buy ticket. While B has to buy a ticket. The end result
    is that A received compensation additional compensation. In the form
    of a plane ticket. While B did not receive anything.
    
    Ron 

    
    
    
    re: -1 
    
    But, but, but, what if all the business travel was on this person's 
    own time?  (I have never had the opportunity to fly during the 
    weekday.  It has always been in evening or on weekends.)
    

    re .65
    
    Exactly.
    
    In Australia the Gov't policy via the FBT (Fringe Benefits Tax) is to
    reduce everyone *DOWN* to the same level.
    
    Hence all the fun and games re Frequent Flyer miles. 
    
    Another one. Recently the Gov't passed a law banning private company
    health funds. Digital Australia had such a beast! The solution was for
    the company to go with a public health fund. The benefits are now a lot
    lower!

    There is one other point that doesn't seem to be addressed.
    
    Frequent Flyer miles only have a value if and when they are converted
    into a plane ticket (or something else).  Many of these never get
    converted into anything.
    
    For example, I've had 6,000 miles sitting in United's program for 3+
    years and will probably never get enough accumulated to ever use them.
    I had enough miles in Continental's program to get 1 free ticket --
    until they jacked up the number of miles needed.  I have some miles in
    Delta's that will probably expire soon.
    
    Although I haven't followed this whole affair that closely, I believe
    that the IRS opinion (and that of others) is that you will be liable
    for tax at the time the miles are *accrued* rather than redeemed.  If
    so, it seems like "pre-emtive taxation" and I know of no other
    circumstance where this is currently implemented.
    
    Larry
    
    

    
    re .67 - Larry, if I recall correctly, Delta FF miles don't expire.
    
    len.
    

Is it just me, or is this whole thing ludicrous?  What about the
discount we get at stores because we're Digital employees?  Shouldn't
that be taxed also?  Shouldn't all such purchases require us to submit
our social security number and the participating store to file a 1099 at
year-end on the difference between the normal price and the discount
price of our purchases?  What about those cheap movie tickets?  Also, I
received a coffee cup from a supplier that (don't gasp) I'm using for
personal, not company coffee.

The public hue and cry has been to *reduce* paperwork, government, the
cost of government, government reporting, and government intrusion into
our lives.  The current cost of all of this reporting on a company and
individual basis is phenomenal.  Let's not add more.

Anyone else think it was provident that this inane idea was stillborn?

								Tex

Under U.S. tax law, discounts aren't taxable.

When you get an FFB award on personal travel, it isn't taxable.

When you use an FFB award received on business travel for business travel,
it isn't taxable.

The IRS is saying that the discount accrues to the person who paid for
the product which gets the discount.

The transfer of that discount from DEC to you is income for you.

This is not the same as discounts given on purchases you make because of
some affinity group you belong to.

/john

IRS Backpedals after Frequent Flier Uproar

Source: The Miami Herald
Date: 11-28-95

------------------------------------------------------------------------
The Miami Herald via First! : In a move that sent fear through South
Florida business travelers, the Internal Revenue Service said Tuesday
that the free trips taken with frequent-flier miles earned on company
travel could produce a tax liability.

But after a day-long uproar, compounded by confusing statements from the
agency, the IRS said it may change its mind back again. And even if it
doesn't, the IRS said it's important to note that it doesn't have any
special enforcement program for frequent-flier miles.

The IRS ruling, a technical advice memorandum disclosed in a Wall Street
Journal story Tuesday, officially applies to only one unidentified
company and not to all members of frequent-flier programs, the IRS said.

"It does not establish precedent for any other case involving any other
employer," the agency said. "The IRS does not want other employers to be
misled by applying the analysis...to their (employee reimbursement)
plans."

But airlines, tax accountants and travel agents fear it could be the
first salvo in a larger effort that could ground one of the most
successful marketing tools ever invented. Since debuting in the early
1980s, frequent flier programs have enrolled more than 30 million
members. The programs have been expanded to the point where frequent
flier miles are awarded by hotels, car rental companies and credit cards
to participating airlines.

"They are like the most important thing there is," said Stephanie
Dreibelbis, manager of Miami's Corporate World Travel & Tours. One
client bought $15,000 worth of office equipment on a frequent flier
credit card so she could upgrade her family to business class for a trip
to Europe.

Barry Dick, of the accounting firm of Berkowitz, Dick & Pollack, said
the IRS has been grappling with frequent flier taxation for years. A
recurring difficulty for the agency has been how, exactly, to assign a
value to the miles. "The valuation is generally determined by a fair
market value," he said. "I'm not sure there is a market value for these.
They're not transferable."

While that may be, Michael Dobzinski, a spokesman for the IRS, said the
memorandum doesn't represent a policy change for the agency. "It's been
our position that those have been taxable all along," he said.

Nevertheless, enforcement has been quite light, and Tuesday's memorandum
caught most travel industry officials by surprise. It required the
company to report as income the cost of tickets its employees purchased
for company travel. Employees, in turn, could deduct the tickets' cost
-- minus the value of frequent flier miles used for personal travel.
Some tax professionals say such confusing guidelines would make tough
enforcement tough. The membership is huge, the paperwork is daunting and
awards frequently aren't redeemed until years after the miles are
earned. "The question is whether it's going to work," said Alvin Lloyd
Brown, a partner in Morrison Brown Argiz & Co.

Theoretically, the IRS could require airlines to report mileage awards.
But Brown believes that would fly in the face of logic. "Do you realize
how much it would cost?" he said. "They could do away with the
programs."

Airlines, however, say they don't want that to happen. "Our frequent
flier program is a very powerful sales and marketing tool," said John
Lampl, a spokesman for British Airways. "Hopefully, there won't be some
sort of impediment created by anyone to cause these programs to diminish
or have less value."

Herald wire services contributed to this report.
By Gregg Fields, The Miami Herald.
    

>                       <<< Note 298.67 by LOCH::SOJDA >>>
>                      -< Suppose you never use the miles >-
>...    
>    Although I haven't followed this whole affair that closely, I believe
>    that the IRS opinion (and that of others) is that you will be liable
>    for tax at the time the miles are *accrued* rather than redeemed.  If
>    so, it seems like "pre-emtive taxation" and I know of no other
>    circumstance where this is currently implemented.

There are instances of preemptive taxation.
You are taxed on the capital gains distributions you get when you have
"automatic reinvestment" in a mutual fund when the new shares ar purchased,
even though you haven't yet cashed them in.
Certain stock option awards incur a tax liability when they are awarded,
even before they are exercised.
While there are normally paths to recover these taxes if no gain is 
ever realized, the plan is sometimes (at best!) "tax now, straighten it
out later."
The IRS could be using this model for "in kind" awards.

- tom]

    >> re .67 - Larry, if I recall correctly, Delta FF miles don't expire.
    
    Well, they sort of expire.  According to the SkyMiles program:
    
    	o Miles accrued on/after May 1, 1995 do not expire as long as
          member takes one Delta or Delta Connection flight ( with purchase
          of fare that is eligible for mileage credit) at least once
          every 36 months.
    
    If you are an "infrequent" Delta frequent flyer, then you run the risk
    of losing accumulated miles.
    
    Larry
      
    

RE: .73

>>>There are instances of preemptive taxation.

Another example in the U.S. of preemptive tax is the 20% manditory 
withholding tax if tip income is not reported.  Perhaps we will see 
something similar for FF miles, sine this law has been upheld for several 
years.


						-Paul

    I just can't wait until the NASB and SEC force the airlines to record
    their FF milage liability as an "unfunded liability" on their balance
    sheets, at some level of value.  
    
    I wonder what would happen to their market capitalization?
    
    gc

    In fact they have to at least to some degree, that's why a few years
    back they started to expire points, to get the liabilities off the
    books.