AR-02: Can't we have one meeting that doesn't end with us digging up a corpse?

Defying logic and common sense to the bitter end, Robbie Wills continues to claim that he is exempt from taxation on the benefit of driving a state-owned vehicle as Speaker of the House.  In an article in Monday’s Dem-Gazette, Seth Blomeley writes:

House Parliamentarian Tim Massanelli said that whether people “like it or not,” legislators are different when it comes to tax law.

What a charming turn of phrase, Tim.  I can tell you are a man who is not at all out of touch with the rest of us.  Now, if you could please point out where in the U.S. Tax Code it gives a blanket pronouncement that state legislators are treated differently, that would be great.
/waiting
/still waiting
/moving on, shaking head slowly in contemptuous disgust
Blomeley continues:

State officials and spokesmen for the Internal Revenue Service offered varying explanations concerning the taxability of state-vehicle use by legislators and mileage payments legislators receive.
Wills, an attorney, didn’t offer a legal basis as to why his travel in a state vehicle from his home in Conway to the state Capitol is considered business travel.  He deferred to House staff for an explanation.

Sign #416 that someone is just making stuff up: they pass the buck on a subject matter they should understand, at least at a basic level.
More Blomeley:

Massanelli and House Chief of Staff Bill Stovall cite examples from Publication 463 by the IRS regarding “travel, entertainment, gift and car expenses.” The don’t directly address legislative travel to the state Capitol[,] but refer to situations with taxpayers having multiple places of business.
Examples from the IRS publication they cited were:

• “[If] your principal place of business is in your home … you can deduct the cost of round-trip transportation between your qualifying home office and your client’s or customer’s place of business.”
• “If you regularly work at two places in one day, whether or not for the same employer, you can deduct your transportation expenses of getting from one workplace to the other.”

Okay…um…did they cite anything that was actually relevant?  IRS Code 162(h) provides certain exemptions for legislators who designate their homes as their main place of business.  However, under 162(h)(4)

Wills lives 31 miles from the Capitol.
As for that second exception that they cited, one of the key words in there is “regularly.” Surely Wills does not expect us to believe that he regularly works at home and at the state Capitol in the same day. (Regarding fringe benefits, including the use of employer-provided vehicles, the IRS defines regularly as “50% or more per year.”)  Moreover, it’s a bit of a stretch to say that 24/7 possession of a state car is covered by a narrowly drawn exception for travel expenses between two locations in certain circumstances, so it’s not like this exception ends the inquiry even if one accepts it as relevant (which I do not).
But Massnelli and Stovall were just getting started.  Blomeley writes:

Whether or not a legislator conducts most of his legislative work at his home or at his place of employment, such as a law firm, doesn’t matter they say.  He represents the entire district and as such a legislator’s entire district is his place of business, Massanelli and Stovall said.
They said legislators don’t have to pay taxes on the 50 cents a mile [sic] they receive for reimbursement traveling from their home to the Capitol.
Or, in the case of Wills, taxable income isn’t withheld from his state paycheck over the fringe benefit of driving a state-provided vehicle. [Author’s note: “taxable income” isn’t “withheld” from your paycheck; taxes, based on a percentage of your taxable income, are withheld.  But I digress.]
Wills'[s] state vehicle is a 2008 Tahoe that had a purchase price of $37,000, but after rebates the price was about $30,000, Stovall said.
[***]
But Stovall said [the distance from Wills’s home to the Capitol] doesn’t matter because 162(h) doesn’t apply to mileage reimbursement of a state-supplied vehicle.
State Revenue Commissioner Tim Leathers agreed.
“Thre is nothing in there that deals with legislative mileage,” Leathers said.
He said mileage reimbursements and a state-provided vehicle for a “business purpose” would be exempt from taxation.

Well, if Tim Leathers says it, it must be accurate!
You know … except when it’s not.
Look, the Internal Revenue Code may be many things — byzantine, prolix, pedantic, convoluted — but one thing it is not, at least not in this situation, is vague.  As a threshold matter, the IRS treats travel allowances/reimbursements differently depending on whether the payments are made via an “accountable plan” as defined in section 62. For a plan to be “accountable,” it must meet the following requirements:

• There must be a business connection to the expenditure
• There must be adequate accounting by the recipient within a reasonable time
• Excess reimbursements or allowances must be returned to the employer within a reasonable time

I’m going to go out on a limb and say that the second and third requirement have not been met by Wills in the instant case, based on the fact that no one involved here seems to have accounted for anything, meaning that any reimbursements/allowances he receives are done through a nonaccountable plan.
Under Regulation §1.62-2(c)(3), payments made under a nonaccountable plan are taxable, subject to all withholding rules, when they are paid by the employer or when they are constructively received by the employee, though employees may be able to deduct these expense if they itemize their individual returns.
Under an accountable plan, which I still assume is not really in play here, costs associated with travel to and from a business destination are excludable only when the travel is outside of the area of the employee’s “tax home” and the stay is longer than would be expected for a typical day’s work (requires an overnight stay at minimum).  See U.S. v Correll, 389 U.S. 299, 302-303 (1967).
More on point, when dealing with an employee’s use of a vehicle, the IRS distinguishes based on whether the vehicle is owned by the employee or the employer. For an employee-owned vehicle, under section 1.274(g)(2)(iii) and Regulation 1.274-5, reimbursements for allowable business travel are excludable from the employee’s wages as long as the reimbursement rate is at or less than the standard Federal mileage rate (currently 50 cents/mile) and the reimbursements are made as part of an accountable plan that includes substantiation of the mileage by the employee.
Reimbursements for non-business travel, including commuting, are always taxable, even if paid at or below the Federal mileage rate. These reimbursements are included in regular wages and are subject to all income and employment taxes. (Personal commuting between the residence and the principal place of business is considered non-business travel or personal use.)
If, on the other hand, the employee is provided an employer-owned vehicle, there are no tax consequences or reporting requirements only if the vehicle is used solely for business purposes. Again, business use does not include commuting except in certain rare exceptions not applicable here.
Ah, but here is the rub (finally!) and the part that pretty much submarines Wills’s position: if an employee is provided an employer-owned vehicle and the vehicle is not used solely for business purposes, if the employee wishes to have taxes withheld only for his personal use of the vehicle, section 274(d) requires that the employee keep separate records for personal and business use and that he substantiate via written records all miles driven for business purposes. If the employee fails to provide such substantiation, the value of all use of the vehicle is considered taxable wages, and the employee can later take itemized deductions for any business use that he can substantiate. (There are a number of different ways to calculate the value of the usage, none of which is particularly germane to a discussion of whether Wills is correct here.)
Now, maybe it’s just me, but that last paragraph seems pretty straightforward, both in what it actually says and in how it shapes the relevant inquiry here.  The only question we need to concern ourselves with is whether Wills maintained the records required by the Code and substantiated all business usage with these records.
Regardless of his answer, however, some portion of the usage is almost certainly going to be non-business and, accordingly, is going to be taxable.  It does not matter what Wills, Massanelli, Stovall, Leathers, or Diamond Joe Quimby has to say about it; contrary to what some seem to believe, the Code does not limit its distinctions and rules with a caveat of “as long as some random state-level pols with vested interests in the matter agree.”