Grassley Asks for Strict Interpretation of Executive Travel Expenses under IRC 162

Fearing that the executive compensation provisions of the Emergency Economic Stabilization Act are becoming window dressing rather than a legitimate attempt to prevent excessive compensation for failed leadership, Senator Charles Grassley has asked that additional restrictions be imposed on the ability of companies to deduct travel expenses under Section 162 of the Internal Revenue Code. In a letter to the Treasury Secretary, he asked that the definition of ordinary and necessary business expenses under the 162 deduction be limited for companies participating in the troubled asset relief program authorized by the Act.

Specifically, the Ranking Member of the Finance Committee recommends that travel and other reimbursable expenses be subject to federal limits under Section 162 for these expenses. The senator emphasized that taxpayers who are struggling to stay in their homes should not be subsidizing first class travel or luxury hotel stays for any employee of a company that is being rescued with taxpayer money. Given the extraordinary regulatory authority Treasury has just exerted under Section 382 for commercial banks, noted the senior member, Treasury surely has the regulatory authority to impose such restrictions here. He asked Treasury to explain if it disagrees. He also asked Treasury to describe what policies and procedures it has implemented to ensure the independence of its advisors and to prevent any current or future conflicts of interest.