Friday, January 11, 2013

Tax Break for Attending Conventions in Bermuda and Other Caribbean Countries

In 1976, Congress finally got tired of taxpayers claiming deductions for boondoggle business conventions in exotic foreign locations, and it imposed strict deduction limits for conventions located outside the "North American area."  The North American area consisted of the United States and its territories, Canada, and Mexico.

But a mere seven years of lobbying later, in the aptly-named Interest and Dividend Compliance Act of 1983, Congress expanded the definition of "North American area" to include select Caribbean countries as specified in the Caribbean Basin Economic Recovery Act.  Oh and it also included Bermuda, which is not very close to the Caribbean.

The end result is that a taxpayer attending a business convention in France or Peru must prove to the IRS that it is as reasonable for the convention to be held there as it is for the convention to be held within the North American area.  But the same rule does not apply to a doctor's tax deductions for attending a medical convention at a Dominican beach resort.

The list of select qualified "Caribbean" countries are:
Antigua and Barbuda
Aruba
Bahamas
Bermuda
Costa Rica
Dominica
Dominican Republic
Grenada
Guyana
Honduras
Jamaica
Netherland Antilles
Panama
Trinidad and Tobago

I hear the business convention facilities are fabulous in these countries.

Section 274(h) Attendance at conventions, etc.
(1) In general. 
In the case of any individual who attends a convention, seminar, or similar meeting which is held outside the North American area, no deduction shall be allowed under section 162 for expenses allocable to such meeting unless the taxpayer establishes that the meeting is directly related to the active conduct of his trade or business and that, after taking into account in the manner provided by regulations prescribed by the Secretary—
(A) the purpose of such meeting and the activities taking place at such meeting,
(B) the purposes and activities of the sponsoring organizations or groups,
(C) the residences of the active members of the sponsoring organization and the places at which other meetings of the sponsoring organization or groups have been held or will be held, and
(D) such other relevant factors as the taxpayer may present,
it is as reasonable for the meeting to be held outside the North American area as within the North American area.
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(3) Definitions. For purposes of this subsection—
(A) North American area. The term “North American area” means the United States, its possessions, and the Trust Territory of the Pacific Islands, and Canada and Mexico.
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(6) Treatment of conventions in certain Caribbean countries.
(A) In general. For purposes of this subsection, the term “North American area” includes, with respect to any convention, seminar, or similar meeting, any beneficiary country if (as of the time such meeting begins)—
(i) there is in effect a bilateral or multilateral agreement described in subparagraph (C) between such country and the United States providing for the exchange of information between the United States and such country, and
(ii) there is not in effect a finding by the Secretary that the tax laws of such country discriminate against conventions held in the United States.
(B) Beneficiary country. For purposes of this paragraph , the term “beneficiary country” has the meaning given to such term by section 212(a)(1)(A) of the Caribbean Basin Economic Recovery Act; except that such term shall include Bermuda.  
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