Government Decreases Rate by Three and One-Half Cents to 54

As announced in its December 17, 2015 press release, the Internal Revenue Service (IRS) has lowered its optional standard mileage reimbursement rates for an employee’s business use of his or her vehicle from 57.5 cents in 2015 to 54 cents per business mile driven in 2016.

The government bases the mileage rate on an annual study of fixed and variable automotive operating costs, including insurance, repairs, maintenance, gas and oil.

Under California Labor Code section 2802, employers must reimburse employees for all actual work-related expenses necessarily incurred. Many employers use the IRS mileage reimbursement rate to satisfy their reimbursement obligation.

According to section 29.2.4 of California’s Division of Labor Standards Enforcement’s Enforcement Policies and Interpretations Manual (p.102), using the IRS mileage reimbursement rate will satisfy an employer’s reimbursement obligation absent evidence demonstrating otherwise. For example, if the employee can show the IRS reimbursement rate does not cover all of his/her actual and necessary business-related vehicle expenses, the employer must pay the difference.

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin for more information.

Cindy Bamforth, February 10, 2016