Alumni Association

Board & Spousal Expense Reimbursement

The Alumni Association has meetings twice each year, attended by elected Alumni Board members. Although the meetings are primarily focused on the business of the Alumni Association, there are several social events on the agenda, and so many board members bring their spouses to these meetings. The Alumni Association has a travel expense policy, and distinguished in the policy between expenses of Board members which would be reimbursed and those which would not be reimbursed. Included in the list of "reimbursable" expenses are several items related to board member spouses. The Alumni Association pays for the spouse's travel expenses once per year and also pays for the spouse's meals on several occasions during each meeting (i.e., as part of several meals planned by the Alumni Association). Finally, two football tickets are provided to each board member during the fall meeting. The question arises as to which of these expense reimbursements are taxable to the participating board members?

Gross income, under Section 61 of the Internal Revenue Code, means all income from whatever source derived. Since there appear to be no specific cases regarding reimbursement of spousal expenses by a charitable organization, the general rules applied to reimbursing spousal expenses in a business setting would apply in these cases, and there have been clear rulings as to the tax treatment of the reimbursements of the board members themselves.

The IRS would be first to review the primary purpose of this meeting. If there is a lack of documentation, or if the meetings were primarily for entertainment, rather than the charitable purposes, all expense reimbursement for both the board member and their spouse would be completely taxable. Since the Alumni Association prepares a detailed agenda for each meeting, and the sessions are predominated by items that relate to the Alumni Association and furthering the exempt purpose of the University, there should be no tax consequences for reimbursement of the Board member's related to the meeting. However, since the football tickets provided bear no relationship to the charitable purpose of the Alumni Association, and because their value exceed any deminimis threshold, the 2 football tickets should be considered income to the board member at their fair value.

The next question to address is whether the board member's reimbursed expenses are excludable from income. Revenue Rulings (67-30, 68-133, and 80-99) have consistently supported the position that when an individual is reimbursed for expenses incurred on behalf of a tax-exempt organization, this reimbursement is only taxable to the extent that it either exceeds those charitable-related expenses or to the extent that it pays for personal expenses. It is important to note that even though the board members are considered "independent contractors", they are still required to provide an adequate accounting to the Alumni Association of all expenses, in order to make the reimbursement of their charitable-related expenses nontaxable.

The final question is whether reimbursement of spousal expenses should be excluded from the board member's income. In this situation, the spouse's expense reimbursement is not income to the board member only when the spouse's presence serves a clear bona fide business purpose. The current meeting structure and agenda do not demonstrate a clear business reason for the spouse's presence, and so all reimbursed spousal expenses should be taxed to the board member since there is no bona fide "business" purpose for the spouse.

In conclusion, football tickets and all reimbursement for (or payment of) spousal expenses (travel, meals, additional lodging cost-if any) should be treated as income to the board member and reported on Form 1099 at year end, if the total dollar exceeds $600.