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Let鈥檚 start with a fairly basic and common situation. Your employer tells you that you鈥檒l be taking a business trip to Seattle.

Your small company has you book air travel. You use your credit card. When you arrive in Seattle, you use your card for the charges.

There are also charges for meals and ground transportation. At the end of the trip, you collect your receipts and submit them for reimbursement.

Now the question. Is the amount of the travel reimbursement included in your taxable income for the year?

This would seem to be a simple question. Stated another way, it should be a simple question.

In the late 1970s and early 1980s, the IRS had a project to study employee fringe benefits.

The IRS was concerned that employers seemed to be making their own rules about the taxability of fringe benefits.

The IRS responded by issuing a 鈥減roposed鈥� revenue ruling that addressed the most common fringe benefits offered by employers.

Revenue rulings are the IRS opinion on how the law applies to a particular set of facts.

The proposed part of the ruling was recognition that many employers would not like the IRS proposal. The IRS wanted to allow these employers to comment.

In the end, Congress decided to take over the process. In 1984, Congress added a new section to the law to deal with fringe benefits.

One part of that section was called a 鈥渨orking condition fringe benefit.鈥� This provision was designed to simplify the reporting of benefits received.

It said that an employee has no income if an employer pays for an item that the employee could have deducted had they paid for the item.

The idea was that if the employer included the item as income, and the employee then deducted that item, the net would be zero income.

Why force both parties to report the item if it nets to zero? The working condition exclusion applies only when the employee deduction is under section 162 or 167.

Section 162 is for ordinary and necessary business expenses. Employees report those deductions as itemized deductions.

In 1986, two years after the fringe benefit rules were enacted, Congress added a category of itemized deductions called miscellaneous.

Miscellaneous deductions are allowed only if they exceed, in the aggregate, 2% of adjusted gross income, or AGI.

Unreimbursed employee travel costs would generally be deductible by the employee as a section 162 expense.

These costs would be reported as itemized deductions that must exceed 2% of AGI following the 1986 change.

Congress protected employees in the 1986 law by saying that the working condition fringe would not be affected by the 2% of AGI rule.

From 1984 to 2017, employees could safely exclude reimbursements of travel costs as a working condition fringe benefit.

Had the employee been forced to pay for the item, or even if the employer reported it as income, the employee could have deducted that amount.

In 2017, the law was changed, effective for 2018 and beyond, to say that no deduction is allowed for miscellaneous itemized deductions.

This raises the question of whether the working condition fringe rules still apply to items like employee business travel.

If the employee paid for that travel, it would not be deductible for years after 2017. Is an employer payment of the cost then taxable income to the employee?

Strangely, Congress never clarified how the working condition fringe rules would apply after the 2017 change to miscellaneous deductions.

The law, as written, says only that the 2% of AGI limit will not affect the ability to use the working condition exclusion.

If employee payments for business travel are now completely nondeductible by the employee, the law would seem to deny any fringe exclusion to the employee.

So, what do employers do about this? They assume that Congress did not want to change the treatment of working condition fringe benefits in 2017.

I think this assumption is factual. But a literal reading of the law has no room for making assumptions.

What do tax advisers say? The 1986 reference to the 2% threshold also covers the 2017 elimination of any deduction.

The result: employers continue to use the working condition fringe to avoid reporting income to employees. So far, no challenge from the IRS.

Jim Hamill is the director of tax practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at jimhamill@rhcocpa.com.