COMBINING BUSINESS AND PERSONAL TRAVEL

Policy Steward:  Office of the Corporate Controller

Table of Contents:

  • General Guidelines
  • Documentation Required
  • Car Rental Involving Personal Use
  • Extended Stay to Save Airfare
  • Taxability of International Travel with Personal Use
  • Illustrations of Combined Business and Personal Travel Issues
  • Further Information

  • General Guidelines

    A traveler may be reimbursed for uninterrupted business travel by the most direct route. When a traveler interrupts travel or deviates from the direct route for personal reasons, a reimbursement may not exceed the cost of the most direct route. If the traveler extends the duration of the trip for nonbusiness reasons and the alternate rate is lower than the direct rate for the comparable period, the reimbursement shall be for the lower rate. It is possible that the traveler may combine personal travel with a business trip that would reduce the overall cost to the University. This is acceptable provided the University's cost is not more than the business portion alone. In the event the traveler leaves the business destination, the University will not pay any expenses at the personal destination.

    Documentation Required

    The traveler is responsible for documentation to prove that any personal travel did not result in additional costs for the University. The traveler must provide comparable price quotes from either Travel onLion or an external travel source to document the difference in cost. The comparable quote must be obtained at the same time that the travel reservation is booked. This comparison is necessary to ensure University expenditures comply with federal travel regulations. The documentation must accompany the request for travel settlement. Failure to follow this procedure will require review by the Corporate Controller, which may delay reimbursement and may result in denial of the claim.

    Car Rental Involving Personal Use

    To be eligible for reimbursement, a rental vehicle must be required for business purposes or be an economical choice to meet business needs. If the personal use of the rental vehicle incurs costs greater than that required for business purposes, the additional cost will be the responsibility of the traveler and will not be reimbursed by the University. To determine the appropriate cost sharing, the traveler should submit price quotes for the cost of car rental for the business portion only. Any rental costs in excess of the quote for business days will be paid by the traveler. If no price quotes are provided for the business portion alone, then the cost will be prorated by day, with only the cost per business day eligible for reimbursement. The cost of fuel for a rental vehicle used for both business and personal travel should be prorated based on the allocation of personal and business miles.

    A common example would be the use of a rental car for travel between the airport and hotel at one's destination. In the case of just one traveler, shuttle service or taxi may be more economical, especially when one considers the cost of parking the car at the hotel. With a larger party traveling as a group, then a rental car might be cheaper than the sum of the individual shuttle fares. When the need for the car is not self-evident, the traveler must explain the rationale and be aware that a portion of the car rental may be classified as a personal expense.

    Extended Stay to Save Airfare

    It is sometimes possible to save airfare by scheduling an additional night's stay in one's travel itinerary. When compared to a normal schedule for the business purpose of the trip, if the documented savings in airfare offsets the increased cost of the trip to be incurred by the University, then the extended stay is acceptable.

    If the extended stay will not incur additional lodging, meal, or other expense to the University and the airfare is equal to or less than the normal schedule for business purposes, this is also acceptable. If the trip extends beyond the requirements for the business purpose and airfare savings do not compensate for the extension, then the additional expense of the extended trip is not allowable for reimbursement. The traveler may still select to include the personal aspect of the trip, but must assume the additional expense as personal.

    Taxability of International Travel with Personal Use

    International travel frequently consists of both business and personal components. According to the IRS, there is a taxability issue if BOTH of the following conditions are met:

    1. The total period of the trip is longer than one week, and

    2. IRS CALCUATION RULE: For purposes of establishing whether the trip was more than seven days, do not count the day in which the person leaves the United States. However, do count the day in which the individual returns to the United States. Thus, in counting days, look at when the person leaves the United States to when he/she returns to the United States, but do not count the day in which the person leaves the United States.

    3. At least 25 percent of the trip is personal

      IRS CALCULATION RULE:  Once you have established that the foreign travel is more than seven days, the calculation of the percentage of personal time should include all days that the person is outside the United States, including travel days en route.>

      Example: Individual leaves New York on Dec. 1, arrives in Japan on Dec. 2, leaves Japan on Dec. 10 and arrives in NY on Dec. 11, there are 10 days for purposes of calculating whether the trip exceeded  seven days (Dec. 2 – 11).  However, all eleven days (Dec. 1-12) are counted in determining the personal time percentage.

    In the event that both conditions are met, a portion of the common business expenses that are reimbursed to the traveler, including airfare, is taxable to the traveler. This requirement applies to travel outside the 50 United States and the District of Columbia.

    NOTE that if a trip includes non-Penn State business travel, such as personal consulting, this can be so noted for purposes of taxes, but the airfare and other travel costs incurred must be appropriately allocated to the non-business travel and the portion related to non-Penn State business will not be payable or reimbursable by Penn State. See the section on Travel Compensated by a Third Party in the Overview. 

    For the purposes of calculating the percentage of business and personal time when a travel day consists of both business and personal time, the day would be classified as a business day. For purposes of this policy, sabbaticals are treated as business. For more information, review the following examples:

    Trip with Taxable Element

    An employee travels to London for 10 days, of which 7 days are business related and 3 days are personal; 70 percent of the trip is business and 30 percent is personal. The traveler is reimbursed for airfare and seven days of meals and lodging. The other three days of meals and lodging are considered personal and are not reimbursed. Since the trip was longer than one week and at least 25 percent personal, the employee will be taxed on 30 percent of the airfare considered personal under IRS regulations.

    Trip with No Taxable Element

    An employee travels to London for 10 days, of which 8 days are business related and 2 days are personal; 80 percent of the trip is business and 20 percent is personal. The traveler is reimbursed for airfare and eight days of meals and lodging. The other two days of meals and lodging are considered personal and are not reimbursed. The cost of airfare, even though it is reimbursed to the traveler, is not taxable to the traveler since the personal component is not equal to or greater than 25 percent of the trip.

    Illustrations of Combined Business and Personal Travel Issues

    Standard Business Trip - no personal elements

    Travel by air from State College to Chicago for three-night stay

    Depart from State College on Sunday at 9:00 a.m., return Wednesday at 9:00 p.m.

    All expenses are eligible for reimbursement:

    $600 Airfare (lowest available commercial economy fare that meets the business purpose of the trip)
    $300 Lodging - three nights (Sunday, Monday, Tuesday) (assume $100 per night)
    $200 Meals - four days per diem (Sunday, Monday, Tuesday, Wednesday) (assume $50 is the daily per diem)
    $50 Ground transport in Chicago
    $80 Airport parking in State College (assume $20 per day for four days)
    $20 Maximum reimbursement for miscellaneous expenses
    $1,250 TOTAL

     

    Standard Business Trip - Saturday night stay to reduce airfare, no personal elements

    Travel by air from State College to Chicago for four-night stay

    Depart from State College on Saturday at 9:00 a.m., return Wednesday at 9:00 p.m.

    All expenses are eligible for reimbursement:

    $350 Airfare (lowest available commercial economy fare that meets the business purpose of the trip)
    $400 Lodging - four nights (Saturday, Sunday, Monday, Tuesday) (assume $100 per night)
    $250 Meals - five days per diem (Saturday, Sunday, Monday, Tuesday, Wednesday) (assume $50 is the daily per diem)
    $50 Ground transport in Chicago
    $100 Airport parking in State College (assume $20 per day for five days)
    $25 Maximum reimbursement for miscellaneous expenses
    $1,175 TOTAL


    Saturday night stay to reduce airfare, with extended stay for personal reasons, includes car rental

    Travel by air from State College to Chicago for six-night stay (Thursday and Friday are personal)

    Depart from State College on Saturday at 9:00 a.m., return Friday at 9:00 p.m. (if on business only, would return Wednesday at 9:00 p.m.)

    Business expenses eligible for reimbursement:

    $350 Airfare (lowest available commercial economy fare that meets the business purpose of the trip)
    $400 Lodging - four nights (Saturday, Sunday, Monday, Tuesday) (assume $100 per night)
    $250 Meals - five days per diem (Saturday, Sunday, Monday, Tuesday, Wednesday) (assume $50 is the daily per diem)
    $50 Ground transport for business purposes in Chicago
    $100 Airport parking in State College (assume $20 per day for five days)
    $25 Maximum reimbursement for miscellaneous expenses
    $1,175 TOTAL

    Personal expenses not eligible for reimbursement:

     

    Include nonbusiness destination for personal reasons, with Saturday stay

    Travel by air from State College to Chicago for four-night stay, then continue to Denver for four-night personal stay

    Depart from State College on Saturday at 9:00 a.m., return a week later on Sunday at 9:00 p.m.

    To determine portion of airfare that is personal, must know the cost of airfare for the business portion of trip to Chicago and return. The total airfare is $750, and the business portion is $350. (If on business only, would return Wednesday at 9:00 p.m.)

    Business expenses eligible for reimbursement:

    $ 350 Airfare (is less than other airfares for the business portion of trip only)
    $ 400 Lodging - four nights (Saturday, Sunday, Monday, Tuesday) (assume $100 per night)
    $ 250 Meals - five days per diem (Saturday, Sunday, Monday, Tuesday, Wednesday) (assume $50 is the daily per diem)
    $ 50 Ground transport in Chicago
    $ 100 Airport parking in State College (assume $20 per day for five days)
    $ 25 Maximum reimbursement for miscellaneous expenses
    $ 1,175 TOTAL

    Personal expenses not eligible for reimbursement:

     

    Including nonbusiness destination results in lower overall cost

    Travel by air from State College to Chicago for four-night stay, then continue to Denver for four-night personal stay

    Depart from State College on Saturday at 9:00 a.m., return a week later on Sunday at 9:00 p.m. (If on business only, would return Wednesday at 9:00 p.m.)

    In a peculiar twist of pricing, airfare can be found that results in total airfare of $300 to include the entire trip. Since this price is less than the stand-alone pricing for airfare to Chicago and back, the entire $300 is permitted as a business expense.

    Business expenses eligible for reimbursement:

    $300 Airfare (is less than other airfares for the business portion of trip only)
    $400 Lodging - four nights (Saturday, Sunday, Monday, Tuesday) (assume $100 per night)
    $250 Meals - five days per diem (Saturday, Sunday, Monday, Tuesday, Wednesday) (assume $50 is the daily per diem)
    $50 Ground transport
    $100 Airport parking in State College (assume $20 per day for five days)
    $25 Maximum reimbursement for miscellaneous expenses
    $1,125 TOTAL

    Personal expenses not eligible for reimbursement:

    FURTHER INFORMATION:

    For questions, additional detail, or to request changes to this policy, please contact the Office of the Corporate Controller.


    Effective Date: July 30, 2012
    Date Approved: July 30, 2012
    Date Published: July 30, 2012 (Editorial changes- October 24, 2013)

    Most Recent Changes:

    Revision History (and effective dates):

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