Volunteer Mileage Reimbursement Remains Change-Free

In early 2017, the Minnesota Department of Revenue published information on their website about the volunteer mileage reimbursement based on IRS federal rules. This caused several organizations to reach out to the Minnesota Council of Nonprofits (MCN) with questions about if there were changes to the reimbursement rate.

To be clear, there have not been any changes to the charitable rate since 1997. We want to clarify the existing rule, share how it impacts nonprofits, and reassure organizations that we are tracking this issue.

What is the volunteer reimbursement rate?

Nonprofit organizations can decide what rate they would like to reimburse volunteers for miles driven for charitable activity. Depending on the amount, the reimbursement could be considered taxable income for the volunteer. There are two rates nonprofits can use to determine how much to reimburse volunteers. Organizations can also choose a different rate to reimburse volunteers.

Charitable rate is 14 cents per mile and is not taxable.   

Business rate is 53.5 cents per mile and is taxable. (Beginning on January 1, 2018, the rate will be 54.5 cents.)

Who sets the reimbursement rates and how often do they change?

The charitable rate has not changed since 1997 and can only be updated by Congress.

The business rate can change yearly and is regulated by the Internal Revenue Service (IRS).

Are reimbursements considered income?

If an organization decides to reimburse volunteers using the charitable rate (14 cents or lower), the reimbursement is not considered income. However, if the volunteer is reimbursed more than the charitable rate, the reimbursement is considered income and needs to be reported as such.

Volunteers who are reimbursed more than 14 cents per mile and the total amount exceeds $600 are required to receive a 1099-MISC from the organization.

If a volunteer is reimbursed more than 14 cents per mile, they can subtract the charitable rate from their total reimbursement and the remainder is what is reported as income.

Example

Miles driven for charitable activity

500 miles

Reimbursement to the volunteer at 53 cents

$265 (500 miles x $0.53)

Charitable activity mileage rate

$70 (500 miles x $0.14)

Reportable income from reimbursement

$195 ($265 – $70)

 

What is the impact to nonprofit organizations?

Over the past ten years, transportation and energy costs have increased, but the charitable reimbursement rate has not. Even if a nonprofit decides to reimburse their volunteers using the business rate, this could result in a significant tax burden for the volunteers. For example, retried volunteer drivers who receive Social Security could be at risk of having their monthly payments decrease by reporting the reimbursement as income. This has caused many volunteers to stop donating their time and talent to help others.

Nonprofit organizations and the communities they partner with rely on volunteer drivers, especially in rural parts of the state where volunteers might drive up to 18,500 miles per year. Drivers often benefit as well and as one organization explained, their volunteer driver program helps retired people get out into the community helping others.

What is the status of any legislation?

A bill was introduced in Congress in March 2013 that sought to raise the volunteer mileage rate to the business rate. The bill was not enacted.

Included in the House tax proposal in December 2017, there was a provision that would have allowed the IRS to set the charitable rate instead of Congress. This proposal did not make it into the final bill passed by Congress.

What can your organization do?

If your organization has lost volunteer drivers because of the reimbursement rate, please contact Taylor Putz, public policy advocate, at tputz@minnesotanonprofits.org. The MCN public policy team will continue to work to understand and try to address this issue.

 
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