IRS Lists North American Areas for Convention Expense Limitation Purposes (Rev. Rul. 2016-16)

The IRS has listed areas that are considered to be within the “North American area” for purposes of the limitation under Code Sec. 274(h) on deductions for convention expenses. The limitation applies to expenses incurred in connection with a convention, seminar, or similar meeting held outside the North American area. This area is defined by Code Sec. 274(h)(3)(A) as the United States, its possessions, the Trust Territory of the Pacific Islands, Canada and Mexico.

The term “North American area” also includes a “beneficiary country,” if there is an information exchange agreement between that country and the U.S., and there is no finding by the Secretary of the Treasury that the tax laws of the beneficiary country discriminate against conventions held in the U.S. The guidance lists all U.S. possessions and all beneficiary countries, along with dates after which conventions held in those countries may generate deductible expenses.

Curacao and Saint Lucia are now included in the North American area. However, Sint Maarten, the Cayman Islands and the British Virgin Islands remain outside the North American area. Since this ruling is the first guidance since the Netherlands Antilles ceased to exist, the IRS has provided some transition relief for expenses incurred in attending a convention in Sint Maarten or the Caribbean part of the Netherlands during the period or with respect to which the taxpayer demonstrates that a nonrefundable contractual obligation existed during the period, from October 10, 2010, through June 27, 2016.

Rev. Rul. 2011-26, I.R.B. 2011-48, 803, is modified and superseded.

Rev. Rul. 2016-16, 2016FED ¶46,357

Other References:

Code Sec. 274

CCH Reference – 2016FED ¶14,408A.0591

CCH Reference – 2016FED ¶14,408A.62

Tax Research Consultant

CCH Reference – TRC BUSEXP: 24,352

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