H&R Block Urges IRS and Congress to Raise Mileage Deductions for Higher Gas Prices

Business Wire, June 16, 2008

KANSAS CITY, Mo. -- Because of recent gasoline price increases, H&R Block (NYSE:HRB) is recommending the Internal Revenue Service consider raising automobile mileage deduction rates for business, medical or moving purposes and that Congress consider raising the rates for miles driven in service to charities.

H&R Block Chairman Richard Breeden suggested the adjustments in a letter to Henry Paulson, Secretary of the U.S. Treasury, as well as to the chairmen and ranking minority members of the Congressional tax-writing committees.

In the letter, Breeden notes that while H&R Block has not traditionally taken positions on tax policy, the company was suggesting this one-time acceleration in hopes the move would "benefit all Americans impacted by the extraordinary price increases in recent months."

Current deduction rates are 50.5 cents per mile for business use, 19 cents for medical or moving use, and 14 cents for charitable use. Since Nov. 27, 2007, when the IRS announced the 2008 optional standard mileage rates, nationwide gasoline prices have increased by more than 40 percent, from less than $2.85/gal. to $4.066 on June 12, 2008, based on data from the American Automobile Association (AAA). Prices in California average more than $4.50 a gallon.

The optional business standard mileage rate is used as a safe harbor number to compute the deductible costs of operating an automobile for business use instead of using receipts to track actual costs. This rate is also used by the federal government and many businesses to reimburse their employees.

Breeden cited precedents for mid-year corrections in 2005 for business mileage rates set by the IRS. That year, the IRS raised the mileage reimbursement rate by nearly 20 percent from 40.5 cents a mile to 48.5 cents per mile, for all business miles driven from Sept. 1 to Dec. 31, 2005. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

Charitable deduction rates are set by statute. Congress more than doubled mileage rates for deductions or reimbursement in connection with Hurricane Katrina-related relief but the standard 14 cents per mile rate for vehicle use in connection with charitable purposes has not changed in a decade.

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