Expense Reimbursement Policy
Company policy governing reimbursement of business expenses — covers eligible categories, per diems, documentation, IRS accountable-plan compliance.
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EXPENSE REIMBURSEMENT POLICY
Company: Northstar Logistics, Inc.
Effective date: May 11, 2026
Governing state: Illinois
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1. PURPOSE AND ACCOUNTABLE PLAN COMPLIANCE
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This Policy governs reimbursement of business expenses incurred by
employees on behalf of the Company. The Policy is designed to comply
with the IRS "accountable plan" rules under Treasury Regulation
§1.62-2 so that reimbursements are excluded from employee taxable
wages. The three accountable-plan requirements are:
(a) Business connection — expenses must be incurred in the
performance of services for the Company.
(b) Substantiation — employees must substantiate the amount, time,
place, and business purpose within a reasonable period
(this Policy: 30 days from the expense).
(c) Return of excess — employees must return any advance or excess
reimbursement within a reasonable period (this Policy: 30 days
from determination).
Failure to follow these procedures means reimbursements may be
treated as taxable wages subject to W-2 reporting and withholding.
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2. ELIGIBLE EXPENSE CATEGORIES
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2.1 Travel — Air, Rail, and Ground
• Air travel: Coach / economy on all domestic flights; coach on international ≤6 hrs; business on international >6 hrs
• Rail / bus: standard class.
• Rental car: mid-size or smaller (subject to safety/specific need
exception with manager approval). Decline collision-damage waiver
unless company credit card does not provide rental coverage.
• Personal-vehicle mileage: IRS standard mileage rate (current: 67¢/mile for 2026 — verify annually).
• Ride-share / taxi / parking: actual cost with receipt.
2.2 Lodging
Standard room at a moderately priced hotel, not exceeding GSA per-diem lodging rate for the destination + 25%. Suite upgrades, in-room movies, mini-bar, and recreational charges are not reimbursable.
2.3 Meals
GSA per diem rates by destination
Per IRC §274(n)(1), business meal expenses are 50% deductible to the
employer. The Company reimburses 100% to the employee but accounts
for the 50% disallowance internally. Meal receipts must show the
date, location, vendor, amount, attendees, and business purpose.
2.4 Client Entertainment
Pre-approval required from the employee's manager for entertainment
above $250 per event. Per IRC §274(a) (post-2017 TCJA), entertainment
expenses are generally NOT deductible to the employer; the Company
reimburses but does not deduct. Required documentation: date, place,
business purpose, names of all attendees and their business
relationship.
2.5 Conference and Professional Development
Reimbursement requires advance approval. Eligible: registration,
travel to/from, lodging, meals (per Section 2.3). Not eligible:
unrelated leisure activities at the conference location.
2.6 Office Supplies and Equipment
Items >$200 require pre-approval and are Company property.
2.7 Communications
Personal phone for business use: $50/month flat allowance OR actual
incremental cost with detailed bill. Roaming charges with receipt.
2.8 Home Office (Remote Workers)
Per applicable state law (CA Labor Code §2802; IL Wage Payment and
Collection Act 820 ILCS 115/9.5; MA G.L. c. 149 §148; NY Labor Code
§198-c), the Company reimburses necessary expenses for performing
work duties, including a portion of internet, utilities, and home
office supplies as approved by the Company. Federal law (no general
reimbursement requirement for non-FLSA-implicated expenses) is
preempted by these stronger state laws.
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3. NON-REIMBURSABLE ITEMS
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• Alcoholic beverages (except client entertainment, manager pre-approval, IRS 50% disallowance applies)
• Personal entertainment, recreation, gym fees
• Personal items (toiletries, laundry on trips ≤3 nights, minibar)
• Traffic violations, parking tickets
• Personal phone or internet bills (use company-issued device)
• Spousal/family travel companions
• First-class or premium-economy upgrades
• Tips above 20% on meals or 15% on services
• Any expense without valid receipt above $25
• Expenses submitted more than ${blank("30")} days after the expense was incurred (without manager exception)
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4. SUBMISSION PROCESS
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4.1 Submission Deadline. Expenses must be submitted within 30 days
of the expense. Late submissions require manager approval and may
not be reimbursed.
4.2 Required Information. Each expense must include:
• Date of expense
• Vendor name and location
• Amount
• Business purpose (one sentence)
• Project / cost-center code
• Receipt for any expense >$25 (per IRS rules, except for
incidental expenses on travel under per-diem rules)
4.3 Approval. Each report routes to the employee's manager. Reports
above $5,000 require an additional executive approval.
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5. REIMBURSEMENT TIMING
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Approved reimbursements are paid: Within 14 days of approved submission.
Reimbursements are deposited to the same account as payroll unless
the employee specifies otherwise.
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6. CORPORATE CARDS AND ADVANCES
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6.1 Corporate Cards. Corporate credit cards may be issued at manager
discretion. Personal use is prohibited; cards are for business
expenses only.
6.2 Travel Advances. Advances are not provided in the ordinary course;
employees use corporate cards or personal funds with reimbursement.
Exceptions for international travel or extended assignments require
CFO approval.
6.3 Lost Receipts. A "missing receipt" form may be used for items
under $75 with manager approval; not acceptable for items above $75.
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7. STATE-SPECIFIC REQUIREMENTS
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Several states impose mandatory employee expense reimbursement that
overrides any company policy to the contrary:
• California — Labor Code §2802 requires reimbursement of all
necessary business expenses, including mileage at the IRS standard
rate, business use of personal phone (Cochran v. Schwan's Home
Service, 228 Cal. App. 4th 1137 (2014)), and home-office costs for
remote workers.
• Illinois — Wage Payment and Collection Act (820 ILCS 115/9.5),
effective 2019: necessary expenditures incurred within the
employee's scope of employment must be reimbursed if requested in
writing within 30 days.
• Massachusetts — G.L. c. 149 §148 plus Mass. Wage Act case law
requires reimbursement of work-related expenses.
• New York — Labor Code §198-c requires reimbursement when failure
to do so brings wages below minimum wage.
• Iowa — Code §91A.3(6) similarly requires reimbursement.
• Other states (PA, MN, NV, NH, ND, SD, DC) have variations.
Where state law conflicts with this Policy, state law controls and
this Policy is modified to the extent necessary.
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8. POLICY VIOLATIONS
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Submission of false expense reports is grounds for immediate
termination and may be referred to law enforcement for criminal
prosecution (theft, fraud). The Company audits expense reports
periodically. Falsification will result in disqualification from
reimbursement of disputed items, potential clawback of prior false
reimbursements, and disciplinary action up to and including
termination.
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9. POLICY ACKNOWLEDGMENT
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I acknowledge receipt of this Expense Reimbursement Policy and agree
to comply with it. I understand that compliance with the substantiation
and submission timelines is required for tax-free reimbursement under
IRS accountable-plan rules.
_____________________________________ May 11, 2026
Employee signature Date
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KEEP A COPY — RETAIN IN PERSONNEL FILE
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About this template
An Expense Reimbursement Policy serves three masters: (1) the IRS, which requires "accountable plan" compliance under Treasury Regulation §1.62-2 to keep reimbursements tax-free to employees; (2) state employment law, which in several jurisdictions mandates reimbursement of work-related expenses regardless of company policy; and (3) the company's internal controls, which need clear rules for what is reimbursable, how to submit, and who approves. The IRS accountable-plan rules are the foundational starting point. Under §1.62-2(c), an arrangement qualifies as an accountable plan if it meets three requirements: (a) business connection — expenses must be incurred in performing services for the employer; (b) substantiation — employees must substantiate amount, time, place, and business purpose within a reasonable period (typically 30-60 days); (c) return of excess — employees must return any advance or over-reimbursement within a reasonable period (typically 30 days). If any requirement fails, reimbursements are treated as taxable wages, subject to FICA, FUTA, federal income tax withholding, and state income tax withholding — a 25-30% effective tax wedge that defeats the purpose of reimbursement. State law overlays are critical. California Labor Code §2802 is the most aggressive: it requires reimbursement of all "necessary" business expenses incurred in the discharge of duties, including mileage, business use of personal cell phone (Cochran v. Schwan's Home Service, 228 Cal. App. 4th 1137 (2014) — required reimbursement of personal phone for required calls even when employee had unlimited plan), and during the COVID era, home-office costs for remote workers. Illinois 820 ILCS 115/9.5, effective 2019, requires reimbursement if requested in writing within 30 days. Massachusetts G.L. c. 149 §148 enforces the same. New York Labor Code §198-c requires reimbursement when failure brings wages below minimum wage. Iowa Code §91A.3(6) is similar. Federal law (the Fair Labor Standards Act) requires reimbursement only when expenses bring wages below minimum wage; states have built on top of this. Substantive policy decisions: (1) Mileage — IRS publishes a standard mileage rate annually (Rev. Proc. updates; current as of 2026: 67¢/mile, but verify the current Notice each year). Companies can reimburse at this rate (simple, no documentation of actual cost) or at actual cost with detailed records. (2) Per diem for meals — the GSA publishes per diem rates by city (gsa.gov/perdiem); using GSA rates is administratively simple. Alternative is actual cost with cap. Note: per IRC §274(n)(1), business meals are 50% deductible to the employer (full reimbursement to employee, but the employer can deduct only 50%). (3) Air travel — class-of-service policy is the key cost lever. Coach for domestic, business for long international is typical. (4) Hotel — GSA per-diem lodging rates plus a 25-50% buffer is typical. (5) Entertainment — post-2017 TCJA, IRC §274(a) eliminated the entertainment deduction. Companies still reimburse but cannot deduct. Pre-approval is recommended to control spend. (6) Home office for remote workers — increasingly important; CA, IL, MA, NY law typically requires partial reimbursement of internet, electricity, and home office supplies for required work-from-home. (7) Submission deadline — 30 days is standard and complies with "reasonable period" under accountable-plan rules. (8) Receipts threshold — IRS allows no receipt for incidental expenses under $75 (Rev. Proc. 2019-48 and prior); company policies can be stricter. Common compliance failures: (a) failing to enforce substantiation deadlines (then all reimbursements are taxable); (b) reimbursing personal expenses (mixed-purpose meals, spousal travel) without proper documentation; (c) failing to require business-purpose statements (just an amount and date is insufficient); (d) excessive per diem rates that exceed federal limits without documentation; (e) failing to update mileage rates annually when IRS publishes new rate; (f) not addressing state-mandated reimbursement (CA, IL, MA exposure). The policy should be reviewed annually with HR, payroll, and tax functions, and updated when (a) IRS publishes new mileage or per-diem rates, (b) state law changes (Illinois, California are particularly active), (c) company travel patterns change, (d) audit findings reveal issues.
When to use it
- Establishing a new business expense policy.
- Annual update for new IRS rates and state-law changes.
- After M&A integration of two policies.
- When transitioning from manual to automated expense management (Concur, Expensify, Brex, Ramp, etc.).
- When expanding to new states with mandatory reimbursement laws.
What to include
- IRS accountable-plan compliance statement (business connection, substantiation, return of excess).
- Eligible expense categories (travel, lodging, meals, entertainment, home office).
- Mileage reimbursement rate (typically IRS standard).
- Per-diem policy (GSA or actual-cost with cap).
- Air-travel class-of-service rules.
- Hotel rate ceiling.
- Non-reimbursable items list.
- Submission deadline (e.g., 30 days from expense).
- Required documentation (date, vendor, amount, business purpose).
- Approval routing.
- Reimbursement payment timing.
- State-specific requirements (CA Labor Code §2802; IL 820 ILCS 115/9.5; MA G.L. c. 149 §148).
- Anti-fraud language with consequences.
- Employee acknowledgment signature line.