Mileage Reimbursement Rates to Rise July 1

With fuel prices around the country soaring—and California’s average exceeding $6 per gallon—the Internal Revenue Service (“IRS”) has taken the step of adjusting its standard mileage rate for the remainder of 2022.  The IRS typically updates its rates on an annual basis, but has cited rising fuel prices, as well as other issues, in announcing its mid-year increase.  Beginning July 1, 2022, the standard mileage rates will increase as follows (from the prior rates, set on January 1, 2022):

• Business: 58.5¢ to 62.5¢

• Medical or moving: 18¢ to 22¢

• Charitable: 14¢

Background on Mileage Reimbursement

As a reminder, under California law, employers are required to reimburse employees for certain expenses, including necessary expenditures incurred by the employee (1) “in direct consequence of the discharge of his or her duties,” or (2) of “his or her obedience to the directions of the employer[.]”  Cal. Lab. Code § 2802(a).  California courts have consistently held that employers are required to reimburse for mileage.  Note, however, that the law does not require employers to reimburse employees for mileage related to daily commutes.  Instead, it covers business travel that occurs in direct consequence of the employee’s duties and/or obedience to their employer. 

The IRS’ rates are optional, but are widely used and accepted—including in California— by employers for purposes of calculating reimbursable employee automobile expenses.  As flagged above, the rates contemplate (1) business travel, (2) medical and moving purposes, and (3) miles driven in service of charitable organizations.

Bottom Line:  Update Policies and Practices to Reflect Rate Increases

For employers who rely on the IRS rates for reimbursement purposes, be prepared to increase your costs pursuant to Cal. Lab. Code § 2802(a).  The new rates will go into effect as of July 1, 2022.  In advance of that, we advise clients to ensure that any business expense reimbursement policies (which may have been updated in January 2022 to reflect the new rates) are updated, again, to reflect the mid-year revisions.

The information, comments, and links posted herein do not provide specific legal advice. For legal advice, please contact an attorney at FitzGerald & Mulé LLP.