Transport Labor Contract/Leasing (TLC) could owe more than $5 million in back taxes because it failed to observe the limits on tax deductibility for per diem payments to drivers it leased to trucking companies in the mid-1990s. The U.S. Tax Court last month agreed with the Internal Revenue Service that actual practices and the terms of its contract with trucking companies established TLC as the employer. The court accepted IRS arguments that the trucking companies’ dispatch of drivers and supply of drivers’ trucks were of little significance. (Transport Labor Contract/Leasing vs. Commissioner; 123 T.C. No. 9)
Owners of Little Rock-based Continental Express were limited to a 50 percent deduction of per diem payments to drivers from 1995 through 1997 because they chose to take advantage of streamlined Internal Revenue Service procedures that don’t require proof of actual expenses, the U.S. Tax Court ruled earlier this year. The carrier fully deducted 60 percent of the per-mile per diem pay as nonmeal expenses. The court declared that the carrier could have fully deducted actual nonmeal expenses only if it substantiated them through receipts and other documentation. (Boyd, et al vs. Commissioner; 122 T.C. No. 18)
New Hampshire Motor Transport Association successfully challenged the state’s diversion of highway funds toward the planning and construction of the Nashua Commuter Rail Project. The state’s Supreme Court agreed that the expenditures were unconstitutional. (NHMTA vs. State of New Hampshire; No. 2003-641)
Q We have been asked by our carrier members to advise them about the wisdom of signing broker contracts that attempt to cut off carrier recourse to the consignor in the event of the broker’s default. What is your view of these provisions from the carrier’s perspective?
A This provision and its cousin – that the carrier appoints the broker as its agent for the collection of freight charges – are becoming all too frequent occurrences in broker-drafted contracts. Nancy Reagan’s advice is the best response. “Just say no.”
In my book, “Protecting Motor Carrier Interests in Contracts,” I discuss language like this as one of 12 objectionable contract provisions that I call the “Dirty Dozen.” The most important collection tool carriers have for assuring payment on brokered loads is recourse to the consignor in the event of nonpayment by the broker or other intermediary.
As the Eleventh Circuit explained, “the bill of lading is a contract between a shipper and a carrier, and the carrier has a contractual right to expect payment pursuant to the bill. If the shipper wishes to avoid liability for double payment, it should take precaution to deal with a reputable broker or contract with the carrier to secure its release.”
