You've Got to Be Kidd-ing Me! A Case Study on the Variable Distinction Between “Temporary” and “Indefinite” Employment

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Melissa Fernley  

With the sluggish economy and the extensive rebuilding along the East Coast as a result of Hurricane Sandy, construction workers are traveling far and wide to find jobs and take advantage of temporal opportunities. Beyond the physical and emotional demands of working away from home, construction workers must also consider the tax implications of earning income away from their tax home. While in theory the expenses incurred during temporary employment are deductible from individual income, the Internal Revenue Service and the courts have created several stumbling blocks that require the taxpayer to pay close attention to the duration and location of temporary work.

I.R.C. §162(a)(2) and Tax Home

Under I.R.C. §162(a)(2), taxpayers are allowed to deduct unreimbursed expenses incurred while working away from the tax home if the expenses are ordinary and necessary and paid or incurred during the taxable year in carrying on a trade or business. The IRS and state departments of revenue allow the business travel deduction to give taxpayers a break when they are required to essentially double their living expenses due to a job that takes them away from their normal tax home.

The location of a taxpayer's tax home varies from court to court. The IRS and United States Tax Court maintain that the metropolitan area surrounding a taxpayer's principal place of business is his tax home.1 In contrast, the Second, Fifth, Sixth, Eighth, and Ninth Circuits consider a taxpayer's personal residence to be his tax home.2

Most taxpayers will have their principle place of business and their personal residence within the same metropolitan area. However, some vocations involve extensive temporary work in many different locations, such as traveling salesmen, pilots, and in the case of the Kidd family, construction workers. In these cases, where a taxpayer does not have a principle place of business, the IRS has ruled that his personal residence, or “permanent place of abode,” is considered his tax home. Alternatively, a taxpayer with no permanent place of residence and no principle place of employment is considered an itinerant worker, and his tax home travels with him.

To determine whether a taxpayer employed at a temporary job is truly “away from home” for purposes of deducting travel expenses under I.R.C. §162(a)(2), the court must ascertain the location of the taxpayer's “permanent place of abode.” The IRS has developed three factors to answer this question, including: (1) whether the taxpayer performs a portion of his business in the vicinity of the residence and uses the residence as lodging during that business, (2) whether the taxpayer's living expenses are duplicated when he is absent from the residence, and (3) whether the taxpayer has members of his marital or lineal family residing in the residence or, if single, has not abandoned the residence.3 If a taxpayer satisfies all three of the requirements, the location is the taxpayer's residence, and is treated as his “tax home.” If a taxpayer can only meet two of the requirements, the IRS or court will look at the surrounding facts and circumstances to make a determination.

Once the tax home is established and it can thus be determined that the taxpayer is working away from his tax home, the taxpayer must still show that his work was of a truly temporary nature, which ultimately justifies the need for a deduction for duplicate expenses. If a taxpayer's employment away from home is determined to be not temporary but “indefinite,” he will not be able to deduct the expenses because his tax home will have shifted to his place of indefinite employment.

Temporary or Indefinite

Whether a job is classified as temporary or indefinite is an issue of fact. While I.R.C. §162(a) establishes the bright line rule that employment for more than one year is per se indefinite, Rev. Rul. 99-7 states that employment realistically expected to last and in fact lasting less than one year is considered temporary “in the absence of facts and circumstances indicating otherwise.” Each court evaluates these “facts” differently, and the United States Supreme Court has never offered any explicit guidance on the question, even in a case centering on the temporary-indefinite distinction.4

The Ninth Circuit, in Doylev. Comr.,5 has established a “reasonable probability” standard when evaluating the facts of a case. Under this standard, if a taxpayer knows of a reasonable probability of continued employment, the job is considered indefinite.

Some courts use hindsight to evaluate whether a job or a series of jobs is considered temporary or indefinite.6 Also, a single job can be considered both temporary and indefinite at different times; expenses are deductible during the period the job would be classified as temporary, up until circumstances change and the job becomes indefinite.7

Questions remain as to how the courts will treat a series of temporary jobs that add up to a year in the aggregate.8 If the jobs are all under the same contractor, but located in different places, it is easier to argue that they were each distinct opportunities for work away from the tax home. If the jobs are under different contractors but in the same location, it may be harder to justify the maintenance of a separate place of residence elsewhere. As we will see in the Kidd case, the relationship between contractors and the location of work opportunities are often the facts on which a case turns.

Kidd Summary

In Kiddv. Oregon Dept. of Rev.,9 a husband and wife each claimed business deductions for vehicle, food, and lodging expenses incurred while working their out-of-state construction jobs. Oregon follows federal guidelines for deducting such travel expenses, requiring that the travel be away from home, incurred in connection with a legitimate business purpose, and reasonable and necessary. At issue in this case was whether the couple's employment could be considered “away from home.” The court's analysis hinged on whether the couple's employment was “temporary,” which would allow them to take the deductions from their tax home in Oregon, or “indefinite,” which would bar the deductions.

Carolyn Kidd

Carolyn Kidd was a construction worker who utilized her union to find and accept jobs both in the area near her residence in Albany, Oregon and across the union's broader territory, which included all of Oregon and several counties in Southern Washington. After a construction job with Hoffman Structures in 2005, which she acquired through the union, Carolyn was asked to join a 2006 project in Portland, Oregon with the affiliated but legally independent company Hoffman Construction. After less than a year with Hoffman Construction, Carolyn was offered a job again with Hoffman Structures, also in the Portland area.10

Carolyn Kidd's Employment

Contractor Job Start Date Job End Date Days Worked Location
Hoffman Structures 8/04/05 1/18/06 168 Vancouver, WA
Hoffman Construction 1/20/06 12/18/06 348 Portland, OR
Hoffman Structures 1/03/07 11/28/07 330 Portland, OR
The Court's Analysis

In considering the nature of Carolyn's employment, the court looked at three cases for guidance. First, the court looked at Moreyv. Dept. of Rev.,11 an Oregon tax court case with a similar fact pattern. In Morey,the tax court decided that the uncertainty of a job in the construction business was not sufficient to qualify as temporary employment for tax purposes, and noted that there were other opportunities available to the taxpayer at his tax home.12 The court also looked at Wilson v. Comr.,13 a U.S. Tax Court case which considered a taxpayer's series of employment positions with the same employer. The Wilsoncourt decided that the entire duration of the relationship between the employer and the taxpayer should be taken into account and that “where the employee is highly regarded by the employer … the relationship between the two parties is a continuing one, subject only to the availability of projects requiring the employee's skills.”14 Finally, the court adopted the Ninth Circuit “reasonable probability” standard, in which knowledge of a reasonable probability of continued employment renders a job indefinite.

Synthesizing the rationales of the three cases, the court ruled that while Carolyn's employment with Hoffman Structures and Hoffman Construction in the Portland area lasted less than a year in each case, and was thus not per se indefinite under the bright-line rule, Carolyn knew of a reasonable probability that she would remain in the Portland area with continued employment, which rendered her jobs indefinite.15 Drawing on Morey, which gave weight to the fact that the taxpayer had myriad opportunities for work near his tax home, the court also noted that there was a low chance that Carolyn would receive work in her tax home of Albany, making it more likely that she would need to seek a job in Portland where sufficient work was available.16 The court also drew on the good relationship between the taxpayer and construction contractor in Wilson, noting that Carolyn was specifically requested for the Hoffman Construction/Structures jobs because she had a good reputation with the companies, which increased her chances of remaining in the Portland area.17 Ultimately, the court decided that Carolyn Kidd's tax home for the year at issue was Portland, disallowing her deductions.

Factors Outside the Court's Analysis

While the court's written analysis is dispositive, the analysis and debate that took place before the trial offers more insight into what facts and circumstances were considered important to the department and the court.

In a letter to the Kidds, the Department listed its reasons for denying the Kidds a business deduction under I.R.C. §162.18 Not all of these reasons were considered by the court. First, the department requested information about the Union's requirement for physical presence when receiving dispatch orders. According to the department, unions which use a phone or email notification process “have reduced the number of instances where the Union hall was claimed as a tax home.”19 The department's comment suggests that the Kidd's Union location could be their tax home if they received their orders in person rather than over the phone. Unfortunately for the Kidds, they received their assignments remotely.

Next, the Department noted that “the tax law has no provision considering economic or prevailing industry conditions.”20 In other words, the state of the economy has no bearing on the characterization of a taxpayer's employment away from home. This was likely a response to a letter written by Mr. and Mrs. Kidd, which stated that “it is impossible to know where we are going to work, how long the project will last, or how long we will work on any project … the best we can do is live in a central location [and] be available and willing to go where the work is.”21

The Department also claimed that there was “no work” in the areas near the Kidds' home, and that “all the projects in the state were in the Portland vicinity requiring their expertise.”22 A Union Dispatch Log included as a plaintiff exhibit includes a long list of employment possibilities outside of the Portland area.23 While the department's claim seems a bit exaggerated, it does suggest that a factor in considering the likelihood of continued employment is the availability of jobs in the taxpayer's field.

Judy Dethloff, the Kidds' representative in the case, told Bloomberg BNA that the questions which came up during the audit involved “how the two companies were related and the length of employment. The court wanted to know if it was all one employment period.” The court's analysis focused on Carolyn's chances of employment in her tax home and her relationship with her employers; however, Dethloff's observation suggests that the court was also considering Carolyn's series of short jobs as possibly consisting of one, more permanent position.

Robert Kidd

Robert Kidd, like his wife, utilized the union to obtain jobs in construction. He worked for four different employers in the early part of 2007.24 Each job was relatively short, and within 30 minutes of the Portland city limits.

Robert Kidd's Employment

Contractor Job Start Date Job End Date Days Worked Location
Tri-State Construction 11/17/06 1/12/07 56 Mt. Hood, OR
Andersen Structures 3/2/07 3/9/07 7 Gresham, OR
Stacy and Witbeck 3/12/07 6/22/07 102 Portland, OR
IUOE Local 701(the Kidds' union) 6/25/07 12/19/07 120 Gladstone, OR
IUOE Local 701 1/07/08 Present n/a Gladstone, OR
The Court's Analysis

In determining whether Robert's jobs in 2007 constituted temporary or indefinite work, the court used the same tests it applied to Carolyn. The court acknowledged that none of the jobs lasted for more than a year, and thus were not per se indefinite.25 The court also said, however, that in Robert's case there was no evidence to suggest that there was a “reasonable probability” that the jobs would last longer than a year.26 The court does not go into detail about how they determined there was not a reasonable probability of continued employment.

The key difference in the court's analysis of Robert's employment, other than the general lack of explanation, is that the court did not focus on the relationship between Robert and his employers, most likely because the jobs were for completely separate entities and none of the employers were repeated. Under these facts, it was easier for the court to believe that there was little chance of Robert remaining in the job for more than a year.

The court did note that Robert's last 2007 job, as a field rep for the Union, potentially held a “reasonable probability” of continued employment.27 Because Robert worked for the union again in 2008, albeit in a different capacity, the court may have seen this as a continuing relationship with an employer. Indeed, Robert still holds his position at the union as a field supervisor.

In his initial position as a field rep with the union, Robert had no office at the union hall and was to work from home. However, towards the end of 2007 Robert was given a desk and office at the union headquarters.28 The introduction of an office into Robert's employment with the union did not seem to have any effect on the court's decision that the work as a field rep was temporary. Indeed, to an outside observer, the progression from a temporary traveling setup to a more permanent office setup would qualify as evidence of how highly he was regarded by his employer, a factor which rendered Carolyn's employment indefinite. Nevertheless, the court determined that Robert Kidd's tax home for the period at issue was his place of residence in Albany, and allowed his deductions.

Factors Outside the Court's Analysis

A letter from the union sheds light on why the court did not consider Robert's employment indefinite.29 The union writes that in 2007, they hired Robert to travel throughout the union's jurisdiction retrieving hourly wage information for the Bureau of Labor and Industry surveys. Only after the survey work was completed was Robert considered for a second employment opportunity with different responsibilities.30 Judy Dethloff explains that “the job description and location changed as he was trained.” Furthermore, Dethloff notes, there was a “break in employment [of approximately three weeks] before he was hired to a permanent position,” which was enough time to satisfy the court.

Dethloff also noted that Robert's prior employment had not been in the Portland area, unlike Carolyn. Robert “had other employment in the two years prior to the audit period including working in Albany for about one and a half years, so the issue of work location was not as important to the court,” Dethloff said.


Kidd demonstrates that the facts and circumstances the court chooses to consider are not always consistent, and are not always related to previous methods of analysis. Accordingly, the best way for a taxpayer to plan for deductible travel expenses is to comply with the statutory law and case precedent as closely as possible, taking as many jobs as possible close to home to establish the taxpayer's permanent residence as his tax home. In addition, the taxpayer should leave his family behind when traveling for temporary work, and should take temporary jobs in varied locales so there can be no argument that the taxpayer shifted his tax home to his latest or longest place of employment. Finally, the taxpayer should attempt to take jobs that last under a year in length, avoiding the bright line rule.

Ultimately, Kiddraises the issue of the court's policy approach towards construction workers and those with unpredictable jobs. In the case at hand, the fact that the court did not follow the bright line rule for Carolyn Kidd makes the ruling suspect. Is it fair to classify Carolyn's work as indefinite because she has a “good reputation” with her employer? From a policy standpoint, might this encourage construction workers to be mediocre employees, forced to follow the assignments of their unions regardless of whether they enjoy or excel at the work to which they are assigned? Was the court more likely to scrutinize Carolyn's employment, even though it was under a year in length, because it was perhaps unconsciously swayed by the fact that Carolyn was a married woman living away from her family, and could have avoided the travel expenses altogether by working closer to home? While these questions may suggest more extreme implications, they emphasize the fact that tax policy has a real effect on behavior, and affects where a taxpayer chooses to live and do business.

The Kidds did not appeal their case, Judy Dethloff said, despite the fact that most tax practitioners they spoke to believed that the Kidds were correct in their position. The Kidds are back to their jobs in construction, a little wiser to the often capricious nature of our tax code and courts.


Most states generally conform to the federal treatment of business expenses as set forth in I.R.C. §162(a)(2). However, in many states the treatment of I.R.C. §162 is irrelevant, because some do not impose an individual income tax (AK, FL, NV, SD, TX, WA, WY), don't allow individual business tax deductions (CT, IN, NH, NJ, OH, PA, TN, WV, WI), or calculate state income tax starting from federal taxable income, which has already taken into account the business deductions (CO, MN, ND, SC, VT). The following chart is a compilation of each state's business deduction regime.

Treatment of Business Deductions by the States

State Conformity to Federal Treatment of § 162(a)(2) Business Deductions Statutory Reference
Alabama Conforms. Ala. Code §40-18-15(a)(1)
Alaska Does not impose an individual income tax. n/a
Arizona Conforms. Ariz. Rev. Stat. Ann. §43-102; § 43-1042
Arkansas Conforms. Ark. Code § 26-51-423(a)(1)
California Conforms. Cal. Rev. & Tax. Code §17201
Colorado Calculation of tax base has already taken into account business deductions. Colo. Rev. Stat. §39-22-104
Connecticut Does not allow itemized deductions. Conn. Gen. Stat. §12-701(a)(20)
Delaware Conforms. Del. Code Ann. tit. 30, §1109
District of Columbia Conforms. D.C. Code Ann. §47-1803.03(b)
Florida Does not impose an individual income tax. n/a
Georgia Conforms. Ga. Code Ann. §48-7-27(a)(1)
Hawaii Conforms. Haw. Rev. Stat. §235-2.3
Idaho Conforms. Idaho Code §63-3022(j)(2)
Illinois Conforms. 35 ILCS 5/203(8)(1)
Indiana Does not allow business deductions. Ind. Code Ann. §6-3-1-3.5(a)(2)
Iowa Conforms. Iowa Code Ann. §422.9(2)(h)
Kansas Conforms. Kan. Stat. Ann. §79-32,120(a)
Kentucky Conforms. Ky. Rev. Stat. Ann. §141.010(11)(d)(1)
Louisiana Conforms. La. Rev. Stat. Ann. §47:62
Maine Conforms. Me. Rev. Stat. Ann. §5125
Maryland Conforms. Md. Code Ann., Tax-Gen. §10-107
Massachusetts Conforms. Mass. Gen. L. ch. 62, §2(d)(2)
Michigan Conforms. Mich. Comp. Laws §141.633
Minnesota Calculation of tax base has already taken into account business deductions. Minn. Stat. §290.01(19)
Mississippi Conforms. Miss. Code Ann. §27-7-17(1)(a)
Missouri Conforms. Mo. Rev. Stat. §143.121(1)
Montana Conforms. Mont. Code Ann. §15-30-2131(1)(a)
Nebraska Conforms. Neb. Rev. Stat. §77-2716.01(3)
Nevada Does not impose an individual income tax. n/a
New Hampshire Does not allow itemized deductions. N.H. Rev. Stat. Ann. §77:4
New Jersey Does not allow business deductions for individuals. N.J. Admin Code tit. 18, § 35-1.2
New Mexico Conforms. N.M. Stat. Ann. §7-2-2(N)
New York Conforms. N.Y. Tax Law §615(a)
North Carolina Conforms. N.C. Gen. Stat. §105-134.6(a2)
North Dakota Calculation of tax base has already taken into account business deductions. N.D. Cent. Code §57-38-30.3(2)
Ohio Does not allow itemized deductions. Ohio Rev. Code Ann. §5747.01(A)(12)(a)
Oklahoma Conforms. Okla. Stat. Ann. tit. 68, §2353(12)
Oregon Conforms. Or. Rev. Stat. §316.695(1)(d)(A)
Pennsylvania Does not allow business deductions. 72 Pa. Stat. §7303(a)(2)
Rhode Island Conforms. R.I. Gen. Laws §44-30-2.6(c)(2)(C)(1)
South Carolina Calculation of tax base has already taken into account business deductions. S.C. Code Ann. §12-6-560; § 12-6-1130
South Dakota Does not impose an individual income tax. n/a
Tennessee Does not allow itemized deductions. Tenn. Code Ann. §67-2-102
Texas Does not impose an individual income tax. n/a
Utah Conforms. Utah Code Ann. §59-10-103(1)(a)
Vermont Calculation of tax base has already taken into account business deductions. Vt. Stat. Ann. tit. 32, §5824
Virginia Conforms. Va. Code Ann. §58.1-322(D)(1)
Washington Does not impose an individual income tax. n/a
West Virginia Does not allow itemized deductions. W. Va. Code §11-21-13
Wisconsin Does not allow itemized deductions. Wis. Stat. §71.01(6)(un)
Wyoming Does not impose an individual income tax. n/a

1 Rev. Rul. 56-49; Rev. Rul. 99-7 (exception for temporary work).

2 For seminal cases, seeRosenspan v. U.S., 438 F.2d 905 (2d Cir. 1971); Six v. U.S., 450 F.2d 66 (2d Cir. 1971); Beebe v. Comr., T.C. Memo 1971-330; Flowers v. Comr., 148 F.2d 163 (5th Cir. 1945), rev'd on other grounds, 326 U.S. 465 (1946); U.S. v. LeBlanc, 278 F.2d 571 (5th Cir. 1960); Burns v. Gray, 287 F.2d 698 (6th Cir. 1961); Comr. v. Janss, 260 F.2d 99 (8th Cir. 1958); Coombs v. Comr., 608 F.2d 1269 (9th Cir. 1979); Wallace v. Comr., 144 F.2d 407 (9th Cir. 1944).

3 Rev. Rul. 73-529.

4 Peurifoy v. Comr., 358 U.S. 59 (1958), aff'g per curiam 254 F.2d 483 (4th Cir. 1957), rev'g27 T.C. 149 (1956).

5 354 F.2d 480 (9th Cir. 1966).

6 See Trapp v. Comr., T.C. Memo 1980-49; Taylor v. Comr., T.C. Memo 1980-376.

7 SeeRev. Rul. 93-86, Johnson v. Comr., T.C. Memo 1999-153.

8 See, e.g. Mitchell v. Comr., T.C. Memo 1999-283, CCA 200025052.

9 TC-MD 111185N (Or. Tax Ct., Oct. 24, 2012).

10 Plaintiff Exhibit B, Union Report of Work History, at page 1.

11 18 OTR 76 (2004).

12 Id.  

13 Wilson v. Comr., 82 TCM 899, WL 1415561 (2001).

14 Id.  

15 Kiddat 11.

16 Id.  

17 Id.  

18 Oregon Dept. of Rev., Notice of Deficiency Assessment (Aug. 5, 2011).

19 Id.  

20 Id.  

21 Plaintiff Exhibit G, Statement from Robert and Carolyn Kidd.

22 Oregon Dept. of Rev., Notice of Deficiency Assessment (Aug. 5, 2011).

23 Plaintiff Exhibit D, Union Dispatch Log for 2007, Non-Portland Area.

24 Plaintiff Exhibit B, Union Report of Work History, at page 2.

25 Kiddat 12.

26 Id.  

27 Kiddat 12-13.

28 Id.  

29 Plaintiff Exhibit C, Letter from Union, March 4, 2011, at page 1.

30 Id.