IRS Confirms Continued Deductibility of Business Meals (When Separable from Entertainment)

For months, the American Institute of CPAs (AICPA) and American businesses have been requesting guidance from the U.S. Treasury Department and Internal Revenue Service (“IRS”) regarding changes made by the Tax Cuts and Jobs Act (TCJA) (Pub. L. No. 115-97) that disallowed the deductibility of entertainment, amusement, recreation and qualified transportation fringe expenses.

Businesses and their accounting professionals requested this guidance to ensure their accounting systems and expense and reimbursement policies comply with the IRS’ interpretation of the TCJA.   One of the key issues was status of business meals.  The AICPA specifically requested clarification regarding:

  • Client-related business meals
    • With current and prospective clients incurred at times other than before, during or after an entertainment event
    • With current and prospective clients incurred before, during or after an entertainment event
  • Employer-provided business meals
    • Related to restaurant and food service workers
    • Definition of “facility”
  • Employer-provided snacks and other food products
  • Employer-hosted recreational, social and similar activities
  • Advertising
  • Charitable contributions
  • Qualified transportation
  • Transportation and commuting
  • Membership dues

 

Although the The Department of the Treasury and the IRS expect to publish proposed regulations clarifying when business meal expenses are deductible and what constitutes entertainment, the IRS has just now clarified that under the 2017 TCJA, taxpayers may continue to deduct 50 percent of the cost of business meals under certain circumstances, as described in this related article.

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