Meal-Expense Deductions: Food for Thought


meals

Employers that pay for the meals of employees traveling on company business generally can only deduct 50 percent of those expenses from income.

However, a recent ruling may allow employers to deduct the full amount of meal expenses. The U.S. Tax Court ruled that the owner of the National Hockey League franchise Boston Bruins could deduct the full amount spent on meals for players and staff members at hotels during away games (Jacobs v. Commissioner, 148 T.C. No. 24, T.C., No. 19009-15, 6/26/17).

The court decided that the Bruins' meals qualified for the de minimis fringe exception to the 50 percent meal-expense deduction limit under tax code Section 274(n). To qualify, an employer must establish that the meals were provided in a facility at or near the employer's business premises and were provided immediately before, after, or during the employees’ workday.

The court’s opinion noted that the National Hockey League requires the Bruins to play half of their games away from their hometown arena and that attendance at pregame breakfasts is mandatory for players. They can be fined or not allowed to play in a game if they are late or absent, it said.

Previous court decisions have allowed employers in the entertainment industry to claim meal deductions. In 1999, the U.S. Court of Appeals for the Ninth Circuit ruled that the operator of a Las Vegas casino could fully deduct its employee meal expenses because the costs were associated with a substantial business purpose of keeping employees on premises.

A question arises as to whether nonentertainment industries can use the same deduction. These industries may find it more difficult to justify such meal deductions because meals may not be integral to their employees’ work travel schedule, compared to traveling performers who do business in the form of a company, such as singers or actors.

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