IRS ISSUES INTERIM GUIDANCE ON DEDUCTIBILITY OF BUSINESS MEALS
November 15, 2018
On October 3, 2018, the IRS issued interim guidance entitled, “Expenses for Business Meals Under § 274 of the Internal Revenue Code.” According to the notice, “[t]he Treasury Department and the IRS intend to publish proposed regulations under § 274 clarifying when business meal expenses are nondeductible entertainment expenses.” Until then, the interim guidance applies, and public comments on the notice are open through December 2, 2018.
One question that arises for the aviation sector is whether transportation to a business-related meal might constitute entertainment and thus no longer be deductible as an ordinary business expense. The 2017 Tax Cuts and Jobs Act amended section 274 of the Internal Revenue Code to disallow entertainment, amusement, and recreation deductions as ordinary business expenses, but continued to provide a limited exception for non-lavish food and beverages served when the taxpayer or their employee was present and if the meal was directly related to the business. Taxpayers can deduct up to 50% of the purchase value for expenses under this exception. The interim guidance makes clear that such expenses continue to be deductible, but must be clearly separated from nondeductible entertainment expenses. The interim guidance, however, does not address, for example, how to classify a flight to a meeting. It remains to be seen how deductions related to air transportation are affected by the interim guidance.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com or 202-659-6622); Drew Derco (dderco@eckertseamans.com or 202-659-6665), or Alexander Matthews (amatthews@eckertseamans.com or 202-659-6633).
Share This Post
Authors
