Temporary 100% Meals Deduction for Food and Beverage Expenses Paid to Restaurants
A temporary exception to the general 50 percent meals deduction limit has been enacted for businesses that pay or incur food or beverage expenses from restaurants during the period beginning January 1, 2021, and ending December 31, 2022.
The term “restaurant” means a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises. However, a restaurant does not include a business that primarily sells pre-packaged food or beverages not for immediate consumption, such as a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or a vending machine or kiosk. In addition, an employer may not treat as a restaurant any eating facility located on the business premises of the employer and used in furnishing meals excluded from an employee’s gross income, or any employer-operated eating facility treated as a de minimis fringe benefit, even if such eating facility is operated by a third party under contract with the employer.
The general meal deduction rules under Internal Revenue Code Section 274(k) still apply, which provide that no deduction is allowed for the expense of any food or beverage unless such expense is not lavish or extravagant under the circumstances and the taxpayer (or an employee of the taxpayer) is present at the furnishing of such food or beverages.
Please contact your professionals at Lutz, Selig & Zeronda, LLP for more information on this provision.