The IRS issued final regulations (T.D. 9925
) addressing the deductibility of meals and entertainment expenses under Section 274. The regulations reflect changes made by Tax Cut and Jobs Act (TCJA) and adopt guidance issued in prior proposed regulations with minor changes and additional examples.
The TCJA eliminated the deduction under Section 274 for expenditures related to entertainment, amusement or recreation activities unless specific exceptions apply, such as holiday parties and other recreational expenses for employees. It also enacted a 50% limitation on the deduction for food and beverages and provided specific exceptions to the limitation.
The final regulations generally provide guidance implementing these changes. They also adopt previous guidance carving out food and beverage expenses in connection with an entertainment activity provided certain requirements are met, including that the amount of the food and beverage expenses are separately stated from entertainment costs.
New examples in the final regulations illustrate the application of the rules in various situations, including food and beverages expenses that are treated as compensation to employees, food and beverages provided to employees in a break room setting and food and beverages provided to restaurant and food service workers.
National Managing Principal
Washington National Tax Office
+1 202 521 1515
Tax professional standards statement
This content supports Grant Thornton LLP’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by Grant Thornton LLP to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact Grant Thornton LLP or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton LLP assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.