Final meals and entertainment regs issued

Tax Hot Topics newsletter 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.

David Auclair
National Managing Principal
Washington National Tax Office
T +1 202 521 1515

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