Human Resources: Issues and Answers,Can employers still reimburse employees for meals?,

Issue: Your company reimburses employees for meals when they work late or on weekends. You heard that the Tax Cuts and Jobs Act of 2017 changed the tax treatment of such meals. What are the revised rules?

Answer: The Tax Cuts and Jobs Act of 2017 (TCJA) revised the limits on meals provided to employees, as well as the limits on other company meals and entertainment expenses.

Prior to January 1, 2018, subject to other requirements and limitations under the Internal Revenue Code (IRC) that applied to the deduction of business expenses, employers were generally permitted to:

• Deduct up to 50 percent of the cost of the face value of tickets to non-charitable events and up to 100 percent of the cost of tickets for charitable events as client entertainment expenses;

• Deduct up to 50 percent of the cost of meals and other food and beverages provided while entertaining clients or while traveling on company business;

• Deduct up to 100 percent of the cost of meals and other food and beverages provided for the convenience of the employer on the company’s premises (such as in the employer’s cafeteria or delivered to the company’s office), to the extent that such expenses were excludible from the employee’s gross income under the de minimis fringe benefit provisions of the IRC; and

• Deduct up to 100 percent of the cost of company holiday parties and picnics and similar events.

Effective for amounts paid or incurred after December 31, 2017, subject to other requirements and limitations under the IRC that apply to the deduction of business expenses, the TCJA:

• Eliminates the employer deduction for tickets to both non-charitable and charitable events as client entertainment expenses;

• Continues to impose a limit of 50 percent on an employer’s deduction for meals and other food and beverages provided while entertaining clients or while traveling on company business;

• Imposes a reduced limit of 50 percent on the deduction for meals and other food and beverages provided for the convenience of the employer on the company’s premises. Unless further extended, after 2025, the employer’s deduction for meals and food and beverages provided for the convenience of the employer on the employer’s premises will be eliminated altogether; and

• Continues to permit employers to deduct up to 100 percent of the cost of company holiday parties and picnics.

Source: Sec. 13304 of the Tax Cuts and Jobs Act of 2017 (P.L. 115-97, 131 Stat. 2054), signed by the president on December 22, 2017.

This is a cultural communication issue.  Make sure that your plans, if you choose to, to cut your employee catering budget is communicated well, and give employees time to adjust prior to making changes that could affect them!