IRS Issues Guidance on Business Meals Deduction

The Internal Revenue Service has issued guidance on the continued deductibility of business meals.  The federal tax reform package enacted late in 2017 amended Internal Revenue Code section 274 to generally disallow income tax deductions for entertainment, amusement, or recreation.  IRS points out, however, that Congress did not specifically address the deductibility of expenses for business meals.  The agency now says that such expenses will, under certain circumstances, remain deductible, and that this guidance may be relied on pending the issuance of formal regulations on Section 274, which IRS plans for the future.  The limitations on the deduction are the same as before, according to IRS; that is, the expenses must not be "lavish or extravagant under the circumstances," the taxpayer or an employee must be present when the meal is furnished, and the furnishing of the meal must be directly related to the conduct of the taxpayer’s business.  The general limitation of the deduction to 50 percent of the expenses incurred is also still in effect.  IRS is accepting comments on the guidance through December 2.  View IRS Notice 2018-76, issued October 3, 2018.  It should be noted that nothing in the tax reform affected motor carriers’ ability to deduct 80 percent of the expenses