On Januray 4, 2007, Senator Daniel Inouye (D-HI) introduced S. 58.  This bill seeks to repeal the reduction in the deductible portion of expenses for business meals and entertainment.  This would effectively increase the income tax deduction for business meals and entertainment expenses from 50 to 75 percent of such expenses in calendar year 2007, and 80 percent in 2008 and thereafter.  Representative Neil Abercrombie (D-HI) introduced similar legislation, H.R. 2648, in the House of Representatives on June 11, 2007.


Any businessperson that spends the majority of their time on the road knows about the impact of the business meals deduction.  The most recent reduction came in 1993 as part of the Omnibus Budget Reconciliation Act, lowering the deduction from 80 percent to 50 percent.  Ostensibly, the deduction was reduced because "some portion of business meal and entertainment expenses represent personal consumption."  The reason for the reduction was to raise Federal revenues.  Either way, business people who rely on the meal deduction were hit the hardest.

Meal expenses incurred for business reasons or for the production of income are deductible if certain legal and substantiation requirements are met.  Generally, the amount allowable as a deduction for business meal expenses is limited to 50 percent of the otherwise deductible amount.  Exceptions to this 50 percent rule are provided for food and beverages provided to crew members of certain vessels and offshore oil or gas platforms or drilling rigs, as well as to individuals subject to hours of service limitations of the Department of Transportation.  No deduction is allowed for meal or beverage expenses unless they are not lavish or extravagant under the circumstances.


Attempts to increase the business meals deduction in the last several Congresses have failed.  There does not appear to be any momentum this Congress either, as neither S. 58 nor H.R. 2648 have gained any cosponsors.



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