BUSINESS
MEALS DEDUCTION
STATUS
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.
ANALYSIS
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.
OUTLOOK
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.
/I56100807
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