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Uncle Sam Is Buying Your Next Business Meal – at Least Half of It!

Tax reform made many structural changes to our tax system. Changes to Code Section 274, however, sent shudders through corporate America. As amended, Code Section 274 eliminated the 50 percent deduction for “entertainment” expenses that are related to business activities. Sadly, gone are the days of companies deducting the cost of box tickets to games for the local sport’s team. Gulp! But, in its haste, Congress left what constitutes entertainment expenses substantially undefined. Accordingly, a strict reading of the statute meant—along with the box seats—went the hot dogs and beer! Ugh! So, under this strict interpretation, taking your client to the fancy restaurant to encourage her to buy your product or services would no longer be deductible.

Thankfully, the IRS has recently clarified that meals are not entertainment under amended Code section 274. IRS Notice 2018-76 explains that business meals are still eligible for the 50 percent deduction if they are not lavish and extravagant. And an IRS press release, IR-2018-195, explains that the IRS will release proposed regulations explaining what “entertainment” means.

Practice Point: We can all sigh with relief that Uncle Sam will continue to underwrite the “wining and dining” of our clients. Although eating is officially not entertainment (at least for tax purposes), the recent IRS guidance acknowledges that America does a lot of its business while breaking bread.

© 2020 McDermott Will & EmeryNational Law Review, Volume VIII, Number 278

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About this Author

Kevin Spencer, McDermott Will & Emery LLP , Tax Litigation Attorney
Partner

Kevin Spencer is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Washington, D.C., office.  He focuses his practice on tax controversy and litigation issues. 

Kevin represents clients in complicated tax disputes in court and before the Internal Revenue Service (IRS) at the IRS Appeals and Examination divisions.

In addition to his tax controversy practice, Kevin has broad experience advising clients on various tax issues, including tax accounting, employment and...

202-756-8203
Emily Rickard, McDermott Will Emery, Employee Benefits Matters Lawyer, ERISA Litigation Attorney
Associate

Emily Rickard is an associate in the law firm of McDermott Will & Emery and is based in the Firm’s Washington D.C. office. She focuses her practice on employee benefits matters.

Outside of the ESOP context, Emily’s practice spans a wide range of national and international employee benefits matters. This includes qualified plans, nonqualified plans, executive compensation, health and welfare arrangements, and Employee Retirement Income Security Act of 1974 (ERISA) litigation. She advises employers in connection with fiduciary issues under ERISA, government audits of employer-provided benefit plans, and also with respect to litigation from regulatory enforcement actions. Emily has also been a member of several cross-practice group deal teams relating to mergers and acquisitions of public as well as private companies.

Emily previously served as an ERISA litigation intern within the Plan Benefits Security Division of the Office of the Solicitor at the U.S. Department of Labor in Washington D.C. She studied executive compensation trends while working as a research assistant at Vanderbilt University Law School. She also served as a judicial intern for the Honorable Jane Roth at the U.S. Court of Appeals for the Third Circuit in Philadelphia.

During law school, Emily was active in public interest work. Emily was a program director for the Medical Legal Partnership in Nashville, Tennessee, where she helped provide comprehensive legal aid service for patients at a free medical clinic.

Emily received her J.D. in May 2015 from the Vanderbilt University Law School, where she served as an executive student writing editor for the Vanderbilt Journal of Transnational Law. She earned her B.A. in diplomatic history, magna cum laude, with minors in African Studies and Latin, from the University of Pennsylvania. Emily is a 2014 Gary S. Tell ERISA Litigation Scholar.

Emily is admitted to practice in Illinois. 

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