The IRS and the Treasury released guidance Thursday on a temporary exception to the 50 percent limit that businesses can deduct for food or beverages from restaurants during the pandemic.
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The provision was included in the Taxpayer Certainty and Disaster Relief Act of 2020, which was part of the year-end Consolidated Appropriations Act of 2020. The goal was to help restaurants that had been hit hard by the pandemic while also giving businesses an expanded tax break for business meals, a tax break frequently cited by former President Trump.
Under the rules enacted last December, starting Jan. 1, 2021, through Dec. 31, 2022, businesses can claim 100 percent of their food or beverage expenses paid to restaurants, as long as the business owner (or an employee of the business) is present when food or beverages are provided, and the expense isn’t considered to be lavish or extravagant under the circumstances.
“Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption,” the Treasury and the IRS explained in a news release. “However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores. Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.”
In addition to barring grocery stores and convenience stores, the term “restaurant” also doesn’t include specialty food stores; beer, wine or liquor stores; drug stores; newsstands; and vending machines or kiosks.
