- Temporary Tax Deduction Increase to 100% for Business Meals – read now
- Much Needed Financial Assistance for Restaurants, Breweries and Eateries – read now
Temporary Tax Deduction Increase to 100% for Business Meals
For those who thrive making business deals across a dinner table, or who enjoy treating clients to a favorite local lunch spot, there’s exciting news. The IRS has temporarily increased tax deductions for business meal expenses from the usual 50% to a full 100% between December 31, 2020 and January 1, 2023. This includes food and beverages provided by a restaurant, with the goal of increasing business spending at restaurants after a year of instability and fluctuation. The change was included in the Consolidated Appropriations Act of 2021.
The IRS notice (Notice 2021-25) defines the term “restaurant” as a business that prepares and sells food or beverages to retail customers for immediate consumption, whether or not the food or beverages are consumed on the business’s premises. This means the deduction applies to catering and takeout. A restaurant does NOT include a business that primarily sells pre-packaged food or beverages not for immediate consumption. For example, food or beverages purchased from grocery stores; specialty food stores; beer, wine, or liquor stores; drug stores; convenience stores; newsstands or a vending machine or kiosk would not qualify for the deduction. The definition also excludes eating facilities on business premises that are used to provide meals outside of an employee’s compensation, and employer-operated facilities that are considered de minimis fringe.
So, what kind of meals are 100% deductible? Assuming that the food is ordered from a restaurant satisfying the above guidelines, the deduction can apply to meals such as business-related lunches with clients, food provided for employees working late, spreads provided to the public for free, catering for stakeholder meetings, and travel meals, among others.
Entertainment expenses remain non-deductible unless the food is paid for separately or can be itemized out from the overall invoice. In conjunction with this, for the 100% deduction to apply, costs must not be lavish or extravagant, and the taxpayer or an employee of the taxpayer must be present for said meal.
You can read the IRS’s released notice on Section 274(n)(2) in full here.
So, start lining up those business lunches!
Much Needed Financial Assistance for Restaurants, Breweries and Eateries
On March 11, 2021, President Biden signed a $1.9 trillion stimulus package called the American Rescue Plan Act of 2021. The Act provides for additional PPP funding and extends the eligibility of PPP loans to certain non-profits and digital news services.
The Act also established the Restaurant Revitalization Fund which provides new funding for all the breweries, restaurants and eateries out there who have been impacted by COVID and the economic downturn.
Per Section 5003 of the Act, restaurants, food stands and trucks, pubs, and other similar businesses where the public assemble for the primary purpose of being served food or drink, will be eligible for relief grants from this newly established $28.6 billion Fund. The funding will be administered by the SBA and will be used to provide grants of up to $10 million to eligible applicants.
There are limitations to the amount a business can request. The amount of each grant may not exceed the applicant’s “pandemic-related revenue loss,” which is generally defined as the difference between the applicant’s 2019 and 2020 gross receipts. The grants can be used for a variety of expenses including payroll costs, principal and interest on a mortgage, rent payments, utilities, maintenance expenses (including the construction of outdoor seating), supplies (including protective equipment and cleaning supplies), food and beverage expenses, supplier costs, operational expenses, paid sick leave, and other expenses determined by the SBA to be essential.
It is anticipated that these funds will be available in May or June of 2021. There is a 21-day priority period that is allotted for small businesses owned and controlled by women, veterans, and the socially and economically disadvantaged.
In addition, $5 billion is reserved only for applicants who had $500,000 or less in gross receipts during 2019. Applicants must make a good faith certification that (i) the uncertainty of current economic conditions makes the grant requested necessary to support their ongoing operations and (ii) that they have not applied for or received a grant under the Shuttered Venue Operators Grant program.
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