Disallowance of the Entertainment Expense

The Tax Cuts and Jobs Act permanently repealed most business deductions related to entertainment, amusement, or recreation activities or a facility used in connection with any of the aforementioned activities. Membership and club dues remain non-deductible.

In addition, the Act disallows deductions for employer qualified transportation fringe benefits, such as qualified parking, transit passes, van pools, and bicycle commuting, unless the benefit is for the sole exception of ensuring employee safety. It should be noted that these pre-tax benefits offered to employees are still not included in their taxable wages, with the exception of the qualified bicycle commuting benefit.

The above changes apply to amounts paid or incurred after December 31, 2017.

While the Act provided substantial changes to entertainment and employer transportation benefits, the deduction for 50% of food and beverage expenses associated with operating a trade or business is retained (meals consumed by employee while traveling for work). Additionally, the Act expands the 50% limit to include employer expenses associated with providing food and beverages to employees through an eating facility, which meets de minimis fringe requirements, as well as meals provided on-premises to employees for the convenience of the employer to employees, spouses and dependents through December 31, 2025.

Please visit the Our Thoughts On...Energy and Resources blog for more articles, or contact a Schneider Downs tax advisor if you have any questions.

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