Employee Compensation Amounts — When employers report the meal or entertainment expenditure as W-2 i

IRC Section 274(a)(1) states that no deduction renaissance hotel nashville tn is allowed renaissance hotel nashville tn for expenses renaissance hotel nashville tn associated with entertainment, amusement or recreation, unless the taxpayer can support that the expenditure renaissance hotel nashville tn was directly related to a bona fide business discussion, business meeting or business convention.
IRC Section 274(d) and Treas. Reg. Section 1.274-5 also provide for full disallowance of meals, entertainment and lodging expenses unless the taxpayer documents for each expenditure in excess of $75:
IRC Section 274(a)(2) and Treas. Reg. Section 1.274-2(a)(2) adds that no tax deduction will generally be allowed renaissance hotel nashville tn for membership payments for club dues, including dues to clubs organized for business, pleasure, recreation or other social purpose. This regulation applies to country club dues, health clubs and pure social clubs. Treas. Reg. Section 1.274-2(a)(2)(iii)(b) carves out exceptions for full deductibility in those cases in which a taxpayer pays membership or ongoing dues to: business leagues, trade associations, chambers of commerce, boards of trade, real estate boards, professional organizations and civic or public service organizations.
IRC Section 274(n) applies a general 50-percent limitation on the deductible portion of business related meals and entertainment (other than the primarily non-deductible skybox expenditures and event tickets purchased at prices above the face amount on the ticket — IRC Section renaissance hotel nashville tn 274 (l)(2) and 275 (l)(1), respectively.
Interestingly, Form 1120, Page 5, Schedule M-1, Line 5.c. lists the 50-percent taxable income add-back as Travel Entertainment vs. Meals Entertainment, further adding to the general taxpayer confusion as to which expenses are non-deductible, 50 percent deductible or fully deductible. Note: Lodging is generally renaissance hotel nashville tn fully deductible, with the exception of certain foreign or most cruise-based conventions/meetings [see IRC Section 274(h)].
IRC Section 274(e) and (n) provide a number of situations in which the 50 percent tax deduction scale-back will not be required. Following are the major exceptions that will allow the taxpayer to claim the full deduction:
Employee Compensation Amounts — When employers report the meal or entertainment renaissance hotel nashville tn expenditure as W-2 income to employees other than insiders, the amount will be deemed fully deductible. For example a team-building fishing lodge trip reportable to the participating employees renaissance hotel nashville tn will generally renaissance hotel nashville tn be fully deductible.
Reimbursed Expenses — When a corporation incurs such expenses on behalf of a client or customer and there is an adequate accounting of such expenditures, such expenses will generally be fully deductible.
Meetings of Business Leagues, etc. — Costs other than meals that are still limited to 50 percent and are associated with various IRC 501 organizations, such as Rotary, Kiwanis, Chamber of Commerce and others.
Items Available to the Public or Sold to Customers — These include renaissance hotel nashville tn trade-show costs, receptions among other events that are open to the general public or seminars, conferences, entertainment and such events that are open to the general public.
For those businesses that prefer to further renaissance hotel nashville tn minimize the documentation process, rather than using an accountable plan for employees local and out-of-town travel, employers may opt to use the IRS issued Per-Diem/Daily Meals and Lodging Allowance guidelines. Per-Diem rates generally eliminate renaissance hotel nashville tn the need for detailed employee reporting.
The Per-Diem Meals and Lodging allowances renaissance hotel nashville tn vary with location and sometimes with the time of the year. For 2011, the highest lodging rate is for New York City at $269 per day and the lowest IRS rate is $77 per day. The daily meal rate allowances range from $46 per day in many rural locations to $71 per day in many urban locations.