Publication 15b |
2000 Tax Year |
Meals
This section discusses the exclusion rules that apply to the
following meals.
- De minimis (minimal) meals
- Meals on your business premises
De Minimis Meals
This exclusion applies to any meal or meal money you provide to an
employee that has so little value (taking into account how frequently
you provide meals to your employees) that accounting for it would be
unreasonable or administratively impracticable. The exclusion applies,
for example, to the following items.
- Coffee, doughnuts, or soft drinks.
- Occasional meals or meal money provided to enable an
employee to work overtime. (However, the exclusion does not apply to
meal money figured on the basis of hours worked.)
- Occasional parties or picnics for employees and their
guests.
This exclusion also applies to meals you provide at an
employer-operated eating facility for employees if the
annual revenue from the facility equals or exceeds the direct costs of
the facility. For this purpose, your revenue from providing a meal is
considered equal to the facility's direct operating costs to provide
that meal if its value can be excluded from an employee's wages under
the rules explained under Meals on Your Business Premises,
later.
If food or beverages you furnish employees qualify as a de minimis
benefit, you can deduct their full cost. The 50% limit on deductions
for the cost of meals does not apply. The deduction limit on meals is
discussed in chapter 2 of Publication 535.
Employee.
For this exclusion, treat any recipient of a de minimis meal as an
employee.
Employer-operated eating facility for employees.
This is an eating facility that meets all the following conditions.
- You own or lease the facility.
- You operate the facility. You are considered to operate the
eating facility if you have a contract with another to operate
it.
- The facility is on or near your business premises.
- You provide meals (food, drinks, and related services) at
the facility during, or immediately before or after, the employee's
workday.
Exclusion from wages.
You can generally exclude the value of de minimis meals you provide
to an employee from the employee's wages.
Exception for highly compensated employees.
You cannot exclude from the wages of a highly compensated employee
the value of a meal provided at an employer-operated eating facility
that is not available on the same terms to one of the following
groups.
- All your employees.
- A group of employees defined under a reasonable
classification you set up that does not favor highly compensated
employees.
For this exclusion, a highly compensated employee for 2001 is an
employee who meets either of the following tests.
- The employee was a 5% owner at any time during the year or
the preceding year.
- The employee received more than $85,000 in pay for the
preceding year.
You can choose to ignore test (2) if the employee was not also
in the top 20% of employees when ranked by pay for the preceding year.
Meals on Your Business Premises
You can exclude the value of meals you furnish to an employee from
the employee's wages if they meet the following tests.
- They are furnished on your business premises.
- They are furnished for your convenience.
This exclusion does not apply if you allow your employee to choose
to receive additional pay instead of meals.
On your business premises.
For this exclusion, your business premises is generally your
employee's place of work.
For your convenience.
Whether you furnish meals for your convenience as an employer
depends on all the facts and circumstances. You furnish the meals to
your employee for your convenience if you do this for a substantial
business reason other than to provide the employee with additional
pay. This is true even if a law or an employment contract provides
that the meals are furnished as pay. However, a written statement that
the meals are furnished for your convenience is not sufficient.
Meals excluded for all employees if excluded for more than
half.
If more than half of your employees who are furnished meals on your
business premises are furnished the meals for your convenience, you
can treat all meals you furnish to employees on your business premises
as furnished for your convenience.
Food service employees.
Meals you furnish to a restaurant or other food service employee
during, or immediately before or after, the employee's working hours
are furnished for your convenience. For example, if a waitress works
through the breakfast and lunch periods, you can exclude the value of
the breakfast and lunch you furnish in your restaurant for each day
she works from her wages.
Example.
You operate a restaurant business. You furnish your employee,
Carol, who is a waitress working 7 a.m. to 4 p.m., two meals during
each workday. You encourage but do not require Carol to have her
breakfast on the business premises before starting work. She must have
her lunch on the premises. Since Carol is a food service employee and
works during the normal breakfast and lunch periods, you can exclude
the value of her breakfast and lunch from her wages.
If you also allow Carol to have meals on your business premises
without charge on her days off, you cannot exclude the value of those
meals from her wages.
Employees available for emergency calls.
Meals you furnish during working hours so an employee will be
available for emergency calls during the meal period are furnished for
your convenience. You must be able show that these emergency calls
have occurred or can reasonably be expected to occur.
Example.
A hospital maintains a cafeteria on its premises where all of its
230 employees may get meals at no charge during their working hours.
The hospital furnishes meals to have 120 employees available for
emergencies. Each of these employees is at times called upon to
perform services during the meal period. Although the hospital does
not require these employees to remain on the premises, they rarely
leave the hospital during their meal period. Since the hospital
furnishes meals on its premises to its employees to have more than
half of them available for emergency calls during meal periods, the
hospital can exclude the value of these meals from the wages of all
its employees.
Short meal periods.
Meals you furnish during working hours are furnished for your
convenience if the nature of your business restricts an employee to a
short meal period (such as 30 or 45 minutes) and the employee cannot
be expected to eat elsewhere in such a short time. For example, meals
can qualify for this treatment if the peak workload occurs during the
normal lunch hour. However, they do not qualify if the reason for the
short meal period is to allow the employee to leave earlier in the
day.
Example.
Frank is a bank teller who works from 9 a.m. to 5 p.m. The bank
furnishes his lunch without charge in a cafeteria the bank maintains
on its premises. The bank furnishes these meals to Frank to limit his
lunch period to 30 minutes, since the bank's peak workload occurs
during the normal lunch period. If Frank got his lunch elsewhere, it
would take him much longer than 30 minutes and the bank strictly
enforces the time limit. The bank can exclude the value of these meals
from Frank's wages.
Proper meals not otherwise available.
Meals you furnish during working hours are furnished for your
convenience if the employee could not otherwise eat proper meals
within a reasonable period of time. For example, meals can qualify for
this treatment if there are insufficient eating facilities near the
place of employment.
Meals after work hours.
Meals you furnish to an employee immediately after working hours
are furnished for your convenience if you would have furnished them
during working hours for a substantial nonpay business reason but,
because of the work duties, they were not eaten during working hours.
Meals you furnish to promote goodwill, boost morale, or
attract prospective employees.
Meals you furnish to promote goodwill, boost morale, or attract
prospective employees are not considered furnished for your
convenience. However, you may be able to exclude their value under the
rules discussed under De Minimis Meals, earlier.
Meals furnished on nonworkdays or with lodging.
You generally cannot exclude from an employee's wages the value of
meals you furnish on a day when the employee is not working. However,
you can exclude these meals if they are furnished with lodging that is
excluded from the employee's wages under the rules discussed under
Lodging on Your Business Premises, earlier.
Meals with a charge.
The fact that you charge for the meals and that your employees may
accept or decline the meals is not taken into account in determining
whether meals are furnished for your convenience.
S corporation shareholder-employee.
For this exclusion, do not treat a 2% shareholder of an S
corporation as an employee of the corporation. A 2% shareholder is
someone who directly or indirectly owns (at any time during the year)
more than 2% of the corporation's stock or stock with more than 2% of
the voting power.
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