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1 1 (April 6, 2020)

handle is hein.crs/govctzz0001 and id is 1 raw text is: Researh Sevice Business Deductions for Entertainment and Meals April 6, 2020 Congress has passed several laws in response to the COVID-19 pandemic, including, most recently, the Coronavirus Aid, Relief, and Economic Security (CARES' Act (P.L. 116-136), which-among its many purposes-provides tax relief to individuals and businesses. Several of the CARES Act's business tax relief provisions were accomplished by temporarily rolling back restrictions on net operating losses and interest deductions that were enacted as part of P.L. 115-97 (sometimes referred to as the Tax Cuts and Jobs Act or TCJA). As Congress continues to assess the need for further responses, it may consider temporarily rolling back other provisions enacted as part of P.L. 115-97. This Insight provides an overview of one such option-the business deductions for meals and entertainment. Businesses are allowed to deduct a variety of expenses in determining their taxable income. The more that can be deducted, the smaller their taxable income, and the less the business will owe in taxes, all else being equal. The ability of businesses to deduct expenses for meals and entertainment was limited in the TCJA. Although as a whole the law resulted in a tax cut for businesses, by itself this provision restricted the value of the deduction to businesses, thus raising taxable income. Rules Prior to the TCJA Prior to the TCJA, no deduction was allowed for activities generally considered to be entertainment, amusement, or recreation (entertainment), unless the activity or facility was directly related to or associated with the active conduct of the taxpayer's trade or business-such as a meal with a prospective client. If directly related, the allowed deduction for entertainment was generally limited to 50% of the amount. Similarly, a deduction for any expense for meals generally was limited to 50% of the amount, although meals provided for the convenience of the employer were fully (100%) deductible. (An example of an expense eligible for the deduction for meals provided for the convenience of the employer is the cost to run an on-site subsidized cafeteria for employees.) In addition, no deduction was allowed for membership dues with respect to any club or organization. Congressional Research Service https://crsreports.congress.gov IN11313 CRS }NStGHT Prepaed for Membei's and Cornm ittees o4 Co q ess ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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