Good news for restaurants: businesses can now expense 100% of their restaurant meals. The move is part of the “Consolidated Appropriations Act, 2021”, and is intended to encourage more corporate spending at restaurants. This a temporary measure, and only applies to meals purchased between Dec. 31, 2020 and before Jan. 1, 2023.
The IRS released specific guidelines about what counts as a “restaurant”, and it’s pretty generous: any establishment that prepares food and drinks for immediate consumption counts, even if the product is consumed off-premise. Grocery stores, pre-packaged food companies, and other establishments are not included – for more information, see here.
To be clear, this new regulation doesn’t change the taxes your venue pays. It’s an incentive to get businesses spending more at local restaurants for dine-in and take-out.
In 2018, the Tax Cuts and Jobs Act (TCJA) slashed entertainment-related business deductions. Overnight, lavish Wolf of Wall Street-style dinners became a thing of the past. Prior to the TCJA, businesses could deduct at least 50% of their entertainment expenses, making it more palatable for corporations to drop hundreds – if not thousands – of dollars on client dinners.
These new regulations temporarily allow businesses to deduct the full cost of restaurant-provided meals from now until 2022. After 2022, they’ll be able to deduct 50% of meals again. According to MarketWatch, there are a few guidelines for businesses to follow when claiming their deductions:
- The meals can’t be too over the top (the language here is vague, but the implication is that the Consolidated Appropriations Act, 2021 is intended to support smaller venues over the larger operators)
- The taxpayer or an employee has to be present at the time of sale
- The taxpayer or an employee has to actually receive the food and drinks
Hopefully, this change heralds an influx of business-related customers to your venue. In the meantime, make sure you’re offering guests fully detailed receipts so they can claim their deductions – and talk to your accountant to stay on top of your own filings for the next fiscal year.