On February 26, 2020, the IRS published proposed regulations implementing changes made
by the Tax Cuts and Jobs Act of 2017 (TCJA) regarding the
elimination of deductions for entertainment and the limitation on
food and beverage expenses. The regulations largely track prior IRS
guidance, Notice 2018-76, on these issues.
Internal Revenue Code (IRC) Section 274 generally limits
employer deductions for meal expenditures and disallows deductions
for entertainment expenditures. The proposed regulations apply the
entertainment disallowance rule whether or not the activity is
related to the taxpayer's trade or business.1 It
also provides guidance on whether an activity should be considered
entertainment. The proposed regulations, however, also provide that
50% of food and beverage expenses may be deducted if they are not
"lavish or extravagant," the taxpayer or a taxpayer's
employee is present, and the cost of the meal is stated
separately.
