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You can exclude any meal or meal
money you provide to an employee if it 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.
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Coffee, doughnuts, or soft drinks.
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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 as explained under Meals on Your Business Premises later.
If food or beverages you furnish to 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.
An employer-operated eating facility for employees is an eating
facility that meets all the following conditions.
-
You own or lease the facility.
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You operate the facility. (You are considered to operate the eating facility if you have a contract with another to operate
it.)
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The facility is on or near your business premises.
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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.
For this exclusion, a highly compensated employee for 2009 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 $105,000 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.
This exclusion does not apply if you allow your employee to choose to receive additional pay instead of meals.
On your business premises.
Generally, for this exclusion, the employee's place of work is your business premises.
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 from her wages
the value of the breakfast and lunch you furnish in your restaurant for
each day she works.
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 also 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 from her wages
the value of her breakfast and lunch.
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 to show 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 must have 120 of its employees available for emergencies. Each
of these 120 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 so that more than half of them are available
for emergency calls during meal periods, the hospital can exclude the
value of these meals from the wages of all of 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 your peak work-load 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 as
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 as 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 or not 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. Treat a 2% shareholder as you would a partner in a partnership
for fringe benefit purposes, but do not treat the benefit as a
reduction in distributions to the 2% shareholder.
