Publication 15-B Employer'S Tax Guide To Fringe Benefits

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Occasional parties or picnics for employees and

Meals on Your Business Premises

their guests.

You can exclude the value of meals that you furnish to an

employee from the employee’s wages if they meet the

This exclusion also applies to meals that you provide at

following tests.

an employer-operated eating facility for employees if

•

the annual revenue from the facility equals or exceeds the

They are furnished on your business premises.

direct costs of the facility. For this purpose, your revenue

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They are furnished for your convenience.

from providing a meal is considered equal to the facility’s

direct operating costs to provide that meal if its value can

This exclusion does not apply if you allow your em-

be excluded from an employee’s wages as explained

ployee to choose to receive additional pay instead of

under Meals on Your Business Premises later.

meals.

If food or beverages that you furnish to employ-

On your business premises. Generally, for this exclu-

TIP

ees qualify as a de minimis benefit, you can

sion, the employee’s place of work is your business prem-

deduct their full cost. The 50% limit on deductions

ises.

for the cost of meals does not apply. The deduction limit on

meals is discussed in chapter 2 of Pub. 535.

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 em-

ployee for your convenience if you do this for a substantial

Employee. For this exclusion, treat any recipient of a de

business reason other than to provide the employee with

minimis meal as an employee.

additional pay. This is true even if a law or an employment

contract provides that the meals are furnished as pay.

Employer-operated eating facility for employees. An

However, a written statement that the meals are furnished

employer-operated eating facility for employees is an eat-

for your convenience is not sufficient.

ing facility that meets all the following conditions.

Meals excluded for all employees if excluded for

•

You own or lease the facility.

more than half. If more than half of your employees who

•

are furnished meals on your business premises are fur-

You operate the facility. (You are considered to op-

nished the meals for your convenience, you can treat all

erate the eating facility if you have a contract with

meals that you furnish to employees on your business

another to operate it.)

premises as furnished for your convenience.

•

The facility is on or near your business premises.

Food service employees. Meals you furnish to a res-

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You provide meals (food, drinks, and related serv-

taurant or other food service employee during, or immedi-

ices) at the facility during, or immediately before or

ately before or after, the employee’s working hours are

after, the employee’s workday.

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

Exclusion from wages. You can generally exclude the

lunch that you furnish in your restaurant for each day she

value of de minimis meals that you provide to an employee

works.

from the employee’s wages.

Exception for highly compensated employees. You

Example. You operate a restaurant business. You fur-

nish your employee, Carol, who is a waitress working 7

cannot exclude from the wages of a highly compensated

a.m. to 4 p.m., two meals during each workday. You

employee the value of a meal provided at an employer-

encourage but do not require Carol to have her breakfast

operated eating facility that is not available on the same

on the business premises before starting work. She must

terms to one of the following groups.

have her lunch on the premises. Since Carol is a food

•

All of your employees.

service employee and works during the normal breakfast

•

and lunch periods, you can exclude from her wages the

A group of employees defined under a reasonable

value of her breakfast and lunch.

classification you set up that does not favor highly

If you also allow Carol to have meals on your business

compensated employees.

premises without charge on her days off, you cannot ex-

clude the value of those meals from her wages.

For this exclusion, a highly compensated employee for

2003 is an employee who meets either of the following

Employees available for emergency calls. Meals that

tests.

you furnish during working hours so an employee will be

available for emergency calls during the meal period are

1) The employee was a 5% owner at any time during

furnished for your convenience. You must be able to show

the year or the preceding year.

that these emergency calls have occurred or can reasona-

bly be expected to occur.

2) The employee received more than $90,000 in pay for

the preceding year.

Example. A hospital maintains a cafeteria on its prem-

You can choose to ignore test (2) if the employee was not

ises where all of its 230 employees may get meals at no

also in the top 20% of employees when ranked by pay for

charge during their working hours. The hospital furnishes

the preceding year.

meals to have 120 employees available for emergencies.

Page 12

Publication 15-B Employer'S Tax Guide To Fringe Benefits - 2003 Page 12

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