Updated 9/28/2021
4/8/2021
Notice 2021-25: Temporary 100-Percent Deduction for Business Meal Expenses provides guidance regarding the temporary 100-percent deduction for expenses that are paid or incurred after December 31, 2020, and before January 1, 2023, for food or beverages provided by a restaurant. It explains when the temporary 100-percent deduction applies and when the 50-percent limitation continues to apply for purposes of § 274 - Disallowance of certain entertainment, etc., expenses, as amended by § 210 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted as Division EE of the Consolidated Appropriations Act, 2021 (December 27, 2020).
The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants. Beginning January 1, 2021 through December 31, 2022 businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner or an employee of the business is present when food or beverages are provided, and the expense is not lavish or extravagant under the circumstances.
Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. Restaurants do not include businesses that primarily sell pre-packaged food or beverages not for immediate consumption, such as a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or a vending machine or kiosk. An employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.
See full text in IRB 2021-17, 4/26/2021.