Tax Relief for Corporate Clients

May 01, 2001

America’s restaurants are the conference rooms for today’s small businesses. It is for that reason that small business owners, along with the various restaurant associations, are once again asking Congress to increase the current 50 percent deduction for business meals. These groups argue that the 50 percent deduction for such expenses hurts people who conduct business face to face over a meal. For these individuals, the cost of a business meal is a legitimate business expense. Yet, unlike other business expenses, these business meals are not fully deductible as a cost of doing business.

In 1987, Congress lowered the tax deduction for business meals from 100 percent to 80 percent. Seeking additional revenue, Congress further lowered the deduction to 50 percent in 1994. While it may not have been contemplated at the time, the unfortunate result of this decrease has been an unfair and disproportionate increase in taxes for small business owners and the self-employed, each of whom rely heavily on this deduction as part of doing business.

For whatever the reason, small business owners have been unable to successfully lobby for a positive change in the law. In 1995, the White House Conference on Small Business established restoration of the business meal deduction as one of its top priorities for boosting small business. To date, however, there has been no increase in the deduction.

On May 3, 2001, United States Senator Richard Shelby (R-Alabama) introduced legislation (S. 831) to provide this long overdue relief to small business owners. While his bill is not the first or only measure introduced to Congress which looks to increase the business meal deduction, it is the most clear. Senator Shelby’s proposal seeks only to amend the Internal Revenue Code of 1986 to provide for a 100 percent deduction for business meals.

Conducting business over a meal is a staple in today’s business world and should be treated the same as advertising or any other business expenses under the nation’s tax code. Allowing full deductibility of business-related meals will lighten the heavy financial burden of small business owners. In addition, it will inject additional capital into our country’s businesses, thereby allowing them to spend more money on innovation and growth. Furthermore, full deductibility of business meals will increase restaurant patronage. As a result, this change will benefit waiters, waitresses, cooks and other restaurant workers by increasing their job security and wages. It is time for Americans to rally behind Senator Shelby’s push to increase the business meal deduction.

In order to comply with certain U.S. Treasury regulations, we are informing you that any U.S. federal tax advice that may be contained in this document is not intended or written to be used, and cannot be used, by any person for the purpose of (i) avoiding any tax penalties that may be imposed by the Internal Revenue Service or any other U.S. federal taxing authority or agency or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

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