NCPA - National Center for Policy Analysis

IRS Looks to Tax Employer-Provided Meals

September 5, 2014

In Silicon Valley, it is common for employers to provide complimentary food to their employees. The Wall Street Journal reports employees at Google, Facebook and Twitter have access to buffets boasting gourmet meals as well as in-house restaurants and organic produce.

But the Internal Revenue Service (IRS) sees the free meals as a source of revenue, claiming the cafeterias are providing a taxable fringe benefit. The agency has sought back taxes on the lunches of up to 30 percent of the meals' value.

In fact, the IRS and the Department of the Treasury recently announced their list of top tax priorities for the fiscal year ending in June 2015. Employer-provided meals were on the list, with the agency indicating that it would issue new guidance on the tax treatment of workplace food. While the IRS did not provide much detail, observers expect the agency will seek to include the value of the food in a worker's taxable income.

According to the Wall Street Journal, meals provided by employers can be taxable benefits, just as the use of a company car or employer-provided life insurance is. However, tax law allows meals to go untaxed for a number of reasons, including if the meals are provided for the employer's convenience and for a "noncompensatory" reason. Often, this exception is applied when workers are employed in remote locations, such as an oil rig.

Could Google's free meal program fit under the convenience-of-the-employer exception? Many suggest yes, as in-house meals generally result in quicker lunches, making workers more productive.

Source: Mark Maremont, "Silicon Valley Cafeterias Whet Appetite of IRS," Wall Street Journal, September 1, 2014. 

 

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