Order the Steak! IRS to Reinstate Dining Expense Write-Off

Summary

Podcast Summary: WSJ Your Money Briefing

Episode: Order the Steak! IRS to Reinstate Dining Expense Write-Off
Date: October 1, 2018
Host: JR Whalen
Guest: Laura Saunders (WSJ Tax Reporter)

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Episode Overview

This episode explores recent changes regarding business expense deductions following the 2017 tax legislation overhaul. Specifically, it delves into which dining and entertainment expenses businesses can still write off, clarifying new IRS guidance on meals with clients versus other perks like entertainment and office snacks. The discussion is designed to help business owners, employees, and tax professionals understand which expenses remain deductible—and which do not—under the updated rules.

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Key Discussion Points & Insights

1. Background: 2017 Tax Reform and Business Deductions

• The 2017 tax bill lowered business income taxes significantly but cut back on many deductions to offset costs (02:26).
• Major area of change: Business food, meal, and entertainment deductions.
  • Speaker Laura Saunders: “Last year...in order to sort of raise some of the money to help pay for this, it took away a lot of other deductions. And one of them is it pulled way back on meal and food and entertainment deductions by businesses..." (02:26)

2. Impact on Entertainment vs. Meals

• Entertainment:
  • Business entertainment expenses (e.g., sports, golf, theater tickets, outings) are no longer deductible at all (03:05).
  • Used to be 50% deductible.
    • Saunders: “If you want to take your client to the ball game or on the company jet for a round of golf, that used to be 50% deductible, now it’s not deductible at all.” (03:05)
• Meals with Clients:
  • Initial concern was that client meals would also become non-deductible due to, as described, “sloppy drafting” of the legislation (03:32).
  • Good news: IRS guidance is expected to clarify that business meals remain deductible—likely at 50% as before—for meals involving business discussions.
    • Saunders: “...it appears the IRS is going to issue some guidance that says the normal business meal probably is deductible.” (03:32)
    • Memorable moment: “So if you work for three hours on a tricky tax return, go to lunch and come back with the client, you know, probably that meal will continue to be deductible as it was last year.”* (03:46)
• Lavish or Extravagant Meals:
  • Still cannot deduct meals considered “lavish or extravagant,” though what qualifies as such remains somewhat ambiguous.
    • Saunders: “Unless...it’s lavish or extravagant. Now, we don’t quite know what that means, but it’s an elastic term.” (04:13)

3. Other Food & Office Perks

• Office Snacks and Coffee:
  • The deduction for office refreshments (snacks, coffee) has been reduced from 100% to 50%.
    • “Coffee, office coffee, office snacks like M&Ms... Not deductible anymore.” (05:07−05:09)
  • Host’s humorous aside: “We have a nice little snack table here at the Wall Street Journal.” (05:12)
  • Saunders responds: “You know, that we'll have to bring in cookies from home. All that coffee comes to a pretty penny I imagine.” (05:14)
• Employer-Provided Meals for Convenience (e.g., Tech Campus Meals):
  • Meals provided for convenience of the employer (like free tech-campus lunches) are no longer fully deductible and may eventually become non-deductible.
    • “That is not 100% deductible anymore and it may not be at all deductible in a few years.” (05:46)

4. The Boston Bruins Precedent

• Case noted where the Boston Bruins hockey team had secured a 100% deduction for player meals at away games.
  • Congress appears to have specifically reversed this precedent with the new rules.
    • “That’s right. And they won 100% deduction for that. And so we feel that Congress was reversing that...” (06:01)

5. Practical Takeaway for Listeners

• “Go out and enjoy the theater show or the round of golf with your client. You’d be paying for that. But enjoy the hamburger and the steak afterwards.”
  • JR Whalen, summarizing the split between entertainment and meal deductions. (06:15)

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Notable Quotes & Memorable Moments

• “The worst thing didn’t happen to meals. The worst thing happened to entertainment.” — Laura Saunders (03:05)
• “There was a great fear that the normal client business meal would also be non-deductible.” — Laura Saunders (03:32)
• “If you want to take your client to the ball game or on the company jet for a round of golf, that used to be 50% deductible, now it’s not deductible at all.” — Laura Saunders (03:05)
• “So, with the Boston Bruins hockey team, there was a question as to the providing of food to the players at away games.” — JR Whalen
  “That’s right. And they won 100% deduction for that. And so we feel that Congress was reversing that.” — Laura Saunders (06:01)
• “But enjoy the hamburger and the steak afterwards.” — JR Whalen (06:15)

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Important Timestamps

• 02:26 – Background on tax reform and deduction changes
• 03:05 – Entertainment deductions eliminated
• 03:32 – IRS clarifies business meals remain deductible
• 04:13 – Limits on “lavish or extravagant” meals
• 05:07 – Office snacks and coffee deductions cut back
• 05:46 – Employer-provided meal deductions reduced
• 06:01 – Boston Bruins case explained
• 06:15 – Host’s practical summary and closing remarks

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Episode Tone & Style

The tone is informative and practical, laced with light humor—especially regarding office snacks and the perennial mysteries of IRS definitions. Both JR Whalen and Laura Saunders keep the discussion accessible yet detailed, emphasizing actionable takeaways for listeners affected by these tax changes.

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Transcript

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[C]

With your money briefing, I'm JR Whalen at the Wall Street Journal in New York. Good news from the IRS if you plan to take your business clients out for dinner or drinks. Bad news if you want to go to a show or play a round of golf. We'll explain in a moment. First, these money and market stories. You should know the core inflation index, which excludes food and energy products, was flat in August from July. Meanwhile, the broader inflation index, including food and energy, rose 0.1% due to a surge in gas prices. And while many economists predict the Trump administration's trade disputes to put upward pressure on prices in the months ahead, that hasn't happened yet. We've reported here that consumer sentiment rose in September, powered by Americans confidence in the current and future state of the economy. Well, it turns out America's low income earners boosted consumer sentiment overall this month, evidence that an economic expansion is benefiting a larger swath of workers. Also, confidence among lower income Americans was the highest since 2000. And JetBlue is introducing bare bones economy fares to keep up with competition from discount air carriers and boost sales as it faces rising labor and fuel costs. The number five US Carrier by traffic has tattered amenities like free Wi Fi and Romeo coach seats as other carriers have pared back their free services. The basic economy fares are $30 to $50 cheaper than than standard economy tickets, but leave out amenities like advanced seat assignments, overhead bin space, frequent flyer awards and other benefits. If you take your clients out for business meals. There's some good news coming from the irs and Wall Street Journal tax reporter Laura Saunders is here to spell out the details for us. So, Laura, this has to do with with the tax deductibility of client meals?

[D]

Yes, it absolutely does. And let me back up and set the stage a little bit here. Last year when Congress did the great big tax revision, it lowered taxes on business income a lot more than ever before. And in order to sort of raise Some of the money to help pay for this, it took away a lot of other deductions. And one of them is it pulled way back on meal and food and entertainment deductions by businesses, I.e. big corporations, a lawyer in a firm, just all these food deductions and entertainment deductions.

[C]

Now, in terms of meals, that's a sizable expense for a lot of companies.

[D]

Well, the worst thing didn't happen to meals. The worst thing happened to entertainment. They just took that away. If you want to take your client to the ball game or on the company jet for a round of golf, that used to be 50% deductible, now it's not deductible at all.

[C]

Not at all.

[D]

Not at all. Theater tickets, things like that. That's gone.

[C]

A lot of those perks might be going away.

[D]

Exactly.

[C]

And the IRS says, hey, don't fudge with the numbers.

[D]

Yeah, well, now. But then there was this big question that came out of it. What about client business meals? And because the bill was pushed through and the drafting was a little sloppy, there was a great fear that the normal client business meal would also be non deductible. The good news here is it appears the IRS is going to issue some guidance that says the normal business meal probably is deductible. So if you work for three hours on a tricky tax return, go to lunch and come back with the client, you know, probably that meal will continue to be deductible as it was last year.

[C]

So you're paying for the round of golf with your client.

[A]

Right.

[D]

You have to pay for the round of golf or the theater tickets, but you still can get some help from Uncle Sam on that meal. Unless. Unless it's lavish or extravagant. Now, we don't quite know what that means, but it's an elastic term. We hear that on different occasions it can be a very capacious term. You know, that it can include very large expenses for a very big deal.

[C]

Now, it also says in your column in the Wall Street Journal that this reverses a precedent set involving the Boston Bruins.

[D]

There are several more things they pulled back on all kinds of food and entertainment deductions. I mean, we talked about the entertainment, but the food. Seems like they're leaving this client business meal in place as deductible. But they have pulled back on, well, coffee, office coffee, office snacks like M&Ms. Or pretzels.

[C]

Not deductible anymore.

[D]

Half. Half used to be all. Now it's half.

[C]

We have a nice little snack table here at the Wall Street Journal.

[D]

You know, that we'll have to bring in cookies from home. All that coffee comes to a pretty penny I imagine. So that's one thing that has been pulled back. And the other thing is food provided for the convenience of the employer. This could be a meal during tax season for hard working tax accountants, you know, dinners and things like that. It could also be those, you know, those famous campuses in Silicon Valley that maybe like Google or Facebook that have free sushi because they don't want people to leave at lunch. That is not 100% deductible anymore and it may not be at all deductible in a few years.

[C]

So with the Boston Bruins hockey team there was a question as to the providing of food to the players at away games.

[D]

That's right. And they won 100% deduction for that. And so we feel that Congress was reversing that. It was a beautifully argued case, but they got a nice big hundred percent deduction for the all the food at the away games.

[C]

All right, so that's good news. So go out and enjoy the theater show or the round of golf with your client. You'd be paying for that. But enjoy the hamburger and the steak afterwards.

[D]

Yes, exactly.

[C]

Alright. That is Wall Street Journal tax reporter Laura Saunders here with us. Laura, thanks for being with us.

[D]

And thank you.

[C]

And that's your money briefing. I'm JR Whalen in New York for the Wall Street Journal.

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