Tax Reform Bill Has Pros And Cons For Foodservice

Like many others, we’re still figuring out exactly what is in the 430-page Tax Cut and Jobs Act of 2017, and what it means for the foodservice industry.

Does it help restaurant businesses “thrive and grow,” as the National Restaurant Association had anticipated last fall? Time will tell, but here’s a quick look at what we do know.

Overall, the new tax bill provides for stricter limits on the deductibility of business meals and entertainment expenses. Entertainment expenses incurred or paid after December 31, 2017 are nondeductible unless they fall under specific exceptions in Code Section 274(e).

Under the Act, the IRS will end its deductions for business entertaining, though deductions for business meals remain intact.

• Entertainment previously was 50% deductible. Among those items no longer deductible as entertainment are concert or sporting tickets; customer or client meals; dues or fees to any social, athletic, or sporting club; taking someone to play golf
• Meals while travelling for business are still 50% deductible. These meals must be “reasonable” in cost and only for the person travelling.  In other words, taking someone out to dinner while traveling still constitutes entertainment, which is not deductible.
• Employee meals for the convenience of the employer are still deductible at a rate of 50%. These meals should be served on or near the employer’s place of business.
• Travel is still 100% deductible. Travel includes direct transportation (planes, trains, taxis, Ubers, car rentals) and lodging.

The law also calls for the IRS to increase its limit on how much businesses can deduct for new equipment purchases but it also ends tax breaks for companies exchanging equipment as they purchase new items—those rules now only apply to real estate transfers.

Tax attorneys and accountants should be consulted for specific details on how the new tax laws apply to your business.