When the tax rules were made for meals provided by employers to their employees, the IRS had in mind companies like logging operations with workers located in remote areas with no access to food. The law maintains that companies can deduct the full cost of free meals and workers don’t have to pay income or payroll taxes on meals they are provided “for the convenience of the employer.”
Financial Advisor magazine explains that big tech companies with their impressive offices and well-stocked free cafeterias didn’t exist when the law was created. But now companies are taking advantage of it in ways that weren’t originally intended. And the IRS is losing a lot of potential revenue as a result.
The Treasury Department is in the process of reviewing the rules and deciding what needs to change.
Companies argue that the meals are necessary to keep employees working more hours on campus. That could potentially be an argument for lunch meals, but isn’t as solid reasoning for breakfast and dinner. Sam Brunson, a tax law professor at Loyola University in Chicago suggested that employers could sell meals at cost, providing cheaper meals than employees could get elsewhere, and/or could give employees raises to cover the additional cost of meals on campus.
However the Treasury Department decides to rephrase the law, the days of using employee meals as a tax write-off are probably over.