March 1, 2019
Authored by: Adam Braun and Jennifer Stokes
Something to gnaw on during your lunch hour today (sorry, we couldn’t resist): the IRS recently released TAM 201903017, which ruled that free employee meals provided by an employer were includible in its employees’ taxable income – and therefore subject to employment taxes.
Section 119(a)(1) of the Code excludes the value of meals provided to an employee by an employer if the meals are furnished on the employer’s business premises “for the convenience of the employer.” The “convenience” test can be met if the employer has a substantial noncompensatory business reason for providing the free meals, such as that the employee must be available for emergency calls or that there are no nearby alternatives to secure a meal within the employee’s meal period. Under Section 119(b)(4) of the Code, if more than 50% of an employer’s employees on its premises receive meals that satisfy the “convenience” test,