The IRS has provided more guidance on the temporary 100% deduction for expenses that are paid or incurred in 2021 and 2022 for food or beverages provided by a restaurant. This guidance provides a special rule that allows a taxpayer to treat the meal portion of a per diem rate or allowance as being attributable to food or beverages provided by a restaurant.

Temporary 100% deduction. The Taxpayer Certainty and Disaster Relief Act of 2020 provides a temporary exception to the 50% limit on the amount that businesses can deduct for food and/or beverages. For expenses paid or incurred in 2021 and 2022, this temporary exception allows businesses a 100% deduction for food and/or beverages provided by restaurants (2021-2022 deduction). (Code Sec. 274(n)(2)(D))

In April 2021, the IRS issued a notice which provided the definition of “restaurant.” For purposes of the 2021-2022 deduction, “restaurant” means a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises.

Per diems and temporary 100% deduction. The IRS notice provides that, solely for purposes of the 2021-2022 deduction, a taxpayer that properly applies the per diem rate rules may treat the meal portion of a per diem rate or allowance paid or incurred after December 31, 2020, and before January 1, 2023, as attributable to food or beverages provided by a restaurant.

Effective date. The notice is effective for the meal portion of per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only, that are paid or incurred by an employer, a self-employed individual or an employee for travel away from home, after December 31, 2020, and before January 1, 2023.

 

Source:  Checkpoint Newsstand 11/17/21