The Internal Revenue Service and the Treasury Department have released their Priority Guidance Plan for 2014 to 2015, including the treatment of employer-provided meals.
Some observers are concerned that the IRS plans to tax the free meals that technology companies such as Google, Facebook and Twitter provide to employees in their cafeterias, according to The Wall Street Journal, considering them a taxable fringe benefit. However, the article pointed out that the meals would not be taxable if they are offered for a “noncompensatory” reason for the “convenience of the employer.”
In the Priority Guidance Plan, the IRS and Treasury merely said they would provide “Guidance under §§119 and 132 regarding employer-provided meals.” Section 119 of the Tax Code covers "meals or lodging furnished for the convenience of the employer” and Section 132 pertains to "certain fringe benefits."
Elsewhere in the plan, the IRS and Treasury also said they plan to issue further guidance on the Supreme Court’s decision in the case of United States v. Windsor, which determined that Section 3 of the Defense of Marriage Act is unconstitutional, along with regulations under the Affordable Care Act regarding the minimum value of eligible employer-sponsored coverage and other provisions relating to the health insurance premium tax credit.
The IRS’s current guidance on fringe benefits in Publication 15-B on employer-provided meals states, “You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. The exclusion applies, for example, to the following items:
Coffee, doughnuts, or soft drinks.
Occasional meals or meal money provided to enable an employee to work overtime. However, the exclusion does not apply to meal money figured on the basis of hours worked.
Occasional parties or picnics for employees and their guests.
"This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility.
"For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises , later.”
Later on, in explaining this, the IRS states, “You can exclude the value of meals you furnish to an employee from the employee's wages if they meet the following tests.
They are furnished on your business premises.
They are furnished for your convenience.
"This exclusion does not apply if you allow your employee to choose to receive additional pay instead of meals.
"On your business premises. Generally, for this exclusion, the employee's place of work is your business premises.
"For your convenience. Whether you furnish meals for your convenience as an employer depends on all the facts and circumstances. You furnish the meals to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. This is true even if a law or an employment contract provides that the meals are furnished as pay. However, a written statement that the meals are furnished for your convenience is not sufficient.“