Trump calls for more tax deductibility for restaurant meals
In a move that could have implications for the distribution of food in the United States, President Donald Trump on Sunday called for easing restrictions on the deductibility of restaurant meals as business expenses.
At the White House Coronavirus Task Force briefing in the Rose Garden, Trump said he would ask Treasury Secretary Steven Mnuchin and Labor Secretary Eugene Scalia to look into “restoring of the deductibility of meals and entertainment costs for corporations that set the restaurant business back a lot when it was done originally, and then done not so long ago.”
Trump’s meaning was not exactly clear because the situation is complicated. At present, businesses can deduct only 50% of the cost of meals and since the 2017 tax act can deduct them only if the meals are not “lavish or extravagant.”
Trump did not say whether he was referring to one of the rules or both. Since 2017, deduction for other entertainment has been banned and Trump referred to that too.
Many years ago, Congress limited the deductibility of business meals to 50% of the cost. The 2017 Tax Cuts and Jobs Act eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. The 2017 bill continued to allow the deduction of expenses related to food and beverages provided by employers to their employees, but said the meals cannot be “considered lavish or extravagant.”
On Feb. 26, the Internal Revenue Service issued proposed regulations on the business expense deduction for meals and entertainment following changes made by the 2017 Tax Cuts and Jobs Act.
These proposed regulations generally follow Notice 2018-76 (PDF), issued on Oct. 15, 2018, which provided transitional guidance on the deductibility of expenses for certain business meals. In comparison, business expenses such as plane tickets and lodging on business trips are 100 percent deductible.
Taxpayers affected by this change and other interested parties may submit comments on the proposed regulations. The IRS has scheduled a public hearing on these proposed regulations on April 7.
Trump said, “Today I spoke with Wolfgang Puck. Wolfgang Puck is a great restaurateur, as you know, as is Jean-Georges and Thomas Keller and Daniel Boulud, and other leaders in the restaurant business, which has been probably one of the hardest-hit industries. I’ve directed my staff to use any and all authority available to give restaurants, bars, clubs incentives to stay open. You’re going to lose all these restaurants and they’re not going to make it back. They have to get going.”
“So what I’m doing is I’m going to tell Secretary Mnuchin and also our great Secretary of Labor, who you know very well, to immediately start looking into the restoring of the deductibility of meals and entertainment costs for corporations that set the restaurant business back a lot when it was done originally, and then done not so long ago,” Trump said.
“And we’re going to go to deductibility so that companies can send people to restaurants. I think it’ll have a tremendous impact and maybe keep them open. I mean, don’t forget, some are closing right now, despite the fact that they could be open in the not-too-distant future, and we expect that. But there are some that aren’t going to be able to get open, and we want to make sure they do.
“So we’re going to look at the restoration — restoring the deductibility of meals and entertainment costs for corporations so that corporations can send people to restaurants and take a deduction on it like they did in the old days. That was when restaurants were doing really well.”
Later in his remarks, Trump added, “I think we’re going to be in great shape. And we’re going to be in a position, even with what we’re trying to do with restaurants, with deductibility — we have to get these restaurants back in.”
“We have to get our businesses open. We have to get the planes flying. We have to get everything going. We have to get even the cruise ships. I mean, we have to get those cruise ships moving along. We had the greatest economy in the history of the world, three weeks ago, and now we’ve said, ‘Please don’t work anymore.’ We’re actually paying people not to work. Nobody has ever heard that. That’s not for us. People want to work.”
Trump also said, “I spoke to great people today that have done a great job. And one day, at the top of their business, they’re celebrity chefs, they’ve got the most successful restaurants, and in one day they have nothing. They’ve gotten wiped out. One day, from our enemy: this invisible, horrible scourge.”
On Thursday, Trump appeared to agree with the association’s estimate that up to 11% of the country’s restaurants could shut down permanently due to loss of revenue amid coronavirus-prompted closures, Fox News reported.
In response to a question from the press, which cited a National Restaurant Association survey that found 3% of all restaurants had already closed for good, Trump said he heard 3% “could be lost,” but acknowledged that “10 or 11%” could go under in total, Fox said.
Any change in the deductibility of restaurant meals would not not have any value, of course, until restaurants are reopened. It’s also unclear how much the executive branch could change the rules without action from Congress, which passed laws ordering both the reduction in deductibility to 50% and the increased restrictions.
But if restaurant meals become fully deductible to businesses, that could increase food sales to restaurants in the future, which would help those sectors of agriculture that have had the biggest sales to the food service sector, particularly local fruit and vegetable producers and the fishing industry.