User:Etcollins

Free Meals: On your employer or on you?

Many employers provide free meals to employees who work long hours as an incentive to continue working. For example, a businessperson who is at her office at six PM might decide to continue working until eight PM if she knows she will be provided with a free meal. Depending on how the employer distributes the meal, however, the value could be considered gross income1 and therefore be subject to inclusion on the person’s federal income tax form. Meals provided to an employee are excludable from gross income if, 1) the employer provides the meal, 2) the meal is for the convenience of the employer, and 3) the meal is served on the business premises.2 Legislative history and case law mandate that Internal Revenue Code §119 only apply to meals “in kind,” barring cash-allowances.3 For example, if an employee is given $20 to spend at a restaurant of her choosing, the Internal Revenue Code would view the cash allowance as gross income because it is not “in kind” and the meal did not take place on the business’ premises. Meals ordered in and paid for by the employer, would be excludable.      The meal must also be provided for the convenience of the employer. For example, the Supreme Court in Commissioner v. Kowalski found that the cash meal allowance provided to state troopers was for the convenience of the employer because it permitted them to stay in their patrol areas when eating.4 This insured that the area patrolled by those specific troopers would still be under patrol, even during lunchtime.5 Business lunches and recruiting events are covered by another code section6 and may not be included as gross income.

1. 26 U.S.C. 61(a) (2007) (stating that gross income “means all income from whatever source derived…”). 2. 26 U.S.C. 119(a) (2007). 3. Comm’r v. Kowalski, 434 U.S. 77 (1977). 4. Id. 5. Id. 6. See 26 U.S.C. 61(a) (2007); U.S. v. Gotcher, 401 F.2d 118, 121 (5th cir. 1968) (meals and lodging were not income because there was no economic gain which personally benefited the taxpayer).