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  • The law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, eliminated most deductions of business-related entertainment expenses and reduced the former 100% deduction for expenses of some meals provided to employees by employers to 50%. Subsequent guidance addressed distinguishing between the cost of food and beverages provided at or during an entertainment activity, which remain 50% deductible, from the nondeductible cost of the entertainment.

  • Subsequent legislation and guidance temporarily allows a 100% deduction for food or beverages provided by a restaurant if paid or incurred during the 2021 and 2022 calendar years.

  • The TCJA also eliminated the deduction of the cost of qualified transportation fringe and other commuting benefits. Guidance on determining the nondeductible portion of employer-provided parking benefits was issued in 2018 and 2020.

  • Sec. 162(m), which limits the annual compensation deduction to $1 million for each covered employee of a publicly held corporation, also was significantly expanded by the TCJA. This limitation was further expanded in 2021 by the American Rescue Plan Act, P.L. 117-2, to take effect in tax years after 2026.

  • Tax-exempt organizations also received an excess-compensation limitation from the TCJA in the form of an excise tax under Sec. 4960. Guidance has addressed a number of outstanding questions and issues, but some remain, such as coordination with Sec. 162(m).

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