- 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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