By William Colgin and John Ludlum

Internal Revenue Code Section 119 (Code Section 119) allows employees to exclude from income the value of any meals furnished by or on behalf of their employer if the meals are furnished on the employer’s business premises for the convenience of the employer. Whether meals are furnished for the convenience of the employer is one of fact to be determined by analysis of all the facts and circumstances in each case. Treasury Regulation 1.119-1 provides that meals furnished by an employer to the employee will be regarded as furnished for the convenience of the employer if such meals are furnished for a substantial non-compensatory business reason of the employer.

Many companies provide meals to their employees, but the rules for excluding this benefit from income are complex and have detailed administration requirements. The taxpayer bears the burden of proving entitlement to such an exclusion. An employer who is claiming exclusion from income and wages for meals furnished to employees for the convenience of the employer must provide substantiation if requested concerning the business reasons. A recent IRS Technical Advice Memorandum issued on February 15, 2019, (“TAM 201903017”) underlines how difficult it can be to prove to the IRS administratively a substantial non-compensatory business reason and provides guidance for employers looking to claim the exclusion.

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