Newburg Staff Writers (4/12/21)

Thanks to the Consolidation Appropriations Act of 2021 businesses are provided with an extra tax incentive to help out local restaurants that has been impacted by the pandemic. For years 2021 and 2022 businesses will receive a 100% tax deduction for certain qualified meals and beverages.

This past Thursday, the IRS released additional guidance as to when the temporary 100% deduction for restaurant meals is available. It also clarified where the prior 50% deduction still remains applicable.

Within the IRS notice, it is explained that the term “restaurant” means a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises. It should be noted that a restaurant does not include a business that primarily sells beverages or prepackaged food not for immediate consumption. Some examples that unfortunately would not qualify include grocery stores, specialty food stores, beer, wine or liquor stores, convenience stores or vending machine/kiosk type operations. The 50% limitation continues for purchases made from these types of businesses (unless another exception in Sec. 274(n)(2) applies).

Further the IRS notice went on to explain that a qualified restaurant would not be considered one of the following :
  • Any eating facility located on the employer’s business premises and used in furnishing meals excluded from an employee’s gross income under Sec. 119; or;
  • Any employer-operated eating facility treated as a de minimis fringe under Sec. 132(e)(2), even if that eating facility is operated by a third party under Regs. Sec. 1.132-7(a)(3).
Despite these few exceptions, those establishments preparing and selling food or beverages to retail customers for immediate consumption will continue to qualify and benefit your business with a 100% tax deduction. Keep this in mind as restaurants position themselves for what hopefully will be a strong comeback in 2021.