IRS Chief Counsel Memorandum Provides Guidance On Compensation Exclusion for Employee Meals Provided for Convenience of the Employer
• The meals are furnished to an employee during the employee’s working hours so that the employee will be available for emergencies while eating (e.g., certain hospital workers).
• The employer’s business requires the employee’s meal period to be short (e.g., 30 minutes) and the employee cannot be expected to eat elsewhere during the short time period (e.g., where the peak work hours of the employer’s business in which the employee is engaged occur during meal times).
• The meals are furnished to the employee because the employee could not otherwise have a proper meal within a reasonable meal period (e.g., where there are insufficient eating facilities in the vicinity of the employer’s business premises where the employee works).
• If the employer’s particular business policies require the employer to provide certain employees with on-premises meals in order for the employees to properly perform their jobs, then meals provided to employees with those duties in that job position are provided for the employer’s convenience, even if certain individual employees in that position decline the meals.
• Per applicable case law, the IRS cannot substitute its judgment for the business decision of the employer as to its business needs and concerns and as to which policies or practices are best suited to address them; however, in regard to meals for the employer’s convenience, the IRS is not prevented from requiring substantiation that a specific employee meal policy exists, as well as an explanation and substantiation that the provision of employer-provided employee on-site meals is necessitated by the policy in order for the employer to meet its business needs and goals (e.g., the employer could not run a hospital without certain staffers being available for emergencies while eating. However, an employer using the ‘on-call for emergencies’ approach could be required to demonstrate to the IRS that emergencies have actually occurred or can be reasonably be expected to occur).
• An employer utilizing the Section 119 exclusion bears the burden of proving that they are entitled to the exclusion, and should be prepared to provide substantiation, if requested by the IRS, as to the business reasons supporting its position that the meals are for the employer’s convenience.
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