In a bid to help the U.S. restaurant industry, which has been hit hard by closures and reduced demand stemming from the Covid-19 outbreak, President Donald Trump has raised the possibility of making more business meal costs deductible on corporate tax filings.
During a March 29 White House briefing on the pandemic, Trump said he would urge the heads of the U.S. Treasury and Labor Dept. to "start looking into the restoring of the deductability of meals and entertainment costs for corporations."
The U.S. tax code long has allowed companies to deduct 50 percent of client and most types of employee meal costs from corporate taxes, but Trump's 2017 tax reform added the specification that such a deduction only was allowed for meals that were not "lavish or extravagant." Trump did not specify which elements of the existing rule he was considering amending: increasing the percentage of a meal cost that is deductible, removing the carve-out for lavish meals, or both.
The 2017 tax overhaul also eliminated the previously existing 50 percent tax deduction for expenses related to activities considered entertainment, amusement or recreation. Trump indicated during the briefing that he would seek the restoration of some type of deduction for entertainment costs.
Social distancing measures and bans on in-restaurant dining put into place to combat the spread of Covid-19 have sent U.S. restaurants reeling since mid-March. The National Restaurant Association has estimated that up to 3 percent of all restaurants in the nation already have closed permanently, while up to 11 percent ultimately could shutter as a result of the outbreak, according to the industry group.
With so many restaurants closed, easing restrictions on corporate meal deductions likely would not have a significant impact until restaurants begin to reopen for in-house dining but presumably could encourage faster subsequent recovery.