Recent executive compensation and fringe benefit changes

By Veena K. Murthy, J.D., LL.M. (Taxation), and Jacqueline McCumber, CPA, J.D.



  • 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).

The 2017 tax reform legislation referred to as the Tax Cuts and Jobs Act (TCJA)1 significantly affected the tax treatment of executive compensation and employee fringe benefits. The TCJA amended deduction limitations on employer costs for meals and entertainment and employer-provided transit and parking benefits under Sec. 274, significantly expanded the reach of the annual $1 million deduction limitation on the compensation of certain executives under Sec. 162(m), and enacted new Sec. 4960 imposing an excise tax on tax-exempt organizations providing excessive executive compensation. All of these changes are generally effective for tax years beginning after Dec. 31, 2017.

During 2018 and 2019, Treasury and the IRS released guidance with respect to these law changes in the form of notices2 followed by four sets of proposed regulations.3 Between October 2020 and January 2021, Treasury published final regulations implementing the TCJA changes to Secs. 274, 162(m), and 4960.4 Within months after the release of these final regulations, Congress further tweaked the Sec. 274 treatment of business meals and which employees are covered under Sec. 162(m).5 Outlined below are the more significant aspects of each of the four sets of final regulations, and the subsequent revisions in two of these areas by Congress.

Sec. 274 disallowance of deductions for entertainment expenses and reduction for some employee meal expenses

The TCJA amended Sec. 274 to generally eliminate the deduction for expenses of entertainment, amusement, or recreation (collectively referred to as entertainment) directly related to or associated with the taxpayer's active conduct of a trade or business. The law also reduced the former 100% deduction for expenses for on-premises meals provided by an employer for the employer's convenience under Sec. 119 and for costs associated with food and beverages provided through an employer-operated eating facility under Sec. 132(e)(2) — temporarily, to 50% for amounts paid or incurred before Jan. 1, 2026, and permanently to 0% for amounts paid or incurred on or after that date.6

Congress intended to preserve the 50% deduction for properly substantiated business meals unassociated with entertainment activities. Certain exceptions under Sec. 274(e) ("Subsection (e) exceptions") were also preserved, such as amounts that are properly included in an employee's wages,7 or for expenses of certain recreational, social, or similar activities primarily for the benefit of employees, such as annual picnics and holiday parties, where such benefits are provided on a nondiscriminatory basis.8

A primary issue that emerged in relation to this law change was its impact on the deduction for business meal costs. Previously, distinguishing between whether an employer-provided meal was associated with business or entertainment was not as critical, since generally both business meal and entertainment costs were 50% deductible.9 Clarifying the IRS's view of this issue was largely the focus of Notice 2018-76, which outlined how meal costs, particularly those of food or beverages provided along with or during an entertainment event, could remain 50% deductible. Although Congress intended to preserve the 50% business meal deduction only when dissociated from entertainment entirely, the notice provided that such meal expenses remain 50% deductible if all of the following requirements are met:

  • The expenses are ordinary and necessary under Sec. 162 in carrying on any trade or business;
  • The expenses are not lavish or extravagant under the circumstances;
  • The taxpayer, or an employee of the taxpayer, is present at the furnishing of the food or beverages;
  • The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
  • If the food and beverages are provided during or at an entertainment activity, they are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on relevant bills, invoices, or receipts and cannot be inflated to circumvent the entertainment disallowance.

Proposed regulations published on Feb. 26, 2020,10 generally follow the notice in this regard, adding certain clarifications, including that the notice's requirements apply to all food or beverages, including travel meals and employer-provided meals, provided during an entertainment activity. Other clarifications relate to various definitions, including what constitutes "food and beverage expenses," and that the food or beverages must be provided to a "business associate" as a requirement for deductibility.

The proposed rules also make clear that stringent prior-law rules associated with substantiation of travel meal expenses, including limitations on any deduction for travel meal expenses of spouses and dependents, were unchanged. Additionally, while the TCJA did not generally eliminate various prior-law Sec. 274(e) exceptions from the deduction limitations, not every exception continues to apply, and taxpayers should distinguish between expenses for entertainment versus for food and beverages within those exceptions.

The final regulations,11 published on Oct. 9, 2020, and effective for tax years beginning on or after the date of publication, substantially adopted the proposed rules, but the final regulations include a number of important clarifications. One is that the cost of transportation to a meal (for example, a taxi to a restaurant) is not part of food or beverage expenses. Also, the prior regulatory definition of entertainment under an objective standard was substantially unchanged.

Apparently in response to numerous taxpayer comments or questions of a similar nature, the final regulations reiterate certain issues in the preamble and rules themselves. For example, they note that the TCJA repealed business entertainment expenses, whether or not related to or associated with the active conduct of a trade or business, and that as certain prior-law Sec. 274(e) exceptions continue to apply, the related rules on how to meet those exceptions in connection with entertainment are unchanged. While the final regulations do not provide new rules on meeting such exceptions for entertainment expenditures, they provide quite a bit of guidance on how and whether food or beverage expenses may fall within the exceptions.

Temporary relief enacted under the CAA

In the Consolidated Appropriations Act, 2021 (CAA),12 enacted on Dec. 27, 2020, Congress included a temporary 100% deduction for expenses for food or beverages "provided by a restaurant" if paid or incurred during the 2021 and 2022 calendar years. Many questions arose on how expansively the terms "provided by" and "restaurant" could be interpreted. In Notice 2021-25, the IRS defines a restaurant as a business that prepares and sells food or beverages to retail customers for immediate consumption, whether or not consumed on the premises. It clarifies that this does not include a business that primarily sells prepackaged food or beverages not for immediate consumption, such as a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or a vending machine or kiosk.

Note that various other requirements under the existing law for deductibility continue to apply, including that the taxpayer or its employee must be present and the expense cannot be lavish or extravagant under the circumstances. Additionally, the notice states that the current-law 50% deduction disallowance is unchanged for the costs of meals excluded from an employee's gross income under Sec. 119 and provided for the convenience of the employer on the employer's business premises and for costs associated with food and beverages provided through an employer-operated eating facility under Sec. 132(e)(2). This means that for purposes of the temporary 100% deduction allowance, an eating facility on the employer's business premises and any employer-operated eating facility are not restaurants. Note that the costs of meals in both these categories become fully nondeductible starting in 2026.

Questions remain concerning how this temporary 100% allowance applies to expenses for food and beverages during business travel, including when per diems are in place, particularly given that strict substantiation requirements apply to such expenses as well as accountable-plan rules that, if not followed, could result in no deduction. This temporary change also does not free taxpayers from the requirements described above for deducting the cost of food and beverages provided along with entertainment.

Sec. 274 deduction disallowance for expenses of qualified transportation fringe and other commuting benefits

The TCJA amended Sec. 274 to generally disallow employers a deduction for the expense of any qualified transportation fringe (QTF) and other commuting benefits.13 QTFs are indexed amounts excluded from an employee's wages because they meet the various requirements under Sec. 132(f). QTFs subject to the disallowance include transit passes, transportation in a commuter highway vehicle between the employee's residence and place of employment, and qualified parking. Qualified bicycle commuting reimbursements are temporarily not listed among QTFs and are therefore taxable to employees as a result of the TCJA for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026;14 as a result, qualified bicycle commuting reimbursements remain deductible during this temporary period (provided that the amount of such reimbursements is properly included in wages).

The TCJA also added a new provision that generally disallows a deduction for any other employer-paid or -provided commuting expenses (except as necessary for ensuring the safety of the employee) whether taxable to the employee or not.15 Taxable commuting expenses subject to this deduction disallowance include (but are not limited to) employer-paid or -provided expenses of a remote worker commuting from the employee's residence to the employee's assigned place of employment, even when the assigned place of employment is thousands of miles away.

Notice 2018-99 provided interim guidance to address pressing questions related to employer-provided parking for taxpayers that own or lease a parking facility. The notice provided guidance on what types of costs constitute "parking expenses" (for example, maintenance costs, security, etc.), as well as a four-step methodology that constitutes a reasonable method to determine the percentage of such parking expenses attributable to employee usage and the deduction disallowance. This four-step analysis included determining the percentage of reserved spots for employees versus nonemployees, if applicable, and whether the primary use of the parking spaces is by the "general public."

Proposed regulations, published on June 23, 2020,16 contain a general rule based on a reasonable interpretation of the statute (subject to certain limiting principles), as well as three simplified methodologies (the notice's four-step "primary use" method with some modifications, a qualified parking limit methodology, and a cost-per-space methodology), all of which rely on determining employee usage during a "peak demand period." This period is the time in a typical business day during the tax year when employee usage is greatest (disregarding a transition period that overlaps between two working shifts), determined based on any reasonable method.

Detailed rules specific to each methodology apply, including certain helpful rules for multitenant buildings and associated parking spaces, as well as a safe harbor that permits a taxpayer to allocate 5% of certain mixed parking expenses to a parking facility when such expenses are not separately stated from non—parking facility expenses. This safe harbor applies to mixed parking expenses related to payments under a lease or rental agreement and payments for utilities, insurance, interest, and property taxes. It may only be used in the primary-use methodology and cost-per-space methodology and not with the general rule or the qualified parking limit methodology.

The final regulations,17 published on Dec. 16, 2020, and effective for tax years beginning on or after the date of publication, largely adopt the proposed regulations. For taxpayers that own or lease a parking facility, the final regulations retain the proposed general rule and three simplified methodologies for determining the parking disallowance, with some modifications. These modifications include:

  1. Allowing taxpayers affected by a federally declared disaster under Sec. 165(i)(5) (which includes COVID-19) to determine a ''peak demand period'' based on a typical business day in the same tax year or same month of the prior tax year before they were affected by the disaster;
  2. Expanding the definition of "inventory/unusable spaces" to allow taxpayers to use any reasonable methodology (such as the average of monthly inventory count) to determine the number of inventory/unusable spaces in a parking facility under the primary-use and cost-per-space methodologies;
  3. Expanding the definition of "general public" for the primary-use test in multitenant situations; and
  4. Changing the cost-per-space methodology multiplier to base it on "total parking spaces," which include reserved parking, and allowing the calculation to be performed monthly.

The final regulations also significantly expand an exception for parking sold by the taxpayer in a rural, industrial, or remote area if the taxpayer can prove the value of such parking is zero.

Additionally, with respect to the deduction disallowance for any other commuting expenses (whether those expenses are taxable to the employee or not), the final regulations incorporate the concept of "tax home" to clarify that commuting expenses include long-distance travel even when the employee works from home, adding that "temporary or occasional" places of employment are not considered an employee's place of employment. The final rules clarify that the Sec. 274(e) exceptions cannot apply to non-QTF commuting expenses. With respect to the exception for transportation provided by an employer that is necessary to ensure an employee's safety, the final regulations incorporate existing general reasonableness standards under fringe benefit rules18 for evaluating unsafe conditions.

Sec. 162(m) $1 million deduction limitation on executive compensation

Sec. 162(m) limits the compensation deduction of a "publicly held corporation" (PHC) to $1 million per "covered employee" in the tax year when the deduction would otherwise apply. The TCJA significantly expanded the application of Sec. 162(m) by:

  1. Expanding the definition of a PHC to any employer having any securities (not just common equity securities) required to be registered under Section 12 of the Securities and Exchange Act of 1934 (Exchange Act) and any employer required to file reports under Sec. 15(d) of the Exchange Act;
  2. Eliminating exceptions for commissions and performance-based compensation, so that, generally, all taxable compensation of a covered employee falls within its ambit; and
  3. Significantly expanding the definition of who is a covered employee in any tax year.

Prior to the law change, a covered employee was limited to the CEO (or an individual acting in that capacity) and the three highest-paid officers other than the CEO, only if employed on the last day of the tax year and if required to be reported on the summary compensation table in the company's proxy. The TCJA requires, for all tax years beginning after 2017, a potentially growing list of covered employees of the taxpayer (or a predecessor) that generally includes anyone who was a covered employee in the 2017 tax year (determined under prior law) and anyone who in 2018 tax years and all future years is the CEO or CFO, or one of the three highest-compensated officers other than the CEO or CFO, for any such tax year, even if not employed on the last day of the tax year.

Because the TCJA does not limit Sec. 162(m) to publicly traded corporations to which a proxy requirement applies, a covered employee no longer necessarily is limited to those who are reported on a summary compensation table. A protection from the TCJA expansion may apply with respect to amounts payable under a written binding contract in effect on Nov. 2, 2017, that was not materially modified on or after this date; however, note that, generally, this means old Sec. 162(m) still applies to any such amounts.

While Notice 2018-68 provided limited guidance on issues raised by the TCJA changes, proposed regulations released on Dec. 20, 2019,19 created a bifurcation between the regulations under prior Sec. 162(m) and those applicable to the TCJA's amendments. Very generally, the proposals clarify that PHCs subject to Sec. 162(m) can include certain private C corporations, S corporations, foreign private issuers, publicly traded partnerships (to the extent treated as a corporation under Sec. 7704), as well as privately held C corporations or S corporations that own a disregarded entity and S corporations that own a qualified Subchapter S subsidiary (QSub), if the disregarded entity or QSub issues securities required to be registered or reported under the Exchange Act.

The proposed regulations include various expansive rules related to allocating the deduction disallowance among affiliated groups, and predecessor corporation determinations. With respect to "Up-C" partnership structures (which may be stand-alone or part of a larger organizational structure), other than for compensation paid after Dec. 30, 2020, pursuant to a written binding contract in effect on Dec. 20, 2019, and not materially modified thereafter, the proposed regulations require a corporation to take into account its distributive share of a partnership's deduction for compensation expenses paid to a covered employee when determining the amount of compensation subject to Sec. 162(m)'s deduction disallowance. Another significant change is the elimination of the initial public offering (IPO) transition rule (permitting a newly public company a "pass" from the application of Sec. 162(m) for, generally, up to three years if various conditions are met), but only with respect to IPOs occurring on or after Dec. 20, 2019.

The final regulations,20 published on Dec. 30, 2020, generally apply to tax years beginning on or after that date but can apply to a taxpayer's tax years beginning after Dec. 31, 2017, and before Dec. 30, 2020, if applied in their entirety and in a consistent manner. The final regulations follow, and are largely consistent with, the proposed regulations — including retaining the December 2019 dates relating to the above-described transition applicability date for corporations undergoing IPOs (but changing "on or after" Dec. 20, 2019, to "after" that date) and compensation in Up-C partnership structures. The final regulations provide additional relief for Up-C partnership structures by applying these rules only to compensation paid after Dec. 18, 2020.

Additionally, the final rules confirm that Sec. 162(m) applies to all compensation earned by a covered employee, including amounts earned in a nonemployee capacity (even prior to becoming a covered employee). Other items of note in the final regulations relate to clarification that covered employees are "executive officers" based on SEC rules, clarification of protection from application of the TCJA to compensation payable under account and nonaccount nonqualified deferred compensation balance plans, and the ability to preserveprotection fromthe TCJA if a nonqualified stock option or stock appreciation right otherwise protected from the TCJA is extended in compliance with Sec. 409A.

Future changes enacted under the American Rescue Plan Act

In the American Rescue Plan Act (ARPA),21 enacted on March 11, 2021, Congress included an amendment to the definition of covered employee for tax years beginning after Dec. 31, 2026. This amendment adds the five highest-compensated employees of a PHC in each tax year as covered employees for that tax year — in other words, separately from the PHC's existing list of covered employees under the TCJA. Because the TCJA limits this group to executive officers, ARPA's reference to "employees" means that, in a given tax year, the TCJA group does not necessarily overlap with ARPA's group of five highest-compensated employees.22 Guidance on this issue is anticipated.

Sec. 4960 excise tax on tax-exempt organizations that provide excess executive compensation

Sec. 4960, enacted by the TCJA, imposes an excise tax on applicable tax-exempt organizations (ATEOs) equal to the corporate tax rate (currently 21%) on the sum of any excess remuneration (remuneration exceeding $1 million, other than excess parachute payments) and any excess parachute payment paid by the ATEO to a "covered employee." For this purpose, a covered employee is one of the five highest-compensated employees of the organization (or a predecessor) in a tax year or in any preceding tax year beginning after Dec. 31, 2016.

An ATEO is any organization that is exempt from taxation under Sec. 501(a), that excludes income from taxation under Sec. 115(1), that is a farmer's cooperative organization described in Sec. 521(b)(1), or that is a political organization described in Sec. 527(e)(1).Generally, all compensation paid, directly or indirectly, to an employee by the ATEO — which is deemed to include payments from a "related organization" of an ATEO — must be counted to determine whether the employee is a covered employee and, if so, whether the covered employee has excessive remuneration and excess parachute payments.

Remuneration is treated as paid (counted against the threshold) when the covered employee's right to the amount is no longer subject to a substantial risk of forfeiture as determined under Sec. 457(f), because such amounts are often paid under deferred compensation arrangements.

Generally, an excess parachute payment exists when the sum of all payments made due to involuntary separation from employment equals or exceeds three times an employee's base amount; this aspect of Sec. 4960 borrows heavily from Sec. 280G.

Notice 2019-9 provided substantive initial guidance on the new law, and proposed regulations published on June 11, 2020,23 are generally consistent with the notice. The guidance is comprehensive with respect to definitions and determinations needed under the new law. Among the highlights are that remuneration generally means wages, as defined for income tax withholding purposes, in the calendar year ending with or within the ATEO's tax year but also includes certain amounts not subject to income tax withholding (including amounts includible in gross income such as income imputed from a below-market split-dollar loan under Sec. 7872 and parachute payments that are not excess parachute payments).

Most notably, because the term "related organization" can include for-profit entities (including foreign entities) and the excise tax is allocated among any payer of the excess remuneration or excess parachute payment, the proposed regulations provide significant exceptions when an executive of a for-profit entity provides limited hours or services to a related ATEO (such as a foundation), as well as a nonexempt-funds exception. These exceptions have detailed rules that affected taxpayers should carefully address.

Additionally, the law prevents compensation of a covered employee from being subject to both Secs. 4960 and 162(m), so the proposed rules provide relief by addressing their coordination when not all circumstances are known that determine which statute applies first (e.g., when a for-profit deduction is in a year (or years) after Sec. 4960 would apply, or a covered employee of an ATEO becomes a Sec. 162(m) covered employee of a for-profit entity).

The final regulations,24 published on Jan. 19, 2021, are applicable to tax years beginning after Dec. 31, 2021. Until then, taxpayers can only do one of the following: rely on the notice in its entirety; rely on the proposed regulations in their entirety; or, for tax years beginning after Dec. 31, 2017, and on or before Dec. 31, 2021, apply the final regulations in their entirety and in a consistent manner. While, until the applicability date of the final regulations, positions may also be based on reasonable, good-faith interpretations of the statute, it is important to note that Notice 2019-9 describes certain positions that Treasury and the IRS have concluded are not consistent with a reasonable, good-faith interpretation of the statutory language, and the proposed and final regulations reflect this view.

The final regulations substantially adopt the proposed regulations, with some clarifications and revisions. These include:

  1. Excepting from the Sec. 4960 excise tax a related organization that is a foreign organization described in Sec. 4948(b) and that is also either exempt from tax under Sec. 501(a) or a taxable private foundation — but requiring any remuneration paid from such foreign organization to be taken into account for purposes of determining the ATEO's (and its related organizations') covered employees and excise tax liability;
  2. Modifications to the nonexempt-funds exception, such as expanding the measurement period from the current applicable year to two applicable years (the current applicable year plus the preceding applicable year), and changes to the attribution rules for determining eligibility for the nonexempt-funds exception; and
  3. Clarifying that the rules on medical services (generally, Sec. 4960(c)(3)(B) excludes compensation of a licensed medical professional attributable to the performance of medical services from remuneration and parachute payments) allow a reasonable, good-faith allocation between employee compensation for both medical and nonmedical services, regardless of the form of compensation (including deferred compensation plan contributions and earnings).

The final regulations indicate that the issue of coordination with Sec. 162(m) is still under consideration. Until that future guidance is issued on this topic, taxpayers may use a reasonable, good-faith approach with respect to the coordination of Secs. 4960 and 162(m) in circumstances in which it is not known whether a deduction for the remuneration will be disallowed under Sec. 162(m) by the due date (including any extension) of the relevant Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. For this purpose, a reasonable, good-faith approach must have a reasonable basis for anticipating that the compensation that a particular employee will be paid in the future may be subject to the deduction limitations of Sec. 162(m).

The final regulations retain the rule that when remuneration is vested (is no longer subject to a substantial risk of forfeiture, as defined for this purpose) but paid at a later time, the amount of such remuneration treated as paid generally is the present value of that remuneration on the date when the covered employee's right to the remuneration vests. However, the final regulations allow taxpayers to treat the full amount of remuneration that is scheduled to be actually or constructively paid within 90 days after the vesting date of that remuneration as its present value at vesting for all forms of deferrals (the proposed rules had limited this to non—account balance plans). The final Sec. 4960 regulations do not provide rules for determining present value for this purpose, but an employer may use the rules set forth in Prop. Regs. Sec. 1.457-12(c)(1) to determine present value. Treasury anticipates that final regulations to address the determination of present value for Sec. 4960 remuneration will be issued when final regulations under Sec. 457(f) are published.

More to come?

The current Congress is poised to create new tax reform. Any such law will likely include compensation and benefit tax changes. With the exception of ARPA's Sec. 162(m) expansion, various provisions in pandemic legislation have heavily focused on tax relief to both employers and employees with respect to numerous benefits and payroll. While it is unclear whether the CAA's restaurant-meals deduction relief will join Congress's never-ending tax extenders list, the current Congress will more likely reform compensation and benefits tax with more weight toward raising revenue via policy vehicles intended to curb executive compensation and other forms of earnings preferences under current law. Such changes could include not just expansion of deduction limitations or disallowances to employers under Sec. 162(m) or generally but also accelerated taxation or loss of tax benefits or exclusions to employees for certain types of compensation or benefits.

For example, the House of Representatives' budget reconciliation legislation (H.R. 5376 (117th Congress), commonly referred to as the "Build Back Better Act") includes revenue proposals that would accelerate the effective date of the ARPA expansions to Sec. 162(m) as well as make certain technical clarifications of the TCJA amendments to Sec. 162(m). The Build Back Better Act also would repeal the TCJA's temporary suspension of qualified bicycle commuting reimbursements from QTFs and expand both the definition of a bicycle commuting benefit and the amount of such benefit. In addition, the bill could affect the application of Sec. 4960 by its changes to the corporate income tax rate. On the Senate side, there has been talk of further expansion of corporate deduction limits for executive compensation, as well as imposing an excise tax on a company if its CEO's pay exceeds that of an average company worker by a certain ratio. While the final agreement among members of Congress has not yet been made, what is clear is that numerous items of proposed legislation have been introduced or are sitting on the drafting table for Congress to choose among.


1P.L. 115-97.

2Notice 2018-68; Notice 2018-76; Notice 2018-99; Notice 2019-09.

3REG-100814-19; REG-119307-19; REG-122180-18; REG-122345-18.

4T.D. 9925; T.D. 9932; T.D. 9938; T.D. 9939.

5Consolidated Appropriations Act, 2021, P.L. 116-260; American Rescue Plan Act, P.L. 117-2.

6Sec. 274(o).

7Sec. 274(e)(2). 

8Sec. 274(e)(4). 

9For more on the history of the business meal deduction and the TCJA changes, see Smolnik, "Business Meal Deductions After the TCJA," 52 The Tax Adviser 508 (August 2021). 


11T.D. 9925.

12Consolidated Appropriations Act, 2021, P.L. 116-260.

13Sec. 274(a)(4). 

14Sec. 132(f)(8). 

15Sec. 274(l)(1). Note that this provision carves out qualified bicycle commuting reimbursements paid or incurred after Dec. 31, 2017, and before Jan. 1, 2026 (Sec. 274(l)(2)).


17T.D. 9939.

18Regs. Sec. 1.61-21(k)(5).


20T.D. 9932.

21American Rescue Plan Act, P.L. 117-2.

22Sec. 162(m)(3)(C).


24T.D. 9938.



Veena K. Murthy, J.D., LL.M. (Taxation), is a principal with Crowe LLP's Washington National Tax office and its Compensation and Benefits Tax Leader; she is located in Washington, D.C. Jacqueline McCumber, CPA, J.D., is a manager with Crowe LLP's Washington National Tax office and in its Compensation and Benefits Tax group; she is located in Chicago. For more information about this article, contact


Tax Insider Articles


Business meal deductions after the TCJA

This article discusses the history of the deduction of business meal expenses and the new rules under the TCJA and the regulations and provides a framework for documenting and substantiating the deduction.


Quirks spurred by COVID-19 tax relief

This article discusses some procedural and administrative quirks that have emerged with the new tax legislative, regulatory, and procedural guidance related to COVID-19.