Earlier today, the Senate Finance Committee released legislative text of its version of the Tax Cuts and Jobs Act. Up until now, only “conceptual language” had been available. The text clarifies some of the provisions that we have previously discussed in our posts about the Senate bill (see earlier discussion here) and includes new information reporting requirements that we have not previously covered:
- The legislative text would disallow any deduction for meals provided at the convenience of the employer and meals provided in an “employer-operated eating facility.” If the employer chooses to offer food and beverages, they will remain excludable (to the extent currently excludable) from the employee’s income and wages under section 132, but the cost of providing them would not be deductible. It is somewhat unclear what the effect of the deduction disallowance would be with respect to employer-operated eating facilities that collect sufficient revenue to cover their operating expenses. Arguably, the provision could result in the employer recognizing revenue for the food and beverages sold to employees in the facility but having no deduction for the costs associated with selling food and beverages. (Update: Upon further thought, we believe that the employer would not lose the deduction to the extent the employees pay for food and beverages purchased from the employer-operated eating facility because only the value of such food and beverages in excess of the amount paid is excludible from income under Code section 132(e) as a deminis fringe benefit.) The new total deduction disallowance would be repealed for taxable years beginning after December 31, 2025, provided government revenue exceeds a target during the period 2018 through 2026. The provision is effective if the cumulative on-budget Federal revenue from all sources for the 2018 through 2026 government fiscal years exceeds $28.387 trillion.
- As expected, the text would eliminate the exclusion for bicycle commuting reimbursements, but in a surprise, the elimination is only temporary. The bill adds a new Code section 132(f)(8), which suspends the availability of section 132(f)(1)(D) from 2018 through 2025. The exclusion would become available again in 2026. This suggests that the Finance Committee’s decision to eliminate this exclusion may be driven more by revenue demands than by policy considerations, as it helps ensure the reconciliation bill meets the revenue target within the budget window.