Imagine you are an estate planning attorney in Manhattan, NY. You no longer use your physical office space due to Covid-19, and clients don’t want to come to your office. You can meet clients at your favorite coffee shop, but you don’t think that provides the best client experience.
Enter the Consolidated Appropriations Act, 2021: A Little Background
After long negotiations and delay, the President signed the Consolidated Appropriations Act, 2021 on December 27, 2020. In an effort to shore up the dining industry, the relief legislation includes a temporary return of the business deduction for meals.
The deduction was originally reduced to 50 percent of the cost of meals more than thirty years ago. However, the Consolidated Appropriations Act, 2021, allows for businesses to deduct the full amount of meals, including beverages, provided at a restaurant. The deduction is allowed for amounts paid or incurred after December 31, 2020 through December 31, 2022.
So let’s go back to our attorney friend in Manhattan. She needs to meet clients and doesn’t have office space, she goes to a restaurant to meet her client, pays for the meal, and expense the full amount of the meal. Keep in mind, in order for you to take this deduction, it must be ordinary and necessary. In other words, there has to be a necessary business reason for the in-person meeting at the restaurant, and it must be ordinary in that it is generally accepted in your industry and or trade that such meetings take place.
If you look at the legislative intent of congress in passing this bill, you will see it was done to help the restaurant industry in the aftermath of the devastation it sustained due to COVID-19. I would venture to say that in the coming weeks and months, you will see restaurants start to market this to draw in business clients. No different than what we saw with certain car companies advertising tax-benefits on certain size vehicles a few years ago.
Before you go out there and start holding lunch meetings, discuss your situation with your CPA.