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The IRS wants you to be entertained – in a twisted sort of way. The deductibility of employer expenses around entertainment, amusement, recreation, or qualified transportation fringes has a long history that most people would not find very entertaining. Just when many of us thought we understood what an employer could or could not deduct under Internal Revenue Code Section 274, the Tax Jobs and Creations Act of 2017, made the entertainment’s plot change dramatically. The boring documentary suddenly became a bit of a horror picture.
With those caveats, if you read no further below are some of the key takeaways from the final regulations and the preamble:
- The twist coming soon thereafter with Treasury and the Internal Revenue Service providing a Notice that differed from what Congress seemed to have drafted.
- Proposed regulations made the interesting twist have a double “entendre” leaving employers a bit happier but dazed and confused.
The final regulations are the denouement. I have always appreciated the preamble to final regulations. It is a tax attorney's way of really geeking out on tax law. I truly appreciate the way the drafters explain the reasoning behind the regulations as drafted with responses to practitioner’s comments.
Due to how painful this entertainment has been for employers, I felt taking the preamble and condensing it was a very easy way for my clients to get the complicated story. Thus, helping them find their path through this quagmire of employer expense deductibility under the Internal Revenue Code and the government's twisted interpretation of same.
Joshua Sutin helps clients unravel complex legal and business issues related to employee benefit plans, tax-exempt organizations, and business tax planning. He counsels both businesses and not-for-profit organizations on the ...