The person who first said "there's no such thing as a free lunch" may have been right.
The Internal Revenue Service is taking a hard look at taxing free food for employees, which currently is tax-exempt, according to Bloomberg, Forbes and other sources.
Employees are not required to pay income or payroll taxes on meals if they are provided "for the convenience of the employer." Under current law, businesses qualify if employees can't "otherwise eat proper meals within a reasonable period of time." Another provision of the U.S. tax code lets companies set up cafeterias to serve employees and then deduct the full cost of the meals, not just the 50 percent limit that typically applies to business meals.
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The IRS has stepped employment tax audits in recent years. The Treasury Department included the issue in its list of administrative priorities for the year that started July 1 but set no deadline for completion and no detail on the content of the rules.
Even the possibility of a tax is unpopular in areas such as Silicon Valley, where high-tech companies use free meals to help attract talent and encourage employees to work longer hours. For example, Inlkling, a digital publishing startup, has provided its employees free lunches for near four years.
CEO Matt MacInnis said free meals in the tech industry are a lot like standard benefits, such as employers matching 401(k) contributions. "It seems there would be pretty terrible, unintended consequences," he said.
Steve Sarner, vice president of marketing for the social networking site Tagged, agreed. "Having food available or catered in is kind of expected of most tech firms, so this is a bit of a concern," he said.
However, several popular perks remain safe for now: Coffee and doughnuts are exempt under at least one IRS definition.
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
