Business Meal And Entertainment Expenses Deduction
AH&LA believes that the deduction for spousal travel, business meals, and entertainment expenses should be allowed or increased from the current levels.
Travel expense deductions
By allowing for the deduction of the travel expenses of a taxpayer’s spouse who accompanies that taxpayer on business travel, a significant impediment on today's U.S. travel and tourism will be removed. The current economic downturn has impacted the U.S. hospitality industry particularly hard. This legislation would offset some of the effects that have been borne by the lodging sector and at the same time provide relief to working families. Further, these benefits require absolutely no government spending.
Studies show that business trips account for 22% of total domestic trips and $121.8 billion in travel-related spending, not including transportation, but only one out of five business travelers are accompanied by a spouse. Business travelers who are accompanied by a spouse are more likely to take combined business and pleasure trips, staying an average of 1.2 nights longer than business-only travelers. Increasing business travel expenditures by just 1% would generate $1.2 billion in additional travel spending and create 17,000 new travel industry jobs.
In 2005, Rep. Neil Abercrombie (D-HI) introduced legislation to restore the spouse travel expense deduction (H.R. 1457). The legislation did not move and expired at the end of the 109th Congress.
Business meal and entertainment expenses deduction
Unfortunately, the vast majority of business meals remain only 50 percent deductible. Although many meetings are conducted during breakfast, lunch or dinner, this vital marketing activity is not treated in the same manner by the U.S. tax code as other legitimate business activities.
AH&LA and its predecessor association has been fighting to stop Congressional attempts to curtail business meals deductions since these cuts were first proposed in 1962 during the Kennedy Administration. In 1993, the allowable deduction for business meals and entertainment was reduced from 80 to 50 percent. The lodging industry views the 50 percent deduction as an unnecessary constriction on its ability to grow and provide an increasing number of new jobs. Some progress was made in the Taxpayer Relief Act of 1997. As a result, workers subject to federal hours-of-service limitations such as truck drivers and airline crews have since enjoyed a gradual increase of their deduction for their business meals to 80 percent.
In the 110th Congress (2007-08), S. 58 introduced by Sen. Daniel Inouye (D-Hawaii) would raise the income-tax deduction for business meal and entertainment expenses to 80 percent by 2008. The companion bill in the House, H.R. 2648, was introduced in June 2007 by Rep. Neil Abercrombie (D-HI). Unfortunately, both bills languished in their respective committees and were not acted on before the session ended.
In the 111th Congress, Rep. Neil Abercrombie (D-HI) in July 2009 again introduced legislation (H.R. 3333) that would raise the income-tax deduction to 80 percent.
According to National Restaurant Association research, raising the deduction to 80 percent would boost business meal sales by $6 billion and create an $18 billion increase to the overall economy.
While AH&LA supports Rep. Abercrombie's proposal to raise the deduction, our ultimate goal is the restoration of 100 percent deductibility for all business expenses.
AH&LA members are urged to contact their Representative and ask them to cosponsor or support H.R. 3333.
For more information, contact AH&LA's Senior Vice President for Governmental Affairs Shawn McBurney at (202) 289-3123, smcburney@ahla.com.
(Updated September 2009)