There are many claims that the One Big Beautiful Bill Act (OB3 Act) changed the deductibility of employer-provided meals and snacks. Here is an example of an image being shared on Twitter/X:
There is a kernel of truth to this, but it did not originate in the OB3 Act. The provision does not apply to office snacks and coffee, but does apply to employee dining rooms, employee cafeterias, and employer-provided meals excluded from the employee’s income under §119 (on-premise and provided for the convenience of the employer).
Current Law
Before the Tax Cuts and Jobs Act (TCJA), if an expense for food or beverages was excluded from the employee’s income as a §132(e) de minimis fringe benefit, it was 100% deductible to the employer. The pre-TCJA statute read as follows (as quoted in Jacobs v. Comm., 148 T.C. No. 24 (2017)):
SEC. 274(n). Only 50 Percent of Meal and Entertainment Expenses Allowed as Deduction.-- (1) In general.--The amount allowable as a deduction under this chapter for-- (A) any expense for food or beverages, and (B) any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or with respect to a facility used in connection with such activity, shall not exceed 50 percent ofthe amount of such expense or item which would (but for this paragraph) be allowable as a deduction under this chapter.
(2) Exceptions.--Paragraph (1) shall not apply to any expense if-- (A) such expense is described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e). (B) in the case of an expense for food or beverages, such expense is excludable from the gross income of the recipient under section 132 by reason of subsection (e) thereof (relating to de minimis fringes),… [emphasis added]
§132(e)(1) provides an income exclusion for:
…any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer’s employees) so small as to make accounting for it unreasonable or administratively impracticable.
§132(e)(2) provides an income exclusion for certain employer-operated eating facilities. Treas. Reg. §1.132-7 provides additional guidance on this exclusion.
§13304(b) of the TCJA struck subparagraph (B), the bolded provision above, for amounts paid or incurred after December 31, 2017; thus, employers can deduct only 50% of §132(e) fringe benefit expenses under current law.
2026 TCJA Change
§13304(d) of the TCJA added new §274(o) for amounts paid or incurred after December 31, 2025:
(o) MEALS PROVIDED AT CONVENIENCE OF EMPLOYER.—No deduction shall be allowed under this chapter for— ‘‘(1) any expense for the operation of a facility described in section 132(e)(2), and any expense for food or beverages, including under section 132(e)(1), associated with such facility, or (2) any expense for meals described in section 119(a).
The provision makes nondeductible any expenses for operating a §132(e)(2) employer-operated eating facility and the food or beverages associated with that facility. Even if the food and beverages at the facility would be excluded from income under §132(e)(1) (i.e., small amounts), they are still nondeductible.
Food and beverages must be associated with an employer-operated eating facility facility to be nondeductible to the employer; therefore, food and beverages that are §132(e)(1) tax-free de minimis fringe benefits, but are not associated with an eating facility, continue to be 50% deductible to the employer after December 31, 2025.
Expenses for meals furnished to an employee for the convenience of the employer and excluded from the employee’s income under §119 are also nondeductible.
The Joint Committee on Taxation’s General Explanation of Public Law 115-97 confirms that the provision only applies to food or beverages provided through a facility:
For amounts incurred and paid after December 31, 2017, and before January 1, 2026, the provision reduces the deduction to 50 percent for expenses of the employer associated with providing food or beverages to employees through an eating facility that meets the requirements for de minimis fringes and for the convenience of the employer. Such amounts incurred and paid after December 31, 2025, are not deductible.
OB3 Act Modifications to New §274(o)
§70305 of the OB3 Act made minor modifications to new §274(o), which now reads as follows:
(o) MEALS PROVIDED AT CONVENIENCE OF EMPLOYER.— Except in the case of an expense described in subsection (e)(8) or (n)(2)(C), no deduction shall be allowed under this chapter for— ‘‘(1) any expense for the operation of a facility described in section 132(e)(2), and any expense for food or beverages, including under section 132(e)(1), associated with such facility, or (2) any expense for meals described in section 119(a). [Emphasis added]
This amendment ensures that those expenses remain 100% deductible if either (1) adequate and full consideration is paid for the food and beverages provided, or (2) the expenses are for food and beverages provided to workers on certain commercial vessels or oil and gas platforms. These were existing exceptions to the 50% deduction limitation, so they are 100% deductible under current law.
Under Treas. Reg. §1.274-12(c)(2)(v)(A), restaurant employee meals fall under the §274(e)(8) exception; therefore, these amounts remain 100% deductible.
Are Employer Snack and Coffee Expenses Nondeductible?
Break rooms with free snacks, coffee stations, or free snack stations are neither employer-operated eating facilities nor excluded from income under §119; therefore, these expenses generally continue to be §132(e)(1) de minimis fringe benefits that are excluded from the employee’s income and 50% deductible to the employer.
In Technical Advice Memorandum 201903017, the IRS directly addressed these issues. Concerning snacks and coffee as §132(e)(1) de minimis fringe benefits:
8. Is the value of snacks furnished to employees excludable from gross income under section 132(e)(1) and the corresponding Treas. Reg. Sec. 1.132-6?
…Section 1.132-6(e)(1) provides examples of de minimis fringe benefits that are excludable from an employee's gross income. These include occasional typing of personal letters by a company secretary; occasional personal use of an employer's copying machine; occasional cocktail parties, group meals, or picnics for employees and their guests; traditional birthday or holiday gifts of property (not cash) with a low fair market value; occasional theater or sporting event tickets; coffee, doughnuts, and soft drinks; local telephone calls; and flowers, fruit, books, or similar property provided to employees under special circumstances (e.g., on account of illness, outstanding performance, or family crisis).
According to the facts in this instance, Taxpayer provides snacks, such as **** , and beverages to all of its employees, contractors, and escorted guests. There's no indication in the facts provided that these snacks are offered in unusually large portions or are of unusually high value. Generally, quantifying the value consumed by each employee of these types of snacks that come in small, sometimes difficult to quantify portions and are stored in open-access areas is administratively impractical given the low value of each snack portion, even if the employer offers the snacks on a continual basis. Therefore, the value of the snacks Taxpayer furnishes to its employees is excludable from gross income as a de minimis fringe benefit under section 132(e)(1).
Concerning break and snack areas as §132(e)(2) employer-operated eating facilities:
9. Do the taxpayer's snack areas meet the regulatory definition of "eating facility" under Treas. Reg. Sec. 1.132-7 such that the value of snacks furnished to employees are excludable from gross income under section 132(e)(2) and the corresponding Treas. Reg. Sec. 1.132-7?…
As provided previously, for purposes of section 132(e)(2) and the regulations thereunder, an employer-operated eating facility must be an area designated for the preparation and/or serving and consumption of meals. The facts provided indicate that, with the exception of **** , Taxpayer's snack areas did not contain tables, and there is no indication that individuals were employed to prepare and/or serve meals in the snack areas. Therefore, Taxpayer's snack areas are not eating facilities for purposes of section 132(e)(2)…
Concerning coffee and snacks as §119 meals provided for the convenience of the employer:
7. For the same business reasons provided for furnishing meals, is the value of snacks furnished to the taxpayer's employees excludable from gross income under section 119 as furnished for the convenience of the employer?
Section 119 provides for the exclusion of meals provided for the convenience of the employer. In the 1969 case Tougher v. Comm'r of Internal Revenue, the Tax Court found that, "The word 'meals' connotes to us food that is prepared for consumption at such recognized occasions as breakfast, lunch, dinner, or supper, or the equivalent thereof. … To be sure, [individual grocery] items, or portions of some of them, can be processed and combined with other items so as to produce 'meals,' but in their raw form they are not ordinarily regarded as meals, and in the absence of persuasive evidence pointing in the other direction, it is our judgment that Congress did not use the term 'meals' in that sense."… The snacks that Taxpayer provides its employees in designated snack areas are not meals prepared for consumption at a meal time and therefore do not qualify as meals provided for the convenience of the employer under section 119.
New Law Confusion
I was an educator when the TCJA became law. Incorrect information about the OB3 Act appears more prevalent and pervasive (to me) than was the case for TCJA. For example, many are still saying the new OB3 deductions are above the line, even though they are not. Be careful, and please only share trusted information.
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For 2025 tax returns for a client that has a snack room with cookies and candy with soda, and uses DoorDash (or equivalent) for employees that work after hours, what is now deductible at 50% and 100%?