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Employer-Provided Meals and Lodging

by Cochran,Robert Lee last modified Jul 20, 2009 05:28 PM

Employer-Provided Meals and Lodging

Employer-Provided Meals

 

Generally, the value of meals furnished in kind by an employer to an employee is excluded from the employee's income and is not subject to federal income tax withholding or social security, Medicare, or local income tax if:

  • the meals are furnished on the employer's business premises; and
  • they are furnished for the convience of the employer.

 

All meals furnished to employees on the business premises of the employer are treated as furnished for the convience of the employer if more than half of the employees who are furnished such meals are provided with them for the convience of the employer.

 

For the Convience of the Employer

Meals are furnished for the convience of the employer if they are provided for a "substantial noncompensatory business reason of the employer."  Meals furnished as a means of providing additional compensation to an employee are not provided for the employer's convience.  Some examples of noncompensatory business reasons for employer-provided meals would include:

 

  • meals furnished to an employee during working hours so the employee can handle emergency calls during his or her meal period;
  • meals furnished to an employee because the employer's business allows only a short meal period (e.g., 30-45 minutes) and the employee could not be expected to eat elsewhere during that time (e.g., employer's peak business hours occur during the employee's meal period);
  • meals furnished to an employee because there are no eating facilities in the employer's vicinity; and
  • meals furnished to restaurant or food service employees for each meal pereiod they work.

 

Generally, meals furnished during nonworking hours are not provided for the convience of the employer.  While there are some exceptions (i.e., meals furnished to restaurant employees immediately before or after the meal period, meals furnished to an employee immediately after working hours because the employee's work kept him or her from eating during working hours), meals furnished on nonworking days do not qualify for the exclusion.

 

Employer-Provided Lodging

 

The value of employer-provided lodging is excluded from the employee's income if:

 

  • the lodging is furnished on the employer's business premises (including a camp provided by the employer near the work site, if it is in a remote area of a foreign country);
  • the lodging is furnished for the employer's convience; and
  • the employee is required to accept the lodging as a condition of employment.

 

Where an employee was provided housing in a condominium community in a fairly remote area of a foreign country near the employer's premises, the value was included in the employee's income because the condominiums were available to the general public and the units rented by the employer did not meet the definition of a "camp."

 

A separate exclusion applies to the value of qualified campus lodging provided to employees of educational institutions and academic health centers, with certain limitations based on the rent the employee is paying in comparison to the average rental paid for such lodging.

 

The exclusion for meals and lodging does not apply to cash allowances for meals or lodging , but for meals or lodging furnished in kind.  Also, if the employee has the choice of receiving cash or the in-kind meals or lodging, the value is not excluded from the employee's income.

 

 

 

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