50% Meal Deduction LimitationContractor job is out of town employees stay overnight

[cjs]

Ordinarily meals are 50% NON deductible.
A contractor has some employees that are working out of town, for a few weeks and staying overnigt.
The contractor requires the employees to stay out of town overnight, for the convenience of the employeer.
The contractor pays the employees the $ amount of IRS allowed perdiem for meals and pays the motel bill.
QUERY: Is the contractor allowed to deduct 100% of the money paid to employees for meals?
I appreciate you sharing your thoughts.

[mastertaxguy]

Employer per diem reimbursements

1. TTB PP. 8-8/8-9 covers this.
2. Pp. 8-9, left column, middle of page, has a chart reflecting that the per diem allowance paid by the employer to an employee is subject to the 50% limit as to the employer

[David1980]

Ordinarily meals are 50% NON deductible.

It'd probably be more correct to say ordinarily meals are 100% NON deductible, at least the stuff my clients give me. They have a real difficult time understanding that just because they had lunch while at the office it isn't automatically a business deduction. TTB 8-8, 8-9 are good resources.

[Golden Rocket]

Reimbursable Meals 100%

Some interesting history here. Back when meals were reduced to 50% it was the result of political pressure in part. Politicians everywhere were talking about the wealthy deducting a "three-martini lunch" when ordinary people "couldn't even deduct the price of a bologna sandwich." So after years of badgering, the 50% was made law in the mid-80s, maybe even the 1986 overhaul.

As usual, there was unintended fallout. Government contractors are guaranteed "equitable adjustment" factors in their contracts with the federal government. After the change, they were allowed to recover the increased damage to their profits from government customers. In amazingly quick time, the Army, Navy, AirForce, NASA, etc. were banging down the doors of Congress insisting that Congress compensate them all this money they were having to pay. Millions, as most people don't realize how big a part travel and perdiem play in a government contract.

So Congress said "Oh, tee hee, I guess we sorta messed it up." (Tee Hee, I wish they would do the same thing today) So they created a "technical correction" which essentially says that if a contract contains reimbursement for meals per diem, the taxpayer is entitled to a 100% deduction.