Congress's “Gift” to Employers: Redefining Which Gifts to Employees (and Similar Expenses) Are No Longer Deductible


On December 22, 2017, President Donald Trump signed into law H.R. 1, formerly known as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act repeals many deductions employers have historically been able to take for expenses incurred in connection with providing gifts and other benefits to employees. In addition, the Tax Act suspends the ability for employees to exclude from their income some benefits provided by their employers. The changes summarized below may disincentivize employers from providing its employees with the benefits those employees have come to enjoy, leaving neither employers nor employees particularly entertained.

* The benefits received by an employee in connection with employer-operated eating facilities and meals provided for the benefit of the employer qualify as de minimis fringe benefits, and remain excludible from the gross income of the employee.

** Deduction wholly disallowed, unless such expenses are necessary for the employee's safety. Note that "safety" has been left undefined.

*** Vacations, meals, lodging, tickets, or securities, in addition to cash, cash equivalents, and gift cards, are ineligible as employee achievement awards.

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