Go Back To The Office, But Bring Your Own Snacks. Blame Congress.

Forbes

a day ago

I ncreasingly, companies have been asking (or demanding) that employees return to the office, claiming that it fosters a stronger company culture and enhances productivity. To woo employees back, or to make sure they're not angry/hangry when ordered back, companies have been expanding perks such as on-site gyms, childcare facilities, and, of course, free food and beverages.
Beginning January 1, the food part will be more expensive for employers, meaning more of them could revert to B.Y.O.S (Bring Your Own Snacks). Congressional Republicans, who extended so many other tax breaks (and added some new ones) in the One Big Beautiful Bill Act (OBBBA) President Donald Trump signed on July 4th, decided they would allow a current deduction for employers who provide meals and snacks to expire—except that is, for certain employees, such as those working in restaurants and in Alaskan fishing vessels and fish processing facilities. (No, we're not making it up. The fishy part was one of the concessions Alaska Senator Lisa Murkowski extracted from her Republican colleagues for her crucial support.)
Before Trump's first term tax cuts—the 2017 Tax Cuts and Jobs Act (TCJA)—employers who provided meals for their employees—and the employees who benefited from them—were entitled to tax breaks under one of two sections of the tax code.
Under section 119 of the tax code, employees are not taxed on on-site meals provided by employers for the employer's convenience. For tax purposes, whether meals are for the convenience of the employer depends on all the facts and circumstances, but typically means that there's a substantial business reason other than to provide the employee with additional pay (the exclusion doesn't apply to cash allowances instead of meals). So feeding employees who would otherwise be gone too long at distant lunch spots would be deductible for the employer and not taxed to the worker.
Even if the meals couldn't be considered for the employer's convenience, they might still be tax-favored under Section 132(e) of the tax code as a de minimis fringe benefit—something so small or inconsequential as to not be worthy of attention. For tax purposes, it means something that has so little value that accounting for it would be unreasonable or administratively impracticable. Typically, this includes items such as coffee, doughnuts, or soft drinks, as well as occasional meals provided to allow employees to work overtime (although how coffee could be considered so inconsequential as not to be worthy of attention is a mystery to me).
The de minimis exclusion also applied in most cases to restaurants' staff meals—the kind you see in The Bear . (Technically, it's deductible if the facility's annual revenue equals or exceeds its direct operating costs. Direct operating costs include the cost of food, beverages, and labor costs for cooks and waitstaff, and others who provide services primarily on the premises.)
Note that the meals that qualified for the convenience of the employer and the food provided under the de minimis fringe benefit weren't (and still won't be) taxable to the employees. That was a win-win, since employees were not taxed on the perk and employers got a deduction. Trump 1.0: TCJA
The TCJA made several changes to the tax treatment of meals and entertainment expenses. Entertainment expenses were disallowed. Plus, that 2017 law created section 274(o), which, beginning in 2026, disallows 100% of the deduction for expenses for food or beverages provided to employees, as well as expenses for the operation of certain eating facilities for employees.
As part of the Congressional pattern of frontloading tax goodies and backloading tax pain, the TCJA provided that through 2025, 50% of the cost of on-site employee meals would be deductible (provided it was for the employer's convenience). And, although de minimis snacks aren't considered meals, they were also 50% deductible under the TCJA rules. Trump 2.0: The One Big Beautiful Bill Act
The new tax law extended many expiring tax provision in TCJA, but did not extend the rules that had temporarily allowed deductions for snacks and employer convenience perks. Both are now set to expire at the end of the year, which means that U.S. companies that provide snacks, coffee, or on-site meals at the office will no longer receive a tax deduction for doing so.
You might think that it was just an oops—that Congress forgot that the provision might expire. But that's not the case. OBBBA didn't roll back the provision for all industries—two notable exceptions have been carved out.
One exception applies to very specific businesses—those on a fishing vessel, fish processing vessel, or fish tender vessel, or at a facility for the processing of fish for commercial use or consumption located in the U.S. north of 50 degrees north latitude, and is not located in a metropolitan statistical area. It might not surprise you to learn that the only state north of 50 degrees north latitude is Alaska. Notably, the lobster industry wasn't similarly spared; Sen. Susan Collins (R-Maine) was a no vote on OBBBA.
A second exception applies to establishments that sell food and beverages to customers and also provide meals to their employees—in other words, restaurants. The restaurant industry can continue deducting employee meal expenses for kitchen and waitstaff.
As for everybody else? Businesses outside of the Alaskan fishing industry and restaurants may be out of luck now, but Congress apparently thinks it's worth it. The Joint Committee on Taxation found that eliminating the deduction will raise $32.5 billion over the next decade. That might not seem like a lot of money in a law that includes tax cuts that will reduce federal revenues by $4.475 trillion between 2025 and 2034. But consider this: The $25,000 tax deduction for tips, which lasts only through 2028, costs just $32 billion.
And here's the weird part, the cost of throwing holiday parties for employees will still be 100% deductible. As for business meals—if say, an employee is taking a potential client to dinner—that is now, and will still be, 50% deductible. Will Employers Care About A Deduction Lost?
Food at the office can be a big draw for employees. A 2023 survey found that 80% of workers say catered meals encourage them to come into the office.
And anyone who is a regular reader knows that the pull of free coffee and a snack can get me in the door. Plus, let's face it: Sometimes the little, consumable things make a big difference, with 98% of employees saying free meals at work made them feel appreciated. Nearly two-thirds of those who receive free meals say it helps them eat healthier food, and over half (55%) of those who don't receive free meals say they would feel less stressed if they did.
For employers, the small act of providing food to busy employees goes a long way towards retention. The survey—which we should point out was sponsored by EZCater, which delivers food to workplaces—found that seven out of ten tax professionals said they'd be more likely to stay at their company if they received free meals during the busy season. On the employer side, investing in employees' meals benefits overall well-being, work performance, and, importantly, employee retention.
How much difference will the loss of the tax deduction make? That remains to be seen, but no doubt some employers will be putting out the B.Y.O.S. sign.
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