2018 tax law means changes to meals & entertainment

Changes to 2018 tax law will impact the way your company spends money on meals and entertainment. Dining spend is generally 10% of a company’s total travel spend and over 30% of the on-the-ground spend associated with a business trip. But your company probably spends far more on ‘entertainment’ expenses, which often includes food. It’s not just because your employees like to party. US tax laws allowed entertainment related expenses to be a 50% deductible on corporate taxes. Regular meals are deducted at a much lower amount.2018 entertainment party spend

Company Strategy Alignments

Many companies will shift the way they spend money to accommodate the new 2018 tax rules. This is unlikely to impact the average business traveler’s trip but it could change the way sales leaders entertain corporate clients. These decisions will be driven by your organization’s legal and tax departments. The GRC and Internal Audit teams might also be involved. T&E is definitely a stakeholder in this discussion. From a T&E program perspective, you will want to make sure to align with the company’s strategies.

Behavior Changes?

The party is not completely over just yet. A true business meal with clients is still a 50% deductible. It’s the spend around the meal that is now in question. Depending on your company strategy, it might just mean an adjustment to how your organization defines and recognizes entertainment. Taking a client to play golf for 4 hours and only talking about the business deal for 5 minutes on the third hole probably won’t make it into the ‘entertainment’ expense type by 2018 tax definitions. But it might be easier from a change management perspective to leave your entertainment expense type as-is and create a new one that is in-line with 2018 rules. Going forward entertainment will look more like marketing events than they do a small group playing golf. Corporate branding and logo placements could be an indication that it fits the new 2018 laws.

Remember, the spend is still going to happen because that is how business gets done for many organizations. The key is to align the T&E systems and processes to reduce the back-office accounting work associated with the new tax rules.