Internal Revenue Code:Sec. 274. Disallowance of certain entertainment, etc., expenses
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter B - Computation of Taxable Income
PART IX - ITEMS NOT DEDUCTIBLE
Statute
Sec. 274. Disallowance of certain entertainment, etc., expenses
(a) Entertainment, amusement, or recreation
(1) In general
No deduction otherwise allowable under this chapter shall be
allowed for any item -
(A) Activity
With respect to an activity which is of a type generally
considered to constitute entertainment, amusement, or
recreation, unless the taxpayer establishes that the item was
directly related to, or, in the case of an item directly
preceding or following a substantial and bona fide business
discussion (including business meetings at a convention or
otherwise), that such item was associated with, the active
conduct of the taxpayer's trade or business, or
(B) Facility
With respect to a facility used in connection with an
activity referred to in subparagraph (A).
In the case of an item described in subparagraph (A), the
deduction shall in no event exceed the portion of such item which
meets the requirements of subparagraph (A).
(2) Special rules
For purposes of applying paragraph (1) -
(A) Dues or fees to any social, athletic, or sporting club or
organization shall be treated as items with respect to
facilities.
(B) An activity described in section 212 shall be treated as
a trade or business.
(C) In the case of a club, paragraph (1)(B) shall apply
unless the taxpayer establishes that the facility was used
primarily for the furtherance of the taxpayer's trade or
business and that the item was directly related to the active
conduct of such trade or business.
(3) Denial of deduction for club dues
Notwithstanding the preceding provisions of this subsection, no
deduction shall be allowed under this chapter for amounts paid or
incurred for membership in any club organized for business,
pleasure, recreation, or other social purpose.
(b) Gifts
(1) Limitation
No deduction shall be allowed under section 162 or section 212
for any expense for gifts made directly or indirectly to any
individual to the extent that such expense, when added to prior
expenses of the taxpayer for gifts made to such individual during
the same taxable year, exceeds $25. For purposes of this section,
the term ''gift'' means any item excludable from gross income of
the recipient under section 102 which is not excludable from his
gross income under any other provision of this chapter, but such
term does not include -
(A) an item having a cost to the taxpayer not in excess of
$4.00 on which the name of the taxpayer is clearly and
permanently imprinted and which is one of a number of identical
items distributed generally by the taxpayer, or
(B) a sign, display rack, or other promotional material to be
used on the business premises of the recipient.
(2) Special rules
(A) In the case of a gift by a partnership, the limitation
contained in paragraph (1) shall apply to the partnership as
well as to each member thereof.
(B) For purposes of paragraph (1), a husband and wife shall
be treated as one taxpayer.
(c) Certain foreign travel
(1) In general
In the case of any individual who travels outside the United
States away from home in pursuit of a trade or business or in
pursuit of an activity described in section 212, no deduction
shall be allowed under section 162, or section 212 for that
portion of the expenses of such travel otherwise allowable under
such section which, under regulations prescribed by the
Secretary, is not allocable to such trade or business or to such
activity.
(2) Exception
Paragraph (1) shall not apply to the expenses of any travel
outside the United States away from home if -
(A) such travel does not exceed one week, or
(B) the portion of the time of travel outside the United
States away from home which is not attributable to the pursuit
of the taxpayer's trade or business or an activity described in
section 212 is less than 25 percent of the total time on such
travel.
(3) Domestic travel excluded
For purposes of this subsection, travel outside the United
States does not include any travel from one point in the United
States to another point in the United States.
(d) Substantiation required
No deduction or credit shall be allowed -
(1) under section 162 or 212 for any traveling expense
(including meals and lodging while away from home),
(2) for any item with respect to an activity which is of a type
generally considered to constitute entertainment, amusement, or
recreation, or with respect to a facility used in connection with
such an activity,
(3) for any expense for gifts, or
(4) with respect to any listed property (as defined in section
280F(d)(4)),
unless the taxpayer substantiates by adequate records or by
sufficient evidence corroborating the taxpayer's own statement (A)
the amount of such expense or other item, (B) the time and place of
the travel, entertainment, amusement, recreation, or use of the
facility or property, or the date and description of the gift, (C)
the business purpose of the expense or other item, and (D) the
business relationship to the taxpayer of persons entertained, using
the facility or property, or receiving the gift. The Secretary may
by regulations provide that some or all of the requirements of the
preceding sentence shall not apply in the case of an expense which
does not exceed an amount prescribed pursuant to such regulations.
This subsection shall not apply to any qualified nonpersonal use
vehicle (as defined in subsection (i)).
(e) Specific exceptions to application of subsection (a)
Subsection (a) shall not apply to -
(1) Food and beverages for employees
Expenses for food and beverages (and facilities used in
connection therewith) furnished on the business premises of the
taxpayer primarily for his employees.
(2) Expenses treated as compensation.--
(A) In general.--Except as provided in
subparagraph (B), expenses for goods, services, and
facilities, to the extent that the expenses are treated
by the taxpayer, with respect to the recipient of the
entertainment, amusement, or recreation, as compensation
to an employee on the taxpayer's return of tax under
this chapter and as wages to such
employee for purposes of chapter 24 (relating to
withholding of income tax at source on wages).
(B) Specified individuals.--
(i) In general.--
In <<NOTE: Applicability.>> the case of a
recipient who is a specified individual,
subparagraph (A) and paragraph (9) shall each be
applied by substituting `to the extent that the
expenses do not exceed the amount of the expenses
which' for `to the extent that the expenses'.
(ii) Specified individual.--For purposes of
clause (i), the term `specified individual' means
any individual who--
(I) is subject to the requirements of section 16(a)
of the Securities Exchange Act of 1934 with respect
to the taxpayer or a related party to the taxpayer, or
(II) would be subject to such requirements if the
taxpayer (or such related party) were an issuer of
equity securities referred to in such section.
For purposes of this clause, a person is a
related party with respect to another person if
such person bears a relationship to such other
person described in section 267(b) or 707(b).
(3) Reimbursed expenses
Expenses paid or incurred by the taxpayer, in connection with
the performance by him of services for another person (whether or
not such other person is his employer), under a reimbursement or
other expense allowance arrangement with such other person, but
this paragraph shall apply -
(A) where the services are performed for an employer, only if
the employer has not treated such expenses in the manner
provided in paragraph (2), or
(B) where the services are performed for a person other than
an employer, only if the taxpayer accounts (to the extent
provided by subsection (d)) to such person.
(4) Recreational, etc., expenses for employees
Expenses for recreational, social, or similar activities
(including facilities therefor) primarily for the benefit of
employees (other than employees who are highly compensated
employees (within the meaning of section 414(q))). For purposes
of this paragraph, an individual owning less than a 10-percent
interest in the taxpayer's trade or business shall not be
considered a shareholder or other owner, and for such purposes an
individual shall be treated as owning any interest owned by a
member of his family (within the meaning of section 267(c)(4)).
This paragraph shall not apply for purposes of subsection (a)(3).
(5) Employees, stockholder, etc., business meetings
Expenses incurred by a taxpayer which are directly related to
business meetings of his employees, stockholders, agents, or
directors.
(6) Meetings of business leagues, etc.
Expenses directly related and necessary to attendance at a
business meeting or convention of any organization described in
section 501(c)(6) (relating to business leagues, chambers of
commerce, real estate boards, and boards of trade) and exempt
from taxation under section 501(a).
(7) Items available to public
Expenses for goods, services, and facilities made available by
the taxpayer to the general public.
(8) Entertainment sold to customers
Expenses for goods or services (including the use of
facilities) which are sold by the taxpayer in a bona fide
transaction for an adequate and full consideration in money or
money's worth.
(9) Expenses includible in income of persons who are not
employees
Expenses paid or incurred by the taxpayer for goods, services,
and facilities to the extent that the expenses are includible in
the gross income of a recipient of the entertainment, amusement,
or recreation who is not an employee of the taxpayer as
compensation for services rendered or as a prize or award under
section 74. The preceding sentence shall not apply to any amount
paid or incurred by the taxpayer if such amount is required to be
included (or would be so required except that the amount is less
than $600) in any information return filed by such taxpayer under
part III of subchapter A of chapter 61 and is not so included.
For purposes of this subsection, any item referred to in subsection
(a) shall be treated as an expense.
(f) Interest, taxes, casualty losses, etc.
This section shall not apply to any deduction allowable to the
taxpayer without regard to its connection with his trade or
business (or with his income-producing activity). In the case of a
taxpayer which is not an individual, the preceding sentence shall
be applied as if it were an individual.
(g) Treatment of entertainment, etc., type facility
For purposes of this chapter, if deductions are disallowed under
subsection (a) with respect to any portion of a facility, such
portion shall be treated as an asset which is used for personal,
living, and family purposes (and not as an asset used in the trade
or business).
(h) Attendance at conventions, etc.
(1) In general
In the case of any individual who attends a convention,
seminar, or similar meeting which is held outside the North
American area, no deduction shall be allowed under section 162
for expenses allocable to such meeting unless the taxpayer
establishes that the meeting is directly related to the active
conduct of his trade or business and that, after taking into
account in the manner provided by regulations prescribed by the
Secretary -
(A) the purpose of such meeting and the activities taking
place at such meeting,
(B) the purposes and activities of the sponsoring
organizations or groups,
(C) the residences of the active members of the sponsoring
organization and the places at which other meetings of the
sponsoring organization or groups have been held or will be
held, and
(D) such other relevant factors as the taxpayer may present,
it is as reasonable for the meeting to be held outside the North
American area as within the North American area.
(2) Conventions on cruise ships
In the case of any individual who attends a convention,
seminar, or other meeting which is held on any cruise ship, no
deduction shall be allowed under section 162 for expenses
allocable to such meeting, unless the taxpayer meets the
requirements of paragraph (5) and establishes that the meeting is
directly related to the active conduct of his trade or business
and that -
(A) the cruise ship is a vessel registered in the United
States; and
(B) all ports of call of such cruise ship are located in the
United States or in possessions of the United States.
With respect to cruises beginning in any calendar year, not more
than $2,000 of the expenses attributable to an individual
attending one or more meetings may be taken into account under
section 162 by reason of the preceding sentence.
(3) Definitions
For purposes of this subsection -
(A) North American area
The term ''North American area'' means the United States, its
possessions, and the Trust Territory of the Pacific Islands,
and Canada and Mexico.
(B) Cruise ship
The term ''cruise ship'' means any vessel sailing within or
without the territorial waters of the United States.
(4) Subsection to apply to employer as well as to traveler
(A) Except as provided in subparagraph (B), this subsection
shall apply to deductions otherwise allowable under section 162
to any person, whether or not such person is the individual
attending the convention, seminar, or similar meeting.
(B) This subsection shall not deny a deduction to any person
other than the individual attending the convention, seminar, or
similar meeting with respect to any amount paid by such person
to or on behalf of such individual if includible in the gross
income of such individual. The preceding sentence shall not
apply if the amount is required to be included in any
information return filed by such person under part III of
subchapter A of chapter 61 and is not so included.
(5) Reporting requirements
No deduction shall be allowed under section 162 for expenses
allocable to attendance at a convention, seminar, or similar
meeting on any cruise ship unless the taxpayer claiming the
deduction attaches to the return of tax on which the deduction is
claimed -
(A) a written statement signed by the individual attending
the meeting which includes -
(i) information with respect to the total days of the trip,
excluding the days of transportation to and from the cruise
ship port, and the number of hours of each day of the trip
which such individual devoted to scheduled business
activities,
(ii) a program of the scheduled business activities of the
meeting, and
(iii) such other information as may be required in
regulations prescribed by the Secretary; and
(B) a written statement signed by an officer of the
organization or group sponsoring the meeting which includes -
(i) a schedule of the business activities of each day of
the meeting,
(ii) the number of hours which the individual attending the
meeting attended such scheduled business activities, and
(iii) such other information as may be required in
regulations prescribed by the Secretary.
(6) Treatment of conventions in certain Caribbean countries
(A) In general
For purposes of this subsection, the term ''North American
area'' includes, with respect to any convention, seminar, or
similar meeting, any beneficiary country if (as of the time
such meeting begins) -
(i) there is in effect a bilateral or multilateral
agreement described in subparagraph (C) between such country
and the United States providing for the exchange of
information between the United States and such country, and
(ii) there is not in effect a finding by the Secretary that
the tax laws of such country discriminate against conventions
held in the United States.
(B) Beneficiary country
For purposes of this paragraph, the term ''beneficiary
country'' has the meaning given to such term by section
212(a)(1)(A) of the Caribbean Basin Economic Recovery Act;
except that such term shall include Bermuda.
(C) Authority to conclude exchange of information agreements
(i) In general
The Secretary is authorized to negotiate and conclude an
agreement for the exchange of information with any
beneficiary country. Except as provided in clause (ii), an
exchange of information agreement shall provide for the
exchange of such information (not limited to information
concerning nationals or residents of the United States or the
beneficiary country) as may be necessary or appropriate to
carry out and enforce the tax laws of the United States and
the beneficiary country (whether criminal or civil
proceedings), including information which may otherwise be
subject to nondisclosure provisions of the local law of the
beneficiary country such as provisions respecting bank
secrecy and bearer shares. The exchange of information
agreement shall be terminable by either country on reasonable
notice and shall provide that information received by either
country will be disclosed only to persons or authorities
(including courts and administrative bodies) involved in the
administration or oversight of, or in the determination of
appeals in respect of, taxes of the United States or the
beneficiary country and will be used by such persons or
authorities only for such purposes.
(ii) Nondisclosure of qualified confidential information
sought for civil tax purposes
An exchange of information agreement need not provide for
the exchange of qualified confidential information which is
sought only for civil tax purposes if -
(I) the Secretary of the Treasury, after making all
reasonable efforts to negotiate an agreement which includes
the exchange of such information, determines that such an
agreement cannot be negotiated but that the agreement which
was negotiated will significantly assist in the
administration and enforcement of the tax laws of the
United States, and
(II) the President determines that the agreement as
negotiated is in the national security interest of the
United States.
(iii) Qualified confidential information defined
For purposes of this subparagraph, the term ''qualified
confidential information'' means information which is subject
to the nondisclosure provisions of any local law of the
beneficiary country regarding bank secrecy or ownership of
bearer shares.
(iv) Civil tax purposes
For purposes of this subparagraph, the determination of
whether information is sought only for civil tax purposes
shall be made by the requesting party.
(D) Coordination with other provisions
Any exchange of information agreement negotiated under
subparagraph (C) shall be treated as an income tax convention
for purposes of section 6103(k)(4). The Secretary may exercise
his authority under subchapter A of chapter 78 to carry out any
obligation of the United States under an agreement referred to
in subparagraph (C).
(E) Determinations published in the Federal Register
The following shall be published in the Federal Register -
(i) any determination by the President under subparagraph
(C)(ii) (including the reasons for such determination),
(ii) any determination by the Secretary under subparagraph
(C)(ii) (including the reasons for such determination), and
(iii) any finding by the Secretary under subparagraph
(A)(ii) (and any termination thereof).
(7) Seminars, etc. for section 212 purposes
No deduction shall be allowed under section 212 for expenses
allocable to a convention, seminar, or similar meeting.
(i) Qualified nonpersonal use vehicle
For purposes of subsection (d), the term ''qualified nonpersonal
use vehicle'' means any vehicle which, by reason of its nature, is
not likely to be used more than a de minimis amount for personal
purposes.
(j) Employee achievement awards
(1) General rule
No deduction shall be allowed under section 162 or section 212
for the cost of an employee achievement award except to the
extent that such cost does not exceed the deduction limitations
of paragraph (2).
(2) Deduction limitations
The deduction for the cost of an employee achievement award
made by an employer to an employee -
(A) which is not a qualified plan award, when added to the
cost to the employer for all other employee achievement awards
made to such employee during the taxable year which are not
qualified plan awards, shall not exceed $400, and
(B) which is a qualified plan award, when added to the cost
to the employer for all other employee achievement awards made
to such employee during the taxable year (including employee
achievement awards which are not qualified plan awards), shall
not exceed $1,600.
(3) Definitions
For purposes of this subsection -
(A) Employee achievement award
The term ''employee achievement award'' means an item of
tangible personal property which is -
(i) transferred by an employer to an employee for length of
service achievement or safety achievement,
(ii) awarded as part of a meaningful presentation, and
(iii) awarded under conditions and circumstances that do
not create a significant likelihood of the payment of
disguised compensation.
(B) Qualified plan award
(i) In general
The term ''qualified plan award'' means an employee
achievement award awarded as part of an established written
plan or program of the taxpayer which does not discriminate
in favor of highly compensated employees (within the meaning
of section 414(q)) as to eligibility or benefits.
(ii) Limitation
An employee achievement award shall not be treated as a
qualified plan award for any taxable year if the average cost
of all employee achievement awards which are provided by the
employer during the year, and which would be qualified plan
awards but for this subparagraph, exceeds $400. For purposes
of the preceding sentence, average cost shall be determined
by including the entire cost of qualified plan awards,
without taking into account employee achievement awards of
nominal value.
(4) Special rules
For purposes of this subsection -
(A) Partnerships
In the case of an employee achievement award made by a
partnership, the deduction limitations contained in paragraph
(2) shall apply to the partnership as well as to each member
thereof.
(B) Length of service awards
An item shall not be treated as having been provided for
length of service achievement if the item is received during
the recipient's 1st 5 years of employment or if the recipient
received a length of service achievement award (other than an
award excludable under section 132(e)(1)) during that year or
any of the prior 4 years.
(C) Safety achievement awards
An item provided by an employer to an employee shall not be
treated as having been provided for safety achievement if -
(i) during the taxable year, employee achievement awards
(other than awards excludable under section 132(e)(1)) for
safety achievement have previously been awarded by the
employer to more than 10 percent of the employees of the
employer (excluding employees described in clause (ii)), or
(ii) such item is awarded to a manager, administrator,
clerical employee, or other professional employee.
(k) Business meals
(1) In general
No deduction shall be allowed under this chapter for the
expense of any food or beverages unless -
(A) such expense is not lavish or extravagant under the
circumstances, and
(B) the taxpayer (or an employee of the taxpayer) is present
at the furnishing of such food or beverages.
(2) Exceptions
Paragraph (1) shall not apply to -
(A) any expense described in paragraph (2), (3), (4), (7),
(8), or (9) of subsection (e), and
(B) any other expense to the extent provided in regulations.
(l) Additional limitations on entertainment tickets
(1) Entertainment tickets
(A) In general
In determining the amount allowable as a deduction under this
chapter for any ticket for any activity or facility described
in subsection (d)(2), the amount taken into account shall not
exceed the face value of such ticket.
(B) Exception for certain charitable sports events
Subparagraph (A) shall not apply to any ticket for any sports
event -
(i) which is organized for the primary purpose of
benefiting an organization which is described in section
501(c)(3) and exempt from tax under section 501(a),
(ii) all of the net proceeds of which are contributed to
such organization, and
(iii) which utilizes volunteers for substantially all of
the work performed in carrying out such event.
(2) Skyboxes, etc.
In the case of a skybox or other private luxury box leased for
more than 1 event, the amount allowable as a deduction under this
chapter with respect to such events shall not exceed the sum of
the face value of non-luxury box seat tickets for the seats in
such box covered by the lease. For purposes of the preceding
sentence, 2 or more related leases shall be treated as 1 lease.
(m) Additional limitations on travel expenses
(1) Luxury water transportation
(A) In general
No deduction shall be allowed under this chapter for expenses
incurred for transportation by water to the extent such
expenses exceed twice the aggregate per diem amounts for days
of such transportation. For purposes of the preceding
sentence, the term ''per diem amounts'' means the highest
amount generally allowable with respect to a day to employees
of the executive branch of the Federal Government for per diem
while away from home but serving in the United States.
(B) Exceptions
Subparagraph (A) shall not apply to -
(i) any expense allocable to a convention, seminar, or
other meeting which is held on any cruise ship, and
(ii) any expense described in paragraph (2), (3), (4), (7),
(8), or (9) of subsection (e).
(2) Travel as form of education
No deduction shall be allowed under this chapter for expenses
for travel as a form of education.
(3) Travel expenses of spouse, dependent, or others
No deduction shall be allowed under this chapter (other than
section 217) for travel expenses paid or incurred with respect to
a spouse, dependent, or other individual accompanying the
taxpayer (or an officer or employee of the taxpayer) on business
travel, unless -
(A) the spouse, dependent, or other individual is an employee
of the taxpayer,
(B) the travel of the spouse, dependent, or other individual
is for a bona fide business purpose, and
(C) such expenses would otherwise be deductible by the
spouse, dependent, or other individual.
(n) Only 50 percent of meal and entertainment expenses allowed as
deduction
(1) In general
The amount allowable as a deduction under this chapter for -
(A) any expense for food or beverages, and
(B) any item with respect to an activity which is of a type
generally considered to constitute entertainment, amusement, or
recreation, or with respect to a facility used in connection
with such activity,
shall not exceed 50 percent of the amount of such expense or item
which would (but for this paragraph) be allowable as a deduction
under this chapter.
(2) Exceptions
Paragraph (1) shall not apply to any expense if -
(A) such expense is described in paragraph (2), (3), (4),
(7), (8), or (9) of subsection (e),
(B) in the case of an expense for food or beverages, such
expense is excludable from the gross income of the recipient
under section 132 by reason of subsection (e) thereof (relating
to de minimis fringes),
(C) such expense is covered by a package involving a ticket
described in subsection (l)(1)(B),
(D) in the case of an employer who pays or reimburses moving
expenses of an employee, such expenses are includible in the
income of the employee under section 82, or
(E) such expense is for food or beverages -
(i) required by any Federal law to be provided to crew
members of a commercial vessel,
(ii) provided to crew members of a commercial vessel -
(I) which is operating on the Great Lakes, the Saint
Lawrence Seaway, or any inland waterway of the United
States, and
(II) which is of a kind which would be required by
Federal law to provide food and beverages to crew members
if it were operated at sea,
(iii) provided on an oil or gas platform or drilling rig if
the platform or rig is located offshore, or
(iv) provided on an oil or gas platform or drilling rig, or
at a support camp which is in proximity and integral to such
platform or rig, if the platform or rig is located in the
United States north of 54 degrees north latitude.
Clauses (i) and (ii) of subparagraph (E) shall not apply to
vessels primarily engaged in providing luxury water
transportation (determined under the principles of subsection
(m)). In the case of the employee, the exception of subparagraph
(A) shall not apply to expenses described in subparagraph (D).
(3) Special rule for individuals subject to Federal hours of
service
(A) In general
In the case of any expenses for food or beverages consumed
while away from home (within the meaning of section 162(a)(2))
by an individual during, or incident to, the period of duty
subject to the hours of service limitations of the Department
of Transportation, paragraph (1) shall be applied by
substituting ''the applicable percentage'' for ''50 percent''.
(B) Applicable percentage
For purposes of this paragraph, the term ''applicable
percentage'' means the percentage determined under the
following table:
For taxable years beginning The applicable
in calendar year - percentage is -
1998 or 1999 55
2000 or 2001 60
2002 or 2003 65
2004 or 2005 70
2006 or 2007 75
2008 or thereafter 80.
(o) Regulatory authority
The Secretary shall prescribe such regulations as he may deem
necessary to carry out the purposes of this section, including
regulations prescribing whether subsection (a) or subsection (b)
applies in cases where both such subsections would otherwise apply.
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103-66, title XIII, Sec. 13209(a), (b), 13210(a), (b), 13272(a),
Aug. 10, 1993, 107 Stat. 469, 542; Pub. L. 105-34, title IX, Sec.
969(a), Aug. 5, 1997, 111 Stat. 896.)
References in Text
REFERENCES IN TEXT
Section 212(a)(1)(A) of the Caribbean Basin Economic Recovery
Act, referred to in subsec. (h)(6)(B), is classified to section
2702(a)(1)(A) of Title 19, Customs Duties.
Miscellaneous
AMENDMENTS
2005 - P.L. 109-135, Section 403
(mm) Amendments Related to Section 907 of the Act.--Clause (ii) of
section 274(e)(2)(B) is amended--
(1) in subclause (I), by inserting ``or a related party to
the taxpayer'' after ``the taxpayer'',
(2) in subclause (II), by inserting ``(or such related
party)'' after ``the taxpayer'', and
(3) by adding at the end the following new flush sentence:
``For purposes of this clause, a person is a
related party with respect to another person if
such person bears a relationship to such other
person described in section 267(b) or 707(b).''.
2004 - Pub. L. 108-357, Sec. 907. Paragraph (2) of section 274(e)
(relating to expenses treated as compensation) is amended by
striking and inserting the new paragraph (2).
Effective Date.--The <<NOTE: 26 USC 274 note.>> amendment made
by this section shall apply to expenses incurred after the date
of the enactment of this Act
1997 - Subsec. (n)(3). Pub. L. 105-34 added par. (3).
1993 - Subsec. (a)(3). Pub. L. 103-66, Sec. 13210(a), added par.
(3).
Subsec. (e)(4). Pub. L. 103-66, Sec. 13210(b), inserted at end
''This paragraph shall not apply for purposes of subsection
(a)(3).''
Subsec. (m)(3). Pub. L. 103-66, Sec. 13272(a), added par. (3).
Subsec. (n). Pub. L. 103-66, Sec. 13209(a), (b), substituted
''50'' for ''80'' in heading and in concluding provisions of par.
(1).
1990 - Subsec. (l)(2). Pub. L. 101-508, Sec. 11802(b)(1), in
amending par. (2) generally, struck out ''(A) In general'' and
subpar. (B) which provided for phasein deductions of skybox tickets
in the 1987 and 1988 taxable years.
Subsec. (n)(2). Pub. L. 101-508, Sec. 11802(b)(2)(A)(ii), (iii),
substituted ''described in subparagraph (D)'' for ''described in
subparagraph (E)'' and ''of subparagraph (E)'' for ''of
subparagraph (F)'' in concluding provisions.
Subsec. (n)(2)(D) to (F). Pub. L. 101-508, Sec.
11802(b)(2)(A)(i), redesignated subpars. (E) and (F) as (D) and
(E), respectively, and struck out former subpar. (D) which read as
follows: ''in the case of an expense for food or beverages before
January 1, 1989, such expense is an integral part of a qualified
meeting,''.
Subsec. (n)(3). Pub. L. 101-508, Sec. 11802(b)(2)(B), struck out
par. (3) ''Qualified meeting'' which read as follows: ''For
purposes of paragraph (2)(D), the term 'qualified meeting' means
any convention, seminar, annual meeting, or similar business
program with respect to which -
''(A) an expense for food or beverages is not separately
stated,
''(B) more than 50 percent of the participants are away from
home,
''(C) at least 40 individuals attend, and
''(D) such food and beverages are part of a program which
includes a speaker.''
1989 - Subsec. (n)(2). Pub. L. 101-239, Sec. 7816(a), added a new
subpar. (E), substantially identical to former subpar. (E), and
moved sentence formerly appearing between subpars. (E) and (F) to
end of concluding provisions after subpar. (F).
Subsec. (n)(2)(F)(i). Pub. L. 101-239, Sec. 7841(d)(18), inserted
''any'' before ''Federal law''.
1988 - Subsec. (b)(1). Pub. L. 100-647, Sec. 1018(u)(2), related
to execution of amendment by Pub. L. 99-514, Sec. 122(c)(2), see
1986 Amendment note below.
Subsec. (h)(1), (2). Pub. L. 100-647, Sec. 1001(g)(5),
substituted ''trade or business and that'' for ''trade or business
that''.
Subsec. (k)(2). Pub. L. 100-647, Sec. 1001(g)(2), amended par.
(2) generally. Prior to amendment, par. (2) read as follows:
''Paragraph (1) shall not apply to any expense if subsection (a)
does not apply to such expense by reason of paragraph (2), (3),
(4), (7), (8), or (9) of subsection (e).''
Subsec. (m)(1)(B)(ii). Pub. L. 100-647, Sec. 1001(g)(3), amended
cl. (ii) generally. Prior to amendment, cl. (ii) read as follows:
''any expense to which subsection (a) does not apply by reason of
paragraph (2), (3), (4), (7), (8), or (9) of subsection (e).''
Subsec. (n)(2). Pub. L. 100-647, Sec. 6003(a), struck out ''or''
at end of subpar. (D), substituted '', or'' for the period at end
of subpar. (E), and added subpar. (F) and flush sentence at end.
Pub. L. 100-647, Sec. 1001(g)(4)(A), struck out ''or'' at end of
subpar. (C), substituted '', or'' for the period at end of subpar.
(D), and added subpar. (E) and flush sentence at end.
Pub. L. 100-647, Sec. 1001(g)(1), amended subpar. (A) generally.
Prior to amendment, subpar. (A) read as follows: ''subsection (a)
does not apply to such expense by reason of paragraph (2), (3),
(4), (7), (8), or (9) of subsection (e),''.
1986 - Subsec. (b)(1). Pub. L. 99-514, Sec. 122(c)(1)-(3), and
Pub. L. 100-647, Sec. 1018(u)(2), made conforming amendments to
subpars. (A) and (B) and struck out subpar. (C) which read as
follows: ''an item of tangible personal property which is awarded
to an employee by reason of length of service, productivity, or
safety achievement, but only to the extent that -
''(i) the cost of such item to the taxpayer does not exceed
$400, or
''(ii) such item is a qualified plan award.''
Subsec. (b)(3). Pub. L. 99-514, Sec. 122(c)(4), struck out par.
(3) relating to qualified plan award, defining such term in subpar.
(A), and providing for average amount of awards in subpar. (B) and
maximum amount per item in subpar. (C).
Subsec. (e)(1). Pub. L. 99-514, Sec. 142(a)(2)(A), redesignated
par. (2) as (1) and struck out former par. (1), business meals,
which read as follows: ''Expenses for food and beverages furnished
to any individual under circumstances which (taking into account
the surroundings in which furnished, the taxpayer's trade,
business, or income-producing activity and the relationship to such
trade, business, or activity of the persons to whom the food and
beverages are furnished) are of a type generally considered to be
conducive to a business discussion.''
Subsec. (e)(2). Pub. L. 99-514, Sec. 142(a)(2)(A), redesignated
par. (3) as (2). Former par. (2) redesignated (1).
Subsec. (e)(3). Pub. L. 99-514, Sec. 142(a)(2), redesignated par.
(4) as (3) and substituted ''paragraph (2)'' for ''paragraph (3)''
in subpar. (A). Former par. (3) redesignated (2).
Subsec. (e)(4). Pub. L. 99-514, Sec. 1114(b)(6), which directed
the substitution of ''highly compensated employees (within the
meaning of section 414(q))'' for ''officers, shareholders or other
owners, or highly compensated employees'' in par. (5) was executed
to par. (4) to reflect the probable intent of Congress, in view of
the redesignation of par. (5) as (4) by section 142(a)(2)(A) of
Pub. L. 99-514.
Pub. L. 99-514, Sec. 142(a)(2)(A), redesignated par. (5) as (4).
Former par. (4) redesignated (3).
Subsec. (e)(5) to (10). Pub. L. 99-514, Sec. 142(a)(2)(A),
redesignated pars. (5) to (10) as pars. (4) to (9), respectively.
Subsec. (h). Pub. L. 99-514, Sec. 142(c), struck out ''or 212''
after ''section 162'' in introductory provisions of pars. (1), (2),
and (5), in closing provisions of par. (2), and in par. (4)(A),
struck out ''or to an activity described in section 212 and'' after
''active conduct of his trade or business'' in introductory
provisions of pars. (1) and (2), and added par. (7).
Subsec. (j). Pub. L. 99-514, Sec. 122(d), added subsec. (j).
Former subsec. (j) redesignated (k).
Subsec. (k). Pub. L. 99-514, Sec. 142(a)(1), added subsec. (k).
Former subsec. (k) redesignated (o).
Subsecs. (l) to (n). Pub. L. 99-514, Sec. 142(b), added subsecs.
(l) to (n).
Subsec. (o). Pub. L. 99-514, Sec. 142(a)(1), redesignated former
subsec. (k) as (o).
1985 - Subsec. (d). Pub. L. 99-44, Sec. 2(a), inserted at end
''This subsection shall not apply to any qualified nonpersonal use
vehicle (as defined in subsection (i)).''
Pub. L. 99-44, Sec. 1(a), substituted ''adequate records or by
sufficient evidence corroborating the taxpayer's own statement''
for ''adequate contemporaneous records'', and provided that the
Internal Revenue Code of 1954 (now 1986) (this title) shall be
applied as if ''contemporaneous'' had not been added to subsec.
(d). See Effective Date of 1985 Amendment note below.
Subsecs. (i), (j). Pub. L. 99-44, Sec. 2(b), added subsec. (i)
and redesignated former subsec. (i) as (j).
1984 - Subsec. (d). Pub. L. 98-369, Sec. 179(b), substituted, in
introductory provisions, ''No deduction or credit'' for ''No
deduction'' and, in provisions following par. (4), ''adequate
contemporaneous records'' for ''adequate records or by sufficient
evidence corroborating his own statement'' and ''the facility or
property'' for ''the facility'' in two places, and added par. (4).
Subsec. (h)(6)(D). Pub. L. 98-369, Sec. 801(c), substituted in
heading ''with other provisions'' for ''with section 6103'' and in
text inserted provision that the Secretary may exercise his
authority under subchapter A of chapter 78 to carry out any
obligations of the United States under an agreement referred to in
subpar. (C).
1983 - Subsec. (e)(3). Pub. L. 98-67, Sec. 102(a), repealed
amendments made by Pub. L. 97-248. See 1982 Amendment note below.
Subsec. (h)(2). Pub. L. 97-424, Sec. 543(a)(1), inserted
provisions relating to requirements of par. (5) and the description
in section 212, and inserted the $2,000 limit relating to section
162 or 212.
Subsec. (h)(5). Pub. L. 97-424, Sec. 543(a)(2), added par. (5).
Subsec. (h)(6). Pub. L. 98-67, Sec. 227(a), added par. (6).
1982 - Subsec. (e)(3). Pub. L. 97-248 provided that, applicable
to payments of interest, dividends, and patronage dividends paid or
credited after June 30, 1983, par. (3) is amended by inserting
''subchapter A of'' before ''chapter 24''. Section 102(a), (b) of
Pub. L. 98-67, title I, Aug. 5, 1983, 97 Stat. 369, repealed
subtitle A (Sec. 301-308) of title III of Pub. L. 97-248 as of the
close of June 30, 1983, and provided that the Internal Revenue Code
of 1954 (now 1986) (this title) shall be applied and administered
(subject to certain exceptions) as if such subtitle A (and the
amendments made by such subtitle A) had not been enacted.
1981 - Subsec. (b)(1)(C). Pub. L. 97-34, Sec. 265(a), excluded
from term ''gift'' an award for productivity, designated existing
provisions as cl. (i), and as so designated, increased the
limitation to $400 from $100, and added cl. (ii).
Subsec. (b)(3). Pub. L. 97-34, Sec. 265(b), added par. (3).
1980 - Subsec. (a)(2)(C). Pub. L. 96-222, Sec. 103(a)(10)(A),
struck out ''country'' after ''the case of a''.
Subsec. (e)(10). Pub. L. 96-605 and Pub. L. 96-598 made identical
amendments by adding par. (10).
Subsec. (h) Pub. L. 96-608 substituted provision disallowing any
deductions for expenses allocable to a convention, seminar, or
other similar meeting outside the North American area unless,
taking certain factors into account, it is as reasonable for the
meeting to be held outside the North American area as within it,
disallowing any deductions for a convention, seminar, or similar
meeting held on any cruise ship, and defining North American area
and cruise ship, for provision allowing deductions with respect to
not more than 2 foreign conventions per year, limiting deductible
transportation cost to not to exceed the cost of coach or economy
air fare, permitting transportation costs to be fully deductible
only if at least one-half of the days are devoted to business
related activities, disallowing deductions for subsistence expenses
unless the individual attends two-thirds of the business
activities, limiting deductible subsistence costs to not to exceed
the per diem rate for United States civil servants, defining
foreign convention and subsistence expenses, providing that if
transportation expenses or subsistence expenses are not separately
stated or do not reflect the proper allocation all amounts paid be
treated as subsistence expenses, and prescribing special reporting
and substantiation requirements.
1978 - Subsec. (a)(1). Pub. L. 95-600, Sec. 361(a), substituted
provisions allowing no deduction for expenses paid or incurred with
respect to a facility which is used in conjunction with an activity
which is of a type generally considered to constitute
entertainment, amusement, or recreation for provisions allowing a
deduction for expenses paid or incurred with respect to a facility
if the facility used is primarily for the furtherance of the
taxpayer's business, and the expense is ''directly related'' to the
active conduct of taxpayer's business.
Subsec. (a)(2)(C). Pub. L. 95-600, Sec. 361(b), as amended by
Pub. L. 96-222, Sec. 103(a)(10)(B), added subpar. (C).
Subsec. (h)(3). Pub. L. 95-600, Sec. 701(g)(3), substituted ''at
least one-half'' for ''more than one-half'' in first sentence.
Subsec. (h)(6)(D). Pub. L. 95-600, Sec. 701(g)(1), designated
existing provisions as cl. (i), inserted introductory phrase
''Except as provided in clause (ii)'' and substituted ''For the
purposes'' for ''For purpose'', and added cl. (ii).
Subsec. (h)(6)(E). Pub. L. 95-600, Sec. 701(g)(2), added subpar.
(E).
1976 - Subsecs. (c)(1), (d). Pub. L. 94-455, Sec. 1906(b)(13)(A),
struck out ''or his delegate'' after ''Secretary''.
Subsec. (h). Pub. L. 94-455, Sec. 602(a), added subsec. (h).
Former subsec. (h) redesignated (i).
Subsec. (i). Pub. L. 94-455, Sec. 602(a), 1906(b)(13)(A),
redesignated former subsec. (h) as (i) and struck out ''or his
delegate'' after ''Secretary''.
1964 - Subsec. (c). Pub. L. 88-272 limited subsec. (c) to
individuals traveling outside the United States.
EFFECTIVE DATE OF 1997 AMENDMENT
Section 969(b) of Pub. L. 105-34 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
taxable years beginning after December 31, 1997.''
EFFECTIVE DATE OF 1993 AMENDMENT
Section 13209(c) of Pub. L. 103-66 provided that: ''The
amendments made by this section (amending this section) shall apply
to taxable years beginning after December 31, 1993.''
Section 13210(c) of Pub. L. 103-66 provided that: ''The
amendments made by this section (amending this section) shall apply
to amounts paid or incurred after December 31, 1993.''
Section 13272(b) of Pub. L. 103-66 provided that: ''The amendment
made by this section (amending this section) shall apply to amounts
paid or incurred after December 31, 1993.''
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by section 7816(a) of Pub. L. 101-239 effective, except
as otherwise provided, as if included in the provision of the
Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,
to which such amendment relates, see section 7817 of Pub. L.
101-239, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by section 1001(g)(1)-(4)(A), (5) of Pub. L. 100-647
effective, except as otherwise provided, as if included in the
provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
such amendment relates, see section 1019(a) of Pub. L. 100-647, set
out as a note under section 1 of this title.
Section 6003(b) of Pub. L. 100-647 provided that:
''(1) Clauses (i) and (ii) of section 274(n)(2)(F) of the 1986
Code, as added by subsection (a), shall apply to taxable years
beginning after December 31, 1988.
''(2) Clauses (iii) and (iv) of section 274(n)(2)(F) of the 1986
Code, as added by subsection (a), shall apply to taxable years
beginning after December 31, 1987.''
EFFECTIVE DATE OF 1986 AMENDMENT
Amendment by section 122(c), (d) of Pub. L. 99-514 applicable to
prizes and awards granted after Dec. 31, 1986, see section 151(c)
of Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 142(a)-(c) of Pub. L. 99-514 applicable to
taxable years beginning after Dec. 31, 1986, see section 151(a) of
Pub. L. 99-514, set out as a note under section 1 of this title.
Amendment by section 1114(b)(6) of Pub. L. 99-514 applicable to
years beginning after Dec. 31, 1986, see section 1114(c)(1) of Pub.
L. 99-514, set out as a note under section 414 of this title.
EFFECTIVE DATE OF 1985 AMENDMENT
Section 6(a)-(c) of Pub. L. 99-44, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
''(a) Repeals. - The amendment and repeals made by subsections
(a) and (b) of section 1 (amending this section and repealing
section 179(b)(2), (3) of Pub. L. 98-369 which had amended sections
6653 and 6695 of this title) shall take effect as if included in
the amendments made by section 179(b) of the Tax Reform Act of 1984
(Pub. L. 98-369).
''(b) Restoration of Prior Law for 1985. - For taxable years
beginning in 1985, section 274(d) of the Internal Revenue Code of
1986 (formerly I.R.C. 1954) shall apply as it read before the
amendments made by section 179(b)(1) of the Tax Reform Act of 1984
(Pub. L. 98-369, see 1984 Amendments note above).
''(c) Exception From Substantiation Requirements for Qualified
Nonpersonal Use Vehicles. - The amendments made by section 2
(amending this section) shall apply to taxable years beginning
after December 31, 1985.''
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by section 179(b)(1) of Pub. L. 98-369 applicable to
taxable years beginning after Dec. 31, 1984, see section 179(d)(2)
of Pub. L. 98-369, set out as an Effective Date note under section
280F of this title.
Amendment by section 801(c) of Pub. L. 98-369 applicable to
transactions after Dec. 31, 1984, in taxable years ending after
such date, see section 805(a)(1) of Pub. L. 98-369, as amended, set
out as a note under section 245 of this title.
EFFECTIVE DATE OF 1983 AMENDMENTS
Section 222(b) of Pub. L. 98-67 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply to
conventions, seminars, or other meetings which begin after June 30,
1983.''
Section 543(b) of Pub. L. 97-424 provided that: ''The amendments
made by this section (amending this section) shall apply to taxable
years beginning after December 31, 1982.''
EFFECTIVE DATE OF 1981 AMENDMENT
Section 265(c) of Pub. L. 97-34 provided that: ''The amendments
made by this section (amending this section) shall apply to taxable
years ending on or after the date of the enactment of this Act
(Aug. 13, 1981).''
EFFECTIVE DATE OF 1980 AMENDMENTS
Section 4(b) of Pub. L. 96-608, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ''The
amendment made by subsection (a) of this section (amending this
section) shall apply to conventions, seminars, and meetings
beginning after December 31, 1980, except that in the case of any
convention, seminar, or meeting beginning after such date which was
scheduled on or before such date, a person, in such manner as the
Secretary of the Treasury or his delegate may prescribe, may elect
to have the provisions of section 274(h) of the Internal Revenue
Code of 1986 (formerly I.R.C. 1954) be applied to such convention
seminar or meeting without regard to such amendment.''
Section 5(b) of Pub. L. 96-598 and section 108(b) of Pub. L.
96-605 provided that: ''The amendment made by this section
(amending this section) shall apply to any expenses paid or
incurred after December 31, 1980, in taxable years ending after
such date.''
Amendment by Pub. L. 96-222 effective, except as otherwise
provided, as if it had been included in the provisions of the
Revenue Act of 1978, Pub. L. 95-600, to which such amendment
relates, see section 201 of Pub. L. 96-222, set out as a note under
section 32 of this title.
EFFECTIVE DATE OF 1978 AMENDMENT
Section 361(c) of Pub. L. 95-600 provided that: ''The amendments
made by this section (amending this section) shall apply to items
paid or incurred after December 31, 1978, in taxable years ending
after such date.''
Section 701(g)(4) of Pub. L. 95-600 provided that: ''The
amendments made by this subsection (amending this section) shall
apply to conventions beginning after December 31, 1976.''
EFFECTIVE DATE OF 1976 AMENDMENT
Section 602(b) of Pub. L. 94-455 provided that: ''The amendments
made by this section (amending this section) shall apply to
conventions beginning after December 31, 1976.''
EFFECTIVE DATE OF 1964 AMENDMENT
Section 217(b) of Pub. L. 88-272 provided that: ''The amendment
made by subsection (a) (amending this section) shall apply with
respect to taxable years ending after December 31, 1962, but only
in respect of periods after such date.''
EFFECTIVE DATE
Section applicable with respect to taxable years ending after
Dec. 31, 1962, but only in respect of periods after such date, see
section 4(c) of Pub. L. 87-834, set out as an Effective Date of
1962 Amendment note under section 162 of this title.
REGULATIONS
Secretary of the Treasury or his delegate to issue before Feb. 1,
1988, final regulations to carry out amendments made by section
1114 of Pub. L. 99-514, see section 1141 of Pub. L. 99-514, set out
as a note under section 401 of this title.
Section 5 of Pub. L. 99-44 provided that: ''Not later than
October 1, 1985, the Secretary of the Treasury or his delegate
shall prescribe regulations to carry out the provisions of this Act
(amending sections 274, 280F, 3402, 6653, and 6695 of this title,
and enacting provisions set out as notes under sections 274, 280F,
3402, and 6653 of this title) which shall fully reflect such
provisions.''
Section 1(c) of Pub. L. 99-44 provided that: ''Regulations issued
before the date of the enactment of this Act (May 24, 1985) to
carry out the amendments made by paragraphs (1)(C), (2), and (3) of
section 179(b) of the Tax Reform Act of 1984 (Pub. L. 98-369,
amending sections 274, 6653, and 6695 of this title) shall have no
force and effect.''
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 29 of this title.
Transfer of Functions.
TERMINATION OF TRUST TERRITORY OF THE PACIFIC ISLANDS
For termination of Trust Territory of the Pacific Islands, see
note set out preceding section 1681 of Title 48, Territories and
Insular Possessions.
Miscellaneous
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI (Sec. 1101-1147 and 1171-1177) or title
XVIII (Sec. 1800-1899A) of Pub. L. 99-514 require an amendment to
any plan, such plan amendment shall not be required to be made
before the first plan year beginning on or after Jan. 1, 1989, see
section 1140 of Pub. L. 99-514, as amended, set out as a note under
section 401 of this title.
CERTAIN RECORDKEEPING REQUIREMENTS
For treatment of use of automobile by I.R.S. special agent for
purposes of this section and section 132 of this title, see section
1567 of Pub. L. 99-514, set out as a note under section 132 of this
title.
SUBSTANTIATION BY ADEQUATE CONTEMPORANEOUS RECORDS
Section 1(a) of Pub. L. 99-44, as amended by Pub. L. 99-514, Sec.
2, Oct. 22, 1986, 100 Stat. 2095, provided in part that: ''the
Internal Revenue Code of 1986 (formerly I.R.C. 1954) shall be
applied and administered as if the word 'contemporaneous' had not
been added (by Pub. L. 98-369) to such subsection (d) (subsec. (d)
of this section).''
USE OF FACILITIES IN CASE OF INDEPENDENT CONTRACTORS, ETC.
Section 103(a)(10)(C) of Pub. L. 96-222, as amended by Pub. L.
99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
''(i) In general. - Subsection (a) of section 274 of the Internal
Revenue Code of 1986 (formerly I.R.C. 1954) (relating to
disallowance of certain entertainment, etc., expenses) shall not
apply to expenses paid or incurred by the taxpayer for goods,
services, and facilities to the extent that the expenses are
includible in the gross income of a recipient of the entertainment,
amusement, or recreation who is not an employee of the taxpayer as
compensation for services rendered or as a prize or award under
section 74 of such Code.
''(ii) Information return requirement. - Clause (i) shall not
apply to any amount paid or incurred by the taxpayer if such amount
is required to be included in any information return filed by such
taxpayer under part III of subchapter A of chapter 61 of such Code
(section 6031 et seq. of this title) and is not so included.
''(iii) Application of subparagraph. - This subparagraph shall
only apply with respect to expenses paid or incurred during 1979 or
1980.''
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 62, 74, 276, 414, 936,
3121, 3306, 3401, 7701 of this title; title 42 section 409.
