The agency's notice explained that the temporary allowance provided under Internal Revenue Code Section 274(n)(2)(D
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"A restaurant does not include a business that primarily sells prepackaged food or beverages not for immediate consumption, such as a grocery store; specialty food store; beer, wine, or liquor store; drug store; convenience store; newsstand; or a vending machine or kiosk," the agency said.
The IRS also clarified that businesses are prohibited from fully deducting meal expenses that are incurred at dining facilities that are controlled by the taxpayer in question, such as on-campus dining halls and cafeterias, that are used for an employee's reduction in gross income per IRC Section 119.
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The same disallowance applies to taxpayer-operated dining facilities that would qualify for the de minimis fringe exclusion provided under IRC Section 132
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The Consolidated Appropriations Act
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Before the enactment of the Tax Cuts and Jobs Act
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IRC Section 274 generally prohibits deductions for expenses related to recreation, entertainment or amusement-oriented activities. However, under the TCJA's changes businesses can still deduct meal expenses incurred at entertainment venues so long as those food or beverage items are purchased independently from the entertainment activities or are separately stated on invoices or receipts.
--Additional reporting by Amy Lee Rosen. Editing by Vincent Sherry.
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