I read articles this morning on (i) corporate jets, which to the IRS, me and probably most everyone are rightly deemed taxable compensation if used by executives for non-work purposes, and (ii) free food at Google, Zynga and Twitter (and lots of other tech companies), which to me and probably most everyone are rightly deemed non-taxable FOOD when consumed at work. Note that I did not put the IRS in that last clause.
Apparently the IRS sometimes takes the view that free food, under the right circumstances, should be taxable compensation to the employee. I just scratch my head and say “what the burrito!!” (substitute “burrito” with any unsavory word you like). Sometimes I just truly dislike the tax code. It is a complicated mess; this is really true for those like me in the VC/PE world (but I am not getting into that now).
Quoting from a Wall Street Journal article (“Silicon Valley’s Mouthwatering Tax Break” April 7, 2013; here is link, but I think it requires a subscription), the “Tax rules around fringe benefits are complex, but in general they categorize meals regularly provided by an employer as a taxable perk, similar to personal use of a company car. That leads several tax experts to wonder if some companies providing free food may be skirting the rules.” Yet, “Other lawyers point to an exception that allows meals to remain untaxed if they are served for a “noncompensatory” reason for the ‘convenience of the employer.’ The exception generally has been applied to workers in remote locations or in professions where reasonable lunch breaks aren’t feasible. But these lawyers argue that some technology firms could qualify, in part because free food encourages longer work hours and is a crucial part of Silicon Valley’s collaborative culture.”
This debate roasts me. How about an exception that says “Free food is okay because it helps keep employees motivated and produces a boat load of benefits for society not to mention happy employees that spend money…..after they have paid taxes on their money income”.
When the academics chime in it gets downright funny. Again, from the WSJ, “I buy my lunch with after-tax dollars,” said Mr. McMahon, the University of Florida professor. “And I have to pay taxes to support free meals for those Google employees.”
Ugggg, yeah, I guess I am feeling sorry for Professor McMahon….NOT.
I am not sure where the line is between corporate jets and free food, but come on….free food….taxable?? Holy Burrito!