Gaming industry gets new meal-tax guidelines

The Internal Revenue Service issued guidelines Tuesday explaining when it will and will not tax free meals provided by companies to workers.

One set of guidelines is aimed at educating field auditors on the tax while another provides an outline for hotel-casinos.

Nevada's congressional delegation orchestrated passage of an amendment to the massive IRS overhaul bill in June that was intended to prevent hotel-casino workers from being taxed for free meals -- an amount estimated to cost workers about $300 per year. The measure also preserved casinos' tax deductions for the meals.

The amendment preserves tax-free meals for all workers at companies where more than half the employees were eligible for tax-free meals under old IRS regulations. Those employees are food service workers, those who cannot obtain a meal within a reasonable period or have a restricted meal period, or employees who are on emergency call.

"Every hospitality company -- hotels, casinos, resorts -- is going to have to look at their situation to see which properties meet the 50 percent requirement and which ones don't," said Betty Wilson, vice president of taxation for Caesars World and member of the American Gaming Association's task force on taxation and finance.

The IRS offered to settle with properties owing back taxes for the meals.

For taxable years prior to 1995, companies could deduct whatever the code for that particular year allowed from the expense of providing meals. In 1986, that was 80 percent and the amount was reduced to 50 percent of the expense in 1993. For taxable years between 1995 and 1998, companies could write off 70 percent of the expense of providing meals, according to the IRS.

To qualify for the settlements, companies would have to notify the IRS they want to take advantage of the settlement offer within 30 days of the regulations being finalized, which is expected by Oct. 31.

The provisions also address employees.

"If the company enters into a settlement, there would be no tax liability for employees," said Jodi Patterson, IRS spokeswoman.

If the company does not, it's possible employees could be taxed for the meals.

The IRS won the right to tax free employee meals in a U.S. Tax Court case. In a Boyd Gaming case, the court sided with the IRS in ruling the free meals were a form of compensation and should therefore should be regarded as income. The ruling also held that companies could not deduct the cost of providing the meals from their taxes.

With the IRS primed to enact regulations to collect such taxes, Las Vegas gaming companies and the Culinary Union, which represents many of the workers that would have been effected by the tax, joined forces to oppose the move.

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