Did you know that most 2021-2022 company picnics, holiday parties, and incentive trips are 100% tax-deductible? Or that your organization’s profitability can improve by including food and beverage in your virtual meetings?
LEO hosted a Three-Martini Tax Webinar with experts Will Clegg, MBA, and Britany Foley, CPA with Henderson Hutcherson & McCullough, PLLC, to discuss TheConsolidated Appropriations Act (CAA), better known as the Three-Martini tax deduction. The provision refers to the Mad Men-era practice of writing off leisurely lunches and alcoholic beverages as a business expense.
The 2021 CAA tax code, passed in December 2020, states that in 2021-2022, companies can deduct most, if not all, meal expenses. Due to the dramatic effect of the pandemic on the restaurant industry, this bill was passed to incentivize people to purchase from restaurants, which spills over into the events and hospitality industry.
Under the provision, businesses can write off 100% of the costs for:
- Meals in the office during meetings
- Meals during business travel
- Meals at conferences and seminars
- Meals sold to a client or customer
- Meals offered to the public for free
- Office holiday party or picnic
- Team-building meals
- Meals provided for the convenience of the employer (such as meals for occasional employee overtime and production crews)
- Meals included in charitable sports packages
Restauranteurs Deni Reilly, Bert Smythe, and Michael Robinson joined us to discuss how meeting profs can work with restaurants and caterers to take advantage of the tax benefit.
Is it possible to book venue space as part of an F&B package? For instance, can we bill the food cost for $30,000 and include A/V, venue cost, and décor as added value?
Deni Reilly: “I encourage meeting planners to seek out restaurants that already have that structure in place, and if you are working with other restaurants that don’t have that in place to ask, ‘Can you wave the room fee if we meet the minimum?’ I also encourage planners to seek out restaurants that have a dedicated event person who is savvy on things like the Three-Martini Tax.”
How can planners best communicate the tax benefit to restaurants and caterers?
Bert Smythe: “Planners can start by simply asking restaurants if they are familiar with the new tax benefits. More than ever, the restaurant industry is willing to work with planners and groups in any way possible, even if it may take some documentation and billing creativity. Event professionals can also help share this information by educating industry organizations and restaurant associations on the recent changes.”
Is alcohol included in the Three Martini Lunch tax benefit?
Michael Robinson: “The Three Martini Lunch tax benefit includes alcohol costs as a deductible expense. Many restaurants and catering companies that are knowledgeable about the events industry can act as brokers to coordinate your event and bake in costs into more advantageous buckets. I work with several brands and alcohol manufacturers that could benefit financially from hosting events and tastings.”
How do I ensure that I have the proper documentation for my finance department?
Will Clegg: “To receive the deductions, itemize and carefully detail all F&B expenses, and challenge suppliers and partners to separate invoices into detailed classifications. All travel costs, entertainment costs, and food and beverage costs need to be documented separately, so make sure your team has various accounts for different expense categories. Make sure to ask the restaurant or catering company for a full itemized receipt when dining out; the customer copy with just the total and signature isn’t detailed enough.”
Can I deduct meal kits that are provided to attendees of a virtual event?
Will Clegg: “In the era of virtual and hybrid gatherings, planners often provide meal kits or deliveries as part of the event. For documentation purposes, it is important to discern what is a meal versus a gift. For instance, a planner may choose to ship alcohol to virtual attendees through services like Drizzly. As long as it is documented as part of the meal, that cost is 100% tax-deductible.”
Important to Note
The deduction always goes to the end purchaser. If you are looking to hire an agency like LEO Events to execute an event and manage all food and beverage, your company would receive the deduction, not the agency.
If an organization invites you to be a sponsor, ask them if your company can sponsor the food and beverage portion of the event. This offers the same net for the company while getting the best tax benefit for your company.
Ask your financial representatives what the Three Martini tax deduction can offer your business. LEO Events is ready to produce your summer picnics and outdoor gatherings. Outdoor events, planned in accordance with local and state guidelines, are a great way to be face-to-face, safely.
If you are interested in viewing the full webinar on-demand, email us at email@example.com.
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