Photo: Dan Macy
How can an employer best determine whether employer-provided meals qualify as de minimis fringe benefits under the federal tax code? The employer must take into account how frequently the meals or meal money are provided, either on an employee-by-employee basis, or on the basis of the work force as a whole.
Then, how should an employer go about measuring the frequency regarding these two groups: (1) each individual employee; and (2) all employees?
First, the employer must attempt to measure the frequency of meals provided to employees on an individual basis. If that is administratively difficult, then the employer may measure the frequency with which it provides the fringes with reference to the workforce as a whole. The Treasury regulations offer further details and examples.
Treas. Reg. §1.132-6 provides examples regarding how an employer can measure the frequency of employer-provided meals.
With reference to each individual employee, Treas. Reg. §1.132-6(b)(1) states:
For example, if an employer provides a free meal in kind to one employee on a daily basis, but not to any other employee, the value of the meals is not de minimis with respect to that one employee even though with respect to the employer’s entire workforce the meals are provided infrequently.
With reference to the workforce as a whole, Treas. Reg. §1.132-6(b)(2) states:
Notwithstanding the rule of paragraph (b)(1) of this section, except for purposes of applying the special rules of paragraph (d)(2) of this section, where it would be administratively difficult to determine frequency with respect to individual employees, the frequency with which similar fringes are provided by the employer to the employer’s employees is determined by reference to the frequency with which the employer provides the fringes to the workforce as a whole. Therefore, under this rule, the frequency with which any individual employee receives such a fringe benefit is not relevant and in some circumstances, the de minimis fringe exclusion may apply with respect to a benefit even though a particular employee receives the benefit frequently. For example, if an employer exercises sufficient control and imposes significant restrictions on the personal use of a company copying machine so that at least 85 percent of the use of the machine is for business purposes, any personal use of the copying machine by particular employees is considered to be a de minimis fringe.
What This Means to Employers
Measuring on an individual basis or measuring the workforce as a whole is an “either or” proposition. The employer need only measure the frequency on an individual basis if it is not administratively difficult to do so; otherwise, the employer can take into account the workforce as a whole, to determine whether meals are only provided on an “occasional” basis.