Deductions for Entertainment Expenses Eliminated Under Tax Reform
The business purpose and documentation requirements around entertainment expenses have long been a hot button for IRS examiners during audits. The new tax reform law signed by the President in December closes this issue.
Beginning in 2018, no deduction will be allowed for entertainment expenses regardless of business purpose. Previously, entertainment was 50% deductible if properly substantiated.
From our experience, many financial institutions routinely purchase tickets to minor or major league sporting events or may own season passes or sports boxes. Expenses for customer trips or outings are also not uncommon. Institutions will want to re-evaluate whether the benefits of these activities remain sufficient to offset the cost now that the expenses will no longer be tax deductible.
The CLA financial institution team is here to help you navigate the new tax law. Please contact a member of our team to discuss these matters further.
Amanda Garnett is a principal in the financial institutions practice of CliftonLarsonAllen (CLA) from Peoria, Illinois. She currently leads the firm’s Midwest financial institution tax team and serves institutions ranging in size from $15 million to $3.5 billion in total assets. In addition to tax compliance, Amanda assists clients in the areas of tax consulting, mergers and acquisitions, and regulatory reporting. She also routinely teaches courses for banking associations across the country.
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