EASING THE BURDEN OF TAXATION

Meetings & Conventions: Planner's Portfolio April 2001
April 2001 PLANNER'S PORTFOLIO:

The Law & the Planner

By Jonathan T. Howe, Esq.


EASING THE BURDEN OF TAXATION

Reviewing the basics might make filling out forms next year a bit less daunting

Just as Julius Caesar feared the ides of March, U.S. taxpayers wish the ides of April would never come. Taxes are an issue for planners both on a professional and a personal level: They have to make sure their organization and the attendees will be able to write off the meeting, and they have to keep track of their own travel and entertainment expenses.

MEETING MATTERS
Many planners inform interested parties that expenses incurred attending an event might be deductible under Section 162 of the U.S. Code. But planners often do not know the rules of deduction. Not only is the substance of the meeting program important, but its format can be as well. For meeting expenses to be deductible, according to the Internal Revenue Service, they must advance the “trade or business” of the party claiming the deduction (which can be an attendee, the attendee’s employer and the host organization). The IRS considers a trade or business to be an activity undertaken with the expectation of making a profit later.

Planners should emphasize in any promotional and collateral material the need for people to attend the program to advance their trade or business.

The next hurdle to overcome is showing that the expense is “ordinary and necessary.” Regulations state that an expense is ordinary if it is “normal, customary or usual” for the business to incur under the circumstances. A final requirement is that the expense must be “reasonable.” Unfortunately, what might be reasonable to one party might not be to the IRS; however, if it is an expense that can be proven legitimate under the circumstances, generally the reasonableness test is met. For instance, it is normal for Bill Gates to stay in the penthouse, but not for his employees to live so lavishly.

FOOD COSTS
For both the meeting’s F&B and when an individual takes a business associate out, food, beverage and entertainment expenses are limited to 50 percent of the actual costs. For the host organization’s accounting, sleeping rooms are 100 percent deductible, as is ground transportation. So if planners take a hit on the room rate and negotiate hard on F&B, the organization saves money at tax time. Remember, hotels today look at the total amount of money the meeting generates there’s a certain figure they expect to make, but they are not picky about where it comes from.

PERSONAL TRAVEL
Deductions are clearly defined for business travel. For meals and lodging to qualify, you must “be away from home,” home being your place of business. In the past, the IRS required you to be away overnight. Now, travelers can deduct meals and lodging on a business trip as long as they are away sufficiently long to require “rest” or “sleep,” and generally being gone for more than eight hours in a day qualifies.

Transportation to and from a business meeting is deductible as long as you leave your business and return to it. Deducting meals for a day trip would be questionable, unless you are entertaining a client. People who want to bring their spouses should note that travel, meal and lodging expenses for the spouse will be deductible only if that individual also works for the company and his presence serves a business purpose.

Similarly, if the meeting hotel is offering single and double rates, the IRS allows you only to deduct the single rate if the second party is not allowed for deduction purposes. Thus, to help out attendees, meeting planners should negotiate one single/double rate, not separate rates for a single vs. a double.