A New Look at the Section 119 Meals and Lodging Exclusion

One of the most problematic areas of income tax law has been the excludability of various employee fringe benefits from taxable income. This article examines the appropriate tax treatment of one type of fringe benefit-meals furnished by an employer to his employee. Prior to 1954 the excludability of the value of meals furnished by an employer was dependent upon whether the factual circumstances of the case satisfied a convenience of the employer rule developed by administrative rulings and case law. In 1954 Congress attempted to end the confusion surrounding the excludability of meals furnished by an employer by enacting section 119 of the Internal Revenue Code. Through this enactment the Congress not only codified the convenience of the employer rule, but it also created a new on the business premises requirement. In addition to these two statutory requirements, the legislative history of section 119 reveals that the meals exclusion applies only to the value of meals furnished in kind. The purpose of this article is to analyze the development of these three integral tax concepts of the meals and lodgings statute: first, meals furnished for the convenience of the employer ; second, meals furnished on the business premises ; and third, meals furnished in kind. In the wake of the traditional problems of section 119 and due to two recent developments-the Supreme Court decision in Commissioner v. Kowalsk and the 1978 section 119 amendment-a new look at the meals exclusion is required before the appropriate tax treatment of section 119 can be assured