IRS Wants to Tax Free Meals at Tech Companies

That organic meal for workers at Google's headquarters in Silicon Valley may be a thing of the past if the IRS decides to pursue a corporate tax on free meals for employees. Tech companies lure top talent with various incentives such as food, company shuttles, on-site barbershops and dry cleaning. The issue is that sometimes these meals are provided as a perk, rather than a necessity, for employees.

The IRS plans to pursue back taxes for these free meals up to one-third of the food's market value. Google's posh organic offerings are not cheap. The reason, according to the agency, is these perks are fringe benefits rather than necessities. Remote jobs such as construction sites and oil rigs will remain exempt, since regular food breaks are harder to accomplish for these industries.

The current tax code allows companies to deduct food for employees as a business expense. Under certain circumstances, employees may exclude free meals from their income if the food is provided on the company's premises and the meals are convenient for the employer.

The IRS listed free meals as one of 317 priorities for the 2015 tax year, a move that may backfire since the tax agency has become unpopular for its tactics under the second Obama administration. Lost emails, alleged targeting of conservative political groups, and tax complications with the Affordable Care Act have left the IRS with a public relations problem. The idea of a tax on employer-provided food may be settled in federal court if the agency moves forward.

Tax reform has made little ground in Congress, with several bills dying in committee. Instead of pursuing loophole reform, the House Budget Committee recommends reducing the 35 percent tax rate for corporations. Companies often exploit loopholes to protect profits, which is why another tax on businesses may be met with opposition from big corporations.

On the other hand, smaller companies may welcome the tax on free meals, since large companies with a lot of revenue are the ones providing such great perks. A new tax aimed at huge firms may help level the playing field.

Contrarily, tech companies such as Google, Facebook, Twitter and Yahoo! may cry foul over the nature of free enterprise and a free market system. When it comes to high-priced perks, these Silicon Valley giants probably have the best legal teams, and lobbyists, money can buy.

Employees at these tech firms stay loyal for a reason: Perks and benefits outweigh extremely long hours, high pressure and complex computer programming tasks. Take away one of these perks, and Silicon Valley's draw may not be so big.

Taxes that diminish a company's most important asset, its employees, will not go unnoticed. The IRS has more than 300 priorities for the coming year, and taxing free meals provided by a select group of tech companies may not see the light of day if the pattern of corporate tax reform holds in Congress.

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