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The US 2017 tax reform act significantly limited the trade or business expense deduction for meals and entertainment by generally disallowing deductions for business entertainment expenses and removing the de minimis fringe benefit exception to the 50% deduction disallowance for meal expenses.  These amendments apply to expenses paid or incurred after December 31, 2017.  The IRS and Treasury have published proposed regulations interpreting these rules.

The proposed regulations incorporate many rules from the current regulations and from Notice 2018-76.  The proposed regulations and the preamble also provide some welcome clarifications, for example, that employer eating facility operating costs are not subject to the Section 274(n) partial disallowance and the Section 162 substantiation rules apply to allowable entertainment expenses and expenses for meals not connected with travel away from home.  However, the structure of the proposed regulations creates new questions.