[Congressional Record Volume 141, Number 154 (Friday, September 29, 1995)]
[Extensions of Remarks]
[Page E1885]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 DEDUCTIBILITY FOR THE COST OF PROVIDING MEALS TO EMPLOYEES OF SEAFOOD 
           PROCESSORS OPERATING IN REMOTE LOCATIONS OF ALASKA

                                 ______


                             HON. DON YOUNG

                               of alaska

                    in the house of representatives

                       Friday, September 29, 1995

  Mr. YOUNG of Alaska. Mr. Speaker, I rise to introduce a bill to 
restore 100 percent deductibility for meals which seafood processing 
companies are compelled to provide to their employees at processing 
operations located in remote areas of Alaska. This legislation is 
necessary because the limitations on the deductibility of business 
meals and entertainment enacted in 1986 and 1993 have inadvertently 
reduced the deductibility of these employer provided meals to only 50 
percent. The consequence has been that these companies, most of which 
are small businesses, are forced to pay hundreds of thousands of 
dollars in additional taxes simply because they must provide meals to 
their employees at remote locales where there are no other meal 
options.
  This legislation would conform the treatment of seafood processors 
under the Internal Revenue Code with the treatment of other employers--
such as operators of commercial vessels and oil and gas rigs--who must 
provide meals to their employees because the employees do not have 
another practical alternative to obtaining their meals. Under current 
law, these employers, because they must provide meals to their 
employees, are permitted to deduct the full cost of such meals as an 
ordinary and necessary business expense. The bill I am introducing 
would provide the same treatment for seafood processors in Alaska.
  The seafood processing industry in Alaska is primarily located in 
remote coastal areas of the State, almost all along the Aleutian chain 
of islands. Most of these facilities operate on a seasonal basis from 
spring through fall, and must fly their workers in for temporary 
periods. The processing plants are located near very small towns and 
native villages. In some cases the processing plant is the only human 
activity in the area. Because of this isolation and lack of 
infrastructure the firms which operate in the areas have no choice but 
to provide all meals consumed by their employees. In fact, these 
operations are so isolated that the employers must also provide all 
housing, recreation, transportation and medical services.
  There would be only about 40 firms which fall into the category 
covered by our legislation. Most employ under 100 people, although some 
are larger operations with hundreds of workers. But in all cases it 
must be emphasized that the employer is the only source of food and 
shelter for the employees and that the plants are located in very 
remote areas. In many cases there are no other settlements, and, 
indeed, no other human activity for many miles around. A final 
significant impact of the industry on our Nation comes from its role as 
a source of export revenue. Over 50 percent of the export earnings 
generated by the seafood industry nationwide originates in the Pacific 
Northwest and Alaska. After years of suffering from huge trade deficits 
it is encouraging to see that our region of the country is making a 
positive contribution to our balance of payments.
  The changes to the tax laws in 1986 and 1993 which reduced the 
deductibility of business meal and entertainment expenses from 100 
percent to 80 percent and then to 50 percent were justified as an 
appropriate limitation on a discretionary business expense with a 
significant personal consumption element. The decision was made that 
good public policy required changing the tax code so that the public 
was no longer helping defray the cost for business organizations to 
entertain clients and other business associates.
  However, Congress recognized that where the employer must as a 
practical or legal matter provide meals to employees--that it, where 
the employees do not really have the option of providing meals for 
themselves--that such a mandatory cost of business should continue to 
be fully deductible to the business. Under current law, employers of 
crew members on certain commercial vessels and employers of certain oil 
and gas workers, who provide meals to their employees when those 
employees have no real alternative means of obtaining food are 
permitted to deduct the full cost of providing the meals. The same 
precise situation applies to seafood processors in Alaska and they 
should be governed by the same rule. Their workers cannot go to a 
restaurant, they cannot go home and they cannot bring meals with them 
to work since they live in bunkhouses and do not have access to grocery 
stores.
  The companies which are covered by this amendment have paid the 
Federal treasury millions of dollars in taxes since 1986. These tax 
payments are both unintended and unfair. In attempting to correct the 
abuse of the three martini lunch Congress certainly did not intend to 
burden legitimate businesses which are providing meals to their 
employees in cases where those employees have no other source of food.

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