[Congressional Record Volume 144, Number 122 (Tuesday, September 15, 1998)]
[Senate]
[Page S10384]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BREAUX:
  S. 2473. A bill to amend the Internal Revenue Code of 1986 to 
increase the deduction for meal and entertainment expenses of small 
businesses; to the Committee on Finance.


                            tax legislation

  Mr. BREAUX. Mr. President, today I introduce a very important bill 
for small businesses and the self-employed in Louisiana and throughout 
our country. My bill would restore the 80 percent deduction for 
business meals and entertainment expenses, thus eliminating a tax 
burden that has seriously hampered many small businesses in our 
country.
  Small business is a powerful economic engine, both nationwide and in 
Louisiana. Small businesses have helped to create the prosperity that 
we have all enjoyed in the last few years. They are leaders in the 
innovation and technology development that will sustain our economy in 
the 21st century. Nationwide, small business employs 53 percent of the 
private work force, contributes 47 percent of all sales in the country, 
and is responsible for 50 percent of the private gross domestic 
product.
  For these reasons, I believe the tax code should encourage, not 
discourage, small business development and growth. For the more than 
225,000 self-employed and for the thousands of small businesses in 
Louisiana, business meals and entertainment take the place of 
advertising, marketing, and conference meetings. These expenses are a 
core business development cost. As such, a large percentage of these 
costs should be deductible.
  For many years, businesses were allowed to deduct 100 percent of 
business meals and entertainment expenses. In 1987, this deduction was 
reduced to 80 percent. The deduction was further reduced in 1994 to 50 
percent because of the misconception that these meals were ``three 
martini lunches.''
  Contrary to this perception, studies show that the primary 
beneficiary of the business meal deduction is not the wealthy business 
person. Studies indicate that over two-thirds of the business meal 
spenders have incomes of less than $60,000 and 37 percent have incomes 
below $40,000. Low to moderately priced restaurants are the most 
popular types for business meals, with the average check equaling less 
than $20. In addition, 50 percent of most business meals occur in small 
towns and rural areas.
  In 1995, just one year after the deduction was reduced to 50 percent, 
the White House Conference on Small Business established the 
restoration of the deduction as one of its top priorities for boosting 
small business. In Louisiana alone, it is expected that the positive 
economic impact of this proposal could exceed $67 million in 
industries, such as the travel and restaurant industry, that employ 
over 120,000 people. I urge my colleagues to support this legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2473

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SMALL BUSINESSES ALLOWED INCREASED DEDUCTION FOR 
                   MEAL AND ENTERTAINMENT EXPENSES.

       (a) In General.--Subsection (n) of section 274 of the 
     Internal Revenue Code of 1986 (relating to only 50 percent of 
     meal and entertainment expenses allowed as deduction) is 
     amended by adding at the end the following new paragraph:
       ``(4) Special rule for small businesses.--
       ``(A) In general.--In the case of any taxpayer which is a 
     small business, paragraph (1) shall be applied by 
     substituting `the applicable percentage (as defined in 
     paragraph (3)(B))' for `50 percent'.
       ``(B) Small business.--For purposes of this paragraph, the 
     term `small business' means, with respect to expenses paid or 
     incurred during any taxable year--
       ``(i) any corporation which meets the requirements of 
     section 55(e)(1) for such year, and
       ``(ii) any partnership or sole proprietorship which would 
     meet such requirements if it were a corporation.''
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after December 31, 
     1998.
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