[Congressional Record Volume 145, Number 57 (Monday, April 26, 1999)]
[Senate]
[Page S4185]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. INOUYE:
  S. 874. A bill to repeal the reduction in the deductible portion of 
expenses for business meals and entertainment; to the Committee on 
Finance.


 REPEAL THE REDUCTION IN BUSINESS MEALS AND ENTERTAINMENT TAX DEDUCTION

  Mr. INOUYE. Mr. President, I rise to introduce legislation to repeal 
the current fifty percent tax deduction for business meals and 
entertainment expenses, and to gradually restore the tax deduction to 
80 percent over a five-year period. Restoration of this deduction is 
essential to the livelihood of the food service, travel, tourism, and 
entertainment industries throughout the United States. These industries 
are being economically harmed as a result of the 50 percent tax 
deduction.
  The deduction for business meals and entertainment was reduced from 
80 percent to 50 percent under the Omnibus Budget Reconciliation Act of 
1993, and went into effect on January 1, 1994. Many companies, small 
and large, have changed their policies and guidelines on travel and 
entertainment expenses as a result of this reduction. Additionally, 
businesses have been forced to curtail company reimbursement policies 
because of the reduction in business meals and entertainment expenses. 
In some cases, businesses have even eliminated their expense accounts. 
Consequently, restaurants which previously relied heavily on business 
lunches and dinners are being adversely affected by the reduction in 
business meals. For example:
  Currently, there are 23.3 million business meal spenders in the U.S. 
down from 25.3 million in 1989.
  The total economic impact on small businesses of restoring the 
business meal deductibility from 50 percent to 80 percent ranges from 
$8 to $690 million, depending on the state.
  In Hawaii, the restaurant industry alone employs 47,400 people and 
generates $2 billion into the state's economy. An increase in the 
business meal tax deduction from 50 percent to 80 percent would result 
in a 13 percent increase in business meal spending in the State of 
Hawaii.
  One issue of great importance to business travelers is the 
deductibility of expenses, particularly the business meal expense.
  Restauranteurs have reported lower business meal sales forcing some 
restaurants to close during luncheon hours and lay off employees which 
in turn adversely affects those employed in agriculture, food 
processing, and any businesses related to the restaurant sector.
  With sales equaling more than 4 percent of the U.S. gross domestic 
product, and more than 10.2 million persons employed in the industry, 
the restaurant business is obviously very important to the economic 
foundation of America. The 50 percent deduction has adversely affected 
the restaurant and entertainment industry and resulted in detrimental 
factors for the U.S. economy as a whole. I urge my colleagues to join 
me in cosponsoring this important legislation.
  Mr. President, I ask unanimous consent that the bill text be printed 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 874

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

     SECTION 1. REPEAL OF REDUCTION IN BUSINESS MEALS AND 
                   ENTERTAINMENT TAX DEDUCTION.

       (a) In General.--Section 274(n)(1) of the Internal Revenue 
     Code of 1986 (relating to only 50 percent of meal and 
     entertainment expenses allowed as deduction) is amended by 
     striking ``50 percent'' and inserting ``the applicable 
     percentage''.
       (b) Applicable Percentage.--Section 274(n) of the Internal 
     Revenue Code of 1986 is amended by striking paragraph (3) and 
     inserting the following:
       ``(3) Applicable percentage.--For purposes of paragraph 
     (1), the term `applicable percentage' means the percentage 
     determined under the following table:

``For taxable years
  beginning--                                            The applicable
  in calendar year--                                    percentage is--
  1999..........................................................56 ....

  2000..........................................................62 ....

  2001..........................................................68 ....

  2002..........................................................74 ....

  2003 or thereafter..........................................80.''....

       (c) Conforming Amendment.--The heading for section 274(n) 
     of the Internal Revenue Code of 1986 is amended by striking 
     ``Only 50 percent'' and inserting ``Portion''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1998.
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