[Congressional Record Volume 147, Number 25 (Wednesday, February 28, 2001)]
[Senate]
[Page S1712]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. INOUYE:
  S. 418. A bill to repeal the reduction in the deductible portion of 
expenses for business meals and entertainment, to the Committee on 
Finance.
  Mr. INOUYE. Mr. President, I rise to introduce legislation to repeal 
the current 50 percent tax deduction for business meals and 
entertainment expenses, and to restore the tax deduction to 80 percent 
gradually over a five-year period. Restoration of this deduction is 
essential to the livelihood of small and independent businesses as well 
as 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 business meals and entertainment expenses deduction was reduced 
from 80 percent to 50 percent, in the Omnibus Budget Reconciliation Act 
of 1993, and went into effect on January 1, 1994. Its results have been 
detrimental to small businesses, the self-employed, and independent and 
traveling sales representatives. These groups rely on one-on-one 
meetings, usually during meals, for their marketing strategy, and the 
reduction of the business meals and entertainment deduction has 
impacted their marketing efforts.
  Many small business organizations have shown their support for an 
increase in this deduction. The National Restaurant Association, 
National Federation of Independent Business, National Employees and 
Restaurant Employees International Union, National Association of the 
Self-Employed, and the American Hotel and Motel Association, have all 
spoken of the need for the reestablishment of the 80 percent deduction 
for business meal and entertainment expenses.
  For example, traveling and independent sales representatives incur 
substantial travel and entertainment expenses from spending, annually, 
an average of 150 nights on the road. Home-based businesses also rely 
heavily on meeting with clients outside of the home and over meals. 
Such businesses have been harmed by the reduction of this deduction to 
50 percent.
  Currently, there are approximately 23.2 million persons who spend 
money on business meals in the U.S., down from 25.3 million in 1989. 
The total economic impact on small businesses of restoring the business 
meal deduction from 50 percent to 80 percent ranges from $5 to $690 
million, depending on the state. In the state of Hawaii, the estimated 
economic impact ranges from $32 to $43 million.
  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. 418

       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
  in calendar year--                                     The applicable
                                                        percentage is--
  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, 
     2000.
                                 ______