[Congressional Record Volume 151, Number 11 (Monday, February 7, 2005)]
[Senate]
[Pages S1050-S1051]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. INOUYE:
  S. 298. A bill to amend the Internal Revenue Code of 1986 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

[[Page S1051]]

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.
  Small businesses rely heavily on the business meal to conduct 
business, even more so than larger corporations. The Small Business 
Administration (SBA) Office of Advocacy, in releasing a study last May, 
``The Impact of Tax Expenditure Policies on Incorporated Small 
Business,'' found that small incorporated businesses benefit more than 
their larger counterparts from the meal and entertainment tax 
deduction. According to the study, small firms that take advantage of 
the business-meal deduction reduce their effective tax rate by 0.75 
percent on average, while larger firms only receive a 0.11 percent 
reduction in their effective tax rate. More importantly, the study 
strongly suggests that full reinstatement of the business meal and 
entertainment deduction should be a major policy priority for small 
businesses.
  Small companies often use restaurants as ``conference space'' to 
conduct meetings or close deals. Meals are their best and sometimes 
only marketing tool. Certainly, an increase in the meal and 
entertainment deduction would have a significant impact on a small 
businesses bottom line. In addition, the effects on the overall economy 
would be significant.
  Accompanying my statement is the National Restaurant Association's, 
NRA, State-by-State chart reflecting the estimated economic impact of 
increasing the business meal deductibility from 50 percent to 80 
percent. The NRA estimates that an increase to 80 percent would 
increase business meal sales by $6 billion and create a $13 billion 
increase to the overall economy.
  I urge my colleagues to join me in cosponsoring this important 
legislation. I ask unanimous consent that the NRA's State-by-State 
chart and the text of my bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 ESTIMATED IMPACT OF INCREASING BUSINESS MEAL DEDUCTIBILITY FROM 50% TO
                                   80%
------------------------------------------------------------------------
                                       Increase in
                                      business meal      Total economic
               State                 spending, 50% to    impact in the
                                    80% deductibility      state (in
                                      (in millions)        millions)
------------------------------------------------------------------------
Alabama...........................                $86               $177
Alaska............................                 19                 32
Arizona...........................                128                254
Arkansas..........................                 46                 92
California........................                970              2,149
Colorado..........................                131                284
Connecticut.......................                 90                168
Delaware..........................                 24                 43
District of Columbia..............                 34                 45
Florida...........................                376                768
Georgia...........................                215                481
Hawaii............................                 44                 84
Idaho.............................                 25                 49
Illinois..........................                315                738
Indiana...........................                136                279
Iowa..............................                 54                115
Kansas............................                 53                109
Kentucky..........................                 93                187
Louisiana.........................                 98                191
Maine.............................                 28                 54
Maryland..........................                133                277
Massachusetts.....................                207                411
Michigan..........................                223                435
Minnesota.........................                123                278
Mississippi.......................                 49                 94
Missouri..........................                133                302
Montana...........................                 21                 38
Nebraska..........................                 37                 77
Nevada............................                 77                135
New Hampshire.....................                 35                 65
New Jersey........................                196                407
New Mexico........................                 40                 75
New York..........................                439                858
North Carolina....................                196                411
North Dakota......................                 13                 24
Ohio..............................                266                581
Oklahoma..........................                 74                158
Oregon............................                 86                178
Pennsylvania......................                272                606
Rhode Island......................                 35                 64
South Carolina....................                 98                195
South Dakota......................                 17                 33
Tennessee.........................                140                306
Texas.............................                551              1,287
Utah..............................                 44                 95
Vermont...........................                 13                 25
Virginia..........................                164                346
Washington........................                168                342
West Virginia.....................                 31                 54
Wisconsin.........................                115                249
Wyoming...........................                 11                 18
------------------------------------------------------------------------
Source: National Restaurant Association estimates, 2005.

                                 S. 298

       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 calendarThe applicable percentage is--
  2005.............................................................. 70
                                                               ========

  2006 or 2007...................................................... 75
                                                               ========

  2008 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, 
     2004.
                                 ______