Boyd Gaming Corp. v. Commissioner

This case involves the question whether there really is a “free lunch.” In 1986, concerned that the tax laws unfairly allowed high-income taxpayers to structure their business affairs in a manner that generated deductions for personal living expenses, Congress imposed, with certain exceptions, an 80% cap on the amount of deductions for business meals and entertainment. 1 This change, in turn, affected employers who provide “free lunches” to their employees. At issue in this case is whether, under the circumstances here, the employer qualifies for an exception to the 80% cap on deductions associated with “free lunches” furnished to its employees.

Petitioners, California Hotel & Casino, Boyd Gaming Corporation, and their subsidiaries (collectively, “Boyd”), are hotel and casino operators that, for reasons of security and logistics, require their employees to stay on the business premises throughout the work shift. As a consequence of the policy, the employees receive free meals at on-site cafeterias. Boyd contends that it is exempt from the 80% cap on deductions because the meals are provided as a “de minimis fringe” benefit. 26 U.S.C. § 274 (h)(2); see 26 U.S.C. § 132 (e). Boyd…