n-21-63.pdf

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Part III – Administrative, Procedural, and Miscellaneous

Temporary 100-Percent Deduction Applies to Meal Portion of 2021 and 2022 Per Diem
Rate or Allowance

Notice 2021-63

SECTION 1. PURPOSE
This notice provides guidance regarding the temporary 100-percent deduction for
expenses that are paid or incurred after December 31, 2020, and before January 1,
2023, for food or beverages provided by a restaurant for purposes of § 274(n)(2)(D) of
the Internal Revenue Code (Code). In particular, the notice sets forth a special rule for
applying the temporary 100-percent deduction to the meal portion of a per diem rate or
allowance.
SECTION 2. BACKGROUND
Section 274 generally limits or disallows deductions for certain meal and
entertainment expenses that otherwise would be allowable under chapter 1 of the Code
(chapter 1). Section 274(n)(1) provides that a deduction for any expense for food or
beverages generally is limited to 50 percent of the amount otherwise deductible under
chapter 1. However, § 274(n)(2)(D) provides a temporary exception to the 50-percent

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limitation for expenses that are paid or incurred after December 31, 2020, and before
January 1, 2023, for food or beverages provided by a restaurant. Notice 2021-25,
2021-17 I.R.B. 1118, explains when the temporary 100-percent deduction applies and
when the 50-percent deduction continues to apply for purposes of § 274.
Section 274(d) generally provides that no deduction is allowed for any traveling
expense (including meals while away from home) unless the taxpayer substantiates
such expense by adequate records or by sufficient corroborating evidence. However,
§ 274(d) authorizes the Secretary of the Treasury or her delegate to prescribe by
regulation that some or all of the substantiation requirements do not apply in the case of
an expense which does not exceed a particular amount. Section 1.274-5(j)(1) of the
Income Tax Regulations authorizes the Commissioner of Internal Revenue
(Commissioner) to establish a method allowing a taxpayer to treat a specific amount as
paid or incurred for meals while traveling away from home instead of substantiating the
actual cost. See also § 1.274-5(g).
In Rev. Proc. 2019-48, 2019-51 I.R.B. 1392, the Commissioner provides rules for
taxpayers that choose to use a per diem rate to substantiate, under § 274(d) and
§ 1.274-5, the amount of ordinary and necessary business expenses paid or incurred
while traveling away from home for: lodging, meal, and incidental expenses; meals and
incidental expenses only; or incidental expenses only. Taxpayers that follow the rules in
Rev. Proc. 2019-48 are deemed to meet the substantiation requirements in § 274(d) for
the applicable travel expenses. See, for example, section 4.01 of Rev. Proc. 2019-48.
Except for incidental expenses only deductions, all or part of the amount of an expense
deemed substantiated under Rev. Proc. 2019-48 is subject to the appropriate limitation

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under § 274(n) on the deductibility of food or beverage expenses. See section 6.05 of
Rev. Proc. 2019-48.
SECTION 3. SPECIAL RULE
Solely for purposes of § 274(n)(2)(D), a taxpayer that properly applies the rules of
Rev. Proc. 2019-48 may treat the meal portion of a per diem rate or allowance paid or
incurred after December 31, 2020, and before January 1, 2023, as being attributable to
food or beverages provided by a restaurant.
SECTION 4. EFFECTIVE DATE
This notice is effective for the meal portion of per diem allowances for lodging, meal
and incidental expenses, or for meal and incidental expenses only that are paid or
incurred by an employer after December 31, 2020, and before January 1, 2023. For
purposes of computing the amount allowable as a deduction to a self-employed
individual or employee described in § 62(a)(2)(B)-(E) for travel away from home, this
notice is effective for the meal portion of per diem rates for meal and incidental
expenses paid or incurred after December 31, 2020, and before January 1, 2023.
DRAFTING INFORMATION
The principal author of this notice is James Liechty of the Office of Associate Chief
Counsel (Income Tax & Accounting). For further information regarding this notice
contact James Liechty at (202) 317-4657 (not a toll-free call).