Internal Revenue Bulletin 2020-12 (PDF rendition): IRS Revenue Rulings

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Bulletin No. 2020–12
March 16, 2020
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
ADMINISTRATIVE
Rev. Rul. 2020-7, page 522.
Interest rates: underpayments and overpayments. The rates
for interest determined under Section 6621 of the code for
the calendar quarter beginning April 1, 2020, will be 5 per-
cent for overpayments (4 percent in the case of a corpora-
tion), 5 percent for underpayments, and 7 percent for large
corporate underpayments. The rate of interest paid on the
portion of a corporate overpayment exceeding $10,000 will
be 2.5 percent.
INCOME TAX
Action On Decision 2020-1, page 521.
The IRS’ position is that an entity is not in control of the pay-
ment of wages within the meaning of section 3401(d)(1) if
the payment of wages is contingent upon, or proximately
related to, the entity having first received funds from the
common law employer.
REG-100814-19, page 542.
These proposed regulations provide guidance under section
274 of the Internal Revenue Code (Code) regarding certain
amendments made to section 274 by the Tax Cuts and Jobs
Act of 2017 (TCJA). Specifically, the proposed regulations
address the elimination of the deduction under section 274
for expenditures related to entertainment, amusement, or
recreation activities, and provide guidance to determine
whether an activity is of a type generally considered to be
entertainment. The proposed regulations also address the
limitation on the deduction of food and beverage expenses
under section 274(k) and (n), including the applicability of
the exceptions under section 274(e)(2), (3), (4), (7), (8), and
(9). These proposed regulations affect taxpayers who pay or
incur expenses for meals or entertainment in taxable years
beginning after December 31, 2017.
Rev. Proc. 2020-17, page 539.
This revenue procedure exempts from section 6048 infor-
mation reporting requirements certain U.S. individuals’ trans-
actions with, and ownership of, certain tax-favored foreign
trusts that are established and operated exclusively or al-
most exclusively to provide pension or retirement benefits,
or to provide medical, disability, or educational benefits. In
addition, this revenue procedure provides procedural guid-
ance for certain eligible individuals on how, subject to sec-
tions 6511 and 6402, to request abatement of penalties that
have been assessed, or refunds of penalties that have been
paid, pursuant to section 6677 for a failure to comply with
the information reporting requirements of section 6048 re-
garding these foreign trusts.
Finding Lists begin on page ii.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and en-
force the law with integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing of-
ficial rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless other-
wise indicated. Procedures relating solely to matters of inter-
nal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rul-
ings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbar-
ment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
March 16, 2020 Bulletin No. 2020–12

Actions Relating to
Decisions of the Tax Court
It is the policy of the Internal Reve-
nue Service to announce at an early date
whether it will follow the holdings in cer-
tain cases. An Action on Decision is the
document making such an announcement.
An Action on Decision will be issued at
the discretion of the Service only on un-
appealed issues decided adverse to the
government. Generally, an Action on De-
cision is issued where its guidance would
be helpful to Service personnel working
with the same or similar issues. Unlike a
Treasury Regulation or a Revenue Ruling,
an Action on Decision is not an affirma-
tive statement of Service position. It is not
intended to serve as public guidance and
may not be cited as precedent.
Actions on Decisions shall be relied
upon within the Service only as conclu-
sions applying the law to the facts in the
particular case at the time the Action on
Decision was issued. Caution should be
exercised in extending the recommenda-
tion of the Action on Decision to similar
cases where the facts are different. More-
over, the recommendation in the Action
on Decision may be superseded by new
legislation, regulations, rulings, cases, or
Actions on Decisions. Prior to 1991, the
Service published acquiescence or non-
acquiescence only in certain regular Tax
Court opinions. The Service has expanded
its acquiescence program to include other
civil tax cases where guidance is deter-
mined to be helpful. Accordingly, the Ser-
vice now may acquiesce or nonacquiesce
in the holdings of memorandum Tax Court
opinions, as well as those of the United
States District Courts, Claims Court, and
Circuit Courts of Appeal. Regardless of
the court deciding the case, the recom-
mendation of any Action on Decision will
be published in the Internal Revenue
Bulletin.
The recommendation in every Action
on Decision will be summarized as ac-
quiescence, acquiescence in result only,
or nonacquiescence. Both “acquies-
cence” and “acquiescence in result only”
mean that the Service accepts the holding
of the court in a case and that the Service
will follow it in disposing of cases with
the same controlling facts. However, “ac-
quiescence” indicates neither approval
nor disapproval of the reasons assigned
by the court for its conclusions; whereas,
“acquiescence in result only” indicates
disagreement or concern with some or
all of those reasons. “Nonacquiescence”
signifies that, although no further review
was sought, the Service does not agree
with the holding of the court and, gener-
ally, will not follow the decision in dis-
posing of cases involving other taxpay-
ers. In reference to an opinion of a circuit
court of appeals, a “nonacquiescence”
indicates that the Service will not follow
the holding on a nationwide basis. How-
ever, the Service will recognize the prec-
edential impact of the opinion on cases
arising within the venue of the deciding
circuit.
The Commissioner does NOT ACQUI-
ESCE in the following decision:
Paychex Business Solutions, LLC,
et al., v. United States of America, 2017
WL 2692843 (M.D. Fla. 2017)
1
1
The IRS’ position is that an entity is not in control of the payment of wages within the meaning of section 3401(d)(1) if the payment of wages is contingent upon, or proximately related to,
the entity having first received funds from the common law employer.
Bulletin No. 2020–12 521 March 16, 2020

Part I
26 CFR 301.6621-1: Interest rate.
Rev. Rul. 2020-7
Section 6621 of the Internal Reve-
nue Code establishes the interest rates
on overpayments and underpayments of
tax. Under section 6621(a)(1), the over-
payment rate is the sum of the federal
short-term rate plus 3 percentage points
(2 percentage points in the case of a cor-
poration), except the rate for the portion of
a corporate overpayment of tax exceeding
$10,000 for a taxable period is the sum of
the federal short-term rate plus 0.5 of a per-
centage point. Under section 6621(a)(2),
the underpayment rate is the sum of the
federal short-term rate plus 3 percentage
points.
Section 6621(c) provides that for pur-
poses of interest payable under section
6601 on any large corporate underpay-
ment, the underpayment rate under section
6621(a)(2) is determined by substituting
“5 percentage points” for “3 percentage
points.” See section 6621(c) and sec-
tion 301.6621-3 of the Regulations on
Procedure and Administration for the
definition of a large corporate underpay-
ment and for the rules for determining the
applicable date. Section 6621(c) and sec-
tion 301.6621-3 are generally effective for
periods after December 31, 1990.
Section 6621(b)(1) provides that the
Secretary will determine the federal
short- term rate for the first month in each
calendar quarter. Section 6621(b)(2)(A)
provides that the federal short-term rate
determined under section 6621(b)(1) for
any month applies during the first calen-
dar quarter beginning after that month.
Section 6621(b)(3) provides that the fed-
eral short-term rate for any month is the
federal short-term rate determined during
that month by the Secretary in accordance
with section 1274(d), rounded to the near-
est full percent (or, if a multiple of 1/2 of
1 percent, the rate is increased to the next
highest full percent).
Notice 88-59, 1988-1 C.B. 546, an-
nounced that in determining the quarterly
interest rates to be used for overpayments
and underpayments of tax under section
6621, the Internal Revenue Service will
use the federal short-term rate based on
daily compounding because that rate is
most consistent with section 6621 which,
pursuant to section 6622, is subject to dai-
ly compounding.
The federal short-term rate de-
termined in accordance with section
1274(d) during January 2020 is the rate
published in Revenue Ruling 2020-3,
2020-7 IRB 409, to take effect beginning
February 1, 2020. The federal short-term
rate, rounded to the nearest full percent,
based on daily compounding determined
during the month of January 2020 is
2 percent. Accordingly, an overpayment
rate of 5 percent (4 percent in the case of
a corporation) and an underpayment rate
of 5 percent are established for the calen-
dar quarter beginning April 1, 2020. The
overpayment rate for the portion of a cor-
porate overpayment exceeding $10,000
for the calendar quarter beginning April
1, 2020 is 2.5 percent. The underpayment
rate for large corporate underpayments
for the calendar quarter beginning April
1, 2020, is 7 percent. These rates apply
to amounts bearing interest during that
calendar quarter.
Sections 6654(a)(1) and 6655(a)(1) pro-
vide that the underpayment rate established
under section 6621 applies in determining
the addition to tax under sections 6654 and
6655 for failure to pay estimated tax for any
taxable year. Thus, the 5 percent rate also
applies to estimated tax underpayments for
the second calendar quarter beginning April
1, 2020. Pursuant to section 6621(b)(2)(B),
in determining the addition to tax under
section 6654 for any taxable year for an
individual, the federal short-term rate that
applies during the third month following
the taxable year also applies during the first
15 days of the fourth month following the
taxable year. See Rev. Rul. 2019-28, 2019-
52 IRB 1401 (5 percent rate for the first
quarter of 2020). In addition, pursuant to
section 6603(d)(4), the rate of interest on
section 6603 deposits is 2 percent for the
second calendar quarter in 2020.
Interest factors for daily compound
interest for annual rates of 2.5 percent,
4 percent, 5 percent and 7 percent are pub-
lished in Tables 58, 61, 63, and 67 of Rev.
Proc. 95-17, 1995-1 C.B. 612, 615, 617,
and 621.
Annual interest rates to be compound-
ed daily pursuant to section 6622 that ap-
ply for prior periods are set forth in the
tables accompanying this revenue ruling.
DRAFTING INFORMATION
The principal author of this revenue
ruling is Casey R. Conrad of the Office of
the Associate Chief Counsel (Procedure
and Administration). For further informa-
tion regarding this revenue ruling, contact
Mr. Conrad at (202) 317-6844 (not a toll-
free number).
March 16, 2020 522 Bulletin No. 2020–12

Bulletin No. 2020–12 523 March 16, 2020
APPENDIX A
365 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
10.000013699630.0008633801250.001713784
20.000027397640.0008770911260.001727506
30.000041096650.0008908011270.001741228
40.000054796660.0009045121280.001754951
50.000068495670.0009182231290.001768673
60.000082195680.0009319341300.001782396
70.000095894690.0009456461310.001796119
80.000109594700.0009593571320.001809843
90.000123294710.0009730691330.001823566
100.000136995720.0009867811340.001837290
110.000150695730.0010004931350.001851013
120.000164396740.0010142061360.001864737
130.000178097750.0010279181370.001878462
140.000191798760.0010416311380.001892186
150.000205499770.0010553441390.001905910
160.000219201780.0010690571400.001919635
170.000232902790.0010827701410.001933360
180.000246604800.0010964841420.001947085
190.000260306810.0011101971430.001960811
200.000274008820.0011239111440.001974536
210.000287711830.0011376251450.001988262
220.000301413840.0011513391460.002001988
230.000315116850.0011650541470.002015714
240.000328819860.0011787681480.002029440
250.000342522870.0011924831490.002043166
260.000356225880.0012061981500.002056893
270.000369929890.0012199131510.002070620
280.000383633900.0012336291520.002084347
290.000397336910.0012473441530.002098074
300.000411041920.0012610601540.002111801
310.000424745930.0012747761550.002125529
320.000438449940.0012884921560.002139257
330.000452154950.0013022081570.002152985
340.000465859960.0013159251580.002166713
350.000479564970.0013296411590.002180441
360.000493269980.0013433581600.002194169
370.000506974990.0013570751610.002207898
380.0005206801000.0013707921620.002221627
390.0005343861010.0013845101630.002235356
400.0005480921020.0013982271640.002249085
410.0005617981030.0014119451650.002262815

March 16, 2020 524 Bulletin No. 2020–12
420.0005755041040.0014256631660.002276544
430.0005892111050.0014393811670.002290274
440.0006029171060.0014531001680.002304004
450.0006166241070.0014668181690.002317734
460.0006303311080.0014805371700.002331465
470.0006440391090.0014942561710.002345195
480.0006577461100.0015079751720.002358926
490.0006714541110.0015216941730.002372657
500.0006851611120.0015354141740.002386388
510.0006988691130.0015491331750.002400120
520.0007125781140.0015628531760.002413851
530.0007262861150.0015765731770.002427583
540.0007399951160.0015902931780.002441315
550.0007537031170.0016040141790.002455047
560.0007674121180.0016177341800.002468779
570.0007811211190.0016314551810.002482511
580.0007948311200.0016451761820.002496244
590.0008085401210.0016588971830.002509977
600.0008222501220.0016726191840.002523710
610.0008359601230.001686340
620.0008496701240.001700062

Bulletin No. 2020–12 525 March 16, 2020
366 Day Year
0.5% Compound Rate 184 Days
DaysFactorDaysFactorDaysFactor
10.000013661630.0008610201250.001709097
20.000027323640.0008746931260.001722782
30.000040984650.0008883661270.001736467
40.000054646660.0009020401280.001750152
50.000068308670.0009157131290.001763837
60.000081970680.0009293871300.001777522
70.000095632690.0009430611310.001791208
80.000109295700.0009567351320.001804893
90.000122958710.0009704091330.001818579
100.000136620720.0009840841340.001832265
110.000150283730.0009977581350.001845951
120.000163947740.0010114331360.001859638
130.000177610750.0010251081370.001873324
140.000191274760.0010387831380.001887011
150.000204938770.0010524591390.001900698
160.000218602780.0010661341400.001914385
170.000232266790.0010798101410.001928073
180.000245930800.0010934861420.001941760
190.000259595810.0011071621430.001955448
200.000273260820.0011208391440.001969136
210.000286924830.0011345151450.001982824
220.000300590840.0011481921460.001996512
230.000314255850.0011618691470.002010201
240.000327920860.0011755461480.002023889
250.000341586870.0011892231490.002037578
260.000355252880.0012029001500.002051267
270.000368918890.0012165781510.002064957
280.000382584900.0012302561520.002078646
290.000396251910.0012439341530.002092336
300.000409917920.0012576121540.002106025
310.000423584930.0012712911550.002119715
320.000437251940.0012849691560.002133405
330.000450918950.0012986481570.002147096
340.000464586960.0013123271580.002160786
350.000478253970.0013260061590.002174477
360.000491921980.0013396851600.002188168
370.000505589990.0013533651610.002201859
380.0005192571000.0013670441620.002215550
390.0005329251010.0013807241630.002229242
400.0005465941020.0013944041640.002242933
410.0005602621030.0014080851650.002256625
420.0005739311040.0014217651660.002270317

March 16, 2020 526 Bulletin No. 2020–12
430.0005876001050.0014354461670.002284010
440.0006012691060.0014491271680.002297702
450.0006149391070.0014628081690.002311395
460.0006286081080.0014764891700.002325087
470.0006422781090.0014901701710.002338780
480.0006559481100.0015038521720.002352473
490.0006696181110.0015175331730.002366167
500.0006832891120.0015312151740.002379860
510.0006969591130.0015448971750.002393554
520.0007106301140.0015585801760.002407248
530.0007243011150.0015722621770.002420942
540.0007379721160.0015859451780.002434636
550.0007516431170.0015996281790.002448331
560.0007653151180.0016133111800.002462025
570.0007789861190.0016269941810.002475720
580.0007926581200.0016406781820.002489415
590.0008063301210.0016543611830.002503110
600.0008200031220.0016680451840.002516806
610.0008336751230.001681729
620.0008473481240.001695413

Bulletin No. 2020–12 527 March 16, 2020
TABLE OF INTEREST RATES
PERIODS BEFORE JUL. 1, 1975 - PERIODS ENDING DEC. 31, 1986
OVERPAYMENTS AND UNDERPAYMENTS
PERIODRATEIn 1995-1 C.B.
DAILY RATE TABLE
Before Jul. 1, 19756%Table 2,pg. 557
Jul.1,1975–Jan.31,19769%Table4,pg.559
Feb.1,1976–Jan.31,19787%Table3,pg.558
Feb.1,1978–Jan.31,19806%Table2,pg.557
Feb.1,1980–Jan.31,198212%Table5,pg.560
Feb.1,1982–Dec.31,198220%Table6,pg.560
Jan.1,1983–Jun.30,198316%Table37,pg.591
Jul.1,1983–Dec.31,198311%Table27,pg.581
Jan.1,1984–Jun.30,198411%Table75,pg.629
Jul.1,1984–Dec.31,198411%Table75,pg.629
Jan.1,1985–Jun.30,198513%Table31,pg.585
Jul.1,1985–Dec.31,198511%Table27,pg.581
Jan.1,1986–Jun.30,198610%Table25,pg.579
Jul.1,1986–Dec.31,19869%Table23,pg.577
TABLE OF INTEREST RATES
FROM JAN. 1, 1987 - Dec. 31, 1998
OVERPAYMENTSUNDERPAYMENTS
1995-1 C.B.1995-1 C.B. RATE
RATETABLEPGRATETABLEPG
Jan.1,1987–Mar.31,19878%215759%23577
Apr.1,1987–Jun.30,19878%215759%23577
Jul.1,1987–Sep.30,19878%215759%23577
Oct.1,1987–Dec.31,19879%2357710%25579
Jan.1,1988–Mar.31,198810%7362711%75629
Apr.1,1988–Jun.30,19889%7162510%73627
Jul.1,1988–Sep.30,19889%7162510%73627
Oct.1,1988–Dec.31,198810%7362711%75629
Jan.1,1989–Mar.31,198910%2557911%27581
Apr.1,1989–Jun.30,198911%2758112%29583
Jul.1,1989–Sep.30,198911%2758112%29583
Oct.1,1989–Dec.31,198910%2557911%27581
Jan.1,1990–Mar.31,199010%2557911%27581
Apr.1,1990–Jun.30,199010%2557911%27581
Jul.1,1990–Sep.30,199010%2557911%27581
Oct.1,1990–Dec.31,199010%2557911%27581
Jan.1,1991–Mar.31,199110%2557911%27581

March 16, 2020 528 Bulletin No. 2020–12
Apr.1,1991–Jun.30,19919%2357710%25579
Jul.1,1991–Sep.30,19919%2357710%25579
Oct.1,1991–Dec.31,19919%2357710%25579
Jan.1,1992–Mar.31,19928%696239%71625
Apr.1,1992–Jun.30,19927%676218%69623
Jul.1,1992–Sep.30,19927%676218%69623
Oct.1,1992–Dec.31,19926%656197%67621
Jan.1,1993–Mar.31,19936%175717%19573
Apr.1,1993–Jun.30,19936%175717%19573
Jul.1,1993–Sep.30,19936%175717%19573
Oct.1,1993–Dec.31,19936%175717%19573
Jan.1,1994–Mar.31,19946%175717%19573
Apr.1,1994–Jun.30,19946%175717%19573
Jul.1,1994–Sep.30,19947%195738%21575
Oct.1,1994–Dec.31,19948%215759%23577
Jan.1,1995–Mar.31,19958%215759%23577
Apr.1,1995–Jun.30,19959%2357710%25579
Jul.1,1995–Sep.30,19958%215759%23577
Oct.1,1995–Dec.31,19958%215759%23577
Jan.1,1996–Mar.31,19968%696239%71625
Apr.1,1996–Jun.30,19967%676218%69623
Jul.1,1996–Sep.30,19968%696239%71625
Oct.1,1996–Dec.31,19968%696239%71625
Jan.1,1997–Mar.31,19978%215759%23577
Apr.1,1997–Jun.30,19978%215759%23577
Jul.1,1997–Sep.30,19978%215759%23577
Oct.1,1997–Dec.31,19978%215759%23577
Jan.1,1998–Mar.31,19988%215759%23577
Apr.1,1998–Jun.30,19987%195738%21575
Jul.1,1998–Sep.30,19987%195738%21575
Oct.1,1998–Dec.31,19987%195738%21575

Bulletin No. 2020–12 529 March 16, 2020
TABLE OF INTEREST RATES
FROM JANUARY 1, 1999 - PRESENT
NONCORPORATE OVERPAYMENTS AND UNDERPAYMENTS
1995-1 C.B.
RATETABLEPAGE
Jan.1,1999–Mar.31,19997%19573
Apr.1,1999–Jun.30,19998%21575
Jul.1,1999–Sep.30,19998%21575
Oct.1,1999–Dec.31,19998%21575
Jan.1,2000–Mar.31,20008%69623
Apr.1,2000–Jun.30,20009%71625
Jul.1,2000–Sep.30,20009%71625
Oct.1,2000–Dec.31,20009%71625
Jan.1,2001–Mar.31,20019%23577
Apr.1,2001–Jun.30,20018%21575
Jul.1,2001–Sep.30,20017%19573
Oct.1,2001–Dec.31,20017%19573
Jan.1,2002–Mar.31,20026%17571
Apr.1,2002–Jun.30,20026%17571
Jul.1,2002–Sep.30,20026%17571
Oct.1,2002–Dec.31,20026%17571
Jan.1,2003–Mar.31,20035%15569
Apr.1,2003–Jun.30,20035%15569
Jul.1,2003–Sep.30,20035%15569
Oct.1,2003–Dec.31,20034%13567
Jan.1,2004–Mar.31,20044%61615
Apr.1,2004–Jun.30,20045%63617
Jul.1,2004–Sep.30,20044%61615
Oct.1,2004–Dec.31,20045%63617
Jan.1,2005–Mar.31,20055%15569
Apr.1,2005–Jun.30,20056%17571
Jul.1,2005–Sep.30,20056%17571
Oct.1,2005–Dec.31,20057%19573
Jan.1,2006–Mar.31,20067%19573
Apr.1,2006–Jun.30,20067%19573
Jul.1,2006–Sep.30,20068%21575
Oct.1,2006–Dec.31,20068%21575
Jan.1,2007–Mar.31,20078%21575
Apr.1,2007–Jun.30,20078%21575
Jul.1,2007–Sep.30,20078%21575
Oct.1,2007–Dec.31,20078%21575
Jan.1,2008–Mar.31,20087%67621
Apr.1,2008–Jun.30,20086%65619
Jul.1,2008–Sep.30,20085%63617
Oct.1,2008–Dec.31,20086%65619
Jan.1,2009–Mar.31,20095%15569

March 16, 2020 530 Bulletin No. 2020–12
Apr.1,2009–Jun.30,20094%13567
Jul.1,2009–Sep.30,20094%13567
Oct.1,2009–Dec.31,20094%13567
Jan.1,2010–Mar.31,20104%13567
Apr.1,2010–Jun.30,20104%13567
Jul.1,2010–Sep.30,20104%13567
Oct.1,2010–Dec.31,20104%13567
Jan.1,2011–Mar.31,20113%11565
Apr.1,2011—-Jun.30,20114%13567
Jul.1,2011-—Sep.30,20114%13567
Oct.1,2011—-Dec.31,20113%11565
Jan.1,2012—-Mar.31,20123%59613
Apr.1,2012—-Jun.30,20123%59613
Jul.1,2012—-Sep.30,20123%59613
Oct.1,2012—-Dec.31,20123%59613
Jan.1,2013—-Mar.31,20133%11565
Apr.1,2013—-Jun.30,20133%11565
Jul.1,2013—-Sep.30,20133%11565
Oct.1,2013—-Dec.31,20133%11565
Jan.1,2014—-Mar.31,20143%11565
Apr.1,2014—-Jun.30,20143%11565
Jul.1,2014—-Sep.30,20143%11565
Oct.1,2014—-Dec.31,20143%11565
Jan.1,2015—-Mar.31,20153%11565
Apr.1,2015—-Jun.30,20153%11565
Jul.1,2015—-Sep.30,20153%11565
Oct.1.2015—-Dec.31,20153%11565
Jan.1,2016—-Mar.31,20163%59613
Apr.1,2016—-Jun.30,20164%61615
Jul.1,2016—-Sep.30,20164%61615
Oct.1,2016—-Dec.31,20164%61615
Jan.1,2017—-Mar.31,20174%13567
Apr.1,2017—-Jun.30,20174%13567
Jul.1,2017—-Sep.30,20174%13567
Oct.1,2017—-Dec.31,20174%13567
Jan.1,2018—-Mar.31,20184%13567
Apr.1,2018–Jun.30,20185%15569
Jul.1,2018–Sep.30,20185%15569
Oct.1,2018–Dec.31,20185%15569
Jan.1,2019–Mar.31,20196%17571
Apr.1,2019–Jun.30,20196%17571
Jul.1,2019–Sep.30,20195%15569
Oct.1,2019–Dec. 31,20195%15569
Jan.1,2020–Mar.31, 20205%63617
Apr.1,2020–Jun.30,20205%63617

Bulletin No. 2020–12 531 March 16, 2020
TABLE OF INTEREST RATES FROM JANUARY 1, 1999 - PRESENT
CORPORATE OVERPAYMENTS AND UNDERPAYMENTS
OVERPAYMENTSUNDERPAYMENTS
1995-1 C.B.1995-1 C.B.
RATETABLEPGRATETABLEPG
Jan.1,1999–Mar.31,19996%175717%19573
Apr.1,1999–Jun.30,19997%195738%21575
Jul.1,1999–Sep.30,19997%195738%21575
Oct.1,1999–Dec.31,19997%195738%21575
Jan.1,2000–Mar.31,20007%676218%69623
Apr.1,2000–Jun.30,20008%696239%71625
Jul.1,2000–Sep.30,20008%696239%71625
Oct.1,2000–Dec.31,20008%696239%71625
Jan.1,2001–Mar.31,20018%215759%23577
Apr.1,2001–Jun.30,20017%195738%21575
Jul.1,2001–Sep.30,20016%175717%19573
Oct.1,2001–Dec.31,20016%175717%19573
Jan.1,2002–Mar.31,20025%155696%17571
Apr.1,2002–Jun.30,20025%155696%17571
Jul.1,2002–Sep.30,20025%155696%17571
Oct.1,2002–Dec.31,20025%155696%17571
Jan.1,2003–Mar.31,20034%135675%15569
Apr.1,2003–Jun.30,20034%135675%15569
Jul.1,2003–Sep.30,20034%135675%15569
Oct.1,2003–Dec.31,20033%115654%13567
Jan.1,2004–Mar.31,20043%596134%61615
Apr.1,2004–Jun.30,20044%616155%63617
Jul.1,2004–Sep.30,20043%596134%61615
Oct.1,2004–Dec.31,20044%616155%63617
Jan.1,2005–Mar.31,20054%135675%15569
Apr.1,2005–Jun.30,20055%155696%17571
Jul.1,2005–Sep.30,20055%155696%17571
Oct.1,2005–Dec.31,20056%175717%19573
Jan.1,2006–Mar.31,20066%175717%19573
Apr.1,2006–Jun.30,20066%175717%19573
Jul.1,2006–Sep.30,20067%195738%21575
Oct.1,2006–Dec.31,20067%195738%21575
Jan.1,2007–Mar.31,20077%195738%21575
Apr.1,2007–Jun.30,20077%195738%21575
Jul.1,2007–Sep.30,20077%195738%21575
Oct.1,2007–Dec.31,20077%195738%21575
Jan.1,2008–Mar.31,20086%656197%67621
Apr.1,2008–Jun.30,20085%636176%65619
Jul.1,2008–Sep.30,20084%616155%63617
Oct.1,2008–Dec.31,20085%636176%65619
Jan.1,2009–Mar.31,20094%135675%15569

March 16, 2020 532 Bulletin No. 2020–12
Apr.1,2009–Jun.30,20093%115654%13567
Jul.1,2009–Sep.30,20093%115654%13567
Oct.1,2009–Dec.31,20093%115654%13567
Jan.1,2010–Mar.31,20103%115654%13567
Apr.1,2010–Jun.30,20103%115654%13567
Jul.1,2010–Sep.30,20103%115654%13567
Oct.1,2010–Dec.31,20103%115654%13567
Jan.1,2011–Mar.31,20112%95633%11565
Apr.1,2011–Jun.30,20113%115654%13567
Jul.1,2011–Sep.30,20113%115654%13567
Oct.1,2011–Dec.31,20112%95633%11565
Jan.1,2012–Mar.31,20122%576113%59613
Apr.1,2012–Jun.30,20122%576113%59613
Jul.1,2012–Sep.30,20122%576113%59613
Oct.1,2012–Dec.31,20122%576113%59613
Jan.1,2013–Mar.31,20132%95633%11565
Apr.1,2013–Jun.30,20132%95633%11565
Jul.1,2013–Sep.30,20132%95633%11565
Oct.1,2013–Dec.31,20132%95633%11565
Jan.1,2014–Mar.31,20142%95633%11565
Apr.1,2014–Jun.30,20142%95633%11565
Jul.1,2014–Sep.30,20142%95633%11565
Oct.1,2014–Dec.31,20142%95633%11565
Jan.1,2015–Mar.31,20152%95633%11565
Apr.1,2015–Jun.30,20152%95633%11565
Jul.1,2015–Sep.30,20152%95633%11565
Oct.1,2015–Dec.31,20152%95633%11565
Jan.1,2016–Mar.31,20162%576113%59613
Apr.1,2016–Jun.30,20163%596134%61615
Jul.1,2016–Sep.30,20163%596134%61615
Oct.1,2016–Dec.31,20163%596134%61615
Jan.1,2017–Mar.31,20173%115654%13567
Apr.1,2017–Jun.30,20173%115654%13567
Jul.1,2017–Sep.30,20173%115654%13567
Oct.1,2017–Dec.31,,20173%115654%13567
Jan.1,2018–Mar.31,20183%115654%13567
Apr.1,2018–Jun.30,20184%135675%15569
Jul.1,2018–Sep.30,20184%135675%15569
Oct.1,2018–Dec.31,20184%135675%15569
Jan.1,2019–Mar.31,20195%155696%17571
Apr.1,2019–Jun.30,20195%155696%17571
Jul.1,2019–Sep.30,20194%135675%15569
Oct.1,2019–Dec.31,20194%135675%15569
Jan.1,2020–Mar. 31,20204%616155%63617
Apr.1,2020–Jun.30,20204%616155%63617

Bulletin No. 2020–12 533 March 16, 2020
TABLE OF INTEREST RATES FOR LARGE CORPORATE UNDERPAYMENTS
FROM JANUARY 1, 1991 - PRESENT
1995-1 C.B.
RATETABLEPG
Jan.1,1991–Mar.31,199113%31585
Apr.1,1991–Jun.30,199112%29583
Jul.1,1991–Sep.30,199112%29583
Oct.1,1991–Dec.31,199112%29583
Jan.1,1992–Mar.31,199211%75629
Apr.1,1992–Jun.30,199210%73627
Jul.1,1992–Sep.30,199210%73627
Oct.1,1992–Dec.31,19929%71625
Jan.1,1993–Mar.31,19939%23577
Apr.1,1993–Jun.30,19939%23577
Jul.1,1993–Sep.30,19939%23577
Oct.1,1993–Dec.31,19939%23577
Jan.1,1994–Mar.31,19949%23577
Apr.1,1994–Jun.30,19949%23577
Jul.1,1994–Sep.30,199410%25579
Oct.1,1994–Dec.31,199411%27581
Jan.1,1995–Mar.31,199511%27581
Apr.1,1995–Jun.30,199512%29583
Jul.1,1995–Sep.30,199511%27581
Oct.1,1995–Dec.31,199511%27581
Jan.1,1996–Mar.31,199611%75629
Apr.1,1996–Jun.30,199610%73627
Jul.1,1996–Sep.30,199611%75629
Oct.1,1996–Dec.31,199611%75629
Jan.1,1997–Mar.31,199711%27581
Apr.1,1997–Jun.30,199711%27581
Jul.1,1997–Sep.30,199711%27581
Oct.1,1997–Dec.31,199711%27581
Jan.1,1998–Mar.31,199811%27581
Apr.1,1998–Jun.30,199810%25579
Jul.1,1998–Sep.30,199810%25579
Oct.1,1998–Dec.31,199810%25579
Jan.1,1999–Mar.31,19999%23577
Apr.1,1999–Jun.30,199910%25579
Jul.1,1999–Sep.30,199910%25579
Oct.1,1999–Dec.31,199910%25579
Jan.1,2000–Mar.31,200010%73627
Apr.1,2000–Jun.30,200011%75629
Jul.1,2000–Sep.30,200011%75629
Oct.1,2000–Dec.31,200011%75629
Jan.1,2001–Mar.31,200111%27581

March 16, 2020 534 Bulletin No. 2020–12
Apr.1,2001–Jun.30,200110%25579
Jul.1,2001–Sep.30,20019%23577
Oct.1,2001–Dec.31,20019%23577
Jan.1,2002–Mar.31,20028%21575
Apr.1,2002–Jun.30,20028%21575
Jul.1,2002–Sep.30,20028%21575
Oct.1,2002–Dec.31,20028%21575
Jan.1,2003–Mar.31,20037%19573
Apr.1,2003–Jun.30,20037%19573
Jul.1,2003–Sep.30,20037%19573
Oct.1,2003–Dec.31,20036%17571
Jan.1,2004–Mar.31,20046%65619
Apr.1,2004–Jun.30,20047%67621
Jul.1,2004–Sep.30,20046%65619
Oct.1,2004–Dec.31,20047%67621
Jan.1,2005–Mar.31,20057%19573
Apr.1,2005–Jun.30,20058%21575
Jul.1,2005–Sep.30,20058%21575
Oct.1,2005–Dec.31,20059%23577
Jan.1,2006–Mar.31,20069%23577
Apr.1,2006–Jun.30,20069%23577
Jul.1,2006–Sep.30,200610%25579
Oct.1,2006–Dec.31,200610%25579
Jan.1,2007–Mar.31,200710%25579
Apr.1,2007–Jun.30,200710%25579
Jul.1,2007–Sep.30,200710%25579
Oct.1,2007–Dec.31,200710%25579
Jan.1,2008–Mar.31,20089%71625
Apr.1,2008–Jun.30,20088%69623
Jul.1,2008–Sep.30,20087%67621
Oct.1,2008–Dec.31,20088%69623
Jan.1,2009–Mar.31,20097%19573
Apr.1,2009–Jun.30,20096%17571
Jul.1,2009–Sep.30,20096%17571
Oct.1,2009–Dec.31,20096%17571
Jan.1,2010–Mar.31,20106%17571
Apr.1,2010–Jun.30,20106%17571
Jul.1,2010–Sep.30,20106%17571
Oct.1,2010–Dec.31,20106%17571
Jan.1,2011–Mar.31,20115%15569
Apr.1,2011–Jun.30,20116%17571
Jul.1,2011–Sep.30,20116%17571
Oct.1,2011–Dec.31,20115%15569
Jan.1,2012–Mar.31,20125%63617
Apr.1,2012–Jun.30,20125%63617

Bulletin No. 2020–12 535 March 16, 2020
Jul.1,2012–Sep.30,20125%63617
Oct.1,2012–Dec.31,20125%63617
Jan.1,2013–Mar.31,20135%15569
Apr.1,2013–Jun.30,20135%15569
Jul.1,2013–Sep.30,20135%15569
Oct.1,2013–Dec.31,20135%15569
Jan.1,2014–Mar.31,20145%15569
Apr.1,2014–Jun.30,20145%15569
Jul.1,2014–Sep.30,20145%15569
Oct.1,2014–Dec.31,20145%15569
Jan.1,2015–Mar.31,20155%15569
Apr.1,2015–Jun.30,20155%15569
Jul.1,2015–Sep.30,20155%15569
Oct.1,2015–Dec.31,20155%15569
Jan.1,2016–Mar.31,20165%63617
Apr.1,2016–Jun.30,20166%65619
Jul.1,2016–Sep.30,20166%65619
Oct.1,2016–Dec.31,20166%65619
Jan.1,2017–Mar.31,20176%17571
Apr.1,2017–Jun.30,20176%17571
Jul.1,2017–Sep.30,20176%17571
Oct.1,2017–Dec.31,20176%17571
Jan.1,2018–Mar.31,20186%17571
Apr.1,2018–Jun.30,20187%19573
Jul.1,2018–Sep.30,20187%19573
Oct.1,2018–Dec.31,20187%19573
Jan.1,2019–Mar.31,20198%21575
Apr.1,2019–Jun.30,20198%21575
Jul.1,2019–Sep.30,20197%19573
Oct.1,2019–Dec.31,20197%19573
Jan.1,2020–Mar.31,20207%67621
Apr.1,2020–Jun. 30,20207%67621

March 16, 2020 536 Bulletin No. 2020–12
TABLE OF INTEREST RATES FOR CORPORATE
OVERPAYMENTS EXCEEDING $10,000
FROM JANUARY 1, 1995 – PRESENT
1995-1 C.B.
RATETABLEPG
Jan.1,1995–Mar.31,19956.5%18572
Apr.1,1995–Jun.30,19957.5%20574
Jul.1,1995–Sep.30,19956.5%18572
Oct.1,1995–Dec.31,19956.5%18572
Jan.1,1996–Mar.31,19966.5%66620
Apr.1,1996–Jun.30,19965.5%64618
Jul.1,1996–Sep.30,19966.5%66620
Oct.1,1996–Dec.31,19966.5%66620
Jan.1,1997–Mar.31,19976.5%18572
Apr.1,1997–Jun.30,19976.5%18572
Jul.1,1997–Sep.30,19976.5%18572
Oct.1,1997–Dec.31,19976.5%18572
Jan.1,1998–Mar.31,19986.5%18572
Apr.1,1998–Jun.30,19985.5%16570
Jul.1.1998–Sep.30,19985.5%16570
Oct.1,1998–Dec.31,19985.5%16570
Jan.1,1999–Mar.31,19994.5%14568
Apr.1,1999–Jun.30,19995.5%16570
Jul.1,1999–Sep.30,19995.5%16570
Oct.1,1999–Dec.31,19995.5%16570
Jan.1,2000–Mar.31,20005.5%64618
Apr.1,2000–Jun.30,20006.5%66620
Jul.1,2000–Sep.30,20006.5%66620
Oct.1,2000–Dec.31,20006.5%66620
Jan.1,2001–Mar.31,20016.5%18572
Apr.1,2001–Jun.30,20015.5%16570
Jul.1,2001–Sep.30,20014.5%14568
Oct.1,2001–Dec.31,20014.5%14568
Jan.1,2002–Mar.31,20023.5%12566
Apr.1,2002–Jun.30,20023.5%12566
Jul.1,2002–Sep.30,20023.5%12566
Oct.1,2002–Dec.31,20023.5%12566
Jan.1,2003–Mar.31,20032.5%10564
Apr.1,2003–Jun.30,20032.5%10564
Jul.1,2003–Sep.30,20032.5%10564
Oct.1,2003–Dec.31,20031.5%8562
Jan.1,2004–Mar.31,20041.5%56610
Apr.1,2004–Jun.30,20042.5%58612

Bulletin No. 2020–12 537 March 16, 2020
Jul.1,2004–Sep.30,20041.5%56610
Oct.1,2004–Dec.31,20042.5%58612
Jan.1,2005–Mar.31,20052.5%10564
Apr.1,2005–Jun.30,20053.5%12566
Jul.1,2005–Sep.30,20053.5%12566
Oct.1,2005–Dec.31,20054.5%14568
Jan.1,2006–Mar.31,20064.5%14568
Apr.1,2006–Jun.30,20064.5%14568
Jul.1,2006–Sep.30,20065.5%16570
Oct.1,2006–Dec.31,20065.5%16570
Jan.1,2007–Mar.31,20075.5%16570
Apr.1,2007–Jun.30,20075.5%16570
Jul.1,2007–Sep.30,20075.5%16570
Oct.1,2007–Dec.31,20075.5%16570
Jan.1,2008–Mar.31,20084.5%62616
Apr.1,2008–Jun.30,20083.5%60614
Jul.1,2008–Sep.30,20082.5%58612
Oct.1,2008–Dec.31,20083.5%60614
Jan.1,2009–Mar.31,20092.5%10564
Apr.1,2009–Jun.30,20091.5%8562
Jul.1,2009–Sep.30,20091.5%8562
Oct.1,2009–Dec.31,20091.5%8562
Jan.1,2010–Mar.31,20101.5%8562
Apr.1,2010–Jun.30,20101.5%8562
Jul.1,2010–Sep.30,20101.5%8562
Oct.1,2010–Dec.31,20101.5%8562
Jan.1,2011–Mar.31,20110.5%*
Apr.1,2011–Jun.30,20111.5%8562
Jul.1,2011–Sep.30,20111.5%8562
Oct.1,2011–Dec.31,20110.5%*
Jan.1,2012–Mar.31,20120.5%*
Apr.1,2012–Jun.30,20120.5%*
Jul.1,2012–Sep.30,20120.5%*
Oct.1,2012–Dec.31,20120.5%*
Jan.1,2013–Mar.31,20130.5%*
Apr.1,2013–Jun.30,20130.5%*
Jul.1,2013–Sep.30,20130.5%*
Oct.1,2013–Dec.31,20130.5%*
Jan.1,2014–Mar.31,20140.5%*
Apr.1,2014–Jun.30,20140.5%*
Jul.1,2014–Sep.30,20140.5%*
Oct.1,2014–Dec.31,20140.5%*

March 16, 2020 538 Bulletin No. 2020–12
Jan.1,2015–Mar.31,20150.5%*
Apr.1,2015–Jun.30,20150.5%*
Jul.1,2015–Sep.30,20150.5%*
Oct.1,2015–Dec.31,20150.5%*
Jan.1,2016–Mar.31,20160.5%*
Apr.1,2016–Jun.30,20161.5%56610
Jul.1,2016–Sep.30,20161.5%56610
Oct.1,2016–Dec.31,20161.5%56610
Jan.1,2017–Mar.31,20171.5%8562
Apr.1,2017–Jun.30,20171.5%8562
Jul.1,2017–Sep.30,20171.5%8562
Oct.1,2017–Dec.31,20171.5%8562
Jan.1,2018–Mar.31,20181.5%8562
Apr.1,2018–Jun.30,20182.5%10564
Jul.1,2018–Sep.30,20182.5%10564
Oct.1,2018–Dec.31,20182.5%10564
Jan.1,2019–Mar.31,20193.5%12566
Apr.1,2019–Jun.30,20193.5%12566
Jul.1,2019–Sep.30,20192.5%10564
Oct.1,2019–Dec. 31,20192.5%10564
Jan.1,2020–Mar.31,20202.5%58612
Apr.1,2020–Jun.30,20202.5%58612
* The asterisk reflects the interest factors for daily compound interest for annual rates of 0.5 percent published in Appendix A of
this Revenue Ruling.

Bulletin No. 2020–12 539 March 16, 2020
Part III
26 CFR 601.105: Examination of returns and claims
for refund, credit, or abatement; determination of
correct tax liability.
(Also: Part I, Sections 6048 and 6677)
Rev. Proc. 2020-17
SECTION 1. PURPOSE
This revenue procedure provides an
exemption from the information reporting
requirements under section 6048 of the
Internal Revenue Code for certain U.S.
citizen and resident individuals (U.S. indi-
viduals) with respect to their transactions
with, and ownership of, certain tax-fa-
vored foreign retirement trusts and certain
tax-favored foreign nonretirement savings
trusts, as described in sections 5.03 and
5.04 of this revenue procedure (collective-
ly, applicable tax-favored foreign trusts).
Only eligible individuals described in sec-
tion 5.02 of this revenue procedure (gen-
erally U.S. individuals who have been
compliant with respect to their income tax
obligations related to such trusts) may rely
on this revenue procedure.
In addition, this revenue procedure
establishes procedures for eligible indi-
viduals to request abatement of penalties
that have been assessed or a refund of
penalties that have been paid pursuant to
section 6677 for the individuals’ failure
to comply with the information reporting
requirements of section 6048 with respect
to an applicable tax-favored foreign trust.
Eligible individuals may request relief
from section 6677 penalties, subject to the
limitations of sections 6402 and 6511, in
accordance with section 6 of this revenue
procedure.
The Department of the Treasury
(Treasury Department) and the Internal
Revenue Service (IRS) intend to issue
proposed regulations that would modi-
fy the requirements under section 6048
to exclude eligible individuals’ transac-
tions with, or ownership of, these ap-
plicable tax-favored foreign trusts from
information reporting. The Treasury De-
partment and the IRS request comments
about these and other similar types of
foreign trusts that should be considered
for an exemption from section 6048 re-
porting.
SECTION 2. BACKGROUND
.01 Section 6048, enacted in 1996, gen-
erally requires annual information report-
ing of a United States person’s transfers of
money or other property to, ownership of,
and distributions from, foreign trusts, and
section 6677 imposes penalties on United
States persons for failing to comply with
section 6048. As relevant here, section
6048(a)(3)(B)(ii) provides an exception
from reporting with respect to transfers
to foreign compensatory trusts described
in section 402(b), 404(a)(4), or 404A. In
addition, section 6048(d)(4) authorizes
the Secretary to suspend or modify any re-
quirement under section 6048 if the Unit-
ed States has no significant tax interest in
obtaining the required information. The
Treasury Department and the IRS have
previously issued guidance providing that
reporting is not required under section
6048(c) with respect to distributions from
certain foreign compensatory trusts, pro-
vided that the recipient of the distribution
reports the distribution as compensation
income on an applicable federal income
tax return, and that information reporting
under section 6048(a) through (c) is not
required with respect to certain Canadian
retirement plans. See Section V of Notice
97-34, 1997-1 C.B. 422; Rev. Proc. 2014-
55, 2014-44 I.R.B. 753. Section 6048 in-
formation reporting is provided on Form
3520, Annual Return To Report Transac-
tions With Foreign Trusts and Receipt of
Certain Foreign Gifts, and Form 3520-A,
Annual Information Return of Foreign
Trust With a U.S. Owner (Under section
6048(b)).
.02 Section 6038D, enacted in 2010,
and the regulations thereunder generally
require a specified person, which includes
a U.S. citizen or resident alien, to report
any interest in a specified foreign financial
asset provided that the aggregate value of
all such assets exceeds certain thresholds.
See §1.6038D-2(a). Section 6038D(d) im-
poses a penalty for failing to comply. A
specified foreign financial asset includes
interests in certain foreign retirement,
pension, and non-retirement savings funds
or accounts. See §§1.6038D-3. Section
6038D information reporting is provid-
ed on Form 8938, Statement of Specified
Foreign Financial Assets. A specified per-
son who is required to report information
under section 6038D on Form 8938 may
also be required to report similar identi-
fying information under section 6048 on
Form 3520 or Form 3520-A. For more
information about section 6038D infor-
mation reporting, see https://www.irs.gov/
businesses/corporations/basic-questions-
and-answers-on-form-8938.
SECTION 3. INFORMATION
REPORTING UNDER SECTION 6048
WITH RESPECT TO APPLICABLE
TAX-FAVORED FOREIGN TRUSTS
The Treasury Department and the IRS
have determined that, because applicable
tax-favored foreign trusts generally are
subject to written restrictions, such as
contribution limitations, conditions for
withdrawal, and information reporting,
which are imposed under the laws of the
country in which the trust is established,
and because U.S. individuals with an in-
terest in these trusts may be required un-
der section 6038D to separately report in-
formation about their interests in accounts
held by, or through, these trusts, it would
be appropriate to exempt U.S. individuals
from the requirement to provide infor-
mation about these trusts under section
6048. Accordingly, pursuant to the au-
thority granted under section 6048(d)(4),
the Treasury Department and the IRS are
exempting from section 6048 information
reporting an eligible individual’s transac-
tions with, or ownership of, an applicable
tax-favored foreign trust. As a result, the
penalties under section 6677 do not apply
to eligible individuals who fail to report
transactions with, or ownership of, these
trusts under section 6048. In addition, eli-
gible individuals who have been assessed
penalties under section 6677 for failing to
comply with section 6048 with respect to
these trusts may, subject to the limitations
of sections 6402 and 6511, request abate-
ment of penalties that have been assessed
or refund of penalties that have been paid,
by following the procedures described in
section 6 of this revenue procedure.
This revenue procedure does not af-
fect any reporting obligations under sec-
tion 6038D or under any other provision

March 16, 2020 540 Bulletin No. 2020–12
of U.S. law, including the requirement to
file FinCEN Form 114, Report of Foreign
Bank and Financial Accounts (FBAR),
imposed by 31 U.S.C. section 5314 and
the regulations thereunder. This revenue
procedure does not affect previously is-
sued guidance providing an exception
from section 6048 reporting with respect
to distributions from certain foreign
compensatory trusts under Section V
of Notice 97-34, and an exception from
all information reporting requirements
under section 6048 with respect to cer-
tain Canadian retirement plans under
Revenue Procedure 2014-55. See also
section 6048(a)(3)(B)(ii) (providing an
exception from reporting with respect to
transfers to foreign compensatory trusts
described in section 402(b), 404(a)(4), or
404A).
SECTION 4. SCOPE
Sections 3 and 6 of this revenue proce-
dure apply to any eligible individual who,
but for this revenue procedure, is (or was)
required to report a transaction with, or
ownership of, an applicable tax-favored
foreign trust under section 6048.
SECTION 5. DEFINITIONS
.01 Applicable tax-favored foreign
trust. For purposes of this revenue pro-
cedure, an applicable tax-favored foreign
trust means a tax-favored foreign retire-
ment trust as defined under section 5.03
of this revenue procedure or a tax-favored
foreign non-retirement savings trust as
defined under section 5.04 of this revenue
procedure.
.02 Eligible Individual. For purposes
of this revenue procedure, an eligible in-
dividual means an individual who is, or
at any time was, a U.S. citizen or resident
(within the meaning of section 7701(a)
(30)(A)) and who, for any period during
which an amount of tax may be assessed
under section 6501 (without regard to sec-
tion 6501(c)(8)), is compliant (or comes
into compliance) with all requirements
for filing a U.S. federal income tax return
(or returns) covering the period such indi-
vidual was a U.S. citizen or resident, and
to the extent required under U.S. tax law,
has reported as income any contributions
to, earnings of, or distributions from, an
applicable tax-favored foreign trust on the
applicable return (including on an amend-
ed return).
.03 Tax-Favored Foreign Retirement
Trust. For purposes of this revenue pro-
cedure, a tax-favored foreign retirement
trust means a foreign trust for U.S. tax
purposes that is created, organized, or
otherwise established under the laws of
a foreign jurisdiction (the trust’s juris-
diction) as a trust, plan, fund, scheme, or
other arrangement (collectively, a trust)
to operate exclusively or almost exclu-
sively to provide, or to earn income for
the provision of, pension or retirement
benefits and ancillary or incidental ben-
efits, and that meets the following re-
quirements established by the laws of the
trust’s jurisdiction.
(1) The trust is generally exempt from
income tax or is otherwise tax-favored un-
der the laws of the trust’s jurisdiction. For
purposes of this revenue procedure, a trust
is tax-favored if it meets any one or more
of the following conditions: (i) contribu-
tions to the trust that would otherwise be
subject to tax are deductible or excluded
from income, are taxed at a reduced rate,
give rise to a tax credit, or are otherwise
eligible for another tax benefit (such as a
government subsidy or contribution); and
(ii) taxation of investment income earned
by the trust is deferred until distribution
or the investment income is taxed at a re-
duced rate.
(2) Annual information reporting with
respect to the trust (or of its participants or
beneficiaries) is provided, or is otherwise
available, to the relevant tax authorities in
the trust’s jurisdiction.
(3) Only contributions with respect to
income earned from the performance of
personal services are permitted.
(4) Contributions to the trust are lim-
ited by a percentage of earned income of
the participant, are subject to an annual
limit of $50,000 or less to the trust, or are
subject to a lifetime limit of $1,000,000 or
less to the trust. These contribution limits
are determined using the U.S. Treasury
Bureau of Fiscal Service foreign curren-
cy conversion rate on the last day of the
tax year (available at https://www.fiscal.
treasury.gov/reports-statements/treasury-
reporting-rates-exchange).
(5) Withdrawals, distributions, or
payments from the trust are conditioned
upon reaching a specified retirement age,
disability, or death, or penalties apply to
withdrawals, distributions, or payments
made before such conditions are met. A
trust that otherwise meets the require-
ments of this section 5.03(5), but that
allows withdrawals, distributions, or pay-
ments for in-service loans or for reasons
such as hardship, educational purposes, or
the purchase of a primary residence, will
be treated as meeting the requirements of
this section 5.03(5).
(6) In the case of an employer-main-
tained trust, (i) the trust is nondiscrimi-
natory insofar as a wide range of employ-
ees, including rank and file employees,
must be eligible to make or receive con-
tributions or accrue benefits under the
terms of the trust (alone or in combina-
tion with other comparable plans), (ii)
the trust (alone or in combination with
other comparable plans) actually pro-
vides significant benefits for a substan-
tial majority of eligible employees, and
(iii) the benefits actually provided under
the trust to eligible employees are non-
discriminatory.
A trust that otherwise meets the re-
quirements of this section 5.03 will not
fail to be treated as a tax-favored foreign
retirement trust within the meaning of
this section solely because it may receive
a rollover of assets or funds transferred
from another tax-favored foreign retire-
ment trust established and operated under
the laws of the same jurisdiction, provided
that the trust transferring assets or funds
also meets the requirements of this section
5.03.
.04 Tax-Favored Foreign Non-Retire-
ment Savings Trust. For purposes of this
revenue procedure, a tax-favored foreign
non-retirement savings trust means a for-
eign trust for U.S. tax purposes that is cre-
ated, organized, or otherwise established
under the laws of a foreign jurisdiction
(the trust’s jurisdiction) as a trust, plan,
fund, scheme, or other arrangement (col-
lectively, a trust) to operate exclusively or
almost exclusively to provide, or to earn
income for the provision of, medical, dis-
ability, or educational benefits, and that
meets the following requirements estab-
lished by the laws of the trust’s jurisdic-
tion.
(1) The trust is generally exempt from
income tax or is otherwise tax-favored un-

Bulletin No. 2020–12 541 March 16, 2020
der the laws of the trust’s jurisdiction as
defined in section 5.03(1) of this revenue
procedure.
(2) Annual information reporting with
respect to the trust (or about the beneficia-
ry or participant) is provided, or is other-
wise available, to the relevant tax authori-
ties in the trust’s jurisdiction.
(3) Contributions to the trust are
limited to $10,000 or less annually or
$200,000 or less on a lifetime basis, de-
termined using the U.S. Treasury Bureau
of Fiscal Service foreign currency conver-
sion rate on the last day of the tax year
(available at https://www.fiscal.treasury.
gov/reports-statements/treasury-report-
ing-rates-exchange).
(4) Withdrawals, distributions, or pay-
ments from the trust are conditioned upon
the provision of medical, disability, or
educational benefits, or apply penalties to
withdrawals, distributions, or payments
made before such conditions are met.
A trust that otherwise meets the re-
quirements of this section 5.04 will not
fail to be treated as a tax-favored foreign
non-retirement savings trust within the
meaning of this section 5.04 solely be-
cause it may receive a rollover of assets
or funds transferred from another tax-fa-
vored foreign non-retirement savings
trust established and operated under the
laws of the same jurisdiction, provided
that the trust transferring assets or funds
also meets the requirements of this sec-
tion 5.04.
SECTION 6. PROCEDURES FOR
REQUESTING ABATEMENT
OR REFUND OF SECTION 6677
PENALTIES
.01 In General. Subject to the limita-
tions of sections 6402 and 6511, eligible in-
dividuals who have been assessed a penalty
under section 6677 for failing to comply
with section 6048 with respect to an appli-
cable tax-favored foreign trust (without re-
gard to whether such failure was due to rea-
sonable cause under section 6677(d)) and
who wish to obtain relief under this reve-
nue procedure may request an abatement
of the penalty assessed, or a refund of the
penalty paid, under section 6677 by filing
Form 843, Claim for Refund and Request
for Abatement. Eligible individuals are not
precluded from requesting relief under any
other applicable relief provisions.
Under section 6402(a), the Secretary
is authorized to credit, within the applica-
ble period of limitations, an overpayment
against any liability in respect of an inter-
nal revenue tax of the person who made
the overpayment, and must generally re-
fund any balance to that person, subject to
the requirements of section 6402(c), (d),
(e), and (f) (providing for offset for past-
due support and certain debts to federal
and state governments). Section 6511(b)
(1) provides that no credit or refund shall
be allowed or made after the expiration
of the period of limitation prescribed in
section 6511(a), unless the taxpayer filed
a claim for credit or refund within that pe-
riod.
.02 Where to File. A Form 843 request-
ing relief under this revenue procedure
should be mailed to Internal Revenue Ser-
vice, Ogden, UT 84201-0027.
.03 Filing Requirements for Form 843.
Eligible individuals should complete the
form and write the statement “Relief pur-
suant to Revenue Procedure 2020-17” on
Line 7 of the form. In addition, Line 7
should include an explanation of how the
eligible individual meets each relevant re-
quirement under section 5.02 of this rev-
enue procedure and how the foreign trust
meets each relevant requirement under sec-
tion 5.03 or 5.04 of this revenue procedure.
SECTION 7. EFFECTIVE DATE
This revenue procedure is effective as
of the date this revenue procedure is pub-
lished in the Internal Revenue Bulletin,
and applies to all prior open taxable years,
subject to the limitations of section 6511.
SECTION 8. DRAFTING
INFORMATION
The principal author of this revenue
procedure is Tracy M. Villecco of the Of-
fice of Associate Chief Counsel (Interna-
tional). For further information regarding
this revenue procedure contact Tracy Vil-
lecco or Lara Banjanin at (202) 317-6933
(not a toll-free number).

March 16, 2020 542 Bulletin No. 2020–12
Part IV
Notice of Proposed
Rulemaking
Meals and Entertainment
Expenses Under
Section 274
REG-100814-19
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemak-
ing.
SUMMARY: This document contains
proposed regulations that provide guid-
ance under section 274 of the Internal
Revenue Code (Code) regarding certain
statutory amendments made to section
274 by 2017 legislation. Specifically, the
proposed regulations address the elimi-
nation of the deduction under section 274
for expenditures related to entertainment,
amusement, or recreation activities, and
provide guidance to determine whether an
activity is of a type generally considered
to be entertainment. The proposed regu-
lations also address the limitation on the
deduction of food and beverage expenses
under section 274(k) and (n), including
the applicability of the exceptions under
section 274(e)(2), (3), (4), (7), (8), and (9).
These proposed regulations affect taxpay-
ers who pay or incur expenses for meals or
entertainment in taxable years beginning
after December 31, 2017. This document
also provides notice of a public hearing on
these proposed regulations.
DATES: Written or electronic comments
must be received by April 13, 2020. Out-
lines of topics to be discussed at the pub-
lic hearing scheduled for April 7, 2020,
at 10 a.m. must be received by April 13,
2020. If no outlines are received by April
13, 2020.
ADDRESSES: Submit electronic sub-
missions via the Federal Rulemaking
Portal at www.regulations.gov (indicate
IRS and REG-100814-19) by following
the online instructions for submitting
comments. Once submitted to the Feder-
al Rulemaking Portal, comments cannot
be edited or withdrawn. The Department
of the Treasury (Treasury Department)
and the Internal Revenue Service (IRS)
will publish for public availability any
comment received to their public dock-
et, whether submitted electronically or in
hard copy. Send hard copy submissions to:
CC:PA:LPD:PR (REG-100814-19), room
5203, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington,
DC 20044.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed
regulations, call Patrick Clinton of the Of-
fice of Associate Chief Counsel (Income
Tax and Accounting), (202) 317-7005;
concerning the submission of comments,
the hearing, or to be placed on the build-
ing access list to attend the hearing, call
Regina Johnson, (202) 317-6901 (not toll-
free numbers), or email fdms.database@
irscounsel.treas.gov.
SUPPLEMENTARY INFORMATION:
Background
I. Statutory Framework
This document contains proposed reg-
ulations under section 274 of the Code
that amend the Income Tax Regulations
(26 CFR part 1). Section 274 was added
to the Code by section 4 of the Revenue
Act of 1962, Public Law 87-834 (76 Stat.
960) and has been amended numerous
times over the years. In general, section
274 limits or disallows deductions for cer-
tain meal and entertainment expenditures
that otherwise would be allowable under
chapter 1 of the Code, primarily under
section 162(a), which allows a deduction
for ordinary and necessary expenses paid
or incurred during the taxable year in car-
rying on any trade or business.
On December 22, 2017, section 274
was amended by section 13304 of Public
Law 115-97 (131 Stat. 2054), commonly
referred to as the Tax Cuts and Jobs Act,
(TCJA) to revise the rules for deducting
expenditures for meals and entertainment,
effective for amounts paid or incurred af-
ter December 31, 2017.
II. Business Meals and Entertainment
Section 274(a)(1)(A) generally dis-
allows a deduction for any item with re-
spect to an activity of a type considered to
constitute entertainment, amusement, or
recreation (entertainment expenditures).
However, prior to the amendment by the
TCJA, section 274(a)(1)(A) provided ex-
ceptions to that disallowance if the tax-
payer established that: (1) the item was
directly related to the active conduct of
the taxpayer’s trade or business (directly
related exception), or (2) in the case of
an item directly preceding or following
a substantial and bona fide business dis-
cussion (including business meetings at
a convention or otherwise), the item was
associated with the active conduct of the
taxpayer’s trade or business (business
discussion exception). Section 274(e)(1)
through (9) also provides exceptions to
the rule in section 274(a) that disallows a
deduction for entertainment expenditures.
The TCJA did not change the application
of the section 274(e) exceptions to enter-
tainment expenditures.
Section 274(a)(1)(B) disallows a de-
duction for any item with respect to a fa-
cility used in connection with an activity
referred to in section 274(a)(1)(A). Sec-
tion 274(a)(2) provides that, for purposes
of applying section 274(a)(1), dues or fees
to any social, athletic, or sporting club or
organization shall be treated as items with
respect to facilities. Section 274(a)(3) dis-
allows a deduction for amounts paid or
incurred for membership in any club orga-
nized for business, pleasure, recreation, or
other social purpose.
Prior to amendment by the TCJA, sec-
tion 274(n)(1) generally limited the de-
duction of food or beverage expenses and
entertainment expenditures to 50 percent
of the amount that otherwise would have
been allowable. Thus, under prior law,
taxpayers could deduct 50 percent of meal
expenses and 50 percent of entertainment
expenditures that met the directly related
or business discussion exception. Distin-

Bulletin No. 2020–12 543 March 16, 2020
guishing between meal expenses and en-
tertainment expenditures was unnecessary
for purposes of the 50 percent limitation.
Section 13304(a)(1) of the TCJA re-
pealed the directly related and business
discussion exceptions to the general prohi-
bition on deducting entertainment expen-
ditures in section 274(a)(1)(A). Also, sec-
tion 13304(a)(2)(D) of the TCJA amended
the 50 percent limitation in section 274(n)
(1) to remove the reference to entertain-
ment expenditures. Thus, entertainment
expenditures are no longer deductible un-
less one of the nine exceptions to section
274(a) in section 274(e) applies.
While the TCJA eliminated the deduc-
tion for entertainment expenses, Congress
did not amend the provisions relating to
the deductibility of business meals. Thus,
taxpayers generally may continue to de-
duct 50 percent of the food and bever-
age expenses associated with operating
their trade or business, including meals
consumed by employees on work trav-
el. See H.R. Rep. No. 115-466, at 407
(2017) (Conf. Rep.). However, as before
the TCJA, no deduction is allowed for the
expense of any food or beverages unless
(a) the expense is not lavish or extrava-
gant under the circumstances, and (b) the
taxpayer (or an employee of the taxpayer)
is present at the furnishing of the food or
beverages. See section 274(k).
Prior to amendment by the TCJA,
section 274(d) provided substantiation
requirements for deductions under sec-
tion 162 or 212 for any traveling expense
(including meals and lodging while away
from home), and for any item with respect
to an activity of a type considered to con-
stitute entertainment, amusement, or rec-
reation or with respect to a facility used
in connection with such activity. Section
13304(a)(2)(A) of the TCJA repealed the
substantiation requirements for entertain-
ment expenditures. Traveling expenses
(including meals and lodging while away
from home), however, remain subject to
the section 274(d) substantiation require-
ments. Food and beverage expenses are
subject to the substantiation requirements
under section 162 and the requirement to
maintain books and records under section
6001.
On October 15, 2018, the Treasury De-
partment and the IRS published Notice
2018-76, 2018-42 I.R.B. 599, providing
transitional guidance on the deductibility
of expenses for certain business meals and
requesting comments for future guidance
to further clarify the treatment of business
meal expenses and entertainment expen-
ditures under section 274. Under the no-
tice, taxpayers may deduct 50 percent of
an otherwise allowable business meal ex-
pense if: (1) the expense is an ordinary and
necessary expense under section 162(a)
paid or incurred during the taxable year
in carrying on any trade or business; (2)
the expense is not lavish or extravagant
under the circumstances; (3) the taxpayer,
or an employee of the taxpayer, is present
at the furnishing of the food or beverages;
(4) the food and beverages are provided
to a current or potential business custom-
er, client, consultant, or similar business
contact; and (5) in the case of food and
beverages provided during or at an enter-
tainment activity, the food and beverages
are purchased separately from the enter-
tainment, or the cost of the food and bev-
erages is stated separately from the cost
of the entertainment on one or more bills,
invoices, or receipts. The notice provides
that the entertainment disallowance rule
may not be circumvented through inflat-
ing the amount charged for food and bev-
erages.
The Treasury Department and the IRS
received approximately 25 comments in
response to Notice 2018-76. All comments
were considered and are available at www.
regulations.gov or upon request. Several
of the comments addressing the notice
are summarized in the Explanation of
Provisions. However, comments recom-
mending statutory revisions or addressing
provisions outside the scope of these pro-
posed regulations are not discussed in this
preamble. The Treasury Department and
the IRS continue to study comments on is-
sues related to section 274 that are beyond
the scope of these proposed regulations
and may discuss those comments that are
beyond the scope of these regulations in
the final regulations or future guidance.
III. Travel Meals
Section 274(n)(1) generally limits the
deduction of food or beverage expenses,
including expenses for food or beverag-
es consumed while away from home, to
50 percent of the amount that otherwise
would have been allowable, unless one
of the six exceptions to section 274(n) in
section 274(e) applies. However, no de-
duction is allowed for the expense of any
food or beverages unless (a) the expense
is not lavish or extravagant under the cir-
cumstances, and (b) the taxpayer (or an
employee of the taxpayer) is present at the
furnishing of the food or beverages. See
section 274(k). Section 274(d) provides
substantiation requirements for traveling
expenses, including food and beverage ex-
penses incurred while on business travel
away from home.
Section 274(m) provides additional
limitations on travel expenses. Section
274(m)(1) generally limits the deduction
for luxury water transportation expenses
to twice the highest federal per diem rate
allowable at the time of travel, and section
274(m)(2) generally disallows a deduction
for expenses for travel as a form of educa-
tion. Section 274(m)(3) provides that no
deduction is allowed under chapter 1 of
the Code (other than section 217) for trav-
el expenses paid or incurred with respect
to a spouse, dependent, or other individual
accompanying the taxpayer (or an officer
or employee of the taxpayer) on business
travel, unless: (A) the spouse, dependent,
or other individual is an employee of the
taxpayer, (B) the travel of the spouse, de-
pendent, or other individual is for a bona
fide business purpose, and (C) such ex-
penses would otherwise be deductible by
the spouse, dependent, or other individual.
IV. Employer-Provided Meals
Prior to amendment by the TCJA, sec-
tion 274(n)(1) generally limited the de-
duction for food or beverage expenses to
50 percent of the amount that otherwise
would have been allowable, subject to an
exception in section 274(n)(2)(B) in the
case of an expense for food or beverages
that is excludable from the gross income
of the recipient under section 132 by rea-
son of section 132(e), relating to de mini-
mis fringes. Section 132(e)(1) defines “de
minimis fringe” as any property or service
the value of which is, after taking into ac-
count the frequency with which similar
fringes are provided by the employer to its
employees, so small as to make account-
ing for it unreasonable or administratively
impracticable. Section 132(e)(2) provides

March 16, 2020 544 Bulletin No. 2020–12
that the operation by an employer of any
eating facility for employees is treated
as a de minimis fringe if (1) the facility
is located on or near the business prem-
ises of the employer, and (2) revenue de-
rived from the facility normally equals or
exceeds the direct operating costs of the
facility. Thus, under prior law, employers
generally were allowed to fully deduct
an expense for food or beverages provid-
ed to their employees if the amount was
excludable from the gross income of the
employee as a de minimis fringe. How-
ever, the TCJA repealed section 274(n)
(2)(B), meaning that expenses for food or
beverages that are de minimis fringes un-
der section 132(e) are no longer excepted
from section 274(n)(1). As a result, these
expenses, like other food or beverage ex-
penses generally, are subject to the 50 per-
cent limitation unless one of the six excep-
tions to section 274(n) in section 274(e)
applies.
V. Section 274(e) Exceptions to Section
274(k) and (n)
Section 274(k)(2) and (n)(2)(A) pro-
vide that the limitations on the deduction
of food or beverage expenses in sections
274(k)(1) and (n)(1), respectively, do not
apply if the expense is described in para-
graph (2), (3), (4), (7), (8), or (9) of sec-
tion 274(e). Expenses described in para-
graph (1), (5), and (6) of section 274(e)
are not exceptions to the limitations on the
deduction of food or beverage expenses
in section 274(k)(1) and (n)(1). However,
they are exceptions to the disallowance on
deduction of entertainment expenses in
section 274(a).
Section 274(e)(2) applies to expens-
es for goods, services, and facilities to
the extent that the expenses are treated
as compensation to the recipient. Section
274(e)(3) applies to expenses incurred
by a taxpayer in connection with the per-
formance of services for an employer or
other person under a reimbursement or
other expense allowance arrangement.
Section 274(e)(4) applies to expenses for
recreational, social, or similar activities
for employees. Section 274(e)(7) applies
to expenses for goods, services, and facil-
ities made available to the general public.
Section 274(e)(8) applies to expenses for
goods or services that are sold by the tax-
payer in a bona fide transaction for ade-
quate and full consideration in money or
money’s worth. Section 274(e)(9) applies
to expenses for goods, services, and fa-
cilities to the extent that the expenses are
treated as income to a person other than
an employee.
Explanation of Provisions
The proposed regulations describe and
clarify the statutory requirements of sec-
tion 274(a), 274(k), and 274(n), as well
as the applicability of certain exceptions
under section 274(e) to food or beverage
expenses. To implement the TCJA’s dis-
allowance of entertainment expenditures
under section 274(a), the proposed regula-
tions add a new section at §1.274-11 (pro-
posed §1.274-11) for entertainment expen-
ditures paid or incurred after December
31, 2017. The proposed regulations also
add a new section at §1.274-12 (proposed
§1.274-12) to address food or beverage
expenses under section 274(k) and 274(n)
paid or incurred after December 31, 2017,
including the application of the exceptions
in section 274(e)(2), (3), (4), (7), (8), and
(9). Specifically, proposed §1.274-12 ad-
dresses expenses for business meals as
described in Notice 2018-76, as well as
expenses for other meals including travel
meals and employer-provided meals.
1. Entertainment Expenditures
A. In General
Proposed §1.274-11 restates the statu-
tory rules under section 274(a), including
the application of the entertainment de-
duction disallowance rule to dues or fees
to any social, athletic, or sporting club or
organization. The proposed regulations
substantially incorporate the existing defi-
nition of entertainment in §1.274-2(b)
(1), with minor modifications to remove
outdated language. The proposed regula-
tions also confirm that the nine exceptions
in section 274(e) continue to apply to en-
tertainment expenditures under section
274(a). Finally, as described further in
part I.B. of this Explanation of Provisions,
the proposed regulations provide that
for purposes of section 274(a), the term
“entertainment” does not include food or
beverages unless the food or beverages
are provided at or during an entertainment
activity and the costs of the food or bev-
erages are not separately stated from the
entertainment costs.
Taxpayers may continue to rely upon
the existing rules in §1.274-2, to the ex-
tent applicable and not superseded by the
TCJA, for entertainment expenditures
paid or incurred after December 31, 2017.
B. Separately Stated Food or Beverages
not Entertainment
The proposed regulations substantially
incorporate the guidance in Notice 2018-
76 to distinguish between entertainment
expenditures and food or beverage ex-
penses in the context of business meals
provided at or during an entertainment
activity. In addition, the proposed regu-
lations generally apply the guidance in
Notice 2018-76 to all food or beverages,
including travel meals and employer-pro-
vided meals, provided at or during an en-
tertainment activity. However, in response
to a comment on the notice, the proposed
regulations further clarify the rules appli-
cable to food or beverages provided at or
during an entertainment activity.
Notice 2018-76 explains that in the case
of food and beverages provided during or
at an entertainment activity, the taxpayer
may deduct 50 percent of an otherwise
allowable business expense if the food
and beverages are purchased separately
from the entertainment, or if the cost of
the food and beverages is stated separate-
ly from the cost of the entertainment on
one or more bills, invoices, or receipts.
The notice provides that the entertainment
disallowance rule may not be circumvent-
ed through inflating the amount charged
for food and beverages. Taxpayers may
continue to rely on the guidance in Notice
2018-76 until these proposed regulations
are finalized.
One commenter asked for clarification
of the requirement in the notice that the
entertainment disallowance rule may not
be circumvented by inflating the amount
charged for food and beverages on one
or more bills, invoices, or receipts. In re-
sponse, the proposed regulations provide
that the amount charged for food or bev-
erages on a bill, invoice, or receipt must
reflect the venue’s usual selling cost for
those items if they were to be purchased

Bulletin No. 2020–12 545 March 16, 2020
separately from the entertainment, or
must approximate the reasonable val-
ue of those items. Further, the proposed
regulations provide that unless food or
beverages provided at or during an enter-
tainment activity are purchased separate-
ly from the entertainment, or the cost of
the food or beverages is stated separate-
ly from the cost of the entertainment on
one or more bills, invoices, or receipts,
no allocation can be made and the entire
amount is a nondeductible entertainment
expenditure. Finally, in accordance with
the TCJA’s amendments to section 274(a)
(1) specifically repealing the “directly re-
lated” and “business discussion” excep-
tions to the general disallowance rule for
entertainment expenditures, the proposed
regulations clarify that the entertainment
disallowance rule applies whether or not
the expenditure for the activity is related
to or associated with the active conduct
of the taxpayer’s trade or business. The
Treasury Department and the IRS request
comments on these rules.
2. Food or Beverage Expenses
A. Business Meal Expenses
As noted earlier in this Explanation
of Provisions, the proposed regulations
substantially incorporate the guidance in
Notice 2018-76 addressing business meals
provided during or at an entertainment
activity. The proposed regulations also
incorporate other statutory requirements
taxpayers must meet to deduct 50 per-
cent of an otherwise allowable business
meal expense. Specifically, the expense
must not be lavish or extravagant under
the circumstances and the taxpayer, or an
employee of the taxpayer, must be present
at the furnishing of the food or beverages.
The proposed regulations also address
the general requirement in Notice 2018-76
that the food and beverages be provided to
a business contact, which was described in
the notice as a “current or potential busi-
ness customer, client, consultant, or sim-
ilar business contact.” This requirement
is to ensure that the meal expenses are di-
rectly connected with or pertaining to the
taxpayer’s trade or business, as required
under section 162. One commenter on
Notice 2018-76 requested a definition of
“potential business contact,” suggesting
that the term could be interpreted broad-
ly to include almost anyone. In response
to the comment, and to conform the rule
more closely to the trade or business re-
quirement in section 162, the proposed
regulations follow the definition of “busi-
ness associate” as currently provided in
§1.274-2(b)(2)(iii). Thus, the proposed
regulations provide that the food or bev-
erages must be provided to a “person with
whom the taxpayer could reasonably ex-
pect to engage or deal in the active conduct
of the taxpayer’s trade or business such as
the taxpayer’s customer, client, supplier,
employee, agent, partner, or professional
adviser, whether established or prospec-
tive.” In addition to clarifying this defini-
tion for purposes of determining whether
a business meal expense is deductible, the
proposed regulations apply this standard
to the deduction of food or beverage ex-
penses generally. In particular, the pro-
posed regulations include employees as
a type of business associate, making the
standard applicable to employer-provided
meals as well as to situations in which a
taxpayer provides meals to both employ-
ees and non-employee business associates
at the same event. The Treasury Depart-
ment and the IRS request comments on
this standard.
B. Travel Meal Expenses
Although the TCJA did not specifi-
cally amend the rules for travel expens-
es, the proposed regulations are intended
to provide comprehensive rules for food
and beverage expenses and thus apply the
general rules for meal expenses from No-
tice 2018-76, as revised in these proposed
regulations, to travel meals. In addition,
the proposed regulations incorporate the
substantiation requirements in section
274(d), unchanged by the TCJA, to travel
meals. Finally, the proposed regulations
apply the limitations in section 274(m)(3)
to expenses for food or beverages paid or
incurred while on travel for spouses, de-
pendents or other individuals accompany-
ing the taxpayer (or an officer or employee
of the taxpayer) on business travel. These
limitations do not apply to deductions
for moving expenses under section 217.
However, the TCJA amended section 217
to suspend the deduction for moving ex-
penses for taxable years beginning after
December 31, 2017, and before January
1, 2026, except with respect to certain
members of the Armed Forces. Thus, the
proposed regulations revise the reference
to section 217 to reflect that amendment.
C. Other Food or Beverage Expenses
The proposed regulations apply the
business meal guidance in Notice 2018-76,
as revised in these proposed regulations,
to food or beverage expenses generally.
Under section 274(n)(1), the deduction
for food or beverage expenses general-
ly is limited to 50 percent of the amount
that would otherwise be allowable. Prior
to the TCJA, under section 274(n)(2)(B),
expenses for food or beverages that were
excludable from employee income as
de minimis fringe benefits under section
132(e) were not subject to the 50 percent
deduction limitation under section 274(n)
(1) and could be fully deducted. The TCJA
repealed section 274(n)(2)(B) so that ex-
penses for food or beverages excludable
from employee income under section
132(e) are subject to the section 274(n)(1)
deduction limitation unless another excep-
tion under section 274(n)(2) applies.
Under section 274(k)(1), in order for
food or beverage expenses to be deduct-
ible the food or beverages must not be lav-
ish or extravagant under the circumstanc-
es and the taxpayer or an employee of the
taxpayer must be present at the furnishing
of the food or beverages. However, as
discussed in part E of this Explanation of
Provisions, section 274(e) provides six
exceptions to the limitations on the de-
duction of food or beverages in section
274(k)(1) and 274(n)(1) and the proposed
regulations explain how those exceptions
apply.
In response to comments that the Trea-
sury Department and the IRS received af-
ter enactment of the TCJA, the proposed
regulations address several scenarios in-
volving the deductibility of food or bev-
erage expenses. For example, commenters
requested guidance on the deductibility of
expenses for: (i) food or beverages provid-
ed to food service workers who consume
the food or beverages while working in a
restaurant or catering business; (ii) snacks
available to employees in a pantry, break
room, or copy room; (iii) refreshments
provided by a real estate agent at an open

March 16, 2020 546 Bulletin No. 2020–12
house; (iv) food or beverages provided by
a seasonal camp to camp counselors; (v)
food or beverages provided to employees
at a company cafeteria; and (vi) food or
beverages provided at company holiday
parties and picnics. The Treasury Depart-
ment and the IRS considered all com-
ments received and provide examples in
proposed §1.274-12(c) to address many of
the factual scenarios raised by comment-
ers.
D. Definitions
The proposed regulations provide that
the deduction limitation rules generally
apply to all food and beverages, whether
characterized as meals, snacks, or other
types of food or beverage items. In ad-
dition, unless one of the six exceptions
under section 274(n)(2)(A) applies, the
deduction limitations apply regardless of
whether the food or beverages are treated
as de minimis fringe benefits under section
132(e).
The proposed regulations define food
or beverage expenses to mean the cost of
food or beverages, including any deliv-
ery fees, tips, and sales tax. In the case
of employer-provided meals at an eating
facility, food or beverage expenses do not
include expenses for the operation of the
eating facility such as salaries of employ-
ees preparing and serving meals, and other
overhead costs.
E. Section 274(e) Exceptions to Section
274(k) and (n)
Section 274(k)(2) and (n)(2)(A) pro-
vide that the limitations on deductions in
section 274(k)(1) and (n)(1), respectively,
do not apply to any expense described in
section 274(e)(2), (3), (4), (7), (8), and
(9). The proposed regulations, therefore,
provide that the deduction limitations are
not applicable to expenditures for busi-
ness meals, travel meals, or other food or
beverages that fall within one of these ex-
ceptions.
i. Expenses Treated as Compensation
under Section 274(e)(2) or (e)(9)
Pursuant to section 274(e)(2), the pro-
posed regulations provide that the lim-
itations in section 274(k)(1) and (n)(1)
do not apply to expenditures for food or
beverages of an employee of the taxpayer
(including food or beverages of a spouse,
dependent or other individual accompa-
nying the employee on travel described in
section 274(m)(3)), to the extent the tax-
payer treats the expenses as compensation
to the employee on the taxpayer’s income
tax return as originally filed, and as wages
to the employee for purposes of withhold-
ing under chapter 24 of the Code relating
to collection of income tax at source on
wages.
Pursuant to section 274(e)(9), the pro-
posed regulations provide that the limita-
tions in section 274(k)(1) and (n)(1) do
not apply to expenses for food or bever-
ages of a person who is not an employee
of the taxpayer to the extent the expenses
are includible in the gross income of the
recipient of the food or beverages as com-
pensation for services rendered, or as a
prize or award under section 74.
The Treasury Department and the
IRS are aware that some taxpayers may
attempt to claim a full deduction under
section 274(e)(2) or (e)(9) by including a
value that is less than the amount required
to be included under §1.61-21, which pro-
vides the rules for valuation of fringe ben-
efits, or by purportedly including a value
of zero, as compensation and as wages to
the employee, or as includible in gross in-
come by a person who is not an employee
of the taxpayer. The proposed regulations
therefore provide that expenses for food or
beverages with a value that is less than the
amount required to be included in gross
income under §1.61-21, or for which the
amount required to be included in gross
income is zero, will not be considered as
having been treated as compensation and
as wages to the employee, or as includi-
ble in gross income by a recipient of the
food or beverages who is not an employ-
ee of the taxpayer for purposes of section
274(e)(2) and (e)(9).
ii. Reimbursed Food or Beverage
Expenses
Pursuant to section 274(e)(3), the pro-
posed regulations provide that in the case
of expenses for food or beverages paid or
incurred by one person in connection with
the performance of services for another
person (whether or not the other person
is an employer) under a reimbursement
or other expense allowance arrangement,
the limitations on deductions in section
274(k)(1) and (n)(1) apply either to the
person who makes the expenditure or to
the person who actually bears the expense,
but not to both. Section 274(e)(3)(B) pro-
vides that if the services are performed for
a person other than an employer, such as
by an independent contractor, the excep-
tion in section 274(e)(3) applies only if
the taxpayer, in this case, the independent
contractor, accounts, to the extent provid-
ed by section 274(d), to such person. The
proposed regulations therefore provide
that the deduction limitations in section
274(k)(1) and (n)(1) apply to an indepen-
dent contractor unless, under a reimburse-
ment or other expense allowance arrange-
ment, the contractor accounts to the client
or customer with substantiation that satis-
fies the requirements of section 274(d).
iii. Recreational Expenses for Employees
Pursuant to section 274(e)(4), the pro-
posed regulations provide that any food
or beverage expense paid or incurred by a
taxpayer for a recreational, social, or sim-
ilar activity, primarily for the benefit of
the taxpayer’s employees, is not subject to
the deduction limitations in section 274(k)
(1) and (n)(1). However, activities that
discriminate in favor of highly compen-
sated employees, officers, shareholders
or others who own a 10-percent or greater
interest in the business are not considered
paid or incurred primarily for the benefit
of employees.
The Treasury Department and the IRS
have received several questions and com-
ments on the deductibility of food or bev-
erage expenses for recreational, social and
similar activities for employees. Many
commenters requested confirmation that
food or beverage expenses for company
holiday parties and picnics that do not dis-
criminate in favor of highly compensated
employees are not subject to the deduction
limitations in section 274(k)(1) and (n)(1)
because the exception in section 274(e)(4)
applies. Commenters also suggested that
expenses for snacks and beverages avail-
able to all employees in a pantry, break
room, or copy room are not subject to the
deduction limitations in section 274(k)(1)
and (n)(1) because the exception in sec-
tion 274(e)(4) applies.
In response to the questions and com-
ments received, the proposed regulations

Bulletin No. 2020–12 547 March 16, 2020
confirm the rules in the existing regula-
tions that the exception in section 274(e)
(4) applies to food or beverage expenses
for company holiday parties, annual pic-
nics, or summer outings that do not dis-
criminate in favor of highly compensated
employees. However, an example in the
proposed regulations demonstrates the
section 274(e)(4) exception does not ap-
ply to free food or beverages provided in
a break room because the mere provision
or availability of food or beverages is not
a recreational, social, or similar activity,
despite the fact that employees may in-
cidentally socialize while they are in the
break room.
In addition, the proposed regulations
provide that the exception in section
274(e)(4) does not apply to food or bev-
erage expenses that are excludable under
section 119 as meals provided for the con-
venience of the employer. Because these
food or beverages are, by definition, fur-
nished for the employer’s convenience,
they cannot also be primarily for the ben-
efit of the employees, even if some social
activity occurs during the provision of
food or beverages.
iv. Items Available to the Public
Pursuant to section 274(e)(7), the pro-
posed regulations provide that any food
or beverage expense of a taxpayer is not
subject to the deduction limitations in
section 274(k)(1) and (n)(1) to the extent
the food or beverages are made available
to the general public. In addition, the pro-
posed regulations provide that this excep-
tion applies to the entire amount of the
expense for food or beverages provided
to employees if similar food or beverag-
es are provided by the employer to, and
are primarily consumed by, the general
public. For this purpose, “primarily con-
sumed” means greater than 50 percent of
actual or reasonably estimated consump-
tion, and “general public” includes, but
is not limited to, customers, clients, and
visitors. The proposed regulations also
provide that the general public does not
include employees, partners, or indepen-
dent contractors of the taxpayer. Further,
an exclusive list of guests also is not con-
sidered the general public. See Churchill
Downs, Inc. v. Commissioner, 307 F.3d
423 (6th Cir. 2002).
Commenters have requested guidance
as to whether the exception in section
274(e)(7) for food or beverages made
available by the taxpayer to the general
public applies in various situations. The
Treasury Department and the IRS consid-
ered these comments and included exam-
ples in the proposed regulations to illus-
trate that the exception in section 274(e)
(7) generally applies to the entire food or
beverage expense if the food or beverag-
es are primarily consumed by the general
public.
v. Goods or Services Sold to Customers
Pursuant to section 274(e)(8), the pro-
posed regulations provide that any ex-
pense for food or beverages that are sold
to customers in a bona fide transaction
for an adequate and full consideration in
money or money’s worth is not subject to
the deduction limitations in section 274(k)
(1) and (n)(1). The proposed regulations
clarify that money or money’s worth does
not include payment through services pro-
vided.
The Treasury Department and the IRS
are aware of concerns raised by comment-
ers that it is a common business practice
for employers of restaurant and food
service workers to provide food or bev-
erages at no cost or at a discount to their
employees. The Joint Committee on Tax-
ation’s Bluebook on the TCJA explains
that amendments made by the TCJA to
limit the deduction for expenses of the
employer associated with providing food
or beverages to employees through an em-
ployer-operated eating facility that meets
the requirements of section 132(e)(2) do
not affect other exceptions to the 50-per-
cent limitation on deductions for food or
beverage expenses. For example, a restau-
rant or catering business may continue to
deduct 100 percent of its costs for food or
beverage items, purchased in connection
with preparing and providing meals to its
paying customers, which are also con-
sumed at the worksite by employees who
work in the employer’s restaurant or ca-
tering business. Joint Committee on Tax-
ation, General Explanation of Public Law
115-97 (JCS-1-18), at 186 n.940 and at
188 n.956, December 2018. The proposed
regulations incorporate this interpretation
of the exception in section 274(e)(8).
Finally, the proposed regulations pro-
vide that for purposes of the section 274(e)
(8) exception to the deduction limitations
in section 274(k)(1) and (n)(1), the term
“customer” includes anyone who is sold
food or beverages in a bona fide transac-
tion for an adequate and full consideration
in money or money’s worth. For example,
employees of the taxpayer are customers
when they purchase food or beverages
from the taxpayer in a bona fide transac-
tion for arm’s length, fair market value
prices.
Request for Comments
The Treasury Department and the IRS
request comments on all aspects of these
proposed regulations. Regarding enter-
tainment expenditures under proposed
§1.274-11, comments are specifically re-
quested about the definition of entertain-
ment, including how to distinguish enter-
tainment from advertising and travel; the
use of the objective test in defining enter-
tainment activities; the application of the
exceptions in section 274(e) to entertain-
ment expenditures; and whether addition-
al issues or examples should be addressed
in the regulations. Regarding food or bev-
erage expenses under proposed §1.274-
12, comments are specifically requested
about the changes from Notice 2018-76 to
the rules for business meals; the applica-
tion of the exceptions in section 274(e) to
food or beverage expenses; and whether
additional issues or examples should be
addressed in the regulations.
Proposed Applicability Date
Section 7805(b)(1)(A) and (B) of the
Code generally provide that no tempo-
rary, proposed, or final regulation relating
to the internal revenue laws may apply to
any taxable period ending before the earli-
est of (A) the date on which the regulation
is filed with the Federal Register, or (B)
in the case of a final regulation, the date on
which a proposed or temporary regulation
to which the final regulation relates was
filed with the Federal Register.
Consistent with authority provided by
section 7805(b)(1)(A), these regulations
are proposed to apply for taxable years
that begin on or after the date of publica-
tion of a Treasury decision adopting these

March 16, 2020 548 Bulletin No. 2020–12
rules as final regulations in the Federal
Register. Pending the issuance of the final
regulations, a taxpayer may rely on these
proposed regulations for entertainment ex-
penditures and food or beverage expenses,
as applicable, paid or incurred after Decem-
ber 31, 2017. In addition, a taxpayer may
rely on the guidance in Notice 2018-76 until
these proposed regulations are finalized.
Special Analyses
These proposed regulations are not
subject to review under section 6(b) of
Executive Order 12866 pursuant to the
Memorandum of Agreement (April 11,
2018) between the Treasury Department
and the Office of Management and Budget
regarding review of tax regulations.
In accordance with the Regulatory
Flexibility Act (5 U.S.C. chapter 6), it is
hereby certified that this proposed rule
will not have a significant economic im-
pact on a substantial number of small
entities. Although the rule may affect a
substantial number of small entities, the
economic impact of the regulations is
not likely to be significant. Data are not
readily available about the number of tax-
payers affected, but the number is likely
to be substantial for both large and small
entities because the rule may affect en-
tities that incur meal and entertainment
expenses. The economic impact of these
regulations is not likely to be significant,
however, because these proposed regula-
tions substantially incorporate prior guid-
ance and otherwise clarify the application
of the TCJA changes to section 274 relat-
ed to meals and entertainment. The pro-
posed regulations will assist taxpayers in
understanding the changes to section 274
and make it easier for taxpayers to comply
with those changes. Notwithstanding this
certification, the Treasury Department and
the IRS welcome comments on the impact
of these regulations on small entities.
Pursuant to section 7805(f), these pro-
posed regulations have been submitted to
the Chief Counsel for Advocacy of the
Small Business Administration for com-
ment on their impact on small business.
Unfunded Mandates Reform Act
Section 202 of the Unfunded Man-
dates Reform Act of 1995 (UMRA) re-
quires that agencies assess anticipated
costs and benefits and take certain oth-
er actions before issuing a final rule that
includes any Federal mandate that may
result in expenditures in any one year
by a state, local, or tribal government,
in the aggregate, or by the private sec-
tor, of $100 million (updated annually
for inflation). This rule does not include
any Federal mandate that may result in
expenditures by state, local, or tribal gov-
ernments, or by the private sector in ex-
cess of that threshold.
Executive Order 13132: Federalism
Executive Order 13132 (entitled
“Federalism”) prohibits an agency from
publishing any rule that has federalism
implications if the rule either imposes
substantial, direct compliance costs on
state and local governments, and is not
required by statute, or preempts state law,
unless the agency meets the consultation
and funding requirements of section 6 of
the Executive order. This proposed rule
does not have federalism implications and
does not impose substantial direct compli-
ance costs on state and local governments
or preempt state law within the meaning
of the Executive order.
Statement of Availability of IRS
Documents
Notices cited in this preamble are
published in the Internal Revenue Bul-
letin (or Cumulative Bulletin) and are
available from the Superintendent of
Documents, U.S. Government Publishing
Office, Washington, DC 20402, or by vis-
iting the IRS web site at http://www.irs.
gov.
Comments
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any electronic and writ-
ten comments that are submitted timely
to the IRS as prescribed in this preamble
under the “ADDRESSES” heading. The
Treasury Department and the IRS request
comments on all aspects of the proposed
rules. All comments will be available at
http://www.regulations.gov or upon re-
quest.
Drafting Information
The principal author of this proposed
regulation is Patrick Clinton, Office of the
Associate Chief Counsel (Income Tax &
Accounting). Other personnel from the
Treasury Department and the IRS partic-
ipated in their development.
List of Subjects in 26 CFR Part 1
Income Taxes, Reporting and record-
keeping requirements.
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is pro-
posed to be amended as follows:
Part 1—INCOME TAX
Paragraph 1. The authority citation for
part 1 is amended by adding entries in nu-
merical order for §§ 1.274-11 and 1.274-
12 to read in part as follows:
Authority: 26 U.S.C. 7805* * *
Section 1.274-11 also issued under 26
U.S.C. 274.
Section 1.274-12 also issued under 26
U.S.C. 274.
* * * * *
Par. 2. Section 1.274-11 is added to
read as follows:
§1.274-11 Disallowance of deductions
for certain entertainment, amusement, or
recreation expenditures paid or incurred
after December 31, 2017.
(a) In general. Except as provided in
this section, no deduction otherwise al-
lowable under chapter 1 of the Internal
Revenue Code (Code) is allowed for any
expenditure with respect to an activity
that is of a type generally considered to
be entertainment, or with respect to a fa-
cility used in connection with an enter-
tainment activity. For purposes of this
paragraph (a), dues or fees to any social,
athletic, or sporting club or organization
are treated as items with respect to facil-
ities and, thus, are not deductible. In ad-
dition, no deduction otherwise allowable
under chapter 1 of the Code is allowed
for amounts paid or incurred for member-
ship in any club organized for business,
pleasure, recreation, or other social pur-
pose.

Bulletin No. 2020–12 549 March 16, 2020
(b) Definitions—(1) Entertainment—
(i) In general. For section 274 purposes,
the term entertainment means any activity
which is of a type generally considered to
constitute entertainment, amusement, or
recreation, such as entertaining at bars,
theaters, country clubs, golf and athletic
clubs, sporting events, and on hunting,
fishing, vacation and similar trips, includ-
ing such activity relating solely to the
taxpayer or the taxpayer’s family. These
activities are treated as entertainment un-
der this section, subject to the objective
test, regardless of whether the expenditure
for the activity is related to or associated
with the active conduct of the taxpayer’s
trade or business. The term entertain-
ment may include an activity, the cost of
which otherwise is a business expense of
the taxpayer, which satisfies the personal,
living, or family needs of any individual,
such as a hotel suite or an automobile to
a business customer or the customer’s
family. The term entertainment does not
include activities which, although satis-
fying personal, living, or family needs of
an individual, are clearly not regarded as
constituting entertainment, such as a ho-
tel room maintained by an employer for
lodging of employees while in business
travel status or an automobile used in the
active conduct of trade or business even
though used for routine personal purpos-
es such as commuting to and from work.
On the other hand, the providing of a ho-
tel room or an automobile by an employer
to an employee who is on vacation would
constitute entertainment of the employee.
(ii) Food or beverages. Under this
section, the term entertainment does not
include food or beverages unless the food
or beverages are provided during or at
an entertainment activity. Food or bever-
ages provided during or at an entertain-
ment activity generally are treated as part
of the entertainment activity. However,
in the case of food or beverages provid-
ed during or at an entertainment activity,
the food or beverages are not considered
entertainment if the food or beverages
are purchased separately from the enter-
tainment, or the cost of the food or bev-
erages is stated separately from the cost
of the entertainment on one or more bills,
invoices, or receipts. The amount charged
for food or beverages on a bill, invoice, or
receipt must reflect the venue’s usual sell-
ing cost for those items if they were to be
purchased separately from the entertain-
ment, or must approximate the reasonable
value of those items. Unless the food or
beverages are purchased separately from
the entertainment, or the cost of the food
or beverages is stated separately from the
cost of the entertainment on one or more
bills, invoices, or receipts, no allocation
can be made and the entire amount is a
nondeductible entertainment expenditure.
(iii) Objective test. An objective test is
used to determine whether an activity is
of a type generally considered to be enter-
tainment. Thus, if an activity is generally
considered to be entertainment, it will be
treated as entertainment for purposes of
this section and section 274(a) regardless
of whether the expenditure can also be
described otherwise, and even though the
expenditure relates to the taxpayer alone.
This objective test precludes arguments
that entertainment means only entertain-
ment of others or that an expenditure for
entertainment should be characterized as
an expenditure for advertising or public
relations. However, in applying this test
the taxpayer’s trade or business is con-
sidered. Thus, although attending a the-
atrical performance generally would be
considered entertainment, it would not be
so considered in the case of a professional
theater critic, attending in a professional
capacity. Similarly, if a manufacturer of
dresses conducts a fashion show to in-
troduce its products to a group of store
buyers, the show generally would not be
considered entertainment. However, if an
appliance distributor sponsors a fashion
show, the fashion show generally would
be considered to be entertainment.
(2) Expenditure. The term expenditure
as used in this section includes amounts
paid or incurred for goods, services, facili-
ties, and other items, including items such
as losses and depreciation.
(3) Expenditures for production of in-
come. For purposes of this section, any
reference to trade or business includes an
activity described in section 212.
(c) Exceptions. Paragraph (a) of this
section does not apply to any expenditure
described in section 274(e)(1), (2), (3),
(4), (5), (6), (7), (8), or (9).
(d) Examples. The following examples
illustrate the application of paragraphs (a)
and (b) of this section. In each example,
neither the taxpayer nor the business asso-
ciate is engaged in a trade or business that
relates to the entertainment activity.
(1) Example 1. Taxpayer A invites, B, a business
associate, to a baseball game to discuss a proposed
business deal. A purchases tickets for A and B to at-
tend the game. The baseball game is entertainment as
defined in paragraph (b)(1) of this section and thus,
the cost of the game tickets is an entertainment ex-
penditure and is not deductible by A.
(2) Example 2. Assume the same facts as in para-
graph (d)(1) of this section (Example 1), except that
A also buys hot dogs and drinks for A and B from
a concession stand. The cost of the hot dogs and
drinks, which are purchased separately from the
game tickets, is not an entertainment expenditure and
is not subject to the section 274(a)(1) disallowance.
Therefore, A may deduct 50 percent of the expenses
associated with the hot dogs and drinks purchased
at the game if they meet the requirements of section
162 and §1.274-12.
(3) Example 3. Taxpayer C invites D, a business
associate, to a basketball game. C purchases tickets
for C and D to attend the game in a suite, where they
have access to food and beverages. The cost of the
basketball game tickets, as stated on the invoice, in-
cludes the food or beverages. The basketball game is
entertainment as defined in paragraph (b)(1) of this
section and, thus, the cost of the game tickets is an
entertainment expenditure and is not deductible by
C. The cost of the food and beverages, which are not
purchased separately from the game tickets, is not
stated separately on the invoice. Thus, the cost of the
food and beverages is an entertainment expenditure
that is subject to the section 274(a)(1) disallowance.
Therefore, C may not deduct the cost of the tickets
or the food and beverages associated with the bas-
ketball game.
(4) Example 4. Assume the same facts as in para-
graph (d)(3) of this section (Example 3), except that
the invoice for the basketball game tickets separately
states the cost of the food and beverages and reflects
the venue’s usual selling price if purchased separate-
ly. As in paragraph (d)(3) (Example 3), the basketball
game is entertainment as defined in paragraph (b)(1)
of this section and, thus, the cost of the game tick-
ets, other than the cost of the food and beverages, is
an entertainment expenditure and is not deductible
by C. However, the cost of the food and beverag-
es, which is stated separately on the invoice for the
game tickets, is not an entertainment expenditure and
is not subject to the section 274(a)(1) disallowance.
Therefore, C may deduct 50 percent of the expens-
es associated with the food and beverages provided
at the game if they meet the requirements of section
162 and §1.274-12.
(e) Applicability date. This section
applies for taxable years that begin on or
after [DATE OF PUBLICATION OF
FINAL REGULATIONS IN THE FED-
ERAL REGISTER].
Par. 3. Section 1.274-12 is added to
read as follows:
§1.274-12 Limitation on deductions for
certain food or beverage expenses paid or
incurred after December 31, 2017.

March 16, 2020 550 Bulletin No. 2020–12
(a) Food or beverage expenses—(1) In
general. Except as provided in this sec-
tion, no deduction is allowed for the ex-
pense of any food or beverages provided
by the taxpayer (or an employee of the
taxpayer) to another person or persons
unless—
(i) The expense is not lavish or extrav-
agant under the circumstances;
(ii) The taxpayer, or an employee of
the taxpayer, is present at the furnishing
of such food or beverages; and
(iii) The food or beverages are provid-
ed to a business associate.
(2) Only 50 percent of food or beverage
expenses allowed as deduction. Except as
provided in this section, the amount al-
lowable as a deduction for any expense
for food or beverages provided by the
taxpayer, or an employee of the taxpayer,
to a business associate may not exceed 50
percent of the amount of the expense that
otherwise would be allowable.
(3) Examples. The following examples
illustrate the application of paragraph (a)
(1) and (2) of this section. In each exam-
ple, the food or beverage expenses are or-
dinary and necessary expenses under sec-
tion 162(a) that are paid or incurred during
the taxable year in carrying on a trade or
business and are not lavish or extravagant
under the circumstances.
(i) Example 1. Taxpayer A takes client B out to
lunch. While eating lunch, A and B discuss A’s trade
or business activities. Under section 274(k) and (n)
and paragraph (a) of this section, A may deduct 50
percent of the food or beverage expenses.
(ii) Example 2. Taxpayer C takes employee D out
to lunch. While eating lunch, C and D discuss D’s an-
nual performance review. Under section 274(k) and
(n) and paragraph (a) of this section, C may deduct
50 percent of the food and beverage expenses.
(4) Special rules for travel meals—(i)
In general. Food or beverage expens-
es paid or incurred while traveling away
from home in pursuit of a trade or busi-
ness generally are subject to the deduction
limitations in section 274(k) and (n) and
paragraph (a)(1) and (2) of this section, as
well as the substantiation requirements in
section 274(d). In addition, travel expens-
es generally are subject to the limitations
in section 274(m)(1), (2) and (3).
(ii) Substantiation. Except as provided
in this section, no deduction is allowed for
the expense of any food or beverages paid
or incurred while traveling away from
home in pursuit of a trade or business un-
less the taxpayer meets the substantiation
requirements in section 274(d).
(iii) Travel meal expenses of spouse,
dependent, or others. No deduction is
allowed under chapter 1 of the Inter-
nal Revenue Code (Code), except under
section 217 for certain members of the
Armed Forces of the United States, for the
expense of any food or beverages paid or
incurred with respect to a spouse, depen-
dent, or other individual accompanying
the taxpayer, or an officer or employee of
the taxpayer, on business travel, unless—
(A) The spouse, dependent, or other in-
dividual is an employee of the taxpayer;
(B) The travel of the spouse, depen-
dent, or other individual is for a bona fide
business purpose of the taxpayer; and
(C) The expenses would otherwise be
deductible by the spouse, dependent or
other individual.
(D) The following example illustrates
the application of paragraph (a)(4)(iii) of
this section. Taxpayer E and Taxpayer E’s
spouse travel from New York to Boston to
attend a series of business meetings. E’s
spouse is not an employee of E, does not
travel to Boston for a bona fide business
purpose of E, and the expenses would not
otherwise be deductible. While in Boston,
E and E’s spouse go out to dinner. Under
section 274(m)(3) and paragraph (a)(4)
(iii) of this section, the expenses asso-
ciated with the food and beverages con-
sumed by E’s spouse are not deductible.
Therefore, the cost of E’s spouse’s dinner
is not deductible. E may deduct 50 percent
of the expense associated with the food
and beverages E consumed while on busi-
ness travel if E meets the requirements in
sections 162 and 274, including section
274(k) and (d).
(b) Definitions. Except as otherwise
provided in this section, the following
definitions apply for purposes of section
274(k) and (n), §1.274-11(b)(1)(ii) and
(d), and this section:
(1) Food or beverages. Food or bever-
ages means all food and beverage items,
regardless of whether characterized as
meals, snacks, or other types of food and
beverages, and regardless of whether the
food and beverages are treated as de mini-
mis fringes under section 132(e).
(2) Food or beverage expenses. Food
or beverage expenses mean the full cost
of food or beverages, including any deliv-
ery fees, tips, and sales tax. In the case of
employer-provided meals furnished at an
eating facility on the employer’s business
premises, food or beverage expenses do
not include expenses for the operation of
the eating facility such as salaries of em-
ployees preparing and serving meals, and
other overhead costs.
(3) Business associate. Business asso-
ciate means a person with whom the tax-
payer could reasonably expect to engage
or deal in the active conduct of the taxpay-
er’s trade or business such as the taxpay-
er’s customer, client, supplier, employee,
agent, partner, or professional adviser,
whether established or prospective.
(4) Independent contractor. For pur-
poses of the reimbursement or other ex-
pense allowance arrangements described
in paragraph (c)(2)(ii) of this section, in-
dependent contractor means a person who
is not an employee of the payor.
(5) Client or customer. For purposes
of the reimbursement or other expense al-
lowance arrangements described in para-
graph (c)(2)(ii) of this section, client or
customer means a person who receives
services from an independent contractor
and enters into a reimbursement or other
expense allowance arrangement with the
independent contractor.
(6) Payor. For purposes of the reim-
bursement or other expense allowance ar-
rangements described in paragraph (c)(2)
(ii) of this section, payor means a person
that enters into a reimbursement or other
expense allowance arrangement with an
employee and may include an employer,
its agent, or a third party.
(7) Reimbursement or other expense
allowance arrangement. For purposes of
the reimbursement or other expense allow-
ance arrangements described in paragraph
(c)(2)(ii) of this section, reimbursement
or other expense allowance arrangement
means—
(i) For purposes of paragraph (c)(2)(ii)
(B) of this section, an arrangement under
which an employee receives an advance,
allowance, or reimbursement from a payor
(the employer, its agent, or a third party)
for expenses the employee pays or incurs;
and
(ii) For purposes of paragraph (c)(2)(ii)
(C) of this section, an arrangement under
which an independent contractor receives
an advance, allowance, or reimbursement

Bulletin No. 2020–12 551 March 16, 2020
from a client or customer for expenses the
independent contractor pays or incurs if
either—
(A) A written agreement between the
parties expressly states that the client or
customer will reimburse the independent
contractor for expenses that are subject to
the limitations on deductions in paragraph
(a) of this section; or
(B) A written agreement between the
parties expressly identifies the party sub-
ject to the limitations.
(8) Primarily consumed. For purposes
of paragraph (c)(2)(iv) of this section, pri-
marily consumed means greater than 50
percent of actual or reasonably estimated
consumption.
(9) General public. For purposes of
paragraph (c)(2)(iv) of this section, the
general public includes, but is not limit-
ed to, customers, clients, and visitors. The
general public does not include employ-
ees, partners or independent contractors
of the taxpayer. Also, an exclusive list of
guests is not the general public.
(c) Exceptions—(1) In general. The
limitations on the deduction of food or
beverage expenses in paragraph (a) of
this section do not apply to any expense
described in paragraph (c)(2) of this sec-
tion. These expenses are deductible to the
extent allowable under chapter 1 of the
Code.
(2) Exceptions—(i) Expenses treated
as compensation—(A) In general. Any
expense paid or incurred by a taxpayer for
food or beverages, including food or bev-
erages provided during travel described
in section 274(m)(3), if an employee is
the recipient of the food or beverages, is
not subject to the deduction limitations in
paragraph (a) of this section to the extent
that the expense is treated by the taxpay-
er—
(1) On the taxpayer’s income tax return
as originally filed, as compensation paid
to the employee; and
(2) As wages to the employee for pur-
poses of withholding under chapter 24 of
the Code, relating to collection of income
tax at source on wages.
(B) Expenses includible in income of
persons who are not employees. An ex-
pense paid or incurred by a taxpayer for
food or beverages, including food or bev-
erages provided during travel described
in section 274(m)(3), is not subject to the
deduction limitations in paragraph (a) of
this section to the extent the expenditure
is includible in gross income as compen-
sation for services rendered, or as a prize
or award under section 74 by a recipient
of the expense who is not an employee of
the taxpayer. The preceding sentence does
not apply to any amount paid or incurred
by the taxpayer if the amount is required
to be included, or would be so required
except that the amount is less than $600,
in any information return filed by such
taxpayer under part III of subchapter A
of chapter 61 of the Code and is not so
included.
(C) Expenses for which value is im-
properly included or for which amount
required to be included is zero. The ex-
ception in section 274(e)(2) and (e)(9) and
paragraph (c)(2)(i) of this section does
not apply to expenses paid or incurred
for food or beverages for which the val-
ue that is included in gross income is less
than the amount required to be included
in gross income under §1.61-21. Further-
more, if the amount required to be includ-
ed in gross income under §1.61-21 is zero,
the exception in section 274(e)(2) and (e)
(9) and paragraph (c)(2)(i) of this section
does not apply.
(D) Examples. The following examples
illustrate the application of paragraph (c)
(2)(i) of this section. In each example, the
food or beverage expenses are ordinary
and necessary expenses under section
162(a) that are paid or incurred during the
taxable year in carrying on a trade or busi-
ness and that are not lavish or extravagant
under the circumstances.
(1) Example 1. Employer F provides food and
beverages to its employees without charge at a com-
pany cafeteria on its premises. The food and bever-
ages do not meet the definition of a de minimis fringe
under section 132(e). F treats the food and beverage
expenses as compensation and wages, and deter-
mines the amount of the inclusion under §1.61-21.
Under section 274(e)(2) and paragraph (c)(2)(i) of
this section, the expenses associated with the food
and beverages provided to the employees are not
subject to the 50 percent deduction limitations in
paragraph (a) of this section. Thus, F may deduct 100
percent of the food and beverage expenses.
(2) Example 2. Employer G provides meals to its
employees without charge. The meals are properly
excluded from the employees’ income under section
119 as meals provided for the convenience of the
employer. Under §1.61-21(b)(1), an employee must
include in gross income the amount by which the
fair market value of a fringe benefit exceeds the sum
of the amount, if any, paid for the benefit by or on
behalf of the recipient, and the amount, if any, spe-
cifically excluded from gross income by some other
section of subtitle A of the Code. Because the entire
value of the employees’ meals is excluded from the
employees’ income under section 119, the fair mar-
ket value of the fringe benefit does not exceed the
amount excluded from gross income under subtitle A
of the Code, so there is nothing to be included in the
employees’ income under §1.61-21. Thus, the excep-
tion in section 274(e)(2) and paragraph (c)(2)(i) of
this section does not apply and G may only deduct 50
percent of the expenses for the food and beverages
provided to employees.
(ii) Reimbursed food or beverage ex-
penses—(A) In general. In the case of
expenses for food or beverages paid or
incurred by one person in connection with
the performance of services for another
person, whether or not the other person
is an employer, under a reimbursement or
other expense allowance arrangement, the
deduction limitations in paragraph (a) of
this section apply either to the person who
makes the expenditure or to the person
who actually bears the expense, but not to
both. If an expense of a type described in
paragraph (c)(2)(ii) of this section proper-
ly constitutes a dividend paid to a share-
holder, unreasonable compensation paid
to an employee, a personal expense, or
other nondeductible expense, nothing in
this paragraph (c)(2)(ii)(A) prevents dis-
allowance of the deduction to the taxpayer
under other provisions of the Code.
(B) Reimbursement arrangements in-
volving employees. In the case of expenses
paid or incurred by an employee for food
or beverages in performing services as an
employee under a reimbursement or oth-
er expense allowance arrangement with a
payor (the employer, its agent, or a third
party) the limitations on deductions in
paragraph (a) of this section apply—
(1) To the employee to the extent the
employer treats the reimbursement or oth-
er payment of the expense on the employ-
er’s income tax return as originally filed
as compensation paid to the employee and
as wages to the employee for purposes of
withholding under chapter 24 relating to
collection of income tax at source on wag-
es; or
(2) To the payor to the extent the re-
imbursement or other payment of the ex-
pense is not treated as compensation and
wages paid to the employee in the manner
provided in paragraph (c)(2)(ii)(B)(1) of
this section. However, see paragraph (c)
(2)(ii)(C) of this section if the payor re-
ceives a payment from a third party that

March 16, 2020 552 Bulletin No. 2020–12
may be treated as a reimbursement ar-
rangement under paragraph (c)(2)(ii)(C).
(C) Reimbursement arrangements in-
volving persons that are not employees. In
the case of expenses for food or beverages
paid or incurred by an independent con-
tractor in connection with the performance
of services for a client or customer under
a reimbursement or other expense allow-
ance arrangement with the independent
contractor, the limitations on deductions
in paragraph (a) of this section apply to
the party expressly identified in an agree-
ment between the parties as subject to the
limitations. If an agreement between the
parties does not expressly identify the
party subject to the limitations, then the
deduction limitations in paragraph (a) of
this section apply—
(1) To the independent contractor
(which may be a payor) to the extent the
independent contractor does not account
to the client or customer within the mean-
ing of section 274(d); or
(2) To the client or customer if the
independent contractor accounts to the
client or customer within the meaning of
section 274(d).
(D) Section 274(d) substantiation. If
the reimbursement or other expense al-
lowance arrangement involves persons
who are not employees and the agreement
between the parties does not expressly
identify the party subject to the limitations
on deductions in paragraph (a) of this sec-
tion, the limitations on deductions in para-
graph (a) of this section apply to the inde-
pendent contractor unless the independent
contractor accounts to the client or cus-
tomer with substantiation that satisfies the
requirements of section 274(d).
(E) Examples. The following examples
illustrate the application of paragraph (c)
(2)(ii) of this section.
(1) Example 1. (i) Employee I performs services
under an arrangement in which J, an employee leas-
ing company, pays I a per diem allowance of $10x
for each day that I performs services for J’s client,
K, while traveling away from home. The per diem
allowance is a reimbursement of travel expenses for
food or beverages that I pays in performing services
as an employee. J enters into a written agreement
with K under which K agrees to reimburse J for any
substantiated reimbursements for travel expenses,
including meal expenses, that J pays to I. The agree-
ment does not expressly identify the party that is
subject to the limitations on deductions in paragraph
(a) of this section. I performs services for K while
traveling away from home for 10 days and provides J
with substantiation that satisfies the requirements of
section 274(d) of $100x of meal expenses incurred
by I while traveling away from home. J pays I $100x
to reimburse those expenses pursuant to their ar-
rangement. J delivers a copy of I’s substantiation to
K. K pays J $300x, which includes $200x compen-
sation for services and $100x as reimbursement of
J’s payment of I’s travel expenses for meals. Neither
J nor K treats the $100x paid to I as compensation
or wages.
(ii) Under paragraph (b)(7)(i) of this section,
I and J have established a reimbursement or oth-
er expense allowance arrangement for purposes of
paragraph (c)(2)(ii)(B) of this section. Because the
reimbursement payment is not treated as compensa-
tion and wages paid to I, under section 274(e)(3)(A)
and paragraph (c)(2)(ii)(B)(1) of this section, I is
not subject to the limitations on deductions in para-
graph (a) of this section. Instead, under paragraph
(c)(2)(ii)(B)(2) of this section, J, the payor, is sub-
ject to limitations on deductions in paragraph (a)
of this section unless J can meet the requirements
of section 274(e)(3)(B) and paragraph (c)(2)(ii)(C)
of this section.
(iii) Because the agreement between J and K
expressly states that K will reimburse J for sub-
stantiated reimbursements for travel expenses that J
pays to I, under paragraph (b)(7)(ii)(A) of this sec-
tion, J and K have established a reimbursement or
other expense allowance arrangement for purposes
of paragraph (c)(2)(ii)(C) of this section. J accounts
to K for K’s reimbursement in the manner required
by section 274(d) by delivering to K a copy of the
substantiation J received from I. Therefore, under
section 274(e)(3)(B) and paragraph (c)(2)(ii)(C)(2)
of this section, K and not J is subject to the deduction
limitations in paragraph (a) of this section.
(2) Example 2. (i) The facts are the same as in
paragraph (c)(2)(ii)(E)(1) of this section (Example 1)
except that, under the arrangements between I and J
and between J and K, I provides the substantiation of
the expenses directly to K, and K pays the per diem
directly to I.
(ii) Under paragraph (b)(7)(i) of this section, I
and K have established a reimbursement or other ex-
pense allowance arrangement for purposes of para-
graph (c)(2)(ii)(C) of this section. Because I substan-
tiates directly to K and the reimbursement payment
was not treated as compensation and wages paid to I,
under section 274(e)(3)(A) and paragraph (c)(2)(ii)
(C)(1) of this section I is not subject to the limita-
tions on deductions in paragraph (a) of this section.
Under paragraph (c)(2)(ii)(C)(2) of this section, K,
the payor, is subject to the limitations on deductions
in paragraph (a) of this section.
(3) Example 3. (i) The facts are the same as in
paragraph (c)(2)(ii)(E)(1) of this section (Example
1), except that the written agreement between J and
K expressly provides that the limitations of this sec-
tion will apply to K.
(ii) Under paragraph (b)(7)(ii)(B) of this sec-
tion, J and K have established a reimbursement or
other expense allowance arrangement for purposes
of paragraph (c)(2)(ii)(C) of this section. Because
the agreement provides that the 274 deduction lim-
itations apply to K, under section 274(e)(3)(B) and
paragraph (c)(2)(ii)(C) of this section, K and not J is
subject to the limitations on deductions in paragraph
(a) of this section.
(4) Example 4. (i) The facts are the same as in
paragraph (c)(2)(ii)(E)(1) of this section (Example
1), except that the agreement between J and K does
not provide that K will reimburse J for travel expens-
es.
(ii) The arrangement between J and K is not a
reimbursement or other expense allowance arrange-
ment within the meaning of section 274(e)(3)(B) and
paragraph (b)(7)(ii) of this section. Therefore, even
though J accounts to K for the expenses, J is subject
to the limitations on deductions in paragraph (a) of
this section.
(iii) Recreational expenses for employ-
ees—(A) In general. Any food or bever-
age expense paid or incurred by a taxpayer
for a recreational, social, or similar activ-
ity, primarily for the benefit of taxpayer’s
employees (other than employees who
are highly compensated employees (with-
in the meaning of paragraph (c)(2)(iii)
(B) of this section)) is not subject to the
deduction limitations in paragraph (a) of
this section. This paragraph (c)(2)(iii)(A)
applies to expenses paid or incurred for
events such as holiday parties, annual pic-
nics, or summer outings. This paragraph
(c)(2)(iii)(A) does not apply to expenses
for meals the value of which is excluded
from employees’ income under section
119 because the meals are provided for the
convenience of the employer.
(B) Highly compensated employees.
The exception in this paragraph (c)(2)(iii)
applies only to expenses for food or bever-
ages made primarily for the benefit of em-
ployees of the taxpayer other than employ-
ees who are officers, shareholders or other
owners who own a 10-percent or greater
interest in the business, or other highly
compensated employees. For purposes of
the preceding sentence, an employee is
treated as owning any interest owned by a
member of the employee’s family, within
the meaning of section 267(c)(4). Any ex-
pense for food or beverages that is made
under circumstances which discriminate
in favor of employees who are officers,
shareholders or other owners, or highly
compensated employees is not considered
to be made primarily for the benefit of em-
ployees generally. An expense for food or
beverages is not to be considered outside
of the exception of this paragraph (c)(2)
(iii) merely because, due to the large num-
ber of employees involved, the provision
of food or beverages is intended to benefit
only a limited number of employees at one
time, provided the provision of food or
beverages does not discriminate in favor

Bulletin No. 2020–12 553 March 16, 2020
of officers, shareholders, other owners, or
highly compensated employees.
(C) Examples. The following examples
illustrate the application of this paragraph
(c)(2)(iii). In each example, the food or
beverage expenses are ordinary and nec-
essary expenses under section 162(a) that
are paid or incurred during the taxable
year in carrying on a trade or business and
that are not lavish or extravagant under the
circumstances.
(1) Example 1. Employer L invites all employees
to a holiday party in a hotel ballroom that includes a
buffet dinner and an open bar. Under section 274(e)
(4), this paragraph (c)(2)(iii), and §1.274-11(c), the
cost of the party, including food and beverage ex-
penses, is not subject to the deduction limitations
in paragraph (a) of this section because the holiday
party is a recreational, social, or similar activity pri-
marily for the benefit of non-highly compensated
employees. Thus, L may deduct 100 percent of the
cost of the party.
(2) Example 2. The facts are the same as in para-
graph (c)(2)(iii)(C)(1) of this section (Example 1),
except that Employer L invites only highly-com-
pensated employees to the holiday party, and the
invoice provided by the hotel lists the costs for food
and beverages separately from the cost of the rental
of the ballroom. The costs reflect the venue’s usual
selling price for food or beverages. The exception in
this paragraph (c)(2)(iii) does not apply because L
invited only highly-compensated employees to the
holiday party. However, under §1.274-11(b)(1)(ii),
the food and beverage expenses are not treated as
entertainment. L may deduct 50 percent of the food
and beverage costs that are separately stated on the
invoice under paragraph (a)(2) of this section.
(3) Example 3. Employer M provides free coffee,
soda, bottled water, chips, donuts, and other snacks
in a break room available to all employees. The ex-
penses associated with the food and beverages are
subject to the deduction limitations in paragraph
(a) of this section because the break room is not a
recreational, social, or similar activity primarily for
the benefit of the employees. Thus, the exception in
section 274(e)(4) and this paragraph (c)(2)(iii) does
not apply and M may only deduct 50 percent of the
expenses for food and beverages provided in the
break room.
(4) Example 4. Employer N has a written policy
that employees in a certain medical services-related
position must be available for emergency calls due
to the nature of the position that requires frequent
emergency response. Because these emergencies can
and do occur during meal periods, N furnishes food
and beverages to employees in this position without
charge in a cafeteria on N’s premises. N excludes
food and beverage expenses from the employees’
income as meals provided for the convenience of
the employer excludable under section 119. Because
these food and beverages are furnished for the em-
ployer’s convenience, and therefore are not primari-
ly for the benefit of the employees, the exception in
section 274(e)(4) and this paragraph (c)(2)(iii) does
not apply, even if some socializing related to the food
and beverages provided occurs. Thus, N may only
deduct 50 percent of the expenses for food and bev-
erages provided to employees in the cafeteria.
(5) Example 5. Employer O invites an employ-
ee and a client to dinner at a restaurant. Because it
is the birthday of the employee, O orders a special
dessert in celebration. Because the meal is a business
meal, and therefore not primarily for the benefit of
the employee, the exception in section 274(e)(4) and
this paragraph (c)(2)(iii) does not apply, even though
an employee social activity in the form of a birthday
celebration occurred during the meal. Thus, O may
only deduct 50 percent of the meal expenses.
(iv) Items available to the public—(A)
In general. Any expense paid or incurred
by a taxpayer for food or beverages to the
extent the food or beverages are made
available to the general public is not sub-
ject to the deduction limitations in para-
graph (a) of this section. If a taxpayer
provides food or beverages to employees,
this paragraph (c)(2)(iv)(A) applies to the
entire amount of expenses for those food
or beverages if the same types of food or
beverages are provided to, and are primar-
ily consumed by, the general public.
(B) Examples. The following examples
illustrate the application of this paragraph
(c)(2)(iv). In each example, the food and
beverage expenses are ordinary and nec-
essary expenses under section 162(a) that
are paid or incurred during the taxable
year in carrying on a trade or business and
that are not lavish or extravagant under the
circumstances.
(1) Example 1. Employer P is a real estate agent
and provides refreshments at an open house for a
home available for sale to the public. The refresh-
ments are consumed by P’s employees, potential
buyers of the property, and other real estate agents.
Under section 274(e)(7) and this paragraph (c)(2)
(iv), the expenses associated with the refreshments
are not subject to the deduction limitations in para-
graph (a) of this section if over 50 percent of the food
and beverages are primarily consumed by potential
buyers and other real estate agents. If the food and
beverages are not primarily consumed by the gener-
al public, only the costs attributable to the food and
beverages provided to the general public are except-
ed under section 274(e)(7) and this paragraph (c)(2)
(iv).
(2) Example 2. Employer Q is an automobile
service center and provides refreshments in its wait-
ing area. The refreshments are consumed by Q’s
employees and customers. Under section 274(e)(7)
and this paragraph (c)(2)(iv), the expenses asso-
ciated with the refreshments are not subject to the
deduction limitations provided for in paragraph (a)
of this section if over 50 percent of the food and bev-
erages are primarily consumed by customers. If the
food and beverages are not primarily consumed by
the general public, only the costs attributable to the
food and beverages provided to the general public
are excepted under section 274(e)(7) and this para-
graph (c)(2)(iv).
(3) Example 3. Employer R operates a summer
camp open to the general public for children and pro-
vides breakfast and lunch, as part of the fee to attend
camp, both to camp counselors, who are employees,
and to camp attendees, who are customers. There
are 20 camp counselors and 100 camp attendees.
The same type of meal is available to each counsel-
or and attendee, and attendees consume more than
50 percent of the food and beverages. Under section
274(e)(7) and this paragraph (c)(2)(iv), the expenses
associated with the food and beverages are not sub-
ject to the deduction limitations in paragraph (a) of
this section, because over 50 percent of the food and
beverages are primarily consumed by camp attend-
ees. Thus, R may deduct 100 percent of the food and
beverage expenses.
(4) Example 4. Employer S provides food and
beverages to its employees without charge at a com-
pany cafeteria on its premises. Occasionally, custom-
ers or other visitors also eat without charge in the
cafeteria. The occasional consumption of food and
beverages at the company cafeteria by customers and
visitors is less than 50 percent of the total amount
of food and beverages consumed at the cafeteria.
Therefore, only the costs attributable to the food and
beverages provided to the general public are except-
ed under section 274(e)(7) and this paragraph (c)(2)
(iv).
(v) Goods or services sold to custom-
ers—(A) In general. An expense paid
or incurred for food or beverages, to the
extent the food or beverages are sold to
customers in a bona fide transaction for an
adequate and full consideration in money
or money’s worth, is not subject to the
deduction limitations in paragraph (a) of
this section. However, money or money’s
worth does not include payment through
services provided. Under this paragraph
(c)(2)(v), a restaurant or catering busi-
ness may deduct 100 percent of its costs
for food or beverage items, purchased in
connection with preparing and providing
meals to its paying customers, which are
also consumed at the worksite by employ-
ees who work in the employer’s restau-
rant or catering business. In addition, for
purposes of this paragraph (c)(2)(v), the
term customer includes anyone, including
an employee of the taxpayer, who is sold
food or beverages in a bona fide transac-
tion for an adequate and full consideration
in money or money’s worth.
(B) Example. The following example
illustrates the application of this para-
graph (c)(2)(v). Employer T operates a
restaurant. T provides food and beverag-
es to its food service employees before,
during, and after their shifts for no con-
sideration. Under section 274(e)(8) and
this paragraph (c)(2)(v), the expenses
associated with the food and beverages

March 16, 2020 554 Bulletin No. 2020–12
provided to the employees are not subject
to the 50 percent deduction limitation in
paragraph (a) of this section because the
restaurant sells food and beverages to
customers in a bona fide transaction for
an adequate and full consideration in
money or money’s worth. Thus, T may
deduct 100 percent of the food and bev-
erage expenses.
(d) Applicability date. This section
applies for taxable years that begin on or
after [DATE OF PUBLICATION OF
FINAL REGULATIONS IN THE FED-
ERAL REGISTER].
Sunita Lough,
Deputy Commissioner for Services
and Enforcement.
(Filed by the Office of the Federal Register on Febru-
ary 21, 2020, 4:15 p.m., and published in the issue of
the Federal Register for February 26, 2020, 85 F.R.
11020)

Bulletin No. 2020–12 i March 16, 2020
Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the
effect:
Amplified describes a situation where
no change is being made in a prior pub-
lished position, but the prior position is
being extended to apply to a variation of
the fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that
the same principle also applies to B, the
earlier ruling is amplified. (Compare with
modified, below).
Clarified is used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion. It
is not used where a position in a prior rul-
ing is being changed.
Distinguished describes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modified is used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
with amplified and clarified, above).
Obsoleted describes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transactions.
This term is most commonly used in a ruling
that lists previously published rulings that
are obsoleted because of changes in laws or
regulations. A ruling may also be obsoleted
because the substance has been included in
regulations subsequently adopted.
Revoked describes situations where the
position in the previously published ruling
is not correct and the correct position is
being stated in a new ruling.
Superseded describes a situation where
the new ruling does nothing more than
restate the substance and situation of a
previously published ruling (or rulings).
Thus, the term is used to republish under
the 1986 Code and regulations the same
position published under the 1939 Code
and regulations. The term is also used
when it is desired to republish in a single
ruling a series of situations, names, etc.,
that were previously published over a
period of time in separate rulings. If the
new ruling does more than restate the sub-
stance of a prior ruling, a combination of
terms is used. For example, modified and
superseded describes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previous-
ly published ruling in a new ruling that is
self contained. In this case, the previously
published ruling is first modified and then,
as modified, is superseded.
Supplemented is used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names
in subsequent rulings. After the original
ruling has been supplemented several
times, a new ruling may be published that
includes the list in the original ruling and
the additions, and supersedes all prior rul-
ings in the series.
Suspended is used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cas-
es in litigation, or the outcome of a Ser-
vice study.
Abbreviations
The following abbreviations in current use
and formerly used will appear in material
published in the Bulletin.
A—Individual.
Acq.—Acquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cumulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Cooperative.
Ct.D.—Court Decision.
CY—County.
D—Decedent.
DC—Dummy Corporation.
DE—Donee.
Del. Order—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Employer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduciary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Foreign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Federal Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grantee.
GP—General Partner.
GR—Grantor.
IC—Insurance Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited Partner.
LR—Lessor.
M—Minor.
Nonacq.—Nonacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Personal Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Partnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Real Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsidiary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Transferee.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpayer.
TR—Trust.
TT—Trustee.
U.S.C.—United States Code.
X—Corporation.
Y—Corporation.
Z—Corporation.

March 16, 2020 ii Bulletin No. 2020–12
Numerical Finding List
1
Bulletin 2020–12
AOD:
2020-1, 2020-12 I.R.B. 521
Announcements:
2020-1, 2020-5 I.R.B. 552
Notices:
2020-1, 2020-2 I.R.B. 290
2020-2, 2020-3 I.R.B. 327
2020-3, 2020-3 I.R.B. 330
2020-4, 2020-4 I.R.B. 380
2020-5, 2020-4 I.R.B. 380
2020-6, 2020-7 I.R.B. 411
2020-7, 2020-7 I.R.B. 411
2020-8, 2020-7 I.R.B. 415
2020-9, 2020-7 I.R.B. 417
2020-10, 2020-10 I.R.B. 456
2020-11, 2020-11 I.R.B. 492
2020-12, 2020-11 I.R.B. 495
2020-13, 2020-11 I.R.B. 502
Proposed Regulations:
REG-107431-19, 2020-3 I.R.B. 332
REG-122180-18, 2020-3 I.R.B. 342
REG-100956-19, 2020-4 I.R.B. 383
REG-125710-18, 2020-5 I.R.B. 554
REG-132741-17, 2020-10 I.R.B. 458
REG-100814-19, 2020-12 I.R.B. 542
Revenue Procedures:
2020-1, 2020-01 I.R.B. 1
2020-2, 2020-01 I.R.B. 107
2020-3, 2020-01 I.R.B. 131
2020-4, 2020-01 I.R.B. 148
2020-5, 2020-01 I.R.B. 241
2020-7, 2020-01 I.R.B. 281
2020-9, 2020-02 I.R.B. 294
2020-10, 2020-02 I.R.B. 295
2020-11, 2020-06 I.R.B. 406
2020-8, 2020-08 I.R.B. 447
2020-12, 2020-11 I.R.B. 511
2020-13, 2020-11 I.R.B. 515
2020-17, 2020-12 I.R.B. 539
Revenue Rulings:
2020-1, 2020-3 I.R.B. 296
2020-2, 2020-3 I.R.B. 298
2020-3, 2020-3 I.R.B. 409
2020-4, 2020-4 I.R.B. 444
2020-5, 2020-5 I.R.B. 454
Revenue Rulings:—Continued
2020-6, 2020-11 I.R.B. 490
2020-7, 2020-12 I.R.B. 522
Treasury Decisions:
9886, 2020-2 I.R.B. 285
9887, 2020-3 I.R.B. 302
9888, 2020-3 I.R.B. 306
9891, 2020-8 I.R.B. 419
9892, 2020-8 I.R.B. 439
9893, 2020-9 I.R.B. 449
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

Bulletin No. 2020–12 iii March 16, 2020
Finding List of Current Actions on
Previously Published Items
1
Bulletin 2020–12
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2018–27 through 2018–52 is in Internal Revenue Bulletin
2018–52, dated December 27, 2018.

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