business entertainment expenses, tax deductions, Shelf Project
Law | Taxation-Federal Income | Tax Law
The proposal is offered as a part of the Shelf Project, a collaboration by tax professionals to develop and perfect proposals to help Congress when it needs to raise revenue. Shelf Project proposals are intended to raise revenue without raising tax rates because the best systems have taxes that are unavoidable to reach the lowest feasible tax rates.
This proposal would deny deductions for all business entertainment expenses. Also, the definition of the term ‘‘entertainment’’ would be narrowed so that expenses that are incurred in a clear business setting and are deeply rooted in producing immediate income or in mining future income prospects (for example, a hospitality tent) would remain deductible. Finally, as part of our proposal, taxpayers who continue to deduct business entertainment expenses would be exposed to an accuracy-related penalty. We anticipate that the adoption of this proposal would raise significant revenue.
Shelf Project proposals defend the tax base and improve the rationality and efficiency of the tax system. Given the calls for economic stimulus, some proposals may stay on the shelf for a while. A longer description of the Shelf Project is found at ‘‘The Shelf Project: Revenue-Raising Proposals That Defend the Tax Base,’’ Tax Notes, Dec. 10, 2007, p. 1077, Doc 2007-22632, or 2007 TNT 238-37.
Shelf Project proposals follow the format of a congressional tax committee report in explaining current law, what is wrong with it, and how to fix it.
Richard L. Schmalbeck and Jay A. Soled, Elimination of the Deduction for Business Entertainment Expenses, 123 Tax Notes 757-764 (2009).