[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.119-1]

[Page 496-500]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.119-1  Meals and lodging furnished for the convenience of the employer.

    (a) Meals--(1) In general. The value of meals furnished to an 
employee by his employer shall be excluded from the employee's gross 
income if two tests are met: (i) The meals are furnished on the business 
premises of the employer, and (ii) the meals are furnished for the 
convenience of the employer. The question of whether meals are furnished 
for the convenience of the employer is one of fact to be determined by 
analysis of all the facts and circumstances in each case. If the tests 
described in subdivisions (i) and (ii) of this subparagraph are met, the 
exclusion shall apply irrespective of whether under an employment 
contract or a statute fixing the terms of employment such meals are 
furnished as compensation.
    (2) Meals furnished without a charge. (i) Meals furnished by an 
employer without charge to the employee will be regarded as furnished 
for the convenience of the employer if such meals are furnished for a 
substantial noncompensatory business reason of the employer. If an 
employer furnishes meals as a means of providing additional compensation 
to his employee (and not for a substantial noncompensatory business 
reason of the employer), the meals so furnished will not be regarded as 
furnished for the convenience of the employer. Conversely, if the 
employer furnishes meals to his employee for a substantial 
noncompensatory business reason, the meals so furnished will be regarded 
as furnished for the convenience of the employer, even though such meals 
are also furnished for a compensatory reason. In determining the reason 
of an employer for furnishing meals, the mere declaration that meals are 
furnished for a noncompensatory business reason is not sufficient to 
prove that meals are furnished for the convenience of the employer, but 
such determination will be based upon an examination of all the 
surrounding facts and circumstances. In subdivision (ii) of this 
subparagraph, there are set forth some of the substantial 
noncompensatory business reasons which occur frequently and which 
justify the conclusion that meals furnished for such a reason are 
furnished for the convenience of the employer. In subdivision (iii) of 
this subparagraph, there are set forth some of the business reasons 
which are considered to be compensatory and which, in the absence of a 
substantial noncompensatory business reason, justify the conclusion that 
meals furnished for such a reason are not furnished for the convenience 
of the employer. Generally, meals furnished before or after the working 
hours of the employee will not

[[Page 497]]

be regarded as furnished for the convenience of the employer, but see 
subdivision (ii) (d) and (f) of this subparagraph for some exceptions to 
this general rule. Meals furnished on nonworking days do not qualify for 
the exclusion under section 119. If the employee is required to occupy 
living quarters on the business premises of his employer as a condition 
of his employment (as defined in paragraph (b) of this section), the 
exclusion applies to the value of any meal furnished without charge to 
the employee on such premises.
    (ii)(a) Meals will be regarded as furnished for a substantial 
noncompensatory business reason of the employer when the meals are 
furnished to the employee during his working hours to have the employee 
available for emergency call during his meal period. In order to 
demonstrate that meals are furnished to the employee to have the 
employee available for emergency call during the meal period, it must be 
shown that emergencies have actually occurred, or can reasonably be 
expected to occur, in the employer's business which have resulted, or 
will result, in the employer calling on the employee to perform his job 
during his meal period.
    (b) Meals will be regarded as furnished for a substantial 
noncompensatory business reason of the employer when the meals are 
furnished to the employee during his working hours because the 
employer's business is such that the employee must be restricted to a 
short meal period, such as 30 or 45 minutes, and because the employee 
could not be expected to eat elsewhere in such a short meal period. For 
example, meals may qualify under this subdivision when the employer is 
engaged in a business in which the peak work load occurs during the 
normal lunch hours. However, meals cannot qualify under this subdivision 
(b) when the reason for restricting the time of the meal period is so 
that the employee can be let off earlier in the day.
    (c) Meals will be regarded as furnished for a substantial 
noncompensatory business reason of the employer when the meals are 
furnished to the employee during his working hours because the employee 
could not otherwise secure proper meals within a reasonable meal period. 
For example, meals may qualify under this subdivision (c) when there are 
insufficient eating facilities in the vicinity of the employer's 
premises.
    (d) A meal furnished to a restaurant employee or other food service 
employee for each meal period in which the employee works will be 
regarded as furnished for a substantial noncompensatory business reason 
of the employer, irrespective of whether the meal is furnished during, 
immediately before, or immediately after the working hours of the 
employee.
    (e) If the employer furnishes meals to employees at a place of 
business and the reason for furnishing the meals to each of 
substantially all of the employees who are furnished the meals is a 
substantial noncompensatory business reason of the employer, the meals 
furnished to each other employee will also be regarded as furnished for 
a substantial noncompensatory business reason of the employer.
    (f) If an employer would have furnished a meal to an employee during 
his working hours for a substantial noncompensatory business reason, a 
meal furnished to such an employee immediately after his working hours 
because his duties prevented him from obtaining a meal during his 
working hours will be regarded as furnished for a substantial 
noncompensatory business reason.
    (iii) Meals will be regarded as furnished for a compensatory 
business reason of the employer when the meals are furnished to the 
employee to promote the morale or goodwill of the employee, or to 
attract prospective employees.
    (3) Meals furnished with a charge. (i) If an employer provides meals 
which an employee may or may not purchase, the meals will not be 
regarded as furnished for the convenience of the employer. Thus, meals 
for which a charge is made by the employer will not be regarded as 
furnished for the convenience of the employer if the employee has a 
choice of accepting the meals and paying for them or of not paying for 
them and providing his meals in another manner.

[[Page 498]]

    (ii) If an employer furnishes an employee meals for which the 
employee is charged an unvarying amount (for example, by subtraction 
from his stated compensation) irrespective of whether he accepts the 
meals, the amount of such flat charge made by the employer for such 
meals is not, as such, part of the compensation includible in the gross 
income of the employee; whether the value of the meals so furnished is 
excludable under section 119 is determined by applying the rules of 
subparagraph (2) of this paragraph. If meals furnished for an unvarying 
amount are not furnished for the convenience of the employer in 
accordance with the rules of subparagraph (2) of this paragraph, the 
employee shall include in gross income the value of the meals regardless 
of whether the value exceeds or is less than the amount charged for such 
meals. In the absence of evidence to the contrary, the value of the 
meals may be deemed to be equal to the amount charged for them.
    (b) Lodging. The value of lodging furnished to an employee by the 
employer shall be excluded from the employee's gross income if three 
tests are met:
    (1) The lodging is furnished on the business premises of the 
employer,
    (2) The lodging is furnished for the convenience of the employer, 
and
    (3) The employee is required to accept such lodging as a condition 
of his employment.

The requirement of subparagraph (3) of this paragraph that the employee 
is required to accept such lodging as a condition of his employment 
means that he be required to accept the lodging in order to enable him 
properly to perform the duties of his employment. Lodging will be 
regarded as furnished to enable the employee properly to perform the 
duties of his employment when, for example, the lodging is furnished 
because the employee is required to be available for duty at all times 
or because the employee could not perform the services required of him 
unless he is furnished such lodging. If the tests described in 
subparagraphs (1), (2), and (3) of this paragraph are met, the exclusion 
shall apply irrespective of whether a charge is made, or whether, under 
an employment contract or statute fixing the terms of employment, such 
lodging is furnished as compensation. If the employer furnishes the 
employee lodging for which the employee is charged an unvarying amount 
irrespective of whether he accepts the lodging, the amount of the charge 
made by the employer for such lodging is not, as such, part of the 
compensation includible in the gross income of the employee; whether the 
value of the lodging is excludable from gross income under section 119 
is determined by applying the other rules of this paragraph. If the 
tests described in subparagraph (1), (2), and (3) of this paragraph are 
not met, the employee shall include in gross income the value of the 
lodging regardless of whether it exceeds or is less than the amount 
charged. In the absence of evidence to the contrary, the value of the 
lodging may be deemed to be equal to the amount charged.
    (c) Business premises of the employer--(1) In general. For purposes 
of this section, the term ``business premises of the employer'' 
generally means the place of employment of the employee. For example, 
meals and lodging furnished in the employer's home to a domestic servant 
would constitute meals and lodging furnished on the business premises of 
the employer. Similarly, meals furnished to cowhands while herding their 
employer's cattle on leased land would be regarded as furnished on the 
business premises of the employer.
    (2) Certain camps. For taxable years beginning after December 31, 
1981, in the case of an individual who is furnished lodging by or on 
behalf of his employer in a camp (as defined in paragraph (d) of this 
section) in a foreign country (as defined in Sec. 1.911-2(h)), the camp 
shall be considered to be part of the business premises of the employer.
    (d) Camp defined--(1) In general. For the purposes of paragraph 
(c)(2) of this section, a camp is lodging that is all of the following:
    (i) Provided by or on behalf of the employer for the convenience of 
the employer because the place at which the employee renders services is 
in a remote area where satisfactory housing is not available to the 
employee on the open market within a reasonable commuting distance of 
that place;

[[Page 499]]

    (ii) Located, as near as practicable, in the vicinity of the place 
at which the employee renders services; and
    (iii) Furnished in a common area or enclave which is not available 
to the general public for lodging or accommodations and which normally 
accommodates ten or more employees.
    (2) Satisfactory housing. For purposes of paragraph (d)(1)(i) of 
this section, facts and circumstances that may be relevant in 
determining whether housing available to the employee is satisfactory 
include, but are not limited to, the size and condition of living space 
and the availability and quality of utilities such as water, sewers or 
other waste disposal facilities, electricity, or heat. The general 
environment in which housing is located (e.g., climate, prevalence of 
insects, etc.) does not of itself make housing unsatisfactory. The 
general environment is relevant, however, if housing is inadequate to 
protect the occupants from environmental conditions. The individual 
employee's income level is not relevant in determining whether housing 
is satisfactory; it may, however, be relevant in determining whether 
satisfactory housing is available to the employee (see paragraph 
(d)(3)(i)(B) of this section).
    (3) Availability of satisfactory housing--(i) Facts and 
circumstances. For purposes of paragraph (d)(1)(i) of this section, 
facts and circumstances to be considered in determining whether 
satisfactory housing is available to the employee on the open market 
include but are not limited to:
    (A) The number of housing units available on the open market in 
relation to the number of housing units required for the employer's 
employees;
    (B) The cost of housing available on the open market;
    (C) The quality of housing available on the open market; and
    (D) The presence of warfare or civil insurrection within the area 
where housing would be available which would subject U.S. citizens to 
unusual risk of personal harm or property loss.
    (ii) Presumptions. Satisfactory housing will generally be considered 
to be unavailable to the employee on the open market if either of the 
following conditions is satisfied:
    (A) The foreign government requires the employer to provide housing 
for its employees other than housing available on the open market; or
    (B) An unrelated person awarding work to the employer requires that 
the employer's employees occupy housing specified by such unrelated 
person.

The condition of either paragraph (d)(3)(ii) (A) or (B) of this section 
is not satisfied if the requirement described therein and imposed either 
by a foreign government or unrelated person applies primarily to U.S. 
employers and not to a significant number of third country employers or 
applies primarily to employers of U.S. employees and not to a 
significant number of employers of third country employees.
    (4) Reasonable commuting distance. For purposes of paragraph 
(d)(1)(i) of this section, in determining whether a commuting distance 
is reasonable, the accessibility of the place at which the employee 
renders services due to geographic factors, the quality of the roads, 
the customarily available transportation, and the usual travel time (at 
the time of day such travel would be required) to the place at which the 
employee renders services shall be taken into account.
    (5) Common area or enclave. A cluster of housing units does not 
satisfy paragraph (d)(1)(iii) of this section if it is adjacent to or 
surrounded by substantially similar housing available to the general 
public. Two or more common areas or enclaves that house employees who 
work on the same project (for example, a highway project) are considered 
to be one common area or enclave in determining whether they normally 
accommodate ten or more employees.
    (e) Rules. The exclusion provided by section 119 applies only to 
meals and lodging furnished in kind by or on behalf of an employer to 
his employee. If the employee has an option to receive additional 
compensation in lieu of meals or lodging in kind, the value of such 
meals and lodging is not excludable from gross income under section 119. 
However, the mere fact that an employee, at his option, may decline to 
accept meals tendered in kind will not of itself require inclusion of 
the value thereof in gross income. Cash allowances for meals or lodging 
received by

[[Page 500]]

an employee are includible in gross income to the extent that such 
allowances constitute compensation.
    (f) Examples. The provisions of section 119 may be illustrated by 
the following examples:

    Example (1). A waitress who works from 7 a.m. to 4 p.m. is furnished 
without charge two meals a work day. The employer encourages the 
waitress to have her breakfast on his business premises before starting 
work, but does not require her to have breakfast there. She is required, 
however, to have her lunch on such premises. Since the waitress is a 
food service employee and works during the normal breakfast and lunch 
periods, the waitress is permitted to exclude from her gross income both 
the value of the breakfast and the value of the lunch.
    Example (2). The waitress in example (1) is allowed to have meals on 
the employer's premises without charge on her days off. The waitress is 
not permitted to exclude the value of such meals from her gross income.
    Example (3). A bank teller who works from 9 a.m. to 5 p.m. is 
furnished his lunch without charge in a cafeteria which the bank 
maintains on its premises. The bank furnishes the teller such meals in 
order to limit his lunch period to 30 minutes since the bank's peak work 
load occurs during the normal lunch period. If the teller had to obtain 
his lunch elsewhere, it would take him considerably longer than 30 
minutes for lunch, and the bank strictly enforces the 30-minute time 
limit. The bank teller may exclude from his gross income the value of 
such meals obtained in the bank cafeteria.
    Example (4). Assume the same facts as in example (3), except that 
the bank charges the bank teller an unvarying rate per meal regardless 
of whether he eats in the cafeteria. The bank teller is not required to 
include in gross income such flat amount charged as part of his 
compensation, and he is entitled to exclude from his gross income the 
value of the meals he receives for such flat charge.
    Example (5). A Civil Service employee of a State is employed at an 
institution and is required by his employer to be available for duty at 
all times. The employer furnishes the employee with meals and lodging at 
the institution without charge. Under the applicable State statute, his 
meals and lodging are regarded as part of the employee's compensation. 
The employee would nevertheless be entitled to exclude the value of such 
meals and lodging from his gross income.
    Example (6). An employee of an institution is given the choice of 
residing at the institution free of charge, or of residing elsewhere and 
receiving a cash allowance in addition to his regular salary. If he 
elects to reside at the institution, the value to the employee of the 
lodging furnished by the employer will be includible in the employee's 
gross income because his residence at the institution is not required in 
order for him to perform properly the duties of his employment.
    Example (7). A construction worker is employed at a construction 
project at a remote job site in Alaska. Due to the inaccessibility of 
facilities for the employees who are working at the job site to obtain 
food and lodging and the prevailing weather conditions, the employer is 
required to furnish meals and lodging to the employee at the camp site 
in order to carry on the construction project. The employee is required 
to pay $40 a week for the meals and lodging. The weekly charge of $40 is 
not, as such, part of the compensation includible in the gross income of 
the employee, and under paragraphs (a) and (b) of this section the value 
of the meals and lodging is excludable from his gross income.
    Example (8). A manufacturing company provides a cafeteria on its 
premises at which its employees can purchase their lunch. There is no 
other eating facility located near the company's premises, but the 
employee can furnish his own meal by bringing his lunch. The amount of 
compensation which any employee is required to include in gross income 
is not reduced by the amount charged for the meals, and the meals are 
not considered to be furnished for the convenience of the employer.
    Example (9). A hospital maintains a cafeteria on its premises where 
all of its 230 employees may obtain a meal during their working hours. 
No charge is made for these meals. The hospital furnishes such meals in 
order to have each of 210 of the employees available for any emergencies 
that may occur, and it is shown that each such employee is at times 
called upon to perform services during his meal period. Although the 
hospital does not require such employees to remain on the premises 
during meal periods, they rarely leave the hospital during their meal 
period. Since the hospital furnishes meals to each of substantially all 
of its employees in order to have each of them available for emergency 
call during his meal period, all of the hospital employees who obtain 
their meals in the hospital cafeteria may exclude from their gross 
income the value of such meals.

[T.D. 6745, 29 FR 9380, July 9, 1964, as amended by T.D. 8006, 50 FR 
2964, Jan. 23, 1985]