[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: 26CFR1.132-7T]

[Page 598-599]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.132-7T  Treatment of employer-operated eating facilities--1985 
through 1988 (temporary).

    (a) In general--(1) General rule. The value of meals provided to 
employees at an employer-operated eating facility for employees is 
excludable from gross income as a de minimis fringe only if--
    (i) On an annual basis, the revenue from the facility equals or 
exceeds the direct operating costs of the facility, and
    (ii) With respect to any officer, owner or highly compensated 
employee, access to the facility is available on substantially the same 
terms to each member of a group of employees that is defined under a 
reasonable classification set up by the employer that does not 
discriminate in favor of officers,

[[Page 599]]

owners, and highly compensated employees. See Sec. 1.132-8T.
    (2) Employer-operated eating facility for employees. An employer-
operated eating facility for employees is a facility that meets all of 
the following conditions--
    (i) The facility is owned or leased by the employer,
    (ii) The facility is operated by the employer,
    (iii) The facility is located on or near the business premises of 
the employer,
    (iv) Substantially all of the use of the facility is by employees of 
the employer operating the facility, and
    (v) The meals furnished at the facility are provided during, or 
immediately before or after, the employee's workday.

For purposes of this section, the term ``meals'' means food, beverages, 
and related services provided at the facility. If an employer can 
determine the number of employees who receive meals that are excludable 
from income under section 119, the employer may, in determining whether 
the requirement of paragraph (a)(1)(i) of this section is satisfied, 
disregard all costs and revenues attributable to such meals provided to 
such employees. For purposes of this section, each dining room or 
cafeteria in which meals are served is treated as a separate eating 
facility, regardless of whether each such dining room or cafeteria has 
its own kitchen or other food-preparation area.
    (3) Operation by the employer. If an employer contracts with another 
to operate an eating facility for its employees, the facility is 
considered to be operated by the employer for purposes of this section. 
If an eating facility is operated by more than one employer, it is 
considered to be operated by each employer.
    (b) Direct operating costs. The direct operating costs test must be 
applied separately for each dining room or cafeteria. For purpose of 
this section, the direct operating costs of an eating facilities are: 
(1) The cost of food and beverages and (2) the cost of labor for 
personnel whose services relating to the facility are performed 
primarily on the premises of the eating facility. Direct operating costs 
do not include the cost of labor for personnel whose services relating 
to the facility are not performed primarily on the premises of the 
eating facility. Thus, for example, the labor cost for cooks, waiters, 
and waitresses is included in direct operating costs, but the labor cost 
for a manager of an eating facility whose services relating to the 
facility are not primarily performed on the premises of the eating 
facility is not included in direct operating costs. If an employee 
perfoms services both on and off the premises of the eating facility, 
only the applicable percentage of the total labor cost of the employee 
that bears the same proportion as time spent on the premises bears to 
total time is included in direct operating costs. For example, assume 
that 60 percent of the services of the cooks in the above example are 
not related to the eating facility. Only 40 percent of the total labor 
cost of the cooks is includible in direct operating costs. For purposes 
of this section, labor costs include all compensation required to be 
reported on a Form W-2 for income tax purposes and related employment 
taxes paid by the employer.
    (c) Valuation of non-excluded meals provided at an employer-operated 
eating facility for employees. If the exclusion for meals provided at an 
employer-operated eating facility for employees is not available, the 
recipient of meals provided at such facility must include in income the 
amount by which the fair market value of the meals provided exceeds the 
sume of: (1) The amount, if any, paid for the meals, and (2) the amount, 
if any, specifically excluded by another section of the Code. For 
special valuation rules relating to such meals see Sec. 1.61-2T (j).

[T.D. 8063, 50 FR 52308, Dec. 23, 1985, as amended by T.D. 8256, 54 FR 
28600, July 6, 1989]