Comprehensive free cafeterias in Silicon Valley offices are just one of the numerous factors that make positions at companies such as Google, Apple, and Facebook some of the most sought after jobs in the world. However, the IRS is attempting to tax these culinary perks, claiming that they are fringe benefits that should be taxed the same as wages.
Google’s Mountain View campus is home to 29 eateries, provided free of charge in order to increase productivity and encourage workers to stay at headquarters longer while spending less time traveling to and from off-site restaurants. The diversity and convenience of Google’s many restaurants is just another of the countless benefits offered by the company in order to attract the best and brightest minds. But is this free food “just another benefit” and should be taxed as such? Or is it an aspect of the office that improves the work environment, such as a scenic park or a comfortable break room?
Congress decided a generation ago to exclude employer-provided meals from the tax definition of wages, and for good reason. If employees, for example, have to work through lunch, it’s unfair to tax the pizza delivery as if it were some sort of wage bonus. These meals clearly fall under the category of de minimis fringe, meaning that they are negligible services which need not be taxed. The tax code explicitly states that operation of any eating facility by an employer shall be treated as de minimis (untaxed) if the facility is located on the premises of the employer and the revenue normally derived from the facility exceeds the direct operating costs of the facility. The dining rooms provided by Silicon Valley companies meet both of these standards and are therefore clear-cut examples of de minimis fringe.
Although the tax code has clearly described these perks as being tax-free the IRS is seeking to pinch every last penny from Silicon Valley. In the case of these companies, the culture is one of long hours, odd meal times, and lots of computer programming. These incentives increase the convenience and efficiency of the office by allowing workers to transfer from work to meals and back to work as quickly and seamlessly as possible. This ease has contributed towards making the atmosphere at these tech giants and other startups one of tenacity as well as teamwork in order to rise to the top of the industry.
The IRS’s attempt to tax one of the more attractive features of leading American businesses reflects their commitment to seeking out American exceptionalism and trying to glean tax revenue from the profits of private businesses. These free lunchrooms possess and attract some of the most intelligent and ingenious minds in the world. Supporters of American growth should be encouraging the expansion of such practices, not finding excuses to take from the most successful of American enterprises.