How have certain de minimis benefits been assessed?

Security concerns. Specially designed transportation provided to an employee out of bona fide business-oriented security concerns can be a de minimis fringe. This, for example, might extend to the cost of bulletproof glass.

Dependent group-term life insurance. The cost of employer-provided group-term life insurance on the life of the spouse or dependent of an employee is excludable from gross income as a de minimis fringe benefit if the face amount does not exceed $2,000. If the policy has a higher face value, only the excess of the cost of the insurance over the amount paid for it by the employee on an after-tax basis is taken into account in determining whether it is de minimis.

Use of copying machine. Where an employer exercises sufficient control and imposes significant restrictions over personal use of a copying machine so that substantially all (i.e., at least 85 percent) of the use of the machine is for business purposes, the employer may treat any personal use of that machine by a particular employee as a de minimis fringe benefit.

Occasional meals and local transportation fare. Meals, meal money, or local transportation fare provided to an employee are excludable as a de minimis fringe benefit if the benefit is reasonable and the following conditions are met:

• They are provided on an occasional basis. The regularity with which the employer provides the benefit is key.

• They are provided due to overtime. The meals, meal money, or local transportation fare is provided to an employee because overtime work requires the extension of the employee's normal work schedule. The meal or meal money must be provided to enable the employee to work overtime.

Money or local transportation fare calculated on the basis of the number of hours worked (e.g., $1.00 per hour for each hour worked over eight hours) is never a de minimis fringe benefit.

Eating facilities. The value of meals provided to employees at an employer-operated eating facility is excludable from gross income as a de minimis fringe benefit if all of the following criteria are met:

• the facility must be owned or leased by the employer;

• the facility must be operated by the employer, either directly or under contract with another;

• the facility must be located on or near the business premises of the employer;

• the meals furnished at the facility must be provided during, or immediately before or after, the employees' workdays; and

• the annual revenue from the facility (including revenue from vending machines) must equal or exceed the facility's direct operating costs (employers may aggregate the costs and revenues of their eating facilities).

Additional test for HCEs. In order for officers, owners, and highly compensated employees to be eligible for the exclusion, access to the facility also must be available on substantially the same terms for highly compensated employees as it is for other employees. Each dining room or cafeteria in which meals are served is treated as a separate eating facility, regardless of whether it has its own kitchen or other food-preparation area.

Valuation of nonexcluded meals. If the exclusion for meals as a de minimis fringe benefit is not available, the employees receiving the meals may have to include the fair market value of the meals in excess of the amount paid for the meals in their income. All or any part of the meals may be excludable under another fringe benefit exception or Internal Revenue Code provision.

Meals provided for an employer's convenience. Meals provided on an employer's premises for the employer's convenience are considered a de minimis fringe benefit under Code Sec. 132. For this purpose, the employee is treated as having paid an amount for the meal equal to the direct operating costs of the facility attributable to the meal.

By bringing these meals within the definition of de minimis, meals provided by an employer at an eating facility for employees are fully deductible by the employer, instead of possibly being subject to the 50 percent limit, under Code Sec. 274, on the deductibility of business meals.