Personal Finance

Senate HEALS Act allows businesses to write off up to 100% of the cost of meals

Key Points
  • A provision in the $1 trillion HEALS Act provides a 100% deduction for business meals until the end of the year. This proposal, dubbed the Supporting America’s Restaurant Workers Act, is championed by Sen. Tim Scott, R-S.C.
  • Dining establishments were hit particularly hard by the coronavirus pandemic. More than 15,700 restaurants were closed permanently as of July 10, according to data from Yelp.
  • Currently, meals and snacks offered at work are 50% deductible, as are client meals if business is conducted.
Kemal Yildirim | E+ | Getty Images

The Senate HEALS Act would allow business owners to take a temporary 100% tax deduction on business meals.

The GOP's $1 trillion proposal, which was released on Monday, calls for a range of relief measures to help buoy Americans during the coronavirus pandemic.

Aside from offering another round of $1,200 stimulus checks and a reduced stream of unemployment benefits, the legislation aims to encourage business people to visit restaurants more often.

A provision in the HEALS Act would permit businesses to fully write off the value of meals until the end of 2020.

More from Personal Finance:
Why unemployment is a broken system
How to build an emergency fund
GOP propose second round of $1,200 stimulus checks

That's up from a 50% deduction that's currently allowed for meals and snacks at work, as well as client meals if business is being conducted.

"We know that more than 5.5 million restaurant workers lost their jobs as the pandemic hit," said Sen. Tim Scott, R-S.C., in a statement. He sponsored the measure, known as the Supporting America's Restaurant Workers Act.

"While some of these jobs have been recovered, it is clear more help is needed," Scott said.

Indeed, coronavirus has battered restaurants. Many establishments shuttered their doors at least temporarily amid stay-at-home orders in the spring.

However, Covid-19 cases are spiking once more, and restaurants are facing the prospect of lower revenues over the long term and greater uncertainty.

There were 26,160 restaurant closures as of July 10, according to data from Yelp. Of these, 15,770 of these establishments have shut their doors permanently.

Among the hardest hit

Though it may have been Sen. Scott's intention to provide restaurants with some relief, policy experts are skeptical of how effective this measure might be.

"There's the timing — we see a resurgence of cases and economic activity receding, so the ability of a deduction like this to stimulate activity is pretty minimal," said Garrett Watson, senior policy analyst at the Tax Foundation.

Government needs to do what's necessary to make sure economy can heal: UBS's Ryan
Government needs to do what's necessary to make sure economy can heal: UBS's Ryan

Meanwhile, even in locations where restaurants can serve people outdoors, patrons remain hesitant to congregate.

"Our town is letting people put seats in the street and have barricades so people can eat and socially distance," said Dan Herron, CPA and principal of Elemental Wealth Advisors in San Luis Obispo, California.

"Who are you entertaining?" he asked. "You can't take people to a restaurant.

"You have to be socially distant," Herron added. "It's not going to move the needle."

Other aid for restaurants

Sen. Marco Rubio, R-Fla.
Tom Williams | CQ-Roll Call | Getty Images

While restaurateurs may only get a little bit of mileage from expanding the business meals deduction, the HEALS Act contains other provisions that give them — and other small businesses — an infusion of funding.

For instance, Sens. Marco Rubio, R-Fla., and Susan Collins, R-Maine, introduced a measure that would permit the most severely affected small businesses to take a second Paycheck Protection Program loan.

These firms must meet certain conditions, including employing no more than 300 workers and demonstrating at least a 50% reduction in gross receipts in the first or second quarter of 2020 compared to the year-ago period.

Business owners who take a PPP loan may be forgiven if they use at least 60% of the proceeds toward payroll costs.