27 NOVEMBER 2023 WorldWide Drilling Resource® Mesquite NV utahgrou (801) 541-7259 .org undwater Drilling Into Money Not Boring by Mark E. Battersby Tax Write-Offs for Fun and Games Uncle Sam, in the form of tax deductions, is helping foot the bill for some of the more enjoyable aspects of doing business. Yes, enjoyable, as when Uncle Sam picks up part of the cost of a drilling operation’s holiday parties. What could be easier? A tax deduction for business entertainment is available to help with the cost of holiday parties or picnics. The parties can’t, of course, exclusively benefit owners, shareholders, or highly compensated employees, but parties thrown primarily for the benefit of all employees are 100% tax deductible. The Internal Revenue Service (IRS) requires the party occur for an “ordinary and necessary” reason. As long as it can be shown the party was a necessary expense of the business, the IRS will usually approve it. Thus, a party, company picnic, or other event hosted for the sole benefit of employees and their families is 100% tax deductible by a drilling business. In fact, employee parties - holiday or otherwise - picnics, outings, and team-building events all qualify for a 100% write-off. While things such as golf expenses and sports games cannot be deducted, there are a number of entertainment-related deductions for holiday parties, picnics, and events - such as reward trips. The rules also cover expenses for business meetings, conferences, etc. In general, entertainment expenses are no longer deductible. This includes the cost of bringing employees to a football game or other sporting event. What’s more, businesses cannot deduct the costs of renting out an “entertainment facility” such as a bowling alley, yacht, fishing camp, swimming pool, or hotel suite. Also nondeductible, are the costs of membership dues such as those for country club memberships. Fortunately, there are strategies which can enable a business to avoid the tax law’s restriction. For example, recreational expenses for employees such as a holiday party or summer picnic are still deductible - as is entertainment treated as compensation can still be deducted. And, don’t forget, expenses related to attending business meetings or conventions of certain exempt organizations such as business leagues, chambers of commerce, and professional associations remain legitimate deductions. Qualifying for those employee-related enjoyment tax deductions - and so many others - under our ever-changing tax laws, may make professional advice a necessity. Mark Mark E. Battersby may be contacted via e-mail to michele@worldwidedrillingresource.com
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