In Notice 2021-63[1] the IRS provides guidance on the interaction of the per diem rules found in Revenue Procedure 2019-48[2] and the temporary allowance of a 100% deduction for business meals provided by a restaurant found at IRC §274(n)(2)(D) for amounts paid or incurred in 2021 and 2022.

The Notice describes the per diem rules as follows:

Section 274(d) generally provides that no deduction is allowed for any traveling expense (including meals while away from home) unless the taxpayer substantiates such expense by adequate records or by sufficient corroborating evidence. However, § 274(d) authorizes the Secretary of the Treasury or her delegate to prescribe by regulation that some or all of the substantiation requirements do not apply in the case of an expense which does not exceed a particular amount. Section 1.274-5(j)(1) of the Income Tax Regulations authorizes the Commissioner of Internal Revenue (Commissioner) to establish a method allowing a taxpayer to treat a specific amount as paid or incurred for meals while traveling away from home instead of substantiating the actual cost. See also § 1.274-5(g).

In Rev. Proc. 2019-48, 2019-51 I.R.B. 1392, the Commissioner provides rules for taxpayers that choose to use a per diem rate to substantiate, under § 274(d) and § 1.274-5, the amount of ordinary and necessary business expenses paid or incurred while traveling away from home for: lodging, meal, and incidental expenses; meals and incidental expenses only; or incidental expenses only. Taxpayers that follow the rules in Rev. Proc. 2019-48 are deemed to meet the substantiation requirements in § 274(d) for the applicable travel expenses. See, for example, section 4.01 of Rev. Proc. 2019-48. Except for incidental expenses only deductions, all or part of the amount of an expense deemed substantiated under Rev. Proc. 2019-48 is subject to the appropriate limitation under § 274(n) on the deductibility of food or beverage expenses. See section 6.05 of Rev. Proc. 2019-48.[3]

The Notice provides that the IRS will allow taxpayers to treat the meals and incidental expense portion of the per diem allowance as consisting of food and beverages provided by a restaurant:

Solely for purposes of § 274(n)(2)(D), a taxpayer that properly applies the rules of Rev. Proc. 2019-48 may treat the meal portion of a per diem rate or allowance paid or incurred after December 31, 2020, and before January 1, 2023, as being attributable to food or beverages provided by a restaurant.[4]

The ruling applies to both reimbursements to employees and amounts properly claimed under the per diem rules by self-employed individuals in accordance with Revenue Procedure 2019-48.[5]

[1] Notice 2021-63, November 16, 2021, https://www.taxnotes.com/research/federal/irs-guidance/notices/irs-clarifies-application-of-temporary-meal-expense-deduction/7clyd?h=2021-63

[2] Revenue Procedure 2019-48, November 26, 2019, https://www.taxnotes.com/research/federal/irs-guidance/revenue-procedures/irs-provides-per-diem-rate-rules-for-substantiating-expenses/2b5g2

[3] Notice 2021-63, November 16, 2021

[4] Notice 2021-63, November 16, 2021

[5] Notice 2021-63, November 16, 2021, Section 4