Ordinarily, a company is allowed to deduct only 50% of its expenses for meals and entertainment.  In some situations, meals and entertainment expenses are 100% deductible. 

Business-related expenses for meals and entertainment are 100% deductible when:

• the expenses are for recreational, social or similar activities that are mainly for the benefit of employees who are not highly compensated (such as, a staff holiday party)
• the expenses are related to business meeetings for employees, stockholders or directors (such as, providing box lunches during a staff meeting)
• the expenses are for meals that are excludable from an employee’s gross income as a de minimis fringe benefit (such as, ordering pizza for employees who work late)
• the expenses are for meals provided to employees for the convenience of the employer (such as, providing free meals at an on-site cafeteria to employees who are not allowed to leave the premises during their shifts)

To claim 100% deductions for eligible meals and entertainment expenses, specific recordkeeping is required.  The general ledger accounts should separately identify meals and enteretainment expenses that are 50% deductible and those that are 100% deductible.

Thanks to Amy Chapman, CPA, in the Orlando office of LarsonAllen LLP, for educating me on this topic.