## Facts

- Boyd Gaming Corporation and related subsidiaries operated multiple Las Vegas casino-hotels during tax years 1987 and 1988.
- Boyd required many employees to remain on the business premises for the entire shift, including meal periods, citing security and operational concerns.
- Because employees could not leave during meal periods, Boyd provided free meals in on-site cafeterias.
- Boyd deducted 100% of the costs of these meals on its 1987 and 1988 corporate tax returns.
- The IRS issued deficiency notices, applying the then-80% deduction limitation for meals under IRC § 274(n).
- Boyd contended the meals were exempt from § 274(n) because they were “de minimis fringe” meals under IRC § 132(e), which required that the meals be furnished for the “convenience of the employer” under IRC § 119.
- The Tax Court sided with the Commissioner, rejecting Boyd’s § 119 “convenience of the employer” position and limiting deductions under § 274(n).
- Boyd appealed.

## Issues

1. Whether Boyd’s on-premises employee meals, provided under a mandatory stay-on-premises policy, were furnished for the “convenience of the employer” under IRC § 119.
2. If so, whether the meals qualified as “de minimis fringe” benefits under IRC § 132(e), exempting the expenses from the IRC § 274(n) percentage limitation.

## Decision

- The Ninth Circuit reversed the Tax Court.
- The court held Boyd’s stay-on-premises policy was supported by substantial noncompensatory business reasons (including security and logistics).
- The meals therefore were furnished for the “convenience of the employer” under § 119.
- Because the meals qualified as de minimis fringe meals under § 132(e), § 274(n)’s 80% limitation did not apply.
- Boyd was entitled to deduct 100% of the meal costs for the years at issue.

## Legal Principles

- For § 119, employer-provided meals on the employer’s premises are “for the convenience of the employer” when furnished for a substantial noncompensatory business reason, rather than as compensation.
- When credible evidence supports legitimate business reasons for a stay-on-premises policy, a court should not substitute its own business judgment for the employer’s.
- Meals qualifying as de minimis fringe benefits under § 132(e) (including the § 119 convenience requirement) fall within an exception to § 274(n)’s percentage limitation, permitting full deductibility of the employer’s costs.

## Conclusion

The Ninth Circuit held that Boyd’s mandatory stay-on-premises policy, justified by security and operational needs, satisfied § 119’s “convenience of the employer” standard; the resulting on-premises meals qualified as de minimis fringe benefits under § 132(e), allowing Boyd to deduct the full meal expenses without the § 274(n) limitation.


Boyd Gaming Corp. v. Commissioner, 177 F.3d 1096 (9th Cir. 1999)