In the church, we often will take someone out for coffee or lunch—for pastoral- or church-related discussions. Is this no longer allowed with the new business expense rules that resulted from the Tax Cuts and Jobs Act?
Tax reform should affect the way churches approach the reimbursement of entertainment expenses to pastors and staff members. If a church does not use an accountable reimbursement plan, the act prevents pastors or staff members from itemizing business expenses as deductions on schedule A. Furthermore, pastors or staff members will have those reimbursements reported as compensation on their Form W-2 or 1040—and the amounts can be taken into account in computing automatic excess benefits (and any potential penalties, if they are triggered).
That's why, as I have advocated for more than 30 years, churches should adopt an accountable reimbursement plan. Such a plan enables pastors and staff members to receive reimbursements without facing any tax consequences. But specific rules must be followed.