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Comment by gph | Hacker News Reader

Which does seem like sort of a loophole. Don't companies have to add perks over a certain amount to the employees pay so that it gets taxed? Wouldn't feeding an employee every day qualify?

It would be sort of weird if we turn back into having sort of 'company towns' where your employer provides a lot of what you need except they pay for it. It's not just Google this would be beneficial for, even if you run a factory you could pay employees a tiny bit less, but provide food/services for them that would make up for it. And because of the taxes/bulk situation it could be economically beneficial for both sides.

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Wouldn't feeding an employee every day qualify?

Meals on the business' premises for the benefit of the business are not taxable income for employees (but are a deductible expense of the business). This is a black-letter IRS regulation; https://www.irs.gov/publications/p15b/ar02.html#en_US_2016_p...

Meals are a sideshow, though; healthcare is where the real action is. If work buys you a Playstation you get taxed on ~$300 in imputed income; if work pays $12k~$25k a year for your health insurance, that isn't taxed.

The company cafeteria was once a staple of American business. They usually were not free, but were below cost. It was just easier and cheaper for everybody than getting everybody out of the building and back.

I used to work for a subsidiary of an auto company, and I got a new company car every year. But those cars were used partly as test vehicles; they were maintained at the company garage by company employees, so they had a benchmark on maintenance problems. The company could make a tax case for that not being income. This only works if your employees are using your own product.

The fact that employer-paid health insurance premiums are not taxed as income is a direct result of the wage-and-price controls established in the US in WWII.

"Employer-sponsored health insurance plans dramatically expanded as a direct result of wage controls imposed by the federal government during World War II. The labor market was tight because of the increased demand for goods and decreased supply of workers during the war. Federally imposed wage and price controls prohibited manufacturers and other employers from raising wages enough to attract workers. When the War Labor Board declared that fringe benefits, such as sick leave and health insurance, did not count as wages for the purpose of wage controls, employers responded with significantly increased offers of fringe benefits, especially health care coverage, to attract workers."

- https://en.wikipedia.org/wiki/Health_insurance_in_the_United...

The benefits must be provided for a business reason to not be taxed (to the employee as income).

I expect that it's a mix of two things:

1. You can make a case that keeping them in the office (rather than making trips out) is a business need, and it might hold up to scrutiny. This probably covers things like coffee, juice, snacks, etc. The company legitimately does benefit from (some key) employees not constantly leaving the office for small necessities.

2. There's a lot of low-level tax fraud the IRS is too understaffed to deal with (and is directed away from corporate fraud like that, anyway). So you probably are supposed to report the value of the meals you get, but no one tracks it, and each employee is only committing a small error, so the IRS can't justify dealing with every case.

The IRS actually has a great PDF on when giving an employee a free meal is a taxable benefit or not. (I found it a couple years back when starting a small corp, but can't seem to find it now.)

Ed:

According to this document [1], Google providing meals probably falls under a nontaxable status because they provide them on campus and there isn't a lot of food near the campus. (Section starts on page 43.)

[1] https://www.irs.gov/pub/irs-pdf/p5137.pdf

I wonder if they are then taxable in NYC, given the plethora of options within a 5 min walk of their office.

The IRS rule is that these kinds of perks are allowed if it is for the company's benefit.

For example, if a free lunch allows an employees to have a lunch meeting, the IRS considers that for the company's benefit.

Whether all of Google's perks actually satisfy that test is a different issue, but that is the IRS's rule.

Interesting, even if you give them the lunches it would be a huge stretch to say a fitness center and massages benefit the company.

Sounds like a rule that is hard to impossible for the IRS to enforce. I hate rules like that, we ought to create a better rule or get rid of it altogether. Because I'm guessing if a factory lowered their wages while providing the same perks as google the IRS would probably say something.

> a fitness center

You'd be amazed how much exercise helps with concentration and reduces stress.

Yea I get that, but you can extend that logic to just about every domain of life. Should they be allowed to buy all their employees the best mattresses available because a good night's sleep helps productivity? Should they pay for a nanny because help with child care makes you more productive?

With that logic you could fund your employees entire lifestyle if you made the case that it helps them be more productive.

Is it "customary" for a company to pay for mattresses? Maybe if the company runs an oil rig, but a tech company?

This even goes for things like salaries. If a company pays salaries that are way above the market rate, this could be seen as [corporate] tax fraud. But there often isn't a bright line in law, which is frustrating to us engineers who think deterministically.

> Should they be allowed to buy all their employees the best mattresses available because a good night's sleep helps productivity?

Yes, potentially though it'd probably help to have data supporting that. But things like company housing or sleep pods can materially benefit the company (for one thing, if you can take a nap at work you'll work longer hours).

> Should they pay for a nanny because help with child care makes you more productive?

Sure, potentially. In fact, employer-provided childcare is a tax-free benefit.

> It would be sort of weird if we turn back into having sort of 'company towns' where your employer provides a lot of what you need except they pay for it.

It would be weird but it would make sense, in the same way that theoretically the 'best' government in a benevolent dictator. When it's good, it's great, when it's bad, it's BAAAD.

I one spoke with a woman from the Netherlands who was surprised that these perks are not taxable. According to her, in the Netherlands perks like shuttles to work or company-provide food are taxable.

What if the company had a business meeting and lunch was provided?

IANADoNTL (I am not a Dutch or Norwegian Tax Lawyer), but I bet there's a ridiculously complex set of rules governing what constitutes 'taxable food'.

If it involves clients, then you need the paperwork and may save on part of the VAT + part of the money could be considered expense. Usually it can be quite complex and it's not harmonized in the EU.

Similar taxes have been adopted in Norway, as companies were paying for leased cars and mobile phones rather than raising wages.

They are in Germany. What happens with perks is that there's a (reasonable) fixed value assigned to them which is accounted for in income taxes.

And as long as they're below a certain amount, the benefits will be taxed at a fixed tax rate, not the employees individual rate. It's much easier for accounting purposes.

Taxable throughout the EU [probably the entire EU]. In most cases it amounts to full income + social tax - just like salary (except it doesn't count for retirement). There could be some exceptions like drinking water but overall it's considered hidden salary.

Shuttles are a weird area even in the U.S. - When I worked as a contractor at Google I was required to pay for shuttle use since Google couldn't write off benefits provided to non-employees.

A lot of factories used to work like that if I recall.

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