Revised: July 1, 2007
Also refer to Signature Authority Policy
Table of Contents
Business Guest Defined
Associated With a Trade or Business
Substantial Business Discussion
Meals as Entertainment
Who Can Incur Entertainment Expenses
Requirements for Payment
Information Available on the Internet
The University will pay for ordinary and necessary expenses to entertain business guests in accordance with IRS regulations.
For entertainment expenses to be reimbursable and not subject to taxes the entertainment must be ordinary and necessary and one of the following tests must be met:
- directly-related test or
- associated test
Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Examples include entertaining guests at social, athletic and sporting clubs; at theaters; or at sporting events.
Business guests include, but are not limited to:
- prospective donors,
- employees (i.e., special recognition for retirement, service etc., special events for faculty or staff; etc.),
- prospective employees (i.e., applicants invited to campus for interviews), and/or
- visiting dignitaries or lecturers.
To be directly related, all conditions below must be met and you must show that:
- The main purpose of the combined business and entertainment was the active conduct of business.
- You did engage in business with the person during the entertainment period.
- You had more than a general expectation of getting income or some other specific benefit at some future time.
To meet the associated test, both conditions below must be met and you must show that the entertainment is:
- Associated with the active conduct of your trade or business, and
- Took place directly before or after a substantial business discussion.
Generally you must show that you had a clear business purpose for having the expense. For example, to solicit gifts or to encourage the continuation of an existing business relationship.
In general, a business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific business benefit.
Entertainment includes the cost of a meal (including beverages, taxes, and tips) you provide to a business guest.
Board members or any member of faculty or staff can incur entertainment expenses on behalf of the University provided the expenses are related to official University business, are substantiated, are not disallowed by University or regulatory policy, and are approved by the cognizant University official or employees supervisor.
Note: When several University personnel are present at an event, it is customary for the most senior individual to "pick up the tab."
Entertainment expenses are reimbursed on an Authorization for Payment form or paid on a procard.
Original receipts or bills must be attached to the Authorization for Payment form or procard statement and the following must be indicated:
- type of entertainment (i.e., breakfast, lunch, dinner, athletic event, etc.),
- place of entertainment,
- name of person or group entertained as well as company (if applicable),
- business relationship, and
- business purpose (topic of discussion, etc.).
Note: If the group entertained is large, attach separate listing to Authorization for Payment form or procard statement.
The following additional information is available on the Internet at http://web.pacific.edu/x8084.xml:
- Authorization for Payment form.
Contact Accounts Payable for additional information.