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Entertainment

Revised: July 1, 2007

Also refer to Signature Authority Policy

Table of Contents

Entertainment Policy
IRS Regulations
Entertainment Defined
Business Guest Defined
Directly-Related Test
Associated Test
Associated With a Trade or Business
Substantial Business Discussion
Meals as Entertainment
Who Can Incur Entertainment Expenses
Payment
Requirements for Payment
Information Available on the Internet
Related Policies
Additional Information


Entertainment policy

The University will pay for ordinary and necessary expenses to entertain business guests in accordance with IRS regulations.

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 defined

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.

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Business guest defined

Business guests include, but are not limited to:

  • donors,
  • 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.

Directly-related test

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.

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Associated test

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.

 

Associated with a trade or business

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.

Substantial business discussion

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.

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Meals as entertainment

Entertainment includes the cost of a meal (including beverages, taxes, and tips) you provide to a business guest.

Who can incur entertainment expenses

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."

Payment

Entertainment expenses are reimbursed on an Authorization for Payment form or paid on a procard.

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Requirements for payment

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.

Information available on the Internet

The following additional information is available on the Internet at http://web.pacific.edu/x8084.xml:

  • Authorization for Payment form.

Related policies

Expenditure Authorization Policy, Procurement Policy, Travel Policy.

Additional information

Contact Accounts Payable for additional information.

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