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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
insurance company that is an interinsurer or reciprocal • Lobbying expenses. However, see the exceptions
underwriter may deduct the increase in savings credited discussed later.
to subscriber accounts for the tax year. • Amounts paid or incurred for any settlement, payout, or
Savings credited to subscriber accounts means the attorney fees related to sexual harassment or sexual
surplus credited to the individual accounts of subscribers abuse, if such payments are subject to a nondisclosure
before the 16th day of the 3rd month following the close of agreement. See section 162(q).
the tax year. This is true only if the corporation would be Travel, meals, and entertainment. Subject to limitations
required to pay this amount promptly to a subscriber if the and restrictions discussed below, a corporation can
subscriber ended the contract when the corporation's tax deduct ordinary and necessary travel, meals, and
year ends. non-entertainment expenses paid or incurred in its trade
Line 31. Other deductions. Attach a statement listing by or business. Generally, entertainment expenses,
type and amount all allowable deductions under sections membership dues, and facilities used in connection with
832(c)(1) and (10) (net of the annual statement change in these activities cannot be deducted. In addition, no
undiscounted unpaid loss adjustment expenses) that are deduction is generally allowed for qualified transportation
not deductible on lines 15 through 30. fringe benefits. Also, special rules apply to deductions for
gifts, luxury water travel, and convention expenses. See
Examples of other deductions may include the
section 274 and Pub. 463 for details.
following.
Travel. The corporation cannot deduct travel expenses
• Any deduction under P.L. 115-97, section 13517(c)(3)
of any individual accompanying a corporate officer or
(B)(i) (transitional relief for change in reserve).
employee, including a spouse or dependent of the officer
• Any energy efficient commercial buildings deduction for
or employee, unless:
property placed in service during the tax year. Complete
and attach Form 7205. • That individual is an employee of the corporation, and
• Certain business startup and organizational costs • That individual’s travel is for a bona fide business
purpose and would otherwise be deductible by that
(discussed earlier under Limitations on Deductions).
individual.
• Legal and professional fees.
• Supplies used and consumed in the business. Meals. Generally, the corporation can deduct only 50%
• Travel, meals, and entertainment expenses. Special of the amount otherwise allowable for
rules apply (discussed later). non-entertainment-related meal expenses paid or incurred
• Utilities. in its trade or business. Meals not separately stated from
• Ordinary losses from trade or business activities of a entertainment are generally not deductible.
partnership from Schedule K-1 (Form 1065). Do not offset In addition (subject to exceptions under section 274(k)
ordinary income against ordinary losses. Instead, include (2)):
the income on line 13. Show the partnership's name, • Meals must not be lavish or extravagant, and
address, and EIN on a separate statement attached to this • An employee of the corporation must be present at the
return. If the amount entered is from more than one meal.
partnership, identify the amount from each partnership. Membership dues. The corporation can deduct
• Any extraterritorial income exclusion from Form 8873, amounts paid or incurred for membership dues in civic or
Extraterritorial Income Exclusion. public service organizations, professional organizations
• Dividends paid in cash on stock held by an employee (such as bar and medical associations), business
stock ownership plan (ESOP). However, a deduction may leagues, trade associations, chambers of commerce,
only be taken for the dividends above if, according to the boards of trade, and real estate boards. However, no
plan, the dividends are: deduction is allowed if a principal purpose of the
1. Paid in cash directly to the plan participants or organization is to entertain or provide entertainment
beneficiaries; facilities for members or their guests. This includes
country clubs, golf and athletic clubs, airline and hotel
2. Paid to the plan, which distributes them in cash to
clubs, and clubs operated to provide meals under
the plan participants or their beneficiaries no later than 90
conditions favorable to business discussion.
days after the end of the plan year in which the dividends
Qualified transportation fringes (QTFs). Generally,
are paid;
no deduction is allowed under section 274(a)(4) for QTFs
3. At the election of the participants or their provided by employers to their employees. QTFs are
beneficiaries (a) payable as provided under (1) or (2) defined in section 132(f)(1) and include:
above, or (b) paid to the plan and reinvested in qualifying • Transportation in a commuter highway vehicle between
employer securities; or the employee’s residence and place of employment,
4. Used to make payments on a loan described in • Any transit pass, and
section 404(a)(9). • Qualified parking.
See section 404(k) for more details and the limitation See section 274; Pub. 15-B, Employer’s Tax Guide to
on certain dividends. Fringe Benefits, for details.
Do not deduct expenses such as the following. Entertainment facilities. Generally, the corporation
• Amounts paid to, or at the direction of, a government or cannot deduct an expense paid or incurred for a facility
specified nongovernmental entity for the violation, or (such as a yacht or hunting lodge) used for an activity
investigation or inquiry, of a law. However, see the usually considered entertainment, amusement, or
exceptions discussed later. recreation.
16 Instructions for Form 1120-PC (2023)
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