To the extent an entertainment expense is treated as compensation to an employee and reflected on their W-2, the expense is fully deductible as compensation.
Similarly, payments to contractors, as long as the amounts paid are includable in the gross income of the non-employee, are fully deductible.
Generally, to the extent a taxpayer receives reimbursement for meals and/or entertainment expense, a full deduction is allowed.
Recreational, social or similar activities (including facilities) primarily for the benefit of employees (other than highly compensated employees). This includes holiday parties, annual picnics, summer outings.
Meetings of employees, shareholders, directors, etc. will remain fully deductible as long as the meeting has a bona fide business purpose, such as employee team building, and awards dinners.
Entertainment activities made available to the public remain fully deductible.
Entertainment, provided as a product and sold to customers, will be fully deductible as long as it is sold in a bona fide transaction for adequate and full consideration.
Entertainment-related to attendance at bona fide business meetings or conventions of 501(c)(6) organizations are fully deductible. This includes professional associations, business leagues, chambers of commerce, etc.
Gifts, such as unaccompanied tickets to entertainment events, should be classified as gifts and subject to annual gift deduction limitations.