Silicon Valley may be known for cutting-edge innovation and breakthrough technology from companies like Google, Facebook, Twitter, Apple, and others, but it’s also known for something else.
You know what I’m talking about — the over-the-top benefits lavished upon employees at tech firms and dot coms. Things like free meals, dry cleaning, day care, and workout facilities.
Others may get some of these same benefits in other places, but nowhere do employees get so many generous (some would say excessive) perks than they do in Silicon Valley.
That’s why these goodies have come under scrutiny by everyone’s favorite party pooper, the IRS.
According to The Wall Street Journal:
When outsiders visit Silicon Valley, the first thing they often notice is the food: Cafeterias brimming with free gourmet meals and snacks offered to employees of Google Inc., Facebook Inc. and other technology firms.
But not all is as it seems in the buffet line. There is growing controversy among tax experts about how to treat these coveted freebies. The Internal Revenue Service also has been focusing on the topic, according to attorneys who practice in the area, examining whether the free food is a fringe benefit on which employees should pay additional tax.
Tax rules around fringe benefits are complex, but in general they categorize meals regularly provided by an employer as a taxable perk, similar to personal use of a company car. That leads several tax experts to wonder if some companies providing free food may be skirting the rules.”
The Journal’s story quotes a number of tax “experts” who seem pretty sure of their point of view, and they are certain that all the free meals and other perks that so many Silicon Valley workers take as a given are actually excessive employer goodies that should clearly be viewed as taxable benefits by the federal government.
But the most persuasive argument for NOT taxing the free meals is this, as the WSJ reports:
(Some) lawyers point to an exception that allows meals to remain untaxed if they are served for a “noncompensatory” reason for the “convenience of the employer.” The exception generally has been applied to workers in remote locations or in professions where reasonable lunch breaks aren’t feasible. But these lawyers argue that some technology firms could qualify, in part because free food encourages longer work hours and is a crucial part of Silicon Valley’s collaborative culture.”
That sounded familiar to me because back at the turn of the Millennium, in 1999-2000, I was a vice president at a then well-known San Francisco dot com. At some point about a year into my time there, the company started contracting with a company called “Waiters on Wheels” to cater dinner on certain nights, and that quickly ballooned into dinner being brought in EVERY night, Monday through Friday.
The thinking of senior management at my dot com was that we had a severe shortage of engineers (some things never change, it seems) and dinner, it was thought, provided an incentive for the engineers to keep working and get more done. That’s because even the most diligent engineer had to eat sometime, and we had found that frequently, when they went to dinner, they simply didn’t come back to work after that.
Despite the best of intentions, even highly motivated people find it’s easy to throw in the towel and call it a day once they get out of the office, after working 11 hours, and sitting down to eat and decompress.
So, if you serve them food in the office where they can’t really decompress, and take away what happens when they leave to go relax and eat, well, you actually get more work out of them.
It’s not a particularly nice thing to do to people — the free dinner not withstanding — but it does follow the logic in The Wall Street Journal that “free food encourages longer work hours and is a crucial part of Silicon Valley’s collaborative culture.”
So, I’m thinking the IRS tax scheme is a terribly bad idea — and another reminder that government, at any and all levels, has virtually no understanding of what it takes to encourage a culture of innovation. If they did, they would’t be focused on the the measly few dollars they would get from taxing stuff like this.
And The Journal story makes this very point, saying:
An IRS crackdown could raise hackles in the influential technology industry, and generate concerns that the federal government is interfering — for relative pocket change — with a culture that has made Silicon Valley a world leader.
“There are real benefits for knowledge workers in having unplanned, face to face interaction,” and free food helps facilitate that, said Victor Fleischer, a tax-law professor at the University of Colorado, who argues that aggressive enforcement of tax laws might be poor public policy in this case.”
Yes, poor public policy indeed, but then again, this is the coming from the same administration that seems to be tone deaf and brain dead when it comes to pushing smart policies that would help encourage companies to start hiring more and perhaps REALLY make a difference in getting our mediocre economy going again.
Of course, there’s a lot more than the IRS possibly taxing Silicon Valley perks in the news this week. Here are some HR and workplace-related items you may have missed. This is TLNT’s weekly round-up of news, trends, and insights from the world of talent management. I do it so you don’t have to.
