Make us your home page

Silicon Valley's lavish perks reportedly under IRS scrutiny

For the thousands blessed to be working for benevolent behemoths like Google and Facebook, there could be an end to the free lunch. And the free shuttle to work. And maybe even the free haircut.

As firms pile on benefits to attract and retain the brightest of the bright, it has increasingly been part of the job description of Silicon Valley tech-workers that they be pampered nearly to death with perks. But now the IRS is reportedly examining whether free food and the other free perks provided by Silicon Valley tech companies qualifies as a fringe benefit on which employees should pay additional tax.

And that set off a great grumbling that could be heard from San Jose to San Francisco.

"It would be stupid to tax this food," said Sanjeev Agrawal, who ran product marketing for Google from 2003 to 2005 and whose Googler-wife still enjoys the perks today. "Free meals should not be taxed because they're not compensation. They're a phenomenal convenience, a terrific motivator and a great social thing because it gives employees an easy way to meet and pass ideas back and forth."

Great social things aside, the debate is growing within the IRS and among tax experts over whether employees should be taxed for these freebies, or whether the perks should be considered "noncompensatory" and therefore nontaxable, according to The Wall Street Journal.

Some experts say companies like Google are dodging the rules and that in some ways taxpayers are unfairly underwriting free meals for already-handsomely paid geeks.

"With the IRS looking for places to reduce any special exclusions to what businesses can write off, it might just start cutting this back," said Annette Nellen, an accounting and taxation professor at San Jose State University. "But this whole issue gets pretty complex; how do you define what qualifies as a work-related meal and what doesn't? And if Google employees are packing up free food and taking it home to eat, then that doesn't really seem fair, does it?

"If these companies see the IRS seriously looking at this, they may take a closer look themselves and start to change their own practices."

Others say that would be unfortunate. But the fact that the IRS is taking a closer look could mean the days of complimentary "spicy she-crab soup and grilled steak with chimichurri sauce" at Facebook's Cafe Epic could be numbered.

The IRS would not comment. Neither would Google, Facebook, Zynga or Twitter, all of which are guilty of fattening their workers with gourmet giveaways. But from the perspective of those accustomed to hogging out freely at the tech trough, denying workers what Gourmet magazine called the "mouthwatering free food" at the Googleplex, including delicacies like "porcini-encrusted grass-fed beef," would be the equivalent of indentured servitude.

"From a cultural perspective," said Agrawal, "the free meals are one of those soft factors that encourage team-building. When I was at Google, we'd all meet for lunch at Charlie's Cafe, where we could share a real sense of belonging to a place."

That cafe would be the namesake of Charlie Ayers, Google's founding chef who left to start his own restaurant in 2005 and has been an evangelist for the corporate free-food movement ever since.

"The free meals were a hiring tool and an integral part of Google's infrastructure, embedded right into the corporate culture," said Ayers, a former chef for the Grateful Dead who has helped create dining programs for LinkedIn and 10 other companies in the region. "The company that eats together makes money together. There's simply no better way to cross-pollinate ideas than over the dining table, and I try to preach that idea to every company in the Valley.

"And these meals should not be taxed," he said. "Taxing the food would kill these programs."

The perks

With the notable exception of Apple, whose employees reportedly must pay for their food at work, a number of tech firms offer their employees a whole slew of freebies. Here are some of them:

Google: Free gourmet meals and snacks, yoga classes, gym membership, cooking classes.

Facebook: Free food at its Menlo Park, Calif., headquarters, which has two main cafes, plus a barbecue shack, a pizza shop, a burrito bar and a 50s-style burger joint.

Twitter: Three free meals a day at its San Francisco office.

Zynga: Ditto.

SOURCE: San Jose Mercury News research

Silicon Valley's lavish perks reportedly under IRS scrutiny 04/20/13 [Last modified: Friday, April 19, 2013 1:38am]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Tribune News Service.

Join the discussion: Click to view comments, add yours

  1. 'Road to Nowhere' is back: Next phase of Suncoast Parkway coming


    Despite intense public opposition and dubious traffic projections, the Florida Department of Transportation has announced that construction of the toll road known as "Suncoast 2" is expected to start in early 2018.

    The Suncoast Parkway ends at U.S. 98 just south of Citrus County. For years residents have opposed extending the toll road, a project dubbed the "Suncoast 2" into Citrus County. But state officials recently announced that the Suncoast 2 should start construction in early 2018. [Stephen J. Coddington  |  TIMES]
  2. A sports rout on Wall Street


    NEW YORK — Sporting goods retailers can't shake their losing streak.

  3. Grocery chain Aldi hosting hiring event in Brandon Aug. 24


    BRANDON — German grocery chain Aldi is holding a hiring event for its Brandon store Aug. 24. It is looking to fill store associate, shift manager and manager trainee positions.

  4. Lightning owner Jeff Vinik backs film company pursuing global blockbusters


    TAMPA — Jeff Vinik's latest investment might be coming to a theater near you.

    Jeff Vinik, Tampa Bay Lightning owner, invested in a new movie company looking to appeal to a global audience. | [Times file photo]
  5. Trigaux: Look to new Inc. 5000 rankings for Tampa Bay's future heavyweights


    There's a whole lotta fast-growing private companies here in Tampa Bay. Odds are good you have not heard of most of them.


    Kyle Taylor, CEO and founder of The Penny Hoarder, fills a glass for his employees this past Wednesday as the young St. Petersburg personal advice business celebrates its landing at No. 25 on the 2017 Inc. 5000 list of the fastest growing private companies in the country. Taylor, still in his 20s, wins kudos from executive editor Alexis Grant for keeping the firm's culture innovative. The business ranked No. 32 last year. [DIRK SHADD   |   Times]