Tax Deduction Cuts Could Hurt O.C. Venues

Congress is considering changes in business travel and entertainment allowances, a move that could deal a blow to Orange County’s convention-dependent hotels, restaurants and attractions, said Michael Rhodes, president of the Orange County chapter of California Restaurant Assn.

“The big change is the deductibility for a spouse or dependents accompanying the employee on a business trip,” said Don Dahl, an Irvine-based tax partner with Arthur Andersen & Co. “Under the new, proposed rule, those deductions would be denied.”

The legislation would affect larger companies that historically have compensated employees for certain expenses accumulated when family members accompanied them on business trips.

Businesses would still be able to compensate employees--but the employee’s personal income would be subject to added federal taxation, Dahl said.

Would that added cost deter a business person from bringing the spouse and kids along for a quick vacation to Disneyland? “At the least, people would have to think harder and look longer at their budgets,” Dahl said.

If business travelers find the added tax burden to be confiscatory, “the potential lost revenues (in Orange County) includes added hotel rooms for the family, gift-shop sales, and theme park admissions while dad or mom are in the business meeting,” Dahl said.