Northwestern Mutual Life Insurance Co. announced today that it is seeking a $23 million tax refund from the Internal Revenue Service (IRS) related to free meals provided on its campuses. The company filed a complaint in the U.S. District Court for the Eastern District of Wisconsin, asserting that the IRS improperly denied the company an exclusion on taxable income for meals offered to employees.
According to the complaint, the thousands of free meals Northwestern Mutual provides annually meet the criteria for tax-free treatment under Internal Revenue Code Section 119(a)(1). This law allows the value of meals to be excluded from employees’ gross income when meals are served at work for the employer’s convenience.
“Northwestern Mutual has a long history of providing nutritious, convenient meals to employees,” said the company in its filing. “These meals not only support productivity and employee health but also foster mentorship and meaningful workplace interactions that cannot be replicated elsewhere.”
The company alleges that the IRS improperly collected federal income and payroll taxes, along with underpayment interest, for 2014, 2015, 2018, and 2019, despite longstanding precedent supporting the meals exclusion. Northwestern Mutual emphasized that the cafeteria program aligns with Treasury Department regulations, which confirm that the “convenience of the employer” standard is satisfied when meals are provided for substantial business reasons.
Northwestern Mutual has historically excluded the value of these meals from employee income since 1915, and the IRS had previously accepted this treatment. However, following employment tax audits for 2014 and 2015, the IRS adjusted the company’s tax liability by more than $13 million and later assessed an additional $5 million for 2018 and 2019. The company subsequently filed claims for refunds, including over $4 million in underpayment interest. Most claims were denied, despite being submitted within statutory deadlines.
The company is represented by Paul F. Heaton, John Haase, and Emma J. Jewell of Godfrey & Kahn. Counsel information for the U.S. government was unavailable at this time.
