Accounting

Northwestern Mutual files tax case amid OBBBA meal crackdown

Published

10 months ago

September 22, 2025

Financial advisors and tax professionals may have lots to chew on with the business owners among their clients over the latest changes to the rules for business meals.

But shifting tax statutes about noshing on the job have been causing heartburn for far longer.

For example, in a lawsuit filed earlier this month in the Milwaukee federal court, Northwestern Mutual demanded a tax refund of more than $23 million that the giant insurer and wealth management firm argued it and thousands of employees at two corporate offices should not have paid over four years for the company’s cafeterias. The complaint traced the company’s 110-year history of providing lunch and its several tax haggles over the years about the cafeterias with the IRS.

A new normal for food at work?

The lawsuit also reflects the complexity of the many tax incentives tied in some way to eating for business purposes. The guidelines giving companies and their workers an exemption from their gross income for the cost of onsite cafeterias is remaining in place, but the One Big Beautiful Bill Act will eliminate a separate deduction for the cost of those lunchrooms starting next year.

The 2017 tax law had cut that deduction to 50% of the cost of onsite cafeterias. However, pandemic-era legislation restored it temporarily to 100% for two years. Unless they qualify for exceptions to the new law for restaurants and the fishing and oil industries, employers that provide workers with lunch or snacks will no longer get to deduct the cost in 2026. The law will cause large companies and employers like universities and hospitals to consider reducing or dropping their onsite meals, according to Michael Chuah, the principal attorney of Paxterra Law.

“It really is targeting very specific types of companies that have this type of benefit like an employee perk,” Chuah said. “When you work in those types of environments, it is certainly possible that you’re going to lose that 50% deduction.”

But, like wealthy clients, large companies like Northwestern, LPL Financial and Coca-Cola frequently get litigious with the IRS over their tax bills. Northwestern alleged the federal government owes the firm $23,047,094 for the repayment of income, payroll and Social Security taxes, plus interest, from the years 2014-2015 and 2018-2019 based on the corporate cafeterias in its downtown Milwaukee headquarters and suburban office in Franklin, Wisconsin.

“Northwestern Mutual is just one of the many targets of a decades-long bureaucratic hostility towards Section 119’s plain language broadly excluding from gross income the value of on-campus meals furnished for the ‘convenience of the employer,’ conceded by the

Treasury Department to encompass meals furnished for any ‘substantial noncompensatory business reason,'” the complaint said.

“While Congress has consistently expanded the scope of the exclusion through multiple amendments to Section 119 over the decades since its enactment, the IRS has repeatedly resisted these Congressional affirmations of the exclusion’s broad scope, thwarting the efforts of employers across the country to invoke the protections of Section 119(a)(1),” it continued. “In 1978, these bureaucratic usurpations became so problematic that Congress was compelled to impose a moratorium on the Treasury Department’s enactment of any new regulations seeking to interpret Section 119 out of the Code, which remained in effect for five years. Institutional memories have faded, however, as the IRS has resumed its systematic thwarting of the sweeping scope of Section 119, burdening thousands of employers and millions of rank-and-file employees across the country with taxes they simply do not owe.”

Representatives for the IRS said the agency doesn’t comment on pending lawsuits. Industry news outlet Insurance Business first reported the Sept. 2 lawsuit.

Food for thought

Northwestern, which generated a record $38 billion in revenue last year, gave out its first free lunch to employees in January 1915. The company received a ruling from the IRS in 1948 enabling it to exclude its on-campus meals from gross income, and it resolved a dispute with the agency 50 years later over the deduction for those expenses in 1991 and 1992, according to the complaint.

However, the IRS challenged the company’s use of that exemption for 2014-15 and 2018-19 and “put forward inconsistent and erroneous justifications for disallowing those claims,” according to the lawsuit.

If Coca-Cola’s ongoing case over several billions of dollars in taxes for the years 2007 to 2009 is any indication, the Northwestern case could take several years to reach a ruling or a resolution. OBBBA didn’t alter that exemption from an employee’s gross income for the cafeteria, but the vast majority of companies or other employers with a cafeteria will no longer get the 50% deduction for the expense. That doesn’t mean they’ll be completely without any tax deductions for the cost of a business meal, though.

“For businesses, tax deductions for meals and entertainment expenses are governed by a maze of rules,” according to a guide by accounting firm RSM. “Allowable deductions vary based on the context and purpose of the meals or entertainment, thus making proper treatment of such expenses a challenging area for tax compliance. In addition, the rules have changed several times over the past decade. With additional changes effective in 2026, taking a fresh look at the deductibility of these expenses may be a good idea for many employers.”

The alterations to the deduction under Section 274 and related sections of the tax code should prompt employers and their advisors to consider shifting part of the cost of work meals and whether to limit them or document them more carefully, according to a blog by Harper & Company Certified Public Accountants. But “meals provided by restaurants or catering vendors in bona fide business transactions” can still get a deduction, it noted.

“Because it changes the game for how companies budget, plan employee perks, cafeterias, staff policies. If you didn’t know this was coming, you could face big tax surprises in 2026,” the blog said. “Also, employee benefits folks will need to communicate clearly. What used to be a ‘perk’ may now come with a cost or reduced tax benefit for the company.”

While entrepreneurs will need to huddle with their advisor or CPA to get into their specific situations, they can figure out the basic criteria for whether a meal might get the deduction. The new rules distinguish between daily meals in a cafeteria and a special occasion or a specific business activity, Chuah said. The former used to qualify for a deduction, but it will no longer get it next year. But the latter kind will still receive a deduction.

“It’s kind of reverse psychology,” he said. “When you read the rule as an employer, it’s a little bit funky, because you have to figure out what is qualifying.”

Accounting

Continuous Auditing Transforms Corporate ERPs

Published

4 days ago

July 21, 2026

Business Finance News

continuous auditing transforms corporate erps

As corporate accounting departments cross the threshold into late July 2026, the adoption of continuous, automated auditing systems has reached a definitive turning point. Driven by advances in artificial intelligence and deep integration with modern Enterprise Resource Planning (ERP) platforms, leading finance organizations are moving away from traditional, periodic post-hoc audits in favor of real-time, 100% transactional verification. This technological transition is redefining internal control environments, reducing compliance costs, and eliminating the structural delays inherent in legacy quarterly closing processes.

Unlike traditional auditing frameworks that rely on statistical sampling—a process that inevitably leaves operational blind spots—continuous auditing software monitors operational data feeds continuously. Every purchase order, electronic invoice, payroll disbursement, and cross-border wire transfer is automatically cross-referenced against established corporate governance parameters, regulatory tax schedules, and anti-fraud algorithms in real time. Anomalies or unauthorized ledger entries are flagged instantly, allowing internal audit teams to investigate and remediate compliance gaps immediately rather than months after the close of a financial period.

The implications for executive financial management are far-reaching. By embedding continuous verification directly into daily transaction workflows, chief financial officers gain uninterrupted visibility into the organization’s true financial standing. Real-time balance sheet auditing eliminates the severe operational bottlenecks associated with month-end and quarter-end financial reconciliations, freeing accounting professionals to focus on strategic financial modeling, tax planning, and capital allocation rather than manual data entry and spreadsheet consolidation.

However, implementing continuous auditing requires accounting leadership to invest heavily in data governance and technical upskilling. Internal audit teams must evolve from manual ledger reviewers into system architects capable of auditing complex algorithms and validating automated data pipelines. Accounting firms and corporate controllers that master continuous auditing will establish a resilient compliance framework capable of meeting stringent international regulatory standards with total transparency.

Accounting

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

Published

5 days ago

July 20, 2026

Business Finance News

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

WASHINGTON — In a major escalation of cross-border trade friction, U.S. President Donald Trump has signed executive orders imposing new 50% tariffs on a wide selection of Canadian exports, citing discriminatory practices by Ottawa targeting American auto, dairy, and beverage industries.

The new duties, announced Monday, will take effect in 30 days. They target a broad spectrum of consumer and industrial goods—ranging from wine, liquor, and milk products to commercial cement, furniture, clothing, and hockey equipment.

Untested Legal Mechanism

To enact the sweeping measures, the administration invoked Section 338 of the Tariff Act of 1930—a rarely used legal provision allowing the executive branch to levy additional tariffs of up to 50% on foreign nations deemed to discriminate against U.S. commerce.

White House officials noted that Section 338 addresses trade discrimination rather than national security or economic emergencies. The move comes months after prior global emergency tariffs faced legal challenges in domestic courts, signaling Washington’s pivot toward alternate statutory authorities to maintain import duties.

Senior administration officials briefed reporters that the measure directly responds to Canadian provincial bans on U.S. alcohol, restrictions on American vehicle exports, and import quota disparities affecting U.S. dairy and cheese producers relative to third-party trading partners.

“While the administration continues to secure reciprocal trade agreements globally, Canada retaliated against efforts to protect domestic industry,” U.S. Trade Representative Jamieson Greer stated.

USMCA Impact and Carve-Outs

Significantly, the newly ordered 50% duties will apply to designated items even if they otherwise comply with the United States-Mexico-Canada Agreement (USMCA).

However, the administration confirmed key targeted exemptions:

Energy products (including oil and natural gas)
Potash and critical minerals
Fish and seafood
Goods already governed by sector-specific duties (such as existing steel and aluminum tariffs)

Administration representatives emphasized that the tariffs do not stem from recent disputes concerning drifting Canadian wildfire smoke, noting that policy options regarding environmental spillover remain under separate review.

Canadian Response and Market Reaction

Following the White House announcement, the Canadian dollar experienced a sharp decline against the U.S. dollar, falling approximately 0.4% during evening trading.

Canadian Prime Minister Mark Carney issued a statement emphasizing that Canada’s earlier counter-duties had merely matched previous U.S. trade actions. “Canada stands ready to engage intensively to address outstanding issues with the U.S. to the mutual benefit of our citizens,” Carney stated, pointing to detailed proposals Ottawa submitted to modernize the USMCA framework.

Ontario Premier Doug Ford took a firmer stance, urging a “dollar-for-dollar” reciprocal response if the measures go into effect on August 19.

With a 30-day implementation window before the duties officially lock in, industry associations and trade groups on both sides of the border are calling for urgent bilateral negotiations to avert further supply chain disruption across North America.

Accounting

Automated Continuous Auditing: Transforming Compliance and Real-Time Financial Oversight

Published

5 days ago

July 20, 2026

Business Finance News

Transforming Compliance and Real-Time Financial Oversight

The traditional accounting paradigm—defined by periodic monthly closures and post-hoc annual audits—is rapidly giving way to continuous, automated financial oversight. As of July 2026, forward-thinking accounting practices and multinational corporate finance departments are leveraging continuous auditing systems powered by advanced machine learning models. These systems monitor operational transactions in real time, shifting audit methodologies from sample-based post-analysis to absolute, 100% transaction-level verification.

The operational advantages of continuous auditing are transformative. Standard auditing procedures historically relied on statistical sampling, which, despite rigorous methodology, inherently left gaps where anomalies or fraudulent transactions could go undetected for months. Modern continuous auditing platforms integrate directly with enterprise resource planning (ERP) databases, instantly cross-referencing purchase orders, invoices, bank feeds, and tax records. Any deviation from established control parameters or unusual transaction behavior triggers immediate flags for internal audit teams, dramatically reducing detection lag from quarters to seconds.

Beyond fraud prevention, continuous auditing fundamentally alters internal reporting and decision-making. Executive leadership no longer has to wait weeks after the close of a quarter to evaluate precise financial standing; real-time verified ledger data provides an uninterrupted view of operating margins, tax liabilities, and cash flow dynamics. This real-time visibility enables corporate controllers to adjust capital allocation strategies dynamically, mitigating liquidity constraints and capitalizing on emerging commercial opportunities far more efficiently than competitors bound to legacy reporting cycles.

However, implementing continuous auditing requires accounting professionals to acquire new analytical capabilities. The role of the auditor is evolving from manual data reconciliation toward system validation, algorithmic model governance, and strategic risk interpretation. Accounting firms and corporate finance departments must invest in continuous technical education, ensuring that audit staff possess the data engineering skills necessary to design, maintain, and evaluate complex automated compliance systems.