November 15, 2022
At this wonderful time of year, we are often asked about whether the value of a turkey, ham, or other item
of merchandise purchased by an employer and distributed generally to each of an institution’s employees
at Thanksgiving – or Christmas – might constitute wages subject to income tax withholding or income
subject to tax for income tax purposes. In most cases the answer is, No. But what about coupons,
vouchers, or gift certificates?

For example, at a College’s annual campus-wide “Thanksgiving Feast,” the President and Academic
Dean of the college go around and give each staff/faculty member a card containing a
certificate/coupon/voucher for a 16-18 pound turkey at a local grocery store. Everyone also gets a
personal “Happy Thanksgiving – we are very thankful for you!” handshake – or hug.

First, it would generally be okay to hand out turkeys or hams. Also, we know that the IRS considers gift
certificates that are redeemable for any merchandise to be taxable income to the employee (and includable
in Form W-2). But what about these “certificates” that can ONLY be exchanged for a turkey?

It is our thought that these certificates/coupons/vouchers would generally not be considered gift cards.
The IRS has stated that whether a “gift coupon” (now more commonly referred to as a gift card) is
redeemable in cash is not the determining factor here.

We would make the case that it would be administratively impractical to try and accumulate each and
every “redeemed value” for every turkey redeemed. Also, given the language used by the IRS in a 2004
Tax Advice Memorandum (TAM), it may be prudent to call these items “certificates” rather than

Please note that a gift card of a stated amount would clearly be taxable to the employee based upon the
2004 TAM – which ultimately employs the “same as cash” reasoning. Also, as stated by the IRS in
Notice 2017-9, taxable gift cards would not be covered by the Form W-2 “de minimis error safe harbor.”

From Revenue Ruling 59-58:
“It is accordingly held that the value of a turkey, ham, or other item of merchandise of similar nominal
value, distributed by an employer to an employee at Christmas, or a comparable holiday, as part of a
general distribution to employees engaged in the business of the employer as a means of promoting their
good will, does not constitute wages subject to income tax withholding or wages for Federal Insurance
Contributions Act or Federal Unemployment Tax Act purposes.”

“…The foregoing rules will not apply to distributions of cash, gift certificates, and similar items of readily
convertible cash value, regardless of the amount involved.”

From Technical Advice Memorandum 200437030:
Whether a gift coupon is “redeemable in cash” is not determinative of whether a gift coupon is a “cash
equivalent fringe benefit” for Income Tax Regulation § 1.132-6(c) purposes. Neither the statute nor the
regulations pertaining to de minimis fringe benefits define a cash equivalent fringe benefit as one that can
be readily converted to cash. Instead, we look to the language of Code § 132(e) which requires a
determination of whether it is administratively impracticable to account for the gift coupons provided in
this case.


  •  Happy Thanksgiving to everyone and please know that we are very grateful for you and your institutions!
  •  Certificates/coupons/vouchers redeemable only for a turkey equate to distributing turkeys (or Christmas hams) by your organization and should not be taxable to the employee.
  •  Remember that gift cards – which are so prevalent these days – are generally going to be taxable and includable in employees’ compensation.
  •  Be sure you are knowledgeable about the “ins-and-outs” of holiday employee gift giving – in order to keep things “non-taxable.”

Written by
David C. Moja, CPA
The information provided herein presents general information and should not be relied on as accounting,
tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions
regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel
about the facts and laws that apply.