At this 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 the employees of an organization at Thanksgiving or Christmas, constitutes wages subject to income tax withholding or income subject to tax for income tax purposes. But what about “coupons”?



Troas Bible College (TBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

At TBC’s annual campus-wide “Thanksgiving Feast,” the President and Head Cross Country Coach of the college go around and give each staff/faculty member a card containing a coupon 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.

We received a call from TBC’s Accounting Team, asking if they would “be forced to include the value of the turkey coupons in each employee’s taxable compensation for the year”. And, if so, how would they put a value on those coupons?

“We know from reading ‘Tax Tips’ in previous years that it would be okay to hand out turkeys, but what about these coupons?”

We ask, “Do the ‘coupons’ state any value and can they be redeemed for cash or other items?”

“No and no,” they say, “they may only be exchanged for a turkey.”

We tell them it is our thought that these coupons 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.  However, 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 the 2004 TAM, it may be prudent to call these items “certificates” rather than “coupons.”

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, these 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!
  • Coupons redeemable only for a turkey could 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.”


Specific questions? Email Dave Moja

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.

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