From the Kiplinger Tax Letter:
"Tax pros tell us they've noticed increased audit activity in this area. Employer-provided meals are tax-free if served on-site and there is a valid noncompensatory business reason for the meals, such as a restricted lunch period. Many big firms put out lavish spreads for their workers. IRS auditors are questioning the business reasons for these meals and are proposing penalties on employers for not withholding taxes. And the agency is eyeing changes to its regulations to further limit when tax-free meals can be offered."
