With retroactive effect, EU Council Directive DAC 6 is now largely inapplicable in the United Kingdom. DAC 6, which came into force on June 25, 2018, requires certain intermediaries (including those who provide legal, tax, or consultancy services) or taxpayers to disclose information related to cross-border tax planning. Our prior coverage of DAC 6 may be found here. Continue Reading
On January 4, 2021, the Internal Revenue Service issued Notice 2021-7 pertaining to the valuation of the personal use of employer-provided vehicles. The Notice permits employers who rely on the special valuation rule of Treasury Regulation § 1.61-21(d), known as the Automobile Lease Valuation (ALV) method, to retroactively apply the vehicle cents-per-mile method of Treasury Regulation § 1.61-21(e) for purposes of valuing an employee’s personal use of a company vehicle in 2020. Due to decreased business use of employer-provided vehicles during the COVID-19 pandemic, the IRS agreed with employers that the application of the ALV method may have resulted in higher income imputation than usual for many employees and that the use of the vehicle cents-per-mile method may provide a “more accurate reflection of the employee’s income . . [,]” particularly in 2020. The ability to switch from the ALV method to the vehicle cents-per-mile method for 2020 applies only to a vehicle with a fair market value not exceeding $50,400 in 2020 and with respect to which the employer would reasonably have expected its regular use in the employer’s trade or business, were it not for the pandemic.
In addition, Notice 2021-7 provides employers, who switch from the ALV method to the vehicle cents-per-mile method for purposes of calculating personal use of the vehicle in 2020, with the option of continuing to apply the vehicle cents-per-mile method in 2021. If the employer decides to continue using the vehicle cents-per-mile method in 2021, that method must be used by the employer and employee for all subsequent years, except to the extent the commuting valuation rule applies. This decision will require employers to carefully evaluate whether the vehicle will continue to meet all of the requirements of Treasury Regulation § 1.61-21(e), other than the consistency requirement, and whether the value of the employee’s personal use of the vehicle will actually be calculated more favorably under the vehicle cents-per-mile method as compared to the ALV method, once the pandemic recedes in 2021 and vehicle use increases. Continue Reading
On Friday, January 1, 2021, the Senate voted to override President Trump’s veto of the 2021 National Defense Authorization Act (“2021 NDAA”) by a vote of 81 -13. The Senate’s override follows the House of Representatives’ override on December 28, 2020, and the 2021 NDAA is now law. As we reported on December 23, 2020, the 2021 NDAA includes new FinCEN reporting requirements for U.S. and foreign entities to disclose information regarding the beneficial owners of reporting companies.
We will provide further coverage of the new FinCEN reporting requirements when the Treasury publishes regulations at some point over the next year.
On Monday, December 28, 2020, the House voted to override the President’s veto of the 2021 National Defense Authorization Act (“2021 NDAA”) by a vote of 322 – 87. As we reported last week, the 2021 NDAA includes new FinCEN reporting requirements for U.S. and foreign entities to disclose information regarding the beneficial owners of reporting companies. The Senate plans to vote tomorrow (Tuesday, December 29, 2020) on whether to override the President’s veto.
As the end of the year approaches, many accounts payable departments are gearing up to complete their annual Form 1099 filings. For 2020, a new form, Form 1099-NEC, will be used to report payments of non-employee compensation to vendors. (See earlier coverage.) The IRS resurrected the Form 1099-NEC, which had not been used in decades, to replace Box 7 reporting on Form 1099-MISC because the Protecting Americans from Tax Hikes (PATH) Act accelerated the filing deadline for non-employee compensation to January 31. The rules for reporting on Form 1099-NEC are generally the same as for reporting in Box 7 of Form 1099-MISC in the past. However, the reporting requirements for the two may differ at the state level.
Earlier this month, both houses of Congress passed the 2021 National Defense Authorization Act (“2021 NDAA”). Included in Title LXIV of the 2021 NDAA (Title 64 for those of us rusty on Roman numerals), are new information reporting requirements intended to identify individual beneficial owners of certain business entities. Subject to a number of exceptions, the bill requires certain U.S. and foreign entities to file annual reports with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) that will disclose information regarding the beneficial owners of reporting companies. Overall, the reporting will identify those individuals exercising “control,” as the term is defined, over those entities required to report. According to the legislation, over two million corporations, LLCs, and similar entities are formed under state law in the United States each year, and many “malign actors seek to conceal their ownership” of various entities intended to facilitate illegal activity. Accordingly, the reporting mandated by the legislation is intended to help protect national security interests and interstate and foreign commerce, as well as counter the financing of terrorism.
The legislation passed both chambers by overwhelming majorities − 335-78 in the House and 84-13 in the Senate. Notwithstanding the significant Congressional support, President Trump has not yet signed the bill into law and has suggested that he may veto the bill (H.R. 6395). The legislation will become law tomorrow (December 24, 2020) if the President does not veto the bill. Even if the President vetoes the bill, it appears likely that Congress will override it by reconvening after Christmas and before the new year. H.Res. 1271 (the rule providing for the consideration of the Senate amendment to H.R. 133 (the end-of-year package that includes COVID relief)) provided that if a veto message is laid before the House on the 2021 NDAA, the veto message and the bill shall be postponed until the legislative day of Monday, December 28, 2020. Accordingly, if Trump vetoes the bill, the House will vote on its override on December 28.
UPDATE: President Trump vetoed the bill on December 23, 2020.
UPDATE: The House of Representatives voted to override President Trump’s veto on December 28, 2020. Additional coverage is available here.
UPDATE: The Senate voted to override President Trump’s veto on January 1, 2021. Additional coverage is available here.
After months of gridlock, the House and Senate, on December 21, both passed another round of COVID relief legislation (H.R. 133). The 5,593-page bill, which gained momentum following the introduction of bipartisan compromise legislation, provides an enhanced employee retention credit (“ERC”), which is easier for employers to qualify during the first six months of 2021, as compared to the ERC enacted as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.
The bill also includes extensions to a number of workforce-related tax credits, including the work opportunity tax credit (“WOTC”), the paid family and medical leave tax credit included in the Tax Cuts and Jobs Act as a two-year pilot program, and the paid leave credits enacted as part of the Families First Coronavirus Response Act (“FFCRA”). The bill would also extend the period during which employers may make student loan payments or reimbursements under an Internal Revenue Code Section 127 educational assistance plan, permit employers to provide additional flexibility under flexible spending accounts, and provide employers with a longer period in which to collect employee Social Security tax which was deferred during 2020 under IRS Notice 2020-65.
The bill would also add an employer income tax credit for qualified wages paid to employees in qualified disaster areas in 2020 for disasters other than COVID-19. Finally, the bill addresses the deductibility of expenses paid with forgiven PPP loans. Continue Reading
On Friday, December 18, the IRS released final regulations under section 162(m) implementing the statutory changes made in 2017 by the Tax Cuts and Jobs Act. Section 162(m), as amended, generally limits the deduction for compensation (also referred to as applicable employee remuneration) paid to the a publicly held corporation’s principal executive officer (“PEO”), principal financial officer (“PFO”), and its three highest-paid executive officers other than the PEO and PFO. The final regulations are largely unchanged from the proposed regulations released almost exactly one year earlier. (See earlier coverage.) The IRS did make a small number of changes in response to taxpayer comments, but declined to make changes in a number of areas. Continue Reading
For employers who decided to defer the employee share of Social Security taxes on wages paid from September 1 to December 31, 2020, pursuant to President Trump’s August 8 presidential memorandum, the employer’s obligation to collect those deferred amounts from employees’ paychecks is fast approaching. Included among our previous posts discussing the deferral, which was voluntary, is a discussion of IRS Notice 2020-65. The notice specifies that the employer “must withhold and pay the total [deferred 2020 taxes] . . . ratably from wages . . . paid between January 1, 2021, and April 30, 2021” and further warns that “if necessary, the [employer] may make arrangements to otherwise collect the total [deferred taxes] from the employee.” (See earlier coverage.) Continue Reading
Yesterday, December 9, the IRS released final regulations implementing the Section 274(a)(4) and 274(l) deduction disallowances, adopted as part of the 2017 Tax Cuts and Jobs Act. Section 274(a)(4) disallows employer deductions for the cost of providing qualified transportation fringe (“QTF”) benefits provided to employees. Section 274(l) provides a broader deduction disallowance for expenses paid for, or to reimburse for, employees’ trips between their residences and their places of employment. Both deduction disallowances took effect for tax years beginning after December 31, 2017.
The final regulations largely follow the approach taken in the proposed regulations issued in June, which built on earlier guidance provided in Notice 2018-99. Treasury Regulation § 1.274-13 addresses the deduction disallowance under section 274(a)(4) for the cost of QTFs provided under section 132(f), such as qualified parking, transit passes, and other tax-free commuting benefits. Treasury Regulation § 1.274-14 addresses the deduction disallowance under section 274(a). Continue Reading