Legislation

On July 27, Senate Republicans introduced a series of bills intended as their opening salvo in what appears likely to be contentious negotiations among Senate Republicans, the White House, and House and Senate Democrats over the next legislative response to the COVID-19 pandemic.  Along with another round of direct stimulus…
Continue Reading Senate Republican Proposal Would Expand WOTC to Spur Hiring

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) authorizes the Treasury Department to provide payments to passenger air carriers, cargo air carriers, and certain contractors that must be exclusively used for the continuation of payment of employee wages, salaries, and benefits.  The Payroll Support to Air Carriers and Contractors Program provides a total of up to $32 billion in payroll support to avoid layoffs and furloughs in the airline industry, which has been hard hit by the COVID-19 pandemic. The CARES Act authorizes up to $25 billion in payroll support for passenger air carriers; other air carriers and certain contractors may receive up to $4 billion and $3 billion in payroll support, respectively.  Section 4117 of the CARES Act provides that the Treasury Department may receive warrants, options, preferred stock, debt securities, notes, or other financial instruments issued by a company receiving payroll support payments to provide appropriate compensation to the Federal Government for the provision of the financial assistance.  Treasury has released a form to memorialize the terms and conditions of the Payroll Support Program Agreement.
Continue Reading IRS Releases FAQs on Federal Tax Consequences of Payroll Support for Air Carriers and Contractors under CARES Act

Holding true to its holiday tradition, the IRS yet again decided to extend the deadline by which providers of minimum essential coverage (including certain applicable large employers (“ALEs”)) must furnish information statements to individuals regarding their 2019 insurance coverage. However, due to the effective elimination of the ACA’s individual mandate penalty through the Tax Cuts and Jobs Act (“TCJA”), the IRS went one step further than in past years by allowing certain providers to forgo the individual furnishing requirement, if certain notice requirements are met instead.
Continue Reading Notice 2019-63 Delivers Relief for Providers of Minimum Essential Coverage

Treasury Assistant Secretary for Tax Policy David Kautter attended the AICPA National Tax Conference on November 13, 2019, and commented that significant TCJA-related guidance should be expected to be released before the end of 2019.  Such guidance is likely to include proposed regulations addressing (1) federal income tax withholding under section 3402, (2) the executive compensation deduction limitation under section 162(m), and (3) computation of unrelated business taxable income (UBTI) under section 512. 
Continue Reading Significant TCJA Guidance Due Before End of Year, Kautter Says

In our first post on the proposed regulation under section 1446(f), we discussed which party is the withholding agent and outlined the various exceptions to withholding that could apply. Sections 864(c)(8) and 1446(f) were adopted as part of tax reform. Section 864(c)(8) was enacted to reverse the holding of the Tax Court in Grecian Magnesite Mining v. Commissioner, which was affirmed by the U.S. Court of Appeals for the DC Circuit. This post addresses the amount the transferee is required to withhold. Our third post on the proposed regulations under section 1446(f) addresses the withholding requirements and “backstop withholding” rules.
Continue Reading IRS Proposes Regulations under Section 1446(f) — Determining the Withholding Amount (Post 2 of 3)

This post is the first of three installments providing an overview of recent proposed regulations under section 1446(f) that address withholding on certain sales of partnership interests by foreign partners of a partnerships engaged in the conduct of a U.S. trade or business (a “U.S. trade or business”). Sections 864(c)(8) and 1446(f) were adopted as part of tax reform.  Section 864(c)(8) was enacted to reverse the holding of the Tax Court in Grecian Magnesite Mining v. Commissioner, which was affirmed by the U.S. Court of Appeals for the DC Circuit.  This post focuses on which party is required to withhold under section 1446(f). The second post focuses on determining the appropriate amount to withhold. Finally, the third post focuses on the withholding requirements and the “backstop withholding” rules.
Continue Reading IRS Proposes Regulations under Section 1446(f) — Which Party is Required to Withhold? (Post 1 of 3)

Yesterday, the IRS released final regulations that aim to prevent identity theft by permitting, but not requiring, employers to truncate the taxpayer identification numbers (TINs) on copies of Forms W-2 and Forms W-2c furnished to employees.  The regulations finalize proposed rules issued in 2017.  Generally, this rule applies to Forms W-2 required to be filed or furnished after December 31, 2020, so employers still have time to decide whether to implement the change.  The delayed effective date is intended to allow states and local governments time to update their rules to permit the use of truncated TINs, if they do not already do so.

The TIN for most individuals (and all employees whose income is required to be reported on Form W-2) is his or her social security number (SSN); therefore, instead of including an individual’s full nine-digit SSN, the final rule permits employers to truncate this sensitive personal identifying information.  In place of the full SSN, employers may use a truncated TIN, which is in the format of XXX-XX-#### or ***-**-#### with the #’s replaced by the final four digits of the employee’s social security number.  Full TINs are still required on copies of Form W-2 filed with the Social Security Administration, however.  In addition, payers of third-party sick pay must include full TINs on statements to employers of employees to whom the third-party paid sick pay.  However, truncated TINs may be used on Forms W-2 that report third-party sick pay issued by employers to employees.Continue Reading New Rule Permits Employers to Include Truncated TINs on Forms W-2 and Forms W-2c

On February 14, 2019, Senator Roy Blunt (R-Mo.) introduced bill S. 503 “to provide the opportunity for responsible health savings to all American families.”  The bill would increase the annual maximum amount that can be contributed to health flexible spending accounts (“FSAs”) as well as permit unused benefits to carry forward by amending section 125(i) of the Internal Revenue Code.  Currently, the bill has been referred to the Senate Finance Committee.

A health FSA is an arrangement between an employer and employee in which an employee elects to set aside wages for the upcoming year to pay for out-of-pocket health expenses with pre-tax dollars.  Permissible health expenses are those medical expenses treated as deductible under section 213 of the Code, which includes insurance copays and deductibles, qualified prescription drugs, medical devices, etc.Continue Reading Proposed Senate Bill Would Expand Health FSA Limits

On March 7, 2019, Senator John Thune (R-SD) reintroduced legislation aimed at simplifying worker classification and requiring additional wage reporting under certain circumstances.  Senator Thune introduced the New Economy Works to Guarantee Independence and Growth Act (the “New GIG Act”) for the first time in 2017.  It was included in the chairman’s mark of the Tax Cuts and Jobs Act, but was ultimately removed because the bill was passed using the reconciliation procedure.  Rep. Tom Rice (R-SC) introduced the bill in the House.

Worker classification has long created headaches for service recipients, who may be unsure if they are required to withhold taxes from payments owed to service providers.  Under the Code and regulations, a service recipient’s withholding obligations depend on a common law worker classification test, which is often difficult to apply to gig economy service relationships.Continue Reading Bill Seeks to Provide Worker Classification Safe Harbor and Update Reporting Thresholds