After being passed by the House of Representatives, this year’s reconciliation bill (H.R. 1) moved to the Senate, which passed its own version of the legislation today, July 1. The Senate bill would preserve without significant change many tax-related items from the House bill. There are several provisions
Continue Reading Senate Reconciliation Bill Drops Unpopular UBTI Proposal for Transportation FringesUBIT
What’s Old is New Again: House Bill Would Resurrect UBTI for Tax-Exempt Organization Transportation Fringes, Make Permanent Suspension of Bicycle Commuting Reimbursement Exclusion
By Lydia Marik & S. Michael Chittenden on
The House of Representatives continues work on a reconciliation bill that would enact significant tax provisions and spending cuts. The various legislative committees have completed work on the areas of the bill within their jurisdiction, including the Ways and Means Committee, which proposed language that would enact $3.8 trillion in tax cuts over the next ten years. Over the weekend, the House Budget Committee consolidated the legislation and the House Bill is now before the Rules Committee, where a managers’ amendment may be considered before it heads to the House floor. This article is one of a series of articles discussing various proposals in the legislation that touch on tax withholding, reporting, and fringe benefits.
Among other changes to the Internal Revenue Code, two of the House Bill’s changes revisit measures included in the 2017 tax reform package (commonly referred to as the “Tax Cuts and Jobs Act”) addressing commuter benefits provided by employers.Continue Reading What’s Old is New Again: House Bill Would Resurrect UBTI for Tax-Exempt Organization Transportation Fringes, Make Permanent Suspension of Bicycle Commuting Reimbursement Exclusion
Significant TCJA Guidance Due Before End of Year, Kautter Says
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
Impact of Tax Cuts and Jobs Act: Part II – Deduction Disallowances for Entertainment Expenses and Certain Fringe Benefits
By S. Michael Chittenden on
Yesterday, the House Ways and Means Committee released the Tax Cuts and Jobs Act (H.R. 1) (the “Bill”), a bill that, if enacted, would represent the most substantial overhaul of the U.S. tax code in decades. Section 3307 of the Bill makes several changes to the deduction limitations under section 274 related to meals and entertainment expenses. The Bill also expands the reach of the deduction limitations to disallow deductions for de minimis fringe benefits excluded from income under Code section 132(e), unless the employer includes such amounts in the employee’s taxable income. With respect to tax-exempt entities, section 3308 of the Bill would treat funds used to provide employees transportation fringe benefits and on-premises gyms and other athletic facilities as unrelated business taxable income.
Total Disallowance of Deductions for Entertainment Expenses. Under Code section 274(a), a taxpayer may not deduct expenses for entertainment, amusement, or recreation (“entertainment expenses”), unless the taxpayer establishes that the item was directly related to the active conduct of the taxpayer’s business, subject to a number of exceptions in Code section 274(e) (e.g., reimbursed expenses; expenses treated as compensation to (or included in the gross income of) the recipient; recreational, social, and similar activities primarily for the benefit of employees other than highly compensated employees; entertainment sold to customers). If the taxpayer establishes that the entertainment expenses were directly related to the active conduct of its trade or business, section 274(n) limits the deduction to 50 percent of expenses relating to entertainment, subject to a number of exceptions, many of which are the same exceptions that apply to the 100 percent disallowance under Code section 274(a) (e.g., reimbursed expenses; expenses treated as compensation to (or included in the gross income of) the recipient; recreational, social, and similar activities primarily for the benefit of employees other than highly compensated employees; entertainment sold to customer).
The Bill would amend section 274(a) to eliminate the exception for entertainment expenses directly related to the active conduct of the taxpayer’s business. Accordingly, deductions for entertainment expenses would be fully disallowed unless one of the exceptions under Code section 274(e) applies. The Bill would also make changes to some of the exceptions under Code section 274(e), described below.
Continue Reading Impact of Tax Cuts and Jobs Act: Part II – Deduction Disallowances for Entertainment Expenses and Certain Fringe Benefits