1. Tax Reform Highlights for Small Businesses and Employers
Richard Furlong, Jr.
Senior Stakeholder Liaison
December 12, 2018
CPA Continuing Education Society of PA

2. New Rules for Depreciation
For section 179 property placed in service in taxable years beginning after Dec. 31, 2017:
Section 179 deduction maximum increased from $500,000 to $1 million
Phase-out threshold increased from $2 million to $2.5 million
Definition of section 179 property expanded to include certain improvements made to nonresidential real property after the date the property was first placed in service

3. New Rules for Depreciation
For qualified property acquired and placed in service after Sept. 27, 2017:
Increase in bonus depreciation from 50 percent to percent, if placed in service before Jan. 1, 2023
100 percent is phased down by 20 percent per calendar year for property placed in service after
Definition of qualified property expanded to include qualified film, television or live theatrical productions

4. New Rules for Depreciation
the taxpayer didn’t acquire the property from a component member of a controlled group of corporations
the taxpayer’s basis of the used property is not figured in whole or in part by reference to the adjusted basis of the property in the hands of the seller or transferor
the taxpayer’s basis is not figured under the provision for deciding basis of property acquired from a decedent

5. New Rules for Depreciation
For property placed in service after Dec. 31, 2017:
Luxury automobiles limits changed – see Pub 946
Farm machinery and equipment (some exclusions) recovery period reduced from 7 to 5 years, if original use by the taxpayer occurs after Dec. 31, 2017
Computers and peripheral equipment are no longer considered “listed property”

6. Modifications of Treatment of Certain Farm Property
150% declining balance depreciation
No longer required for 3, 5, 7 and 10 year farm property
Continues to apply for 15 or 20 year farm property
Applies to farming property placed in service after
Dec. 31, 2017, in taxable years ending after this date

7. Time Limit for Contesting Levies
Extended from 9 months to 2 years if the IRS has levied upon money or sold levied property
New 2-year period covers both administrative claims and civil suits
Applies to levies made after Dec. 22, 2017 and on or before that date, if the previous nine-month period hadn’t yet expired
No time limit to file a claim if the IRS still has the tangible levied property

8. Time Limit for Contesting Levies
If, following a claim, the IRS decides to return levied property, it will:
return the property,
return any money levied upon, or
return any money received from the sale of the property
Immediately contact the IRS if a Final Notice of Intent to Levy and Notice of Your Right to A Hearing is received

9. Like-Kind Exchanges
Section 1031 now applies only to exchanges of real property used in a trade or business or held for investment
Does not apply if the real property is held primarily for sale
Section 1031 applies to certain exchanges of personal or intangible property completed before Jan. 1, 2018
Also applies to certain exchanges of personal or intangible property if the taxpayer disposed of the exchanged property on or before Dec. 31, 2017, or received replacement property on or before that date

10. Like-Kind Exchanges
Properties are of like-kind if they are of the same nature or character
Real property is generally of like-kind to other real property, although domestic real property is not of like-kind to foreign real property

11. IRC §274 Business Deduction for Meals
Tax Cuts and Jobs Act (TCJA) amended the deduction for business meals and entertainment under IRC §274 for amounts incurred or paid after December 31, 2017:
Business entertainment, amusement and recreation expenses are generally no longer deductible.

12. IRC §274 Business Deduction for Meals
Taxpayers may continue to deduct 50 percent of the cost of business meals if they meet these three requirements:
The taxpayer (or employee of taxpayer) is present at the furnishing of meals,
Meals are provided to a current or potential client, customer, or business contact and
The food and beverages are not considered lavish, or extravagant.

13. IRC §274 Business Deduction for Meals
Food and beverages provided at entertainment events will not be considered entertainment if purchased separately from the event, or stated separately from the cost of the event on one or more bills, invoices or receipts.
Guidance – Notice

14. Tax Reform Highlights for Employers
Richard Furlong, Jr.
Senior Stakeholder Liaison
December 12, 2018
CPA Continuing Education Society of PA

15. Revised Withholding

16. Employer Credit for Paid Family and Medical Leave
This is a new non-refundable general business credit that will be reported on Form 3800
A new form will compute the credit that will flow to Form 3800
Partnerships and S Corps will report the credit on Schedule K
Instructions and a computational worksheet are being created to assist in determining the credit

17. The credit is based on wages paid to qualifying employees while on family and medical leave in taxable years beginning after Dec. 31, 2017, and it is not available for taxable years beginning after Dec. 31, 2019

18. Employers must have a written policy in place that meets certain requirements, including providing:
At least two weeks of paid family and medical leave (annually) to all qualifying employees who work full time (prorated for employees who work part time), and
The paid leave is not less than 50% of the wages normally paid to the employee

19. The credit is 12.5% of wages paid to a qualifying employee while on family and medical leave
The credit is increased by .25% for each % point by which the amount paid exceeds 50% of the employees wages (max of 25%)
The credit is limited to 12 weeks per taxable year per employee

20. Qualifying Employee
Employed for one year or more
To qualify in 2018, the employee must not have earned more than $72,000 in 2017
The deduction for wages must be reduced by the amount of the credit

21. Employee Achievement Awards
Employees can exclude from wages if the awards constitute tangible personal property
Employers may deduct these awards subject to certain limitations
This definition is consistent with the tangible personal property definition set forth in proposed regulations section (b)(2) issued by the IRS in 1989; as such, IRC § 274(j) codifies existing law

22. Employee Achievement Awards
Tangible personal property does not include:
Cash or cash equivalents
Gift cards, gift coupons or certificates
Tickets to theaters or sporting events
Vacations, meals, lodging, stocks, bonds or similar items

23. Qualified Transportation Fringe Benefits
These benefits are still excluded from an employee’s income
However, the expenses associated with the benefits are no longer deductible by the employer for amounts paid or incurred after Dec. 31, 2017
Applies to reimbursements and in-kind benefits as well as expenses for an employee’s commute (safety exception)
For tax-exempt employers, amounts paid or incurred for non-deductible benefits increase unrelated business taxable income

24. Bicycle and Moving
Employers must now include bicycle commuting reimbursements in the employee’s wages
Bicycle commuting reimbursements are still deductible by the employer through 2025
From 2018 through 2025, moving expense reimbursements are included in the employees wages with an exception for members of the U.S. Armed Forces (criteria apply)

25. Supplemental Wages Definition of supplemental wages
Under the new law, the optional withholding rate on supplemental wages was lowered to 22% starting in
If withheld at a higher rate, employers may, but are not required to, repay the excess prior to Dec and file a Form 941-X

26. Qualified Equity Grants
The Tax Cuts and Jobs Act added IRC § 83(i) for qualified equity grants
The law also added new Form W-2 reporting requirements for these grants
Instructions for Form W-2, box 12 reflect the changes made under IRC § 83(i)
*See P.L , section for more information

27. Qualified Equity Grants 2
Form W-2, box 12 instructions: Code GG: income from qualified equity grants under IRC § 83(i); report the amount includible in gross income from qualified equity grants under IRC § 83(i)(1)(A) for the calendar year Code HH: aggregate deferrals under IRC § 83(i) elections as of the close of the calendar year; report the aggregate amount of income deferred under IRC § 83(i) elections as of the close of the calendar year

28. Emerging Employment Tax Issue
Wellness Benefits
Many employers, health insurers and unions provide employees with wellness plans or programs that are designed to promote the health of the employees
Employer wellness programs often provide employees with rewards for taking certain actions intended to promote health

29. Emerging Employment Tax Issue 2
If the rewards are limited to section 213 medical expenses then usually they would not be wages subject to employment taxes
An example is where the employer places a limitation on a gift card such that it may only be used for a section 213 medical expense, e.g. prescription medications

30. Emerging Employment Tax Issue 3
Some employers offer a wellness arrangement where they require the employee to pay a pre-tax premium (similar to a health plan premium through a cafeteria plan) and then, within the same pay period, reimburse the employee for almost the entire pre-tax premium
Under existing law in IRC § 105 and 106, the amount of the reimbursement in this arrangement is wages subject to employment taxes

31. Contact Information
Richard Furlong, Jr.
Senior Stakeholder Liaison