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BPAA Federal Policy Update - February 12

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TAX UPDATE

IRS 2nd quarter 2017-2018 guidance plan includes HR 1
•    “This second quarter update to the 2017-2018 plan reflects 29 additional projects, including those that have become near term priorities as a result of the Tax Cuts and Jobs Act legislation enacted on December 22, 2017, as well as guidance we published (or released) during the period from October 13, 2017 through December 31, 2017. 
•    We may further update the 2017-2018 plan during the plan year to reflect additional items that have become priorities and guidance that we have published during the plan year. The periodic updates allow us flexibility to consider comments received from taxpayers and tax practitioners relating to additional guidance priorities and to respond to developments arising during the plan year. 
•    The published guidance process can be fully successful only if we have the benefit of the insight and experience of taxpayers and practitioners who must apply the internal revenue laws. Therefore, we invite the public to continue to provide us with their comments and suggestions as we develop guidance throughout the plan year.”
•    The IRS is to offer rules on the new special tax relief for pass through businesses and the governing of that provision will include "computational, definitional, and anti-avoidance guidance." Some of the other areas of focus include the new tax law's new international rules, its cost recovery approach, tax on offshore profits and the so-called "opportunity zones" meant to spur investment in struggling areas.
•    View the guidance document here: https://www.irs.gov/pub/irs-utl/2017-2018_pgp_2nd_quarter_update.pdf 
 
•    Drive to Kill Estate Tax Isn't Dead, Despite Doubled Exemption: Estate tax repeal efforts aren't dead, but tax law changes will make it harder for proponents to make headway anytime soon. “Getting enough Democrats to vote for repeal in the near term I think is going to be a pretty heavy lift,” Sen. John Thune (R-S.D.), a member of the Senate Finance Committee, told Bloomberg Tax. The 2017 tax overhaul doubled the estate tax exemption to about $11 million for individuals and $22 million for couples. In 2026, those amounts revert to previous levels. The 2017 tax overhaul doubled the estate tax exemption to about $11 million for individuals and $22 million for couples. In 2026, those amounts revert to previous levels. (Story Link)
 
•    EMPLOYMENT TAXES: Tax levy withholding guidance for 2018 is to be revised and guidance is being developed to address changes to the taxation of employee benefits under the new tax law, Internal Revenue Service officials said. Publication 1494, “Tables for Figuring Amount Exempt from Levy on Wages, Salary, and Other Income (Forms 668-W(ACS), 668-W(c)(DO) and 668-W(ICS)),” is to be revised in February, James Malanska, IRS senior policy analyst for collection policy and enforcement, said Feb. 1 during the monthly IRS payroll industry teleconference. The 2018 version of Publication 1494, which was released by the IRS in early January, was only adjusted for inflation and does not reflect changes that need to be made because of the passage of the tax-code overhaul, which was signed into law Dec. 22 (Pub. L. 115-97), Malanska said. The revised publication will take into account the removal of personal exemptions for 2018 under the new law and will provide greater clarity for employers in applying the wage levy, he said. To be addressed at a later date will be whether each employee subject to a tax levy on wages will be required to submit a new statement to that employee's employer for use with Publication 1494 because of the removal of personal exemptions, Malanska said.
 
•    Restaurants, Retailers Don't Benefit From New Depreciation Rules: Retailers and restaurants will miss out on some generous tax write-offs as a result of an apparent congressional oversight as finishing touches were being put on the tax reform bill enacted in 2017. Read the story here: https://www.bgov.com/core/news/#!/articles/P3R7JV3H0JK0 
•    IRC §6301: JCT Provides Overview of Federal Tax System for 2018: The Joint Committee on Taxation issued an overview of the federal tax system effective for 2018, including changes implemented by the 2017 tax act, . [JCX-3-18 (Feb. 7, 2018)] (Story Link)
•    Bloomberg Government: IRS Can't Help With Depreciation Error, Official Says
•    Taxpayers must wait for Congress to fix mistake amending Section 168(k) 
•    Full expensing still applies from Sept. 28, 2017, through end of year
•    The IRS confirmed that it is unable to address a clear error in the new tax law, in which the statutory language clashes with intent outlined in the conference agreement, and must instead wait on a congressional fix. Lawmakers’ attempt to combine three types of improvement property eligible for depreciation—qualified retail improvement property, qualified restaurant improvement property, and qualified leasehold improvement property—into one category left those interior improvement expenses with a much longer recovery period. The new category, qualified improvement property, wasn't assigned a cost-recovery period, and fell to the 39-year period rather than the intended 15-year period by default. “As of now we do not have statutory authority to say it's 15-year property,” Kathleen Reed, chief of Branch 7 of the Internal Revenue Service Office of Chief Counsel (Income Tax & Accounting), said Feb. 9 at the American Bar Association Section of Taxation's meeting in San Diego. She was responding to practitioner questions about whether there was ambiguity in the 2017 tax act (Pub. L. No. 115-97) that might allow the IRS to work around what has become a well-known mistake. Reed acknowledged that the conference agreement made the lawmakers’ plans for qualified improvement property clear, and said she was “sympathetic” to taxpayers hoping for interpretation of the law as it was intended.


TIP POOLING
•    For those interested in the background and overview of tipping/tip-pooling, here is a helpful article that covers the many angles of the issue: https://www.eater.com/2017/12/5/16708374/tipping-laws-trump-department-of-labor-changes
 
•    Bloomberg Government reports: Labor Department leadership scrubbed an unfavorable internal analysis from a new tip pooling proposal, shielding the public from estimates that showed employees could lose out on billions of dollars in gratuities, four current and former DOL sources tell Bloomberg Law. The agency shelved the economic analysis, compiled by DOL staff, from a December proposal to scrap an Obama administration rule. The proposal would permit tip pooling arrangements that involve restaurant servers and other workers who make tips and back-of-the-house workers who don’t. It sparked outrage from worker advocates who said the move would permit management to essentially skim gratuities by participating in the pools themselves. Senior department political officials—faced with a government analysis showing that workers could lose billions of dollars in tips as a result of the proposal—ordered staff to revise the data methodology to lessen the expected impact, several of the sources said.
•    NOTE: The comment period comment period ended on Feb. 5th and the DOL intends publish an informed cost benefit analysis as part of any final rule. 
 
•    17 Attorneys General joined in a coalition to oppose the U.S. Department of Labor proposal governing tips, arguing the new rules could result in workers losing billions of dollars each year. The AGs filed a letter of opposition with the department on the last day of public comment for the proposal that would rescind portions of the 2011 Obama rule that mandated workers receive the tips given to them. The AGs that joined in the coalition are of the following states: CA, IL, PN, CT, DE, DC, IA, ME, MD, MA, NY, NC, OR, RI, VT, VA, and WA.
 
•    Worker advocates are demanding the Department of Labor scrap its tip pooling rule after a Bloomberg Law report showed the agency withheld an internal analysis that showed employees could lose billions of dollars in tips under the proposal. Restaurant Opportunities Centers United, a nonprofit that advocates for higher minimum wage laws and better working conditions, is marking Feb. 5, the last day the public can comment on the tip pooling law, with a protest outside the DOL’s headquarters. The group is also submitting more than 300,000 comments opposing the proposal from its chapters around the country, Diana Ramirez, the deputy director for ROC United, told Bloomberg Law. The proposal would generally permit restaurants to gather tips and distribute them among servers who earn the gratuities and back-of-the-house workers who don’t typically get tipped. It sparked outrage from worker advocates, who said the move will permit management to essentially skim tips by participating in the pools themselves.


PAID FAMILY LEAVE

•    The Washington Post reports, “If working mothers want paid family leave, they’ll probably need a bipartisan solution” Politicos on both sides of the aisle have advocated for improving the workplace experience for working parents, especially mothers, for decades. But competing visions about what that looks like and greater challenges to getting behind bipartisan ideas make doing so difficult. This week marks the 25th anniversary of President Bill Clinton signing the Family and Medical Leave Act, a bill that mandated that employers with 50 or more employees grant full-time workers who need it up to 12 weeks of unpaid time off to take care of a newborn. But the United States remains the only industrialized nation without paid family leave. Sen. Tammy Duckworth (D.-Ill.), who is the first sitting senator to be pregnant, wrote a CNN op-ed touting several bills introduced by Democratic lawmakers that she says will improve lives for expectant mothers, such as a bill by Sen. Kirsten Gillibrand (D-N.Y.) that would establish a universal family and medical leave insurance program that would cost employers and employees less than $1.50 a week for a typical worker. Finding a solution for working families has to be a high priority for both parties because it could have long-term implications for the U.S. economy, Duckworth notes. President Trump campaigned on making significant changes to what America looks like for working mothers, with his oldest daughter, Ivanka Trump, one of his most vocal surrogates for the issue. But ultimately, more than half — 61 percent — of working mothers with children under 18 backed Trump's rival, Hillary Clinton. But that has not kept the president and his staff from continuing conversations about the issue. The president included a proposal for six weeks of paid parental leave in his budget last year, but the most recent comments from the president in his State of the Union speech did not offer policy specifics.


FOOD & BEVERAGE

•    Brewbound reports, “Food and Beverage Industry Urges President Trump Not to Impose Tariffs on Cansheet and Primary Aluminum” WASHINGTON — In light of the Commerce Department submitting to the White House the results of its 232 investigation examining the national security impacts of aluminum imports, CEOs from some of America’s leading food and beverage companies and trade associations joined the American Beverage Association, Beer Institute, and Can Manufacturers Institute today in sending a letter to President Donald J. Trump requesting that he refrain from imposing tariffs or import restrictions on cansheet, primary aluminum, and scrap. To read a copy of the full letter, click HERE. The letter notes a 10 percent tariff on aluminum would cost beer and beverage producers $256.3 million, a 20 percent tariff would cost $512.5 million, and a 30 percent tariff would run $768.8 million.


GAMING

•    The Guardian reports, “'Dangerous gaming': is the WHO right to class excessive video game play as a health disorder?” The World Health Organization (WHO) has included “gaming disorder” in its draft for the next edition of its diagnostic manual, the International Classification of Diseases (ICD-11), which is due for final release this year. The disorder is characterised by behaviours such as impaired control of time spent playing video games and prioritisation of gaming above other activities, in a way that negatively affects other areas of a person’s life such as their education, occupation and relationships.

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