Gibbons Law Alert

Gibbons Law Alert

Author: Steven H. Sholk

IRS Provides Important Guidance for Employer Leave Programs for Donations to Aid Ukraine

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Posted in Employee Benefits

On May 23, 2022

Since the Russian Federation invasion of Ukraine on February 24, 2022, many employers have adopted or are considering adopting employer leave-based donation programs to aid citizens and residents of Ukraine, persons working, traveling, or currently present in Ukraine, or refugees from Ukraine. On May 19, 2022, the IRS issued Notice 2022-28, which provides important guidance on the federal income and employment tax treatment of cash payments made by employers to charitable organizations under these programs. The guidance is similar to the guidance in Notice 2001-69, as modified and superseded by Notice 2003-2, on charitable donations made after the September 11, 2001 terrorist attacks. Under employer leave-based donation programs, employees can elect to forgo vacation, sick, or personal leave in exchange for their employers making cash payments to charitable organizations to aid the victims of the invasion. The organizations must qualify as charitable organizations under Section 170(c) of the Internal Revenue Code. Payments made before January 1, 2023 will not be treated as gross income, wages, or other compensation to the employees. Similarly, employees electing or who have the opportunity to elect to forgo the leave that funds the payments will not be treated as in constructive receipt of taxable income. Employers should not include the payments in Boxes 1, 3, or 5 of the electing...

IRS Issues Guidance on an Employee’s Reduction in Hours and Involuntary Termination of Employment to Qualify for the 100 Percent COBRA Premium Subsidy

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Posted in Employee Benefits / Family Leave / Federal Legislation / Insurance / Sick Leave

On June 2, 2021

The American Rescue Plan Act of 2021 enacted on March 11, 2021 (the “Act”) provides a federally-funded, 100 percent subsidy for the premiums for COBRA continuation coverage from April 1, 2021 to September 30, 2021 for assistance eligible individuals. On May 18, 2021, the IRS issued Notice 2021-31, which provides comprehensive guidance on all aspects of the subsidy. The Notice is in the form of 86 questions and answers and spans 41 single-spaced pages. This news alert focuses on the guidance dealing with the two events that trigger entitlement to the subsidy: a reduction in hours and an involuntary termination of employment. The guidance on reduction in hours is found at Q&A 21 to 23, and on involuntary termination of employment at Q&A 24 to 34. Definition of Assistance Eligible Individual The Act defines an assistance eligible individual as an individual who: Is a qualified beneficiary for a period of COBRA continuation coverage that includes the months between April 1, 2021 and September 30, 2021; Is eligible for COBRA continuation coverage due to a reduction in hours or an involuntary termination of employment other than for gross misconduct; and Elects COBRA continuation coverage. Other COBRA qualifying events, such as a voluntary termination of employment, a child’s aging out of dependent status, or divorce, do not...

IRS Provides Guidance on the Full Deductibility of Restaurant Meals

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Posted in Corporate / Tax

On April 12, 2021

One of the sensual and ineffable pleasures of life is a satisfying meal, whether prepared at home or partaken of at a restaurant. The Consolidated Appropriations Act, 2021 (CAA) temporarily expanded the pathway to this pleasure by providing for the full deductibility of business expenses paid or incurred from January 1, 2021 to December 31, 2022 for food or beverages provided by restaurants. Full deductibility is set forth in Section 274(n)(2)(D) of the Internal Revenue Code of 1986, as amended (the “Code”). Prior to the CAA, the deductibility of restaurant meals, like all other food and beverage business expenses, was subject to a 50 percent limitation. Since the CAA did not define “restaurant,” the precise scope of full deductibility remained uncertain. In Notice 2021-25, the IRS defined “restaurant,” and its definition removes a significant degree of this uncertainty. A restaurant means a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises. A restaurant does not include a business that primarily sells pre-packaged food or beverages not for immediate consumption, such as a beer, wine, or liquor store; convenience store; drug store; grocery store; kiosk; newsstand; specialty food store; or vending machine. The 50 percent deduction continues to...

The Ins and Outs of the 100 Percent COBRA Subsidy Under the American Rescue Plan Act

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Posted in Federal Legislation

On March 16, 2021

As a result of the COVID-19 pandemic, employees who have been involuntarily terminated or had their hours reduced and lost their group health plan coverage face a major hardship – being able to afford the premiums for COBRA continuation coverage. The newly enacted American Rescue Plan Act of 2021 (the “Act”) addresses this hardship through a 100 percent subsidy for premiums for COBRA coverage for the six-month period from April 1, 2021 through September 30, 2021. Individuals and Coverages Eligible for the Subsidy Employees who have involuntarily been terminated or had their hours reduced, and who are currently in their 18-month COBRA continuation coverage period, are eligible for the subsidy. Their qualified beneficiaries, spouses, and dependents who were covered under the employer’s plan and lost coverage due to the employee’s involuntary termination or reduction in hours are also eligible. Domestic partners and their children, regardless of whether the employer’s plan provides COBRA-like coverage for them, are not qualified beneficiaries and therefore are ineligible for the subsidy. Eligible individuals are currently in their 18-month continuation coverage period if their involuntary termination or reduction in hours occurred on or after November 1, 2019. Individuals are eligible for the subsidy regardless of whether they previously elected COBRA and continue to be on COBRA, previously elected COBRA but discontinued...

Cafeteria Plan Provisions of the Consolidated Appropriations Act, 2021

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Posted in Corporations

On January 4, 2021

The Consolidated Appropriations Act, 2021 (the “CAA”) provides employers with the ability to adopt optional relief provisions for participants in cafeteria plans with healthcare and dependent care flexible spending accounts (“FSAs”). These provisions are aimed at preventing forfeiture of unused account balances at the end of the 2020 and 2021 plan years. The unused amounts have often arisen due to the COVID-19 pandemic triggering extended medical provider, school, and daycare closures, and remote work arrangements. Grace Period Extensions and Unlimited Carryover Amounts The CAA provides employers with two options for the use of leftover FSA amounts. First, an employer can extend the grace period to use these amounts in the following plan year from two months and fifteen days to twelve months after the end of the plan year. Accordingly, unused FSA amounts as of the end of the 2020 plan year may be used for qualifying medical and dependent care expenses through the end of the 2021 plan year, and unused FSA amounts as of the end of the 2021 plan year can be used for qualifying medical and dependent care expenses through the end of the 2022 plan year. It is important to note that participants cannot contribute to health savings accounts while healthcare FSA funds are available during a grace period. Thus,...

New Jersey State Pay-to-Play Rules and Federal Elections

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Posted in Political and Campaign Finance Compliance

On May 18, 2016

New Jersey has its own individual pay-to-play rules that do not apply to federal candidates regardless of the state office that the candidate holds. The two sets of New Jersey pay-to-play rules (“Pay to Play Rules”) of concern are: (i) New Jersey statutory rules for state contracts under N.J.S.A. 19:44A-20.13-20.25, and (ii) New Jersey regulations of the New Jersey State Investment Council (“SIC”) pursuant to N.J.A.C. 17:16-4.1 to 4.11. The New Jersey Election Law Enforcement Commission (“ELEC”) and the New Jersey State Treasurer have stated that contributions to a federal account that are to be used only in federal elections will not trigger the New Jersey pay-to-play rules. See Advisory Opinion No. 03-2006; Letter of Bradley I. Abelow, New Jersey State Treasurer, June 23, 2006. The SIC regulations are applicable to political contributions and payments to political parties. See N.J.A.C. 17:16-4.2. Political contribution is defined as a contribution for the purpose of influencing any election for New Jersey state office, and under certain circumstances, any election for New Jersey local office. Since candidate committee for President is a candidate committee for a federal office, contributions to the committee are not political contributions. The SIC regulations define a “political party” as one that does not include a federal or national campaign committee, or nonstate political committee,...

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