Tagged: Internal Revenue Code

The Impact of the Inflation Reduction Act on the Energy Investment Tax Credit and Certain Other Energy Tax Provisions

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “Act”), which includes a number of tax provisions related to green energy. Below is a brief summary of the Act pertaining to the energy investment tax credit (ITC) of Internal Revenue Code (IRC) Section 48 and certain other energy tax provisions, with the following link to our more detailed article highlighting the impact of the Act on the ITC. Prior Law With Respect to Energy ITC: Until somewhat recently, taxpayers could obtain a 30% ITC for purchasing and placing in service qualifying energy property, especially a solar power system, with that percentage being gradually phased out with reductions commencing for energy property for which construction began in the year 2020. Main Revisions to Energy ITC – New Base Credit Percentage of 6%: Under the Act, the base energy percentage for qualifying energy property placed in service after December 31, 2021 is reduced to 6% unless new prevailing wage requirements and apprenticeship requirements are met. Taxpayers will qualify for a 30% ITC (instead of the base 6% credit) if they meet the new prevailing wage requirements and the apprenticeship requirements. The Prevailing Wage and Apprenticeship Requirements: The prevailing wage requirements require that any laborers and mechanics employed by the taxpayer...

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

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 The guidance is similar to the guidance in Notice 2001-69, as modified and superseded by Notice 2003-2, on charitable donations made after the September 11, 2001 terrorist attacks.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...

Supreme Court Holds that Severance Payments to Employees Terminated Involuntarily are Taxable Wage for FICA Purposes

On March 25, 2014, the Supreme Court of the United States unanimously ruled that severance payments ─ that are not linked to the receipt of state unemployment benefits ─ are taxable wages subject to the Federal Insurance Contributions Act (“FICA”). United States v. Quality Stores, Inc., 572 U.S. ___ (2014). Specifically, the Supreme Court ruled that the severance payments made to employees who were terminated involuntarily fit within the broad definition of “wages” under both FICA § 3121(a) and Internal Revenue Code § 3401(a).