The Tax Cuts and Jobs Act (H.R. 1) was signed into law by President Trump in late December 2017 and is a complex, significant piece of legislation affecting U.S. businesses in several ways.
What does the Tax Cuts and Jobs Act mean for you?
Major HR components of the tax bill are listed below:
Paid Family and Medical Leave Tax Credit. The first paid leave-related measure offered at a national level, the tax bill does not require employers to provide paid leave. However, it does offer a tax credit as an incentive to employers that provide a certain level of paid family and medical leave. Both full-time and part-time employees must be offered paid leave in order for the employer to claim the general business tax credit, which is equal to 12.5% of the wages paid to qualifying employees taking family and medical leave.
Sexual Harassment Nondisclosures. As awareness of sexual harassment claims has increased, it has brought attention to nondisclosure agreements in harassment claim settlements. Section 13307 of the bill amends section 162 of the tax code, which generally allows businesses to deduct expenses paid or incurred during the year as part of running the business, to exclude payments related to sexual harassment and sexual abuse. Now, deductions are not allowed for settlement/payment related to sexual harassment or abuse if that payment/settlement is subject to a nondisclosure agreement, or for attorney’s fees related to such a settlement. Basically, employers should determine whether an amount paid to settle a claim is significant enough to be worth the deduction, and ensure that their settlement agreements do not include nondisclosure agreements.
Repeal of the ACA Individual Mandate. The tax bill repeals a cornerstone of the ACA health reform bill, eliminating penalties for the ACA’s individual mandate. This is the requirement that most individuals obtain health coverage or pay a penalty. Note: the associated employer mandate remains in effect.
Fringe Benefit Deductions and Exclusions. The next tax law changes which fringe benefits may be deducted as business expenses. For instance, the deduction associated with an employer providing ordinary commuter benefits to employees has been removed. In addition, it also removes the exclusion from employees’ wages for employer-reimbursed moving costs, bicycle commuting costs, and length of services/safety achievement awards.
The full bill can be found at Congress.Gov.
How We Help
Staff One HR keeps clients up-to-date about changes in employment-related laws and regulations, as well as providing guidance on compliance. If you have questions about how the new tax bill will affect your business, please contact your HR Manager directly or contact our dedicated team today.