Election Year 2020: Big 4 Views from "Inside the Loop" - NASPP
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Election Year 2020: Big 4 Views
from “Inside the Loop”
1
Speakers
Storme Sixeas
Deloitte Tax LLP
ssixeas@deloitte.com
Robert W. Delgado
KPMG LLP
rdelgado@kpmg.com
Susan M. Lennon
PricewaterhouseCoopers LLP
susan.m.lennon@pwc.com
Stephen LaGarde
Ernst & Young LLP
stephen.Lagarde@ey.com
2
Let’s Vote!
3Live Polling Question
1. Which one of these power alignments is most likely next year?
A. Trump is re-elected; Senate stays in Republican hands
B. Trump is re-elected; Senate control won by Democrats
C. Biden beats Trump but his coattails don’t also deliver a
Democratic Senate
D. Blue wave – Biden wins and has a Democratic Senate to work with
E. Don’t know
4Agenda
• The future of tax legislation
− COVID-19 recovery measures
− Democratic priorities
− Republican priorities
− Deficits and funding them
• Employee benefits
5Where Are We Now?
• Families First Coronavirus Response Act
− Required paid leave for employers with fewer than 500 employees
o Up to 2 weeks paid sick leave where employee cannot work because the employee is quarantined
and/or experiencing COVID-19 symptoms and is seeking a medical diagnosis
▪ Maximum $511 per day, $5,110 for 2 weeks
o Up to 2 weeks paid sick leave at 2/3 of employee’s regular rate of pay if employee is caring for
someone with COVID-19 or is caring for a child whose school or childcare is closed
▪ Maximum $200 per day, $2,000 for 2 weeks
o Up to 10 weeks paid FMLA leave at 2/3 pay to take care of a child whose school/childcare is closed
▪ Maximum $200 per day, $10,000 for 2 weeks
− Corresponding payroll tax credit for wages paid plus attributable health care
expenses
6Where Are We Now?
• Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
− Employee Retention Credit
o Employers who are subject to full or partial business suspension due to government shutdown orders
or whose 2020 gross receipts have declined over 50% compared to the same quarter in 2019
o Refundable payroll tax credit up to $5,000 on $10,000 of qualified wages per employee
− Deferral of employer social security taxes
− Penalty-free COVID-related qualified plan distributions and expanded plan loans
− Paycheck Protection Program
o Forgivable loans up to $10M to eligible businesses with not more than 500 employees
− Main Street Lending Program
o Loans from $250,000 to $300M to US businesses with up to 15,000 employees or up to $5B in annual
revenue
− Enhanced unemployment benefits
o Additional $600/week through July 31, 2020
7More to Come?
• Phase 4?
− Expansion of employee retention credit
o Increase applicable percentage of qualified wages reimbursed by the credit
o Modifies gross receipts requirement
o Increases wages taken into account per employee
− Workplace credits
o House – HEROES Act: 50% refundable payroll tax credit for certain qualified fixed costs, such as
rent, mortgage, and utilities payments
o Senate – HEALS Act: 50% refundable payroll tax credit for qualified employee protection expenses,
qualified workplace reconfiguration expense, and qualified workplace technology expenses
− HEROES Act only
o Expands Families First paid leave through 2021
o COBRA premium assistance
− HEALS Act only
o Addresses state and local taxes and withholding on remote and mobile workers impacted by COVID
o Expands WOTC
o Full deduction for business meals for 2020
8Executive Action: Payroll Tax Deferral
On August 8th, the President signed
a memorandum on deferring certain
payroll tax obligations
• The memo directs the Secretary of Treasury to use
his authority to defer certain payroll tax
obligations
• Intended to provide economic relief to American
workers in response to COVID-19
• Awaiting guidance from Treasury with additional
information implementing the proposed deferral
9The Presidential Memo
What do we “know” from the memo?
— What may be deferred? — Are there eligibility requirements?
Employee portion of Social Security Available with respect to employees
(6.2% on the first $137,700 of wages whose wages/compensation payable
per year) during any bi-weekly pay period is less
than $4,000 on a pre-tax basis
— When will the deferral be effective? (approximately $104,000 per year)
The deferral was directed to apply
with respect to wages paid during the — Will the deferral be optional?
period from September 1, 2020 through TBD – Treasury Secretary Mnuchin
December 31, 2020 stated in an interview that the plan
will be optional for employers
— What is the authority for this rule?
Section 7508A allows the Secretary of — How will the deferral process work?
Treasury to delay the deadline for It is unclear how the deferral process
certain Internal Revenue requirements will work until Treasury issues guidance
by up to 1 year for taxpayers affected implementing the direction
by a Stafford Act disaster
10Treasury Guidance
What do we need to know from Treasury?
— Will the deferral be optional? — Would the deferral apply to self-
▪ If so, at whose option? employed individuals?
▪ Will there for a formal notification
requirements or election process? — How will any employee eligibility
criteria be applied?
— How will the deferral be effectuated
and reported by the employer? — Will guidance be provided with
reasonable advance notice to allow
— Must the deferred taxes be repaid? employers and payroll providers to
▪ When would the payments become due?
▪ Who will be liable for payment of the
align with new requirements?
▪ Will there be a retroactive process in
deferred taxes in the future?
the event companies or third parties
▪ If the employer, what if there are no
cannot align systems in time?
wages to withhold from or the employee
has terminated? — To the extent of errors or delays in
— How would a payroll tax deferral deferrals, would there be an
affect existing credits under the opportunity for correction?
CARES Act and FFCRA? — Impact on equity compensation?
11Live Polling Question
2. How is your company handling employees’ payroll taxes following
the President’s executive action?
A. No changes
B. Not deducting taxes – will claw back taxes from employees if and
when payment is due
C. Not deducting taxes – company will cover the taxes if not forgiven
D. Continuing to deduct from paychecks but bumping up employee
pay to cover taxes
E. Don’t know/Not applicable
122020 Presidential Candidates
Donald Trump Joe Biden
Business tax proposals • Corporate rate: Maintain current law of • Corporate rate: Increase to 28%;
21% (though has discussed lowering to Increase GILTI rate to 21%
20%)
• Expensing: Disallow accelerated
• Expensing: Has discussed extending or depreciation deductions
expanding 100% bonus depreciation
• §199A: Phase out deduction for filers
• §199A: Unclear with income >$400k
• Book income: Impose 15% minimum
tax on book income of companies that
report US net income of >$100M but
owe no US income tax
Source: President’s Budget for FY2021, “Trump wants to cut corporate rate again, Mulvaney says,” Politico (Feb. 28, 2020), “Trump eyes new tax cuts for next stimulus package,” New York Times
(May 5, 2020), Biden for President website
132020 Presidential Candidates
Donald Trump Joe Biden
Individual tax proposals • Top rate: Permanently extend current • Top rate: Increase to 39%
law of 37%
• Payroll taxes: Expand Social Security
• Payroll taxes: Forgive payroll taxes payroll taxes to apply to wages
deferred in Sept.-Dec. 2020 for those >$400k
earning $1M, including taxing carried
indexing capital gains to inflation interest at ordinary income rates
• Itemized deductions: Permanently lift • Itemized deductions: Cap value at
Pease limitation 28%; Restore Pease limitation for
those earning >$400k
• Individual and estate tax: Permanently
extend current law • Estate tax: Lower threshold to $3.5M
and repeal stepped-up basis
Source: President’s Budget for FY2021, “Trump doubles down on capital gains, payroll tax cuts to stimulate economy,” Fox Business (May 8, 2020), “Trump again flirts with cutting capital gains
taxes,” Politico (Aug. 30, 2019), Biden for President website
14Survey Data / Heard on the Street
• Compensation
• Benefits
• Equity
15Live Polling Question
3. What is your company doing with respect to compensation,
benefits and rewards?
A. Making no changes
B. Making some changes
C. Making large wholesale changes
D. Don’t know/Not applicable
16Questions?
17Thank You!
18You can also read
