Overview

The SECURE Act 2.0 increased the retirement account catch-up limitations for certain taxpayers.  The increased limits become effective starting in 2025.  For taxpayers who are between ages 60 and 63, the expanded catch-up contribution limit will be equal to the greater of (1) $10,000 or...

The drama over the FTC's sweeping ban on employers' use of non-compete agreements just became more complicated.  Of course, the Fifth Circuit had issued a ruling that created a nationwide ban on the FTC's ability to enforce the ban on non-compete agreements, reasoning that the...

Under the SECURE Act 2.0, the rules governing access to retirement accounts in the wake of natural disasters were relaxed to allow penalty-free access in certain circumstances.  If the disaster qualifies as a federally-declared disaster, taxpayers can access up to $22,000 per disaster without application...

As 2025 approaches, members of Congress are seriously evaluating many of the 2017 tax reform provisions that are scheduled to expire after 2025. One provision gaining significant attention is the 20% Section 199A deduction for qualified business income of pass-through entities. Post-TCJA, a pass-through entity is entitled to deduct 20% of qualified business income (which generally excludes service business income, although service businesses with income that falls below the annual threshold levels also qualify for the deduction). When income exceeds the relevant threshold, the deduction is capped at the greater of (1) 50% of W-2 wage income or (2) the sum of 25% of the W-2 wages of the business, plus 2.5% of the unadjusted basis, immediately after acquisition, of all qualified property.<br /> <br /> We asked two professors and authors of ALM’s <em>Tax Facts </em>with opposing political viewpoints to share their opinions about the impact of the Section 199A deduction as it currently exists.<br /> <br /> Below is a summary of the debate that ensued between the two professors.<br /> <br /> <strong>Their Votes:</strong><br /> <br /> <img class="alignnone size-medium wp-image-62920" src="https://cms-taxfacts.thinkadvisor.com/wp-content/uploads/2024/07/ByrnesThumbsUp-300x105.png" alt="" width="300" height="105" /><br /> <br /> <img class="alignnone size-medium wp-image-62922" src="https://cms-taxfacts.thinkadvisor.com/wp-content/uploads/2024/07/BloinkThumbsDown-300x105.png" alt="" width="300" height="105" /><br /> <br /> <strong>Their Reasons:</strong><br /> <br /> <strong>Byrnes:</strong> This relatively new QBI deduction has essentially levelled the playing field between corporations and pass-through entities. When the corporate tax rate was slashed to 21%, business owners would have been making the choice between the potential 37% tax rate for pass-throughs and that much lower corporate tax rate. Making critical business decisions based solely on tax liability rarely results in the best outcome.<br /> <br /> <strong>Bloink:</strong> The 20% QBI deduction has ended up offering yet another tax loophole for the wealthy. Yes, it's beneficial for small business owners who might otherwise have been forced into the corporate structure. It's also given wealthy corporations yet another option for reducing their federal income tax liability.<br /> <br /> ________________________________<br /> <br /> <strong>Byrnes:</strong> Without the Section 199A deduction, small business owners would be making choices with respect to choice of entity that are entirely based on federal tax issues, rather than the benefits of the business structure itself and the needs of the business. That’s bad for small business owners, of course, but it also damages the economy as a whole. 199A was a necessary part of the puzzle with respect to tax reforms designed to boost business and strengthen the economy.<br /> <br /> <strong>Bloink:</strong> The rules governing the Section 199A deduction are complicated and can easily be manipulated by high-net-worth taxpayers. While I'm not suggesting that we allow the 199A deduction to expire entirely, 199A was never intended to be a tax loophole for the wealthiest Americans to use as they please. Unfortunately, that’s how it’s often been used by wealthy Americans seeking to minimize their tax liability. Change is necessary.<br /> <br /> ________________________________<br /> <br /> <strong>Byrnes:</strong> In the end, without Section 199A, many small business owners would probably have been forced to deal with the traditional corporate structure in order to be taxed fairly, which results in double taxation and isn't really necessary for smaller businesses with less complex operations. Section 199A is important because it essentially works to level the playing field, at least from a pure tax perspective, between traditional C corporations and pass-through entities. The law already contains built-in income thresholds designed to prevent abuse.<br /> <br /> <strong>Bloink:</strong> We need to impose clear and airtight income limits so that the super-rich are not able to manipulate the rules to take advantage of 199A and avoid paying their fair share. As the rule stands, exceptions and qualifications currently exist to allow the wealthiest taxpayers to manipulate their situations to benefit from the deduction rather than paying their fair share.

by Prof. Robert Bloink and Prof. William H. Byrnes<br /> <br /> Employers have long searched for ways to offer flexibility when it comes to their employment benefits structure. It’s common for employers to offer an employer matching contribution when employees fund 401(k) plans and other types of defined...

Employers who make matching contributions to defined contribution plans linked to emergency savings accounts (PLESAs) must make matching contributions based on participants' contributions to PLESAs.  The IRS has published guidance on preventing employees from manipulating the employer matching requirements by funding the PLESA only to...

After over three years of relief, student borrowers were once again required to make payments starting last October.  Interest on failure to pay did once again begin accumulating on outstanding amounts last year.  However, for the past year, student loan providers were not permitted to...

The DOL has filed an appeal of the Fifth Circuit's decision to reverse the Texas court's decision to prevent the new rule from becoming effective earlier this week as scheduled.  The Texas court issued the order to freeze the rule in July without dealing with...

During the COVID-19 pandemic, laws were relaxed to allow providers to offer telehealth services without jeopardizing a health plan’s status as a high deductible health plan (HDHP)—and thus without jeopardizing individual participants’ rights to fund HSAs. Recent proposals have been developed and would extend this relief and expand the availability of telehealth services. The relief would, among other things, allow audio-only telehealth services. Additional proposals would suspend the limitations on subsequent inpatient treatment.<br /> <br /> We asked two professors and authors of ALM’s <em>Tax Facts </em>with opposing political viewpoints to share their opinions about whether expanding telehealth options would have a positive impact.<br /> <br /> Below is a summary of the debate that ensued between the two professors.<br /> <br /> <strong>Their Votes:</strong><br /> <br /> <img class="alignnone size-medium wp-image-62919" src="https://imageserver.amlaw.com/tax-facts/uploads/2019/02/BloinkThumbsUp-300x105.png" alt="" width="300" height="105" /><br /> <br /> <img class="alignnone size-medium wp-image-62921" src="https://imageserver.amlaw.com/tax-facts/uploads/2019/02/ByrnesThumbsDown-300x105.png" alt="" width="300" height="105" /><br /> <br /> <strong>Their Reasons:</strong><br /> <br /> <strong>Bloink:</strong> Telehealth options have had a profoundly positive impact for the American people. First and foremost, telehealth options have proved to be extremely valuable for Americans living in so-called "healthcare deserts" where access to physical healthcare services is difficult to find.  Telehealth also creates additional options for mental health treatment. Often, telehealth options are the only real way these Americans can access quality healthcare without significant travel. Making it easier for Americans to access telehealth options would have an extremely positive impact on these taxpayers.<br /> <br /> <strong>Byrnes:</strong> Expanded telehealth options played a critical role during the COVID-19 pandemic. That doesn't mean that we should expand upon these options. Now, Americans are fully able to access medical care in-person. Not all relief that was created during the pandemic should be expanded now that we’re returned to in-person association.<br /> <br /> _________________________________<br /> <br /> <strong>Bloink:</strong> When we make it easy for Americans to access convenient remote healthcare options, we also increase the likelihood that Americans will actually seek medical assistance before any given condition worsens. That reduces the cost of healthcare for all Americans, because many simple conditions can be treated without the need for in-person appointments—which will always be more expensive than a remote option.<br /> <br /> <strong>Byrnes:</strong> An in-person medical examination is much more likely to uncover the root cause of a patient's concerns. Telehealth simply cannot provide an effective substitute for a hands-on medical examination. Not all conditions can be determined via a video conference or online questionnaire. Inpatient medical care is critical, and limitations on options that would discourage telehealth in lieu of inpatient care should be in place.<br /> <br /> _________________________________<br /> <br /> <strong>Bloink:</strong> No one is suggesting that telehealth is the end-all solution for all medical issues. The reality is that in-person medical attention will always be a necessary part of life. However, some medical issues are so simple that they can be diagnosed, and a treatment plan can be formed without the need for an in-person appointment. When we use telehealth in conjunction with in-person medical care, we increase the chances that people will actually seek medical advice so that simple conditions can be treated before they become more dangerous.<br /> <br /> <strong>Byrnes:</strong> At the government level, there’s no reason that we should be proactively taking steps to encourage Americans to choose telehealth over more traditional and effective in-person medical appointments. We shouldn’t be providing tax benefits for remote health services, which could encourage taxpayers to choose telehealth over traditional inpatient services.

by Prof. Robert Bloink and Prof. William H. Byrnes<br /> <br /> Alternative funding solutions have become incredibly popular among employers seeking to offer health insurance coverage to employees. Traditional health insurance rates have skyrocketed in recent years. Self-funding can create a number of challenges that are often unattractive...