H.R. – 6201, Families First Coronavirus Response Act – A Practical Summary for Businesses

By Alan R. Sasserath, CPA, MS

As someone that works with government on a regular basis and reads political Facebook posts, I have little faith that any legislation passed will do what it claims to do. But this bi-partisan legislation is a good piece of legislation that will help employers with fewer than 500 employees AND their employees as well for those employees and their families who have come into contact with coronavirus.

This legislation is wide-reaching covering many topics including expanded funding for many programs that I had never heard of.  We have selected a few sections that could apply to many of our friends and clients to discuss below.  These sections apply to employers with fewer than 500 employees.

EMERGENCY FAMILY & MEDICAL LEAVE

  • Employer Rules/Employee Benefits: This section provides employees of employers with fewer than 500 employees who have been on the job for at least 30 days with the right to take up to 12 weeks of job-protected leave under the Family and Medical Leave Act, to be used for any of the following reasons:
  1. To adhere to a requirement or recommendation to quarantine due to an exposure to or symptoms of coronavirus;
  2. To care for an at-risk family member who is adhering to a requirement or recommendation to quarantine due to an exposure to or symptoms of coronavirus;
  • To care for a child of an employee if the child’s school or place of care has been closed, or the child-care provider is unavailable, due to a coronavirus.

After two weeks of paid leave, employees will receive a benefit from their employers that will be no less than two-thirds of the employee’s usual pay.

  • Employer Benefit – Payroll Credit for Required Paid Family Leave: This section provides a refundable tax credit equal to 100% of qualified family leave wages paid by an employer for each calendar quarter.  The amount of qualified family leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters.

EMERGENCY PAID SICK LEAVE ACT

  • Employer Rules/Employee Benefits: Under this provision, employers with fewer than 500 employees are required to provide employees two weeks of paid sick leave, paid at the employee’s regular rate to (“Situation A”) quarantine or seek a diagnosis or preventive care for coronavirus; or paid at two-thirds the employee’s regular rate to care for (“Situation B”) a family member for such purpose or to care for a child whose school has closed, or child care provider is unavailable due to coronavirus.

Full time employees are entitled to two weeks (80 hours) and part-time employees are entitled to the typical number of hours that they work in a typical two-week period.

  • Employer Benefit – Payroll Credit for Required Paid Sick Leave: The section provides a refundable tax credit to the employer equal to 100 percent of the qualified paid sick leave wages paid by an employer for each calendar quarter.  The tax credit is permitted against the employer portion of Social Security taxes.  Any excess is refundable and applied on a quarterly basis.

This section makes a distinction between qualified sick leave wages paid for employees in Situation A above (the employee, him- or herself is affected by the coronavirus directly) and those in Situation B (the employee is caring for a family member with coronavirus).  Under Situation A, the amount of qualified sick leave wages taken into account for each employee is capped at $511 per day.  Under Situation B, the amount of qualified sick leave wages is capped at $200 per day.  In either case the aggregate number of days may not exceed the excess of 10 over the aggregate number of days taken into account from all preceding calendar quarters.

  • Self-Employed Individuals: There are a similar required paid family leave and sick leave tax credits available to self-employed individuals who are either afflicted directly, like Situation A or caring for a family member, like Situation B. The credit is allowed against income taxes and, again, is refundable.

A few important items to note:

  1. While the House of Representatives has passed this legislation and the President has stated that he will sign it, as of this writing it has not passed the Senate yet. Senate Majority Leader Mitch McConnell issued the following statement after the bill passed the House: “Of course, Senators will need to carefully review the version just passed by the House. But I believe the vast majority of Senators in both parties will agree we should act swiftly to secure relief for American workers, families, and small businesses.”
  2. This is a high-level overview of a handful of the topics covered by this legislation. The devil is in the details.  The Secretary of the Treasury has been given broad authority to issue regulations and guidance necessary to carry out the purposes of the tax credit sections referred to above, including regulations and guidance related to avoidance, penalty waivers with respect to deposit amounts, compliance, record-keeping requirements, relief and benefit recapture.
  3. Many of these changes would take effect 15 days after the bill is enacted, would not be retroactive and would terminate December 31, 2020.
  4. There are other ways that small business may qualify for relief such as:
    • The Small Business Administration is providing up to $2 million in low-interest disaster recovery loans to businesses
    • According to a Wall Street Journal Article, New York City is offering interest-free loans of up to $75,000 to firms with fewer than 100 employees that see a 25% decline in sales.

Once we have final legislation, we will update the information above in more detail. Please contact us to discuss your particular challenges and together we can plan the path forward.

Your 2020 Personal and Small Business Tax Strategy: Key Opportunities, Trends and Challenges

By: Lynn Montag

Tax season for 2019 may be in full swing, but it’s never too soon to start thinking about your 2020 business tax strategy. A new year means new tax challenges and opportunities for small business owners, so it’s best to understand recent tax code changes right at the beginning. Although different tax rules apply based on business structure, in general small business owners are responsible for sales tax; payroll tax; self-employment tax, which goes towards Social Security and Medicare; excise tax; federal and state (if applicable) income tax; property tax; and taxes on capital gains and dividends. Per the IRS, all businesses large or small, turning a profit or not, must submit an annual income tax. The exception to this rule is partnerships which are required to file an information return instead.

The top things small business owners should keep in mind for 2020 are: 1) changes to the tax code from the 2017 Tax Cuts and Jobs Act (TCJA) impact deductions for pass through companies; 2) state and local tax (SALT) deductions are limited to $10,000; 3) commuters can no longer deduct their ride to work as a “qualified transportation fringe benefit”; and 4) there a new international tax considerations to deal with if you’re an American corporation.

  1. TCJA impacts deductions for pass through companies

For small business owners, recent changes to business deductions could have a huge impact in 2020. As a result of the TCJA, the corporate tax rate was cut from 35% down to 21%. If you are taxed as a c-corporation, this 14% drop could have a major impact on your bottom line. Although this flat rate mostly affects large businesses and corporations, the TCJA also changed the limits on interest deductions and net operating losses for pass-through companies – companies where taxes are passed-through to shareholders and owners – which make up most small businesses in the U.S. Under the TCJA for 2019, joint tax filers who have taxable income below $321,400 (or below $160,700 for individual filers) now qualify to deduct 20% of their qualified business income (QBI) from their annual taxes. If you plan to take advantage of this 20% deduction and your business’ taxable income falls above the thresholds mentioned, please contact our team to determine whether you qualify through other exceptions.

  1. SALT deductions are capped at $10,000

In high-tax states such as New York, California and New Jersey, the SALT deduction restriction could impact you and your small business. As of last year, for the first time ever SALT deductions were capped at $10,000 for combined property taxes plus either state income or state sales tax. For states with high property, income or sales tax, this could seriously limit the amount of federal deductions you are entitled to.

Additionally, if your business owns property overseas, under the new SALT deductions you can no longer deduct foreign real estate taxes from your U.S. tax return.

  1. Fringe benefit deductions for commuters have changed

The TCJA has removed employer deductions previously allowed for parking, transit and carpooling. Additionally, employers who offer transportation benefits for employees who are commuters can no longer deduct these reimbursements as “qualified transportation fringe benefit” from their tax return, although qualified bicycle commuting reimbursements are still allowed as business expense deductions through 2025, when the TCJA expires.

  1. International tax considerations

If your small business operates overseas, the TCJA creates new considerations when filing your taxes. It is vital for small business owners to manage their taxes correctly as penalties for incorrect filing can be severe, including anywhere from lofty fees up to a potential closure of your business. Increased IRS audits of small businesses over the past few years requires that business owners be aware of their tax requirements. Please consult with a tax professional to avoid any costly mistakes.

Hedge Fund Industry Trends in 2020

By Gregory Zoraian

The hedge fund industry is incredibly dynamic and fast moving, with the rise and fall of stocks sometimes altering conditions overnight. Still, general economic trends, as well as previous patterns of growth and decline, allow experts to predict some overall shifts in the industry, and it is vital for hedge fund managers and investors to understand these predicted trends to help them prepare for likely changes. Several well-known global hedge fund consulting and marketing firms release yearly industry analysis after polling thousands of hedge fund organizations and investors. Below are top hedge fund industry guidelines for 2020.

  1. Hedge Fund Assets Continue to Grow

In 2020, we expect to see overall asset growth and industry consolidation, with hedge fund assets anticipated to continue the sustainable growth they’ve shown over the last decade (despite scares and drops such as the turbulence we’ve seen from Coronavirus fears). Despite some negative predictions from economists stating a general hedge fund decline, many experts believe it is a good time to invest. Hedge fund assets are expected to increase by 3% in 2020, mainly resulting from market performance. It should be noted, however, that this growth won’t offset declining fees from reduced overall revenue.

  1. U.K. Hedge Funds will Look to U.S. and Canada

Post-Brexit, U.K. hedge fund managers are expected to turn their attention toward American and Canadian investors. The U.K. is the second largest hedge fund market in the world, but after leaving the EU they face many obstacles in dealing with Europe’s hedge fund industry regulations. As the EU was created to promote internal free trade and to put non-EU member states at a disadvantage, Britain is expected to focus more on North American investors and less on those in neighboring European countries.

  1. ESG Factors Become Increasingly Important in Investor Decisions

Originally a niche activity, the hedge fund industry is rapidly reinventing itself due to evolving, increasingly powerful technology and the fact that ESG (environmental, social and governance) factors are more and more important for potential investors when assessing a company’s future financial performance, or risk and reward. ESG factors can help investors sidestep businesses with potential future financial risk, and many brokerage firms, mutual funds and financial advisors now offer products and services that utilize ESG criteria. Over the next year, investors and managers will seek to integrate ESG criteria across investment products and it will become an increasingly common requirement in regulatory disclosure.

  1. New Technology will Change How Hedge Funds Operate

Several recent surveys of the hedge fund industry found that new statistical and computational tools, cutting-edge management software, and the increasing use of AI (artificial intelligence) in evaluating industry data will soon require hedge funds to reassess how they operate. More than ever, technology is critical to analyze the overabundance of available data as well as to comply with increasing regulation on how that data is used. Throughout the next decade, hedge fund managers are expected to implement alternative data – companies and software that collect, clean, analyze and interpret data – and start utilizing AI capabilities to inform their investment decisions.

To learn more about hedge fund trends predicted for 2020, and to learn how we can put our hedge fund expertise to work for you, please contact our team.

U.S. Business, Brexit and the British Financial Market

By: Alan Sasserath and George Batas

Brexit has officially happened: as of January 31, 2020, the U.K. is no longer a member of the European Union (EU). To many Americans, Brexit may seem like a distant event “across the pond” of no significance to their world, but there are several important ramifications and opportunities for U.S. businesses.

What is Brexit? Brexit is the abbreviation for a British exit from the EU. The EU is an economic and political set of treaties existing between 28 European countries allowing, among other things, free trade and free movement of people between member countries. In June 2016, after a public referendum in the U.K. during which 17.4 million people (or 52% of the population) voted to leave, the process for exiting the EU, or Brexit, began. For many British nationals, the decision to leave came from the belief that the freedom to negotiate their own trade deals with countries would eventually allow access to more wealth and opportunities for British citizens and businesses.

From January 31 through December 31, 2020, the U.K. will be in a transition period, during which they will negotiate a new trade agreement with the EU, as well as with other countries around the world who have no existing EU deals. One of those countries is expected to be the U.S., with both sides stating such a trade deal could be negotiated simultaneously with the deal being discussed between the U.K. and the EU.

For U.S. businesses, this means that during the transition period, the U.K. must obey EU rules and trade regulations; however, they are now allowed to hold formal trade negotiations with countries such as the U.S. and Australia for both goods and services. Any new trade agreements would start at the end of the 2020 transition period, and although the U.K. seeks to remain aligned with EU regulations in such areas as the motor vehicle and chemical industries, their government states that they are open to modification if it is in the best economic interests of the country to do so – for instance, to reach a new trade deal with the U.S.

Many U.S. economic experts believe that Britain’s departure from the EU creates a host of opportunities for U.S. businesses, as well as a chance to deepen historically important economic ties between the U.S. and U.K. Although the two English-speaking countries already have one of the strongest economic partnerships in the world – exceeding a total annual trade revenue of $260 billion in 2019 – heavy EU regulations over the past few decades greatly inhibited the flow of trade in financial services, the telecommunications sector, the motor vehicles industry and in professional services. Furthermore, under EU regulations the U.S. faced a steep 11% tariff for agricultural exports. The U.S. is the world’s largest food exporter and the most efficient producer of food in the world. The U.K.’s exit from the EU presents a great opportunity for American businesses in the food export industry. As two of the most technologically and medically innovative countries in the world, huge opportunities are expected to open up for U.S. and U.K. businesses in these industries as well.

Other U.S. experts believe that Brexit heralds the end of multilateral economic growth, with many countries coming together to chart a common economic course, and that nationalism and bilateral trade agreements will become more common. For U.S. business owners interested in expanding overseas, this will mean carefully weighing the pros and cons of where to set up bases of operation in order to best take advantage of specific markets.

For U.S. businesses post-Brexit, a powerful U.S.–U.K. pact which eliminates or greatly reduces most tariffs, expands market access and writes new rules for digital trade could decrease costs and compliance burdens for businesses in almost every industry while also leading to billions in investment on both sides of the Atlantic. For American businesses already operating in the U.K. and concerned about less access to EU markets, such benefits are expected to help offset any potential economic consequences. An alternate suggestion would be to maintain operations in the U.K. while also expanding to another country within the E.U.

Please see our ongoing series of articles discussing the merits of various countries as a base of operations overseas, the first of which, Ireland, can be found here: http://bit.ly/2v46VC1.

Rarely does the U.S. have the chance to create a trade deal with a country so deeply alike to our own. As the world’s fifth-largest economy, the U.K.’s exit from the EU presents both opportunities and challenges for U.S. business owners.

If you are interested in additional information regarding Brexit and international tax implications, or if you are a business owner operating in the U.K. or the EU, please contact our team to learn more.

 

Ireland as a Business Gateway for U.S. Companies Expanding Overseas

By: Alan Sasserath & Marie Bradley

If you’re a U.S. business owner interested in expanding overseas, your first question is likely: where do I start? At Sasserath & Zoraian, LLP, we maintain several longstanding relationships with overseas firms to assist our clients as they navigate the complex world of international tax and international business. As a result, we’ve noticed that many U.S. businesses interested in cross-border expansion are unsure which location would be best to lay a foundation for their multinational company. This article is the first in a series highlighting some of our top picks.

The Republic of Ireland is an excellent location for businesses from startups to more established multinational organizations. Many U.S. businesses find Ireland an attractive base of operations due to its geographic location as midway between the United States and Asia; its membership in the European Union (EU), which allows simple and quick access to the rest of Europe; and the fact that English is spoken there, thus allowing an ease in communication appreciated by many Americans heading overseas for the first time. In fact, Ireland is the only English-speaking member of the EU that is on the Euro standard of currency, enabling businesses to avoid any exchange rate issues when dealing with other EU member states.

Ireland attracts huge amounts of foreign direct investment (FDI), second only to Singapore, which is due in part to government tax incentives and other public assistance available for high-growth companies. In 2013, Forbes ranked Ireland as one of the best countries for growing multinational businesses. The World Bank has ranked Ireland as number 23 out of 190 measured economies for ease of doing business, with its pro-business policy framework promoting a competitive business environment. Ireland’s 12.5% corporate tax rate is one of the lowest in the world.  Attractive tax incentives are also available to intellectual property and research and development companies.  Ireland has signed comprehensive Double Taxation Agreements (DTAs) with 74 countries and 73 are in effect.

Ireland has successfully attracted foreign investment since the 1980s.  It has a well-educated, highly skilled workforce complemented by its ability to attract non-nationals to study and work. This talented workforce is one of the youngest in Europe and is experienced in assisting multinational companies. Significant government spending on education, Dublin’s reputation as a key destination for international students studying abroad, and Ireland’s growing reputation as Europe’s “Silicon Valley” indicate that talented individuals will continue to seek opportunities in Ireland.

Ireland has an impressive foreign direct investment track record and is home to some of the biggest names in the technology, financial services, and pharmaceutical industries. Fifty percent of the world’s top banks, the top five global software companies, 18 out of 25 top financial services companies, and 24 out of 25 of the top biotech and pharmaceutical companies are located in Ireland. One-third of multinational companies in Ireland have had operations in the country for over two decades, and recently many foreign social media and online gaming companies have also chosen Ireland as a base for foreign operations. Finally, Ireland has fast-growing indigenous businesses, including medical technology companies, a software sector that exports to both the U.K. and U.S., and a competitive food and drinks sector.

U.S. businesses typically establish operations in Ireland for the following reasons:

1) setting up an EMEA headquarter or an Irish holding company;

2) undertaking research and development activities and/or setting up shared services centers; or

3) using Ireland as a low-tax hub to expand internationally into Europe and Asia while also maximizing tax returns.

Contact our team with any questions you may have, as well as to get started expanding overseas to Ireland!

About the Authors

Alan Sasserath, CPA is a Partner and Co-Founder of S&Z. He has over 30 years of public accounting experience and a broad background in accounting, tax, audit and financial planning. A member of International Tax Practitioners, a global group of experienced CPAs, accountants and lawyers, he is one of S&Z’s go-to resources for international tax concerns.

Alan specializes in international tax planning and compliance, transfer pricing review, transactional advisory, expatriate tax services, international business advisory and international outsourcing. He works with businesses and high net worth individuals regarding matters of both domestic and international tax.

Alan can be reached at alan@sz-cpas.com or +1 631-368-3110

 

Marie Bradley is Managing Director of Bradley Tax Consulting. She has broad experience in advising personal and corporate clients having previously worked in the taxation departments of PricewaterhouseCoopers and KPMG advising Irish and foreign multinational companies.

Marie is a highly experienced tax professional having particular expertise in the areas of Irish and international corporate acquisitions, foreign direct investment into Ireland and cross border tax planning for Irish companies expanding abroad.  She is a Fellow and past president of the Irish Taxation Institute.

Marie can be reached at marie.bradley@bradleytaxconsulting.ieLearn more about Bradley Tax Consulting at www.bradleytaxconsulting.ie

 

 

How California and EU Data Protection Laws Impact Your New York Business

By: John McClung

Data privacy is one of the most important business and cultural issues of the 21st century. Universal access to all kinds of personal information is now at unprecedented levels due to the instant communication provided by smartphones and the internet. As a result, identity theft, fraudulent credit card charges, and solicitation from businesses based on consumer spending habits have risen dramatically. Technology and cybersecurity entrepreneurs have scrambled to find ways to make online accounts and transactions more secure, and lawmakers are now following suit. So what does this mean for your business?

In May 2018, the EU’s General Data Protection Regulation (GDPR) went into effect. Created to protect an individual’s online information and simplify the rules for international business, the GDPR imposes tough rules for securing personal data of private individuals, enforces strict penalties for non-compliance, and redefined the way many U.S. companies operating overseas conducted business. This past January, California’s own data privacy law, the California Consumer Privacy Act (CCPA), took effect, borrowing some elements from the GDPR and bringing the U.S. closer to its EU counterparts. It is also the nation’s first statewide data privacy law.

Even if your New York business doesn’t interact with California residents, the CCPA will still affect you. Due to California’s population size as well as their economic and political importance, the CCPA will effectively become the nationwide standard for all U.S. businesses, at least until a federal law for data privacy is passed. Washington lawmakers are looking at California’s new legislation as they consider such a proposal, as setting a single legal standard for data privacy would be more efficient and cheaper for businesses and cybersecurity firms to implement in the long run.

And for those New York businesses that do business with California residents, the impact is more immediate. Those businesses must now, among other requirements, disclose what personal data has been collected and delete the data or stop selling it to outside sources if the customer requests. The CCPA, and the GDPR before it, have also legally broadened the definition of “personal information” to include any information which can “directly or indirectly” identify a person. This includes such things as biometric data, browsing history, employment and education data, consumer preferences, psychological trends, preferences, aptitudes, and other data which can be used to create a profile of the individual.

The CCPA applies to all companies that supply or serve California residents and: (1) have at least $25 million in annual revenue, or (2) have personal data on at least 50,000 people, or (3) collect more than half their revenue through the sale of personal data. Companies don’t have to be based in California or the U.S., or even have a physical presence in California, to be subject to CCPA regulations under the law.

Many New York businesses that operate in California also operate in Europe and have already had to make changes to comply with the GDPR. However, many New York firms, especially smaller firms that don’t operate overseas, have not. To comply with both the GDPR and CCPA, New York businesses should make sure their entire executive team is on board with new data privacy regulations. Businesses should designate one person within the company to ensure that all obligations under the law are being met. Operational implementation is key, and third-party vendors should be thoroughly researched before they are hired. Additionally, annual data protection training should be mandatory for all employees and be built into new-hire training.

An additional suggestion is to use encrypted emails and email accounts. Emails with end-to-end encryption meet the GDPR data protection-by-design standards and implementing zero-access encryption through your email provider means that the provider doesn’t have access to your email content while also limiting vulnerability and liability from any potential data breaches.

When examining your firm’s data collection policy, it is important to keep in mind your client obligations under the GDPR and CCPA, while at the same time understanding that not all businesses operate the same way and may not require the same level of restructuring. Here at Sasserath & Zoraian, LLP for instance, we have always taken client privacy and security very seriously, and unless required by a court-ordered subpoena, all client information remains confidential.

Please contact our team with any questions you may have.