Estate planners and valuation experts have been advising clients for the last year that the IRS and Treasury would be issuing new regulations that would make it harder to transfer business interests without incurring estate or gift tax. The proposed regulations are now here and will reduce the availability of discounting for transfers of business interests that are subject to certain restrictions (e.g., restrictions on marketability). The proposed regulations will go through a 90 day public comment period and a public hearing is scheduled for December 1, 2016. The proposed regulations will be effective as to transfers that occur on or after the date the regulations become final, and in certain circumstances, as to transfers occurring 30 or more days after the regulations become final. Thus, those who hold interests in closely held businesses should contact their professional advisors to determine whether they need to take action before the regulations are finalized. #valuationdiscounts #2704regulations #businessvaluations #estateplanning #businessplanning @bgnthebgn
(h/t to my colleague, Fran Dwornik, for her informative presentation on this issue.)
Enacted in 1938 in response to the Great Depression, the Fair Labor Standards Act (“FLSA” or the “Act”) regulates Federal minimum wage, overtime and child labor standards. All employees are covered unless they are deemed to be exempt (i.e., certain executives, administrative, professional, outside sales, computer specialists and highly compensated employees as defined within the Act). To be exempt, certain requirements must be met that look at the basis for the salary paid, salary level (currently $23,660 per year) and the duties of the employee.
Effective with the pay period including December 1, 2016, the new FLSA regulations will increase the salary level to $47,476 per year, which will then be updated every 3 years beginning January 1, 2020. This means that as an employer, if your employee is salaried and not earning $47,476 annually, then either the salary will have to be increased to the new minimum to continue to classify the employee as exempt or the employee will need to be switched to hourly pay and you will have to track hours and pay overtime as appropriate. There are quarterly catch-up payments that can be made to cure an issue, but you first have to recognize that an issue exists.
Also changing on December 1, 2016 is that the salary threshold to classify an employee as a ‘highly compensated employee’ will increase from $100,000 per year to $134,000 per year, provided the employee performs at least one exempt duty. This threshold will also increase every 3 years beginning on January 1, 2020.
What does this mean for business owners and employers. First, employers who are subject to FLSA need to review and analyze their employee records and salaries to determine who will be exempt and who will not be exempt under the new regulations. Next, employers will have to make some decisions regarding whether to convert currently salaried employees to hourly employees or increase the base salary to the new minimum to maintain exempt status. If the employer converts employees to hourly pay, this may mean that employees will lose some level of flexibility in their day-to-day jobs as hours will now be tracked. For example, working from home may no longer be an option for a once salaried employee who now is paid hourly as an employer may want to be able to visibly track hours and time in the office. If the employer increases base salaries to the new minimum, this may result in an overall reduction of other benefits to cover the increased salary. More part-time jobs may be developed by employers where there are middle management exempt employees who will no longer be exempt (e.g., retail and restaurant industries).
Ultimately, the impact of the new regulations is not yet fully determined. However, if your are an employer subject to FLSA, then you should review your records and sit down with your professional advisor to ensure you are or will be in compliance with the new regulations. #businessplanning #FLSA #newregulations @bgnthebgn