Companies that provide meals and snacks on their “business premises,” as well as manufacturers of snack or breakroom products, will be particularly interested in a possible expansion of what many have assumed would be a 50% disallowance of deductions for all coffee, doughnuts, fruit, soft drinks, candy, and similar items, effective after 2017. A gap in the regulations points to the possibility that breakroom snacks that are considered de minimis fringe benefits provided on business premises might remain 100% deductible.

Act 43 of 2017 (the Act) created a new withholding obligation at the current applicable income tax rate (3.07%) for payors of Pennsylvania source income to non-residents if the total amount of such payments is at least $5,000. (Withholding is optional for payments of less than $5,000.) The Act also expanded the requirements with respect to when a copy of Federal Form 1099-MISC must be filed with the Pennsylvania Department of Revenue (DOR).

Beginning July 1, 2018 (the Act’s effective date has been delayed from January 1, 2018), anyone who makes payments of Pennsylvania source non-employee compensation or business income to a non-resident individual or a disregarded entity that has a nonresident member is required to withhold from such payments at the applicable income tax rate. Non-employee compensation typically includes a payment if it is made to someone who is not an employee for services provided in the ordinary course of a trade or business. (This includes payments to independent contractors and non-resident directors.) For example, if a Pennsylvania business has a non-resident serving as a director, the business is required to withhold if services were rendered within Pennsylvania and it will be paying the individual more than $5,000 annually. Where the total amount of payments to be made in a year is uncertain to exceed $5,000, the DOR encourages businesses to withhold taxes from all payments made to the non-resident.

Join Morgan Lewis in May 2018 for these programs on a variety of topics in employee benefits and executive compensation, including investment related matters.

We’d also encourage you to attend the firm’s Global Public Company Academy series:

Visit the Morgan Lewis events page for more of our latest programs.

Join Morgan Lewis in April 2018 for these programs on a variety of topics in employee benefits and executive compensation.

We’d also encourage you to attend the firm’s Global Public Company Academy series:

And, don’t forget to visit our resource center on Navigating US Tax Reform, which lists our upcoming tax reform events, including:

Visit the Morgan Lewis events page for more of our latest programs.

Join Morgan Lewis in March 2018 for these programs on a variety of topics in employee benefits and executive compensation.

Join Morgan Lewis in February 2018 for these programs addressing business developments that impact employee benefits and executive compensation.

Our outsourcing practice is hosting two upcoming webcasts:

The recent tax reform legislation, HR 1, makes significant changes to the treatment of fringe benefits under the Internal Revenue Code, most of which are effective for taxable years beginning on and after January 1, 2018. For more information about these changes, please read our LawFlash How Tax Reform Will Change the Treatment of Fringe Benefits. If you have questions about the LawFlash, we encourage you to contact any of our authors or your benefits counsel.

In addition, to learn more about US tax reform, please visit our resource center on Navigating US Tax Reform.

The Tax Cuts and Jobs Act passed by the US House of Representatives Ways and Means Committee on November 2, and a Description of the Chairman’s Mark of the Tax Cuts & Jobs Act released by the Senate Committee on Finance on November 9, would make sweeping changes to the tax treatment of executive compensation, fringe benefits, and tax-qualified plans (among many other areas) in order to pay for the bills’ centerpiece reductions to corporate and individual tax rates. This blog describes changes that would affect fringe benefits. In anticipation of changes in this area effective for tax years beginning after 2017, we recommend staying abreast of the tax proposals that could impact your business, and preparing for key management to be available to modify documents at the end of December.