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San Francisco voters on November 3 approved Proposition L, which imposes an additional tax on businesses whose highest paid executive makes 100 times or more than the median salary of the business’s employees based in San Francisco.

Proposition L. Proposition L amends the San Francisco Business and Tax Regulations Code by adding a new Article 33 (titled Overpaid Executive Gross Receipts Tax). Article 33 imposes a tax on any business engaged in business in San Francisco if the business’s highest paid managerial employee’s annual compensation for a tax year, as compared to the median compensation paid to the company’s full-time and part-time employees based in San Francisco for that tax year, exceeds a ratio of 100:1.

This Insight authored by Morgan Lewis lawyers and published by Bloomberg Law poses 100 questions related to the COVID-19 payroll tax and fringe benefits provisions, which we have been explaining in our LawFlashes – including the 6.2% payroll tax deferral, leave and retention credits, PPP loans, Section 139 benefits, business expense reimbursements, and leave-sharing.  Are these the questions that you and your colleagues are tackling, debating, and looking for Treasury and the IRS to answer?

The Internal Revenue Service is planning to add more focus on its examination efforts for tax-exempt organizations, including by adding more personnel and using new strategies to address potential noncompliance. As tax-exempt organizations prepare their Forms 990 for last year, now would be a good time to ask whether any areas warrant further review.

Read our LawFlash for more on how these changes will impact tax-exempt organizations >>

Tax laws have long required that qualified retirement plans timely adopt written plan documents and amendments. But what evidence must a plan sponsor provide to an IRS auditor to prove that they have timely adopted a written plan document and required amendments? The IRS recently addressed this question in Chief Counsel Memorandum 2019‑002 (the CCM), which advises that absent extraordinary circumstances, “. . . it is appropriate for IRS exam agents and others to pursue plan disqualification if a signed plan document cannot be produced by the taxpayer.”

The primary question addressed in the CCM was whether a taxpayer can argue that, based on Val Lanes Recreation Center Corp. v. Commissioner, T.C. Memo 2018-92, it meets its burden to have an executed plan document by producing an unsigned plan and evidence of a pattern and practice of signing plan documents. The IRS’s answer as outlined in the CCM is: No, at least not in the absence of extraordinary circumstances.

On December 20, 2019, President Donald Trump signed into law the Further Consolidated Appropriations Act, 2020 (Act). After years of delayed effective dates, the Act finally repeals the 40% excise tax on high-cost health coverage, often referred to as the “Cadillac tax.” Furthermore, the Act extends the Patient-Centered Outcomes Research Institute (PCORI) fee scheduled to originally sunset at the end of 2019.

Morgan Lewis associate Samantha Kapnek co-authored this article.

On December 4, the Internal Revenue Service (IRS) issued Notice 2019-64, which contains the 2019 Required Amendments List for individually designed tax-qualified retirement plans. As background, the IRS issues its Required Amendments List each year to identify statutory and administrative changes to the tax qualification rules that may require sponsors of individually designed retirement plans to amend their plans to comply with the changes. In general, the deadline for adopting any required amendments on the list is the end of the second calendar year after the list is issued.

The 2019 list identifies the following changes that may require amendments to an individually designed retirement plan:

In final regulations set to take effect for 2020 Forms W-2, the IRS gives employers the option of using truncated Social Security numbers (SSNs) on employee Forms W-2 issued after December 31, 2020. The new rules are an attempt to assist employer efforts to protect confidential employee identification information from identity theft.

As we look forward to 2020, we bring you a few key takeaways on the hot topics and trends that individuals operating in the employee benefits space are watching in health and welfare, plan sponsor considerations, executive compensation, fiduciary, and fringe benefits.

The Internal Revenue Service on September 23 finalized proposed regulations relating to hardship distributions under an IRC 401(k) plan. The final regulations differ little from the proposed regulations published on November 14, 2018, and, like the proposed regulations, reflect changes made under the Bipartisan Budget Act of 2018 (BBA 2018), and provide updates reflecting changes (already in practice) made under the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act) and the Pension Protection Act of 2006 (PAP 2006). They also modify the existing “non-safe harbor” determination of whether a distribution is necessary to satisfy an immediate and heavy financial need. To learn about these changes, please read our LawFlash.

Congratulations to Steven P. Johnson on his election to the Morgan Lewis partnership in our employee benefits and executive compensation practice! Effective October 1, 2019, Steve, who is resident in Washington, DC, will join 29 other newly elected partners from 12 offices and nine practices. For information about all of the firm’s newly elected partners, please see Morgan Lewis Elects 30 New Partners.