The Tax Cuts and Jobs Act (TCJA) has done a stellar job of removing all or part of the “deduction” from the Meals and Entertainment Deduction.
Business related entertainment deductions turned out to be a big loser when the dust settled after the passage of the TCJA in late December 2017. Entertainment expenses were hit particularly hard as the TCJA completely eliminates the deduction for entertainment expenses (including food purchases), for activities such as taking clients or prospective clients to concerts, movies, the theater, sporting events or amusement parks. The Act also eliminates deductions for amounts paid for memberships in any club organized for business, pleasure, recreation or social purposes.
One entertainment expense that did survive the new law is expenses employers incur for recreational, social, or similar activities primarily for the benefit of employees, such as expenses incurred for an annual holiday party or summer outing or picnic.
Businesses are allowed a 50% deduction for amounts paid for meals in conjunction with the active conduct of the taxpayer’s trade or business. However, we must take note of two changes made by the new tax act relating to meals.
First, a definition for “business meal” has been removed, and meals provided to employees traveling on business are still deductible at 50%. However, beginning in 2018 through the end of 2025, the cost of meals provided for the convenience of the employer, such as meals provided to employees who need to be available throughout the mealtime, are only deductible at 50%. Prior to TCJA these types of meals were deductible at 100%. Also, the new tax law expands the definition of meals for the convenience of the employer subject to the 50% limitation to include meals provided in the employer’s on-site dining facility. Further, beginning in 2026, no deduction will be allowed for meals for the convenience of the employer and for the cost, including meals, of operating an on-site dining facility.
While the new law ratchets down on the meals and entertainment deduction that we have become used to over the years, the deduction does survive in some forms. While customers and clients will likely enjoy fewer trips to the ball field or concert venue, employees should continue to look forward to a nice summer picnic and festive holiday party with their coworkers.
The Supreme Court, in a 5-4 decision delivered by Justice Kennedy, has held, in a case involving four state-wide bans on same-sex marriage, that the Fourteenth Amendment requires a State to license a marriage between two people of the same sex. And, since same-sex couples may now exercise the fundamental right to marry in all States, there is no lawful basis for a State to refuse to recognize a lawful same-sex marriage performed in another State. Although the decision made only passing reference to tax implications, the wide-reaching social, political, and economic ramifications inherent in this decision include a number of significant tax issues.
Some brief background – If you will recall, in 2013, in a 5-4 opinion, the Supreme Court, in Windsor, struck down section 3 of DOMA as an unconstitutional deprivation of equal protection.
Following Windsor, the IRS issued a Revenue Ruling which provided that a same-sex couple that was legally married in a domestic or foreign jurisdiction that recognized their marriage would be treated as married for federal tax purposes, regardless of where they currently live. Further, it provided that lawfully married same-sex couples must file as married couples for federal income tax purposes.
In response, many States issued guidance after the IRS ruling that required same-sex couples married in other states to file separate state income tax returns, even if their filing status was married filing jointly for federal income tax purposes.
Implications of the Court’s recent ruling – In addition to the many and varied social, political, economic, etc. ramifications of the Court’s decision, there are also several tax implications. Just a few are noted below.
Same-sex married couples will now enjoy a simplified tax filing environment. Since the Windsor decision and the Revenue Ruling which followed, same-sex married couples must generally file their federal tax returns as married (starting with the 2013 tax year, as well as for earlier years where the original return is filed on or after Sept. 16, 2013). However, for married same-sex couples who live in a State that didn’t recognize same-sex marriage, they had to file their State returns as unmarried taxpayers. This conflict caused couples in these States to incur added time, effort, and expense. Many State tax returns used the federal return as a starting point of sorts, and some States that didn’t recognize same-sex marriage required taxpayers to prepare a “dummy” federal return for purposes of completing their State return.
In this regard, the Court’s recent decision essentially makes Windsor applicable not only for federal tax returns but for State returns as well. Thus, those in a same-sex marriage will be considered married for State and federal return purposes, eliminating the need for “dummy” forms.
The reverse problem may arise for same-sex couples who aren’t married, but are in a State-sanctioned domestic partnership or civil union or similar arrangement—they can’t file a joint federal return, but may be able to file a joint State return.
Same-sex couples who reside in States that didn’t previously allow same-sex marriages can now marry. Same-sex couples who were married in States that allowed such but moved to States that didn’t recognize same-sex marriages are now married for State purposes. Some significant provisions common to all states include, among other things:
In addition, in States that impose estate and gift taxes (or inheritance taxes), many have favorable provisions for transfers to or involving a spouse similar to the federal rules, such as a marital deduction or the ability to make split gifts.
A unique problem may arise for same-sex couples who are in a State-sanctioned domestic partnership or civil union or similar arrangement. Presumably, with all States now required to provide same-sex marriages, there is likelihood that in many (if not all) cases, these marriage “substitutes” may eventually fade away. If that’s the case, such same-sex individuals may have to choose if they want to be married for federal tax purposes—a consideration that needs to take into account many factors.
© Checkpoint Newsstand – June 29, 2015
The past couple of months have seen some new announcements for added airlines and destinations previously unserved for the Reno-Tahoe International Airport. Hooray! It is about time we see a little new blood flexing their muscles in our air service community.
I don’t know if anyone else has become frustrated with the “old standby” (no pun intended) carrier that has served Reno-Tahoe for many years…and might I add…has been enthusiastically supported by residents such as myself for equally as long. In anticipation of writing this blog, I thought I would do a little fantasy get-away planning to make my point. Let me set this trip planning up so that we know that everything was on equal ground. I selected a departure date just in excess of 2 weeks from this writing in hopes of finding fares that weren’t too outrageous…you be the judge! Departure was a Thursday and return the following Sunday for all inquiries. Here are my results with the destination listed first, the roundtrip airfare and the roundtrip flight time:
Really inconsistent results, don’t you think? Can you guess the mystery carrier? I purposely included the last 4 destinations because this carrier has recently discontinued nonstop service to these destinations. I felt that it was important to show that they can still get us to these destinations but you will likely be routed through Las Vegas further distorting the seat demand for that important Nevada destination for business and government purposes.
Just for fun, and to further press my point of discontent, I thought I would plan a more extensive trip for my long weekend. Here are my results from that search using another major airline:
These results point to a very real problem for us that rely on good affordable air service to nearby important destinations for our market. This problem will likely only be rectified by the introduction of additional carriers to our area. Let’s hope we are on the cusp of seeing that happen. In the meantime, we will have to happily climb aboard our over-sold aircraft and enjoy our often delayed flights to our over-priced destinations. Happy flying!
Okay…I confess…I am a little goofy when it comes to cars. However, in my defense, the goofiness is a rather common ailment for many people these days.
Hot August Nights 2014 began earlier this week in northern Nevada and will conclude on August 3, 2014. This will wrap up the 28th year of this event which debuted August 1, 1986. This event has grown into one of the largest, most anticipated annual events in our area. It currently features 10 days of events across the area celebrating the 50′ and 60’s – “a time of innocence, prosperity, cars and the birth of Rock and Roll.” Of course a huge part of this celebration centers around the automobile.
Oh…the automobiles! For me, HAN usually begins in mid-June when I start to see the local enthusiasts breaking out their “classics” and getting them ready for the big event. In late July/early August, the local enthusiasts are then joined by thousands of other enthusiasts during the event week and the party begins. Although I was a bit young to experience this innocent, prosperous time, I nonetheless have a definite appreciation for the four-wheeled artwork that rolled off of the assembly lines in the day. You do not have to be an owner of one of these fine pieces of machinery to participate…simply attend a Show-n-Shine, take in a “Controlled Cruise” through one of our downtown areas or just take an evening stroll down your favorite street. I promise you will be dazzled by the scenery. To access a full schedule of the Hot August Nights events, visit their official website at www.hotaugustnights.net.
If you haven’t attained your fill of beautiful buggies by the end of Hot August Nights, I have another suggestion to whet your appetite. Merely one week after the conclusion of HAN, car enthusiasts can move their operations down to the Monterey Peninsula to continue their oooo’s and ahhhh’s.
The nearly week-long schedule of events culminates with the Pebble Beach Concours d’Elegance which has been described as the World Series or Super Bowl of the automotive universe. Once each year, on the third Sunday in August, about 200 of the most prized collector cars and motorcycles in the world roll onto the fairway of what is often called the best finishing hole in golf — the famed eighteenth at Pebble Beach Golf Links. Tire meets turf and transformation occurs: the stage is set for one of the most competitive events in the automotive world. The occasion is the Pebble Beach Concours d’Elegance.
Like HAN, these events can be enjoyed by non-owners. There are several “free” opportunities to see some amazing pieces of rolling art or you can often become a part of yesteryear by merely hanging out at an intersection in Carmel-By-The-Sea. And once again, I promise you will be dazzled! To access a full schedule of events visit the official Monterey website
Barnard Vogler & Co. is celebrating its 45 Anniversary this year and during all of those 45 years, the firm has chosen to locate our offices in the downtown Reno area. Further, as one of the owners of our “locally-owned” firm, I have chosen to make my home in the downtown Reno neighborhood known as old southwest Reno and specifically the Newlands Manor area. My selection of this area more than 10 years ago was based partly on my hopes that Reno would continue to improve its downtown core area near the Truckee River. I am pleased with the progress that has been made over the years to the downtown area and recognize that there are many improvements that lie ahead as we strive to bring to fruition a vital year-round thriving downtown core area.
July 1st of each year marks the beginning of one of my favorite local events in our area. Artown is a month-long festival celebrating the arts and culture in Reno and northern Nevada. Artown’s mission is “to strengthen Reno’s arts industry, enhance our civic identity and national image, thereby creating a climate for the cultural and economic rebirth of our region.” I often find myself meeting people who have moved to Reno from other areas of the country and, if they are unfamiliar with our area, providing them with a list of “must-see” things to do. Artown is on that list and it cannot be adequately described in words…Artown must be experienced! I have had the pleasure of taking several people to their first Artown event and it has always been a successful outing. People become hooked and next thing you know, they are seeking out other types of events and venues. Artown is one of the many attractions of the northern Nevada area that makes me proud to call Reno my home.
If there are any people reading this blog in our area that have not experienced Artown firsthand, I say do it! I think you will be happy you did. My particular favorite events are the events that occur at Wingfield Park partly because of its proximity to my home but mostly because they are terrific entertainment. There are events nearly every weekday in the park and best of all they are free. The 2014 park events are as follows:
A complete Artown calendar is available here
Please celebrate July, the spectacular evenings and the arts at our very special and unique festival Artown.
Surveyors measured the snowpack in the Sierra Nevada in January 2014, and the results are more proof of Nevada and California’s severe drought: The California Department of Water Resources said the snowpack was 12 percent of average for this time of the year, the lowest level since electronic record-keeping began in 1960 . Prior to today, the lowest comparable snowpack reading was January 1991, when accumulated Sierra snowfall was 21 percent of average. This year, snowpack levels in the northern section of the Sierra were 6 percent of average levels.
If we don’t get several significant storms to create a reasonable snowpack by April 1, we’re going to be looking at runoff values into the streams that quite possibly are going to hit historic all-time lows.
Nevada’s severe drought is a tragedy unfolding in slow motion. But its effects will be far reaching — from rural communities that depend on ranching and agriculture for their existence to the prices we all pay for food at the grocery store.
For the third year in a row, the rain and snow has not come on time. Some longtime ranchers and farmers say the current drought is the worst they have ever seen.
Because of the stingy snowpack through much of the West, federal officials this past month designated portions of 11 Western and Central states as primary natural disaster areas including Nevada.
Some Nevada ranchers have already sold some of their cattle, primarily to their counterparts in the Midwest, where there are healthy grazing lands. The sales are mostly a precautionary move to take advantage of high cattle prices and to reduce herds if normal water deliveries don’t materialize. On a recent Tuesday, about 400 cattle from around the state and even neighboring California were up for auction at a yard.
Alfalfa is Nevada’s largest crop, with just more than 1 million tons worth $217 million produced in 2012. Cattle and dairy cows are also important. There were 470,000 cattle and 29,000 dairy cows in Nevada in 2012, the state Agriculture Department reports. Many people don’t seem to understand the connection between alfalfa and food production, or the relationship between farms and the food they buy in the grocery store.
Additionally, closer to the Sierra’s, tourism is key to the economy. Drought conditions are wreaking havoc on the winter sporting activities so vital to our livelihood in northwestern Nevada. Continued drought will impact tourism in the Reno/Tahoe area during the summer as well with lake levels well below normal and dry conditions yielding threats of wildfire in the Tahoe basin. Should the lake drop far enough, the Truckee River will slow to a trickle impacting fish and wildlife as well as the beautiful backdrop it offers to visitors and locals during the outdoor summer events held in downtown Reno.
So, when venturing out for a meal, a trip to the market or mini-vacation, think local first. There are many fine choices in restaurants, farmer’s markets and nearby tourist attractions that benefit our own local economy in this beautiful area we call home, drought or no drought.
As many of my clients and friends reading my blogs may know, I serve as Nevada’s only elected representative to the governing Council of the American Institute of Certified Public Accountants (AICPA). This is a position that I am pleased and honored to hold as it offers me the opportunity to provide a voice in the national forum that represents our profession with respect to standard-setting as well as giving me a glimpse of all that goes on behind the scenes when it comes to being an advocate for our collective interests as practitioners and clients on the national stage. I attend two national Council meetings and one regional meeting each year. These meetings are packed with Council business and often other interesting topics that promote thought leadership in areas you wouldn’t always expect. My last meeting was no exception.
The 2013 Fall Meeting of the AICPA Council was held in late October in Los Angeles, California. As is always the case at the Council meetings, AICPA President and CEO Barry Melancon, gave a masterful presentation outlining the current issues facing our profession. Near the conclusion of his presentation, Mr. Melancon provided a few remarks regarding the evolution of the CPA’s learning environment pointing out that the general trend in learning is becoming more focused on measuring competency rather than the time spent. This was to become one of the major focuses in this meeting.
In conjunction with the topic of the future of learning, the AICPA had arranged for a presentation by Sal Khan, Founder – Khan Academy. Many of you may be familiar with Mr. Khan as he has been in the spotlight recently having been on CBS’s news magazine 60 Minutes and can be seen on a commercial currently running on TV describing his organization and its partnership with Bank of America. For those of you who are not familiar with him, Sal Khan is the founder and faculty of the Khan Academy— a not-for-profit organization with the mission of providing a free world-class education to anyone, anywhere. It now consists of self-paced software and, with over 1 million unique students per month, the most-used educational video repository on the Internet (over 30 million lessons delivered to-date). All 2000+ video tutorials, covering everything from basic addition to advanced calculus, physics, chemistry and biology, have been made by Mr. Khan.
Prior to the Khan Academy, Mr. Khan was a senior analyst at a hedge fund and had also worked in technology and venture capital. He holds an MBA from Harvard Business School, an M.Eng and B.S. in electrical engineering and computer science from MIT, and a B.S. in mathematics from MIT.
During his presentation to the Council, Khan gave an energetic, often humorous, background story on how he founded his not-for-profit organization. It was a fascinating presentation and I would encourage everyone, especially parents of school-aged children, to learn more about this organization and its revolutionary approach to learning. I now know where I will turn to brush up on my algebra, calculus physics and biology, all of which baffled me during my formative years!
As promised, I am updating my earlier blog outlining many tax law questions left unanswered as a result of the recent Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act (DOMA). The IRS has recently announced their ruling addressing the tax law implications arising from the Court’s decision on DOMA.
The IRS took a surprisingly bold stand in their recognition of a same-sex marriage in the eyes of federal tax law. While it was clear early on that a same-sex couple married and residing in a state or jurisdiction recognizing same-sex marriages would be considered an married couple, there were questions as to whether other same-sex marriages with different situations would be recognized similarly. The IRS was courageous and decided to recognize all same-sex marriages regardless of circumstance as valid marriages in the eyes of the tax code.
What does this mean? As I pointed out in my earlier blog, questions remained for same-sex couples who were married in a state that obviously recognizes same-sex marriage but now reside in a state that does not recognize those marriages. Further, many same-sex couples have made the decision to marry and traveled from their state of residence to a state or jurisdiction that recognizes same-sex marriage to celebrate a legal same-sex marriage. These couples were also unsure of where they would stand in the eyes of the tax law.
On August 29, 2013, the IRS answered their questions…all of the same-sex marriages discussed above are recognized as a legal marriage for federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax or child tax credit. According IR-2013-72:
Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships (RDP’s), civil unions or similar formal relationships recognized under state law. Couples who have an RDP or similar must continue to file as they have in the past which can be complicated by those residing in states that have community property laws such as the State of Nevada.
Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.
Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.
Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.
Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.
As our country moves forward in terms of equality in marriage, so too does the tax law. However, tax law has always been equal in one regard…it is, and continues to be, complicated. Please remember that we at Barnard Vogler & Co., CPA’s are always ready to help you trudge through the process of compliance and keep you on the right track.
Recently, in Windsor v. U.S., the Supreme Court made history by striking down a key provision in the Defense of Marriage Act (DOMA). Although DOMA wasn’t typically viewed as a tax law, it carried significant tax consequences for married same-sex couples who have traditionally been unable to do things like file a joint return or take advantage of a number of favorable estate-planning provisions. The Supreme Court’s decision means that the federal government, including the IRS, must now treat same-sex couples who are legally married in states that permit same-sex marriage the same as their heterosexual counterparts. However, the Court’s decision also raises a number of unanswered questions, including whether and to what extent it will apply retroactively, and how conflicts between state laws will be resolved.
in 1996, Congress enacted, and President Clinton signed into law the Defense of Marriage Act. Section 3 of DOMA defines marriage for purposes of administering federal law as the “legal union between one man and one woman as husband and wife.” It further defines “spouse” as “a person of the opposite sex who is a husband or wife.”
The Windsor Case based on the taxation of an estate of a same-sex couple from New York challenged Section 3 and prevailed in the district court and again in the Second Court of Appeals. In a majority opinion delivered by Supreme Court Justice Kennedy, the Supreme Court held that DOMA Section 3 was unconstitutional deprivation of equal protection. It should be noted that Section 2 of DOMA, allowing states to refuse to recognize same-sex marriages performed under the laws of other states, wasn’t at issue in this case.
Although there was difficulty and confusion in applying tax law for same-sex couples prior to this decision, it has not eased the complexity encountered in reporting and complying with federal and state tax laws with regard to same-sex couples. While the decision makes clear that the federal government must recognize a lawful same-sex marriage, a number of issues remain unanswered including the following:
As with almost all new complex tax law, these new provisions bring about a great deal of confusion and uncertainty as to application. I am sure that as these new provisions come into practice, many cloudy issues will be resolved. I am also sure that just as many new issues will arise. Stay tuned…I will keep you posted.
Last week approximately 400 CPA’s (including yours truly) descended on Capitol Hill to discuss issues of interest to the profession and our clients. The Capitol Hill visits were in conjunction with the Spring Meeting of the AICPA Council which is held every other year in Washington DC in order for Council members to make these important visits to each state’s legislators. Our delegation from Nevada met with each of our elected members of Congress or their staff liaisons in order to discuss the following important issues:
• “What’s at Stake?” – The CPA Profession on Federal Fiscal Responsibility: This updated video resource available for CPA’s, Policymakers and the Public reviews the federal government’s latest financial report and discusses the profession’s role in promoting the importance of the nation’s fiscal responsibility.
• H.R. 1129: The Mobile Workforce State Income Tax Simplification Act of 2013: This bill creates a uniform national standard that will limit state or local taxation of the compensation of an employee who performs duties in more than one state or locality to: (1) the state or locality of the employee’s residence and (2) the state or locality in which the employee is physically present performing duties for more than 30 days.
• S. 420 and H.R. 901: Tax Return Due Date Simplification and Modernization Act of 2013: These bills propose a shuffling of the original and extended due dates of corporate, partnership and other returns to improve the flow of information needed by taxpayers to timely file their personal returns. The bills propose new original due dates as follows:
There are proposed revisions to various extended due dates as well which for the most part remain in the familiar September/October time frame. For more information on these dates see the full text of the bills at www.govtrack.us.
• H.R 797: Municipal Advisor Oversight Improvement Act of 2013: This bill would clarify the definition of a municipal advisor and make it clear that providing customary and usual accounting services by CPA’s is not the same as providing municipal advisory services which now requires SEC registration under the Dodd-Frank Act.
• Our Nevada CPA delegation also discussed various other issues related to the general topic of tax reform which is of great interest to Congress in light of recent and not so recent events. For more information read the AICPA’s Principals of Good Tax Policy.
Our visits always prove to be enlightening for all of those involved be they the elected member of Congress, the staff liaison or the CPA’s participating in the meetings. We must never lose sight of the fact that we all have a voice in our democracy whether it be a visit to Capitol Hill, a phone call or email or the simple casting of a vote.