Articles Posted by Insights

The Federal Tax Cuts and Jobs Act of 2017 (“TCJA”) amended section 2010(c)(3) of the Internal Revenue Code (the “Code”) to provide that, for decedents dying and gifts made after December 31, 2017 and before January 1, 2026, the basic exclusion amount (BEA) and Generation-Skipping Transfer Tax (“GST”) exemptions would increase to $10 million as adjusted for inflation. On January 1, 2026, these exemptions will revert to $5 million (the pre-TCJA figure), adjusted for inflation. The inflation adjustments over the years since 2018 have resulted in BEA and GST Exemptions of $12,920,000 in 2023.

On November 9, 2023 the IRS issued Revenue Procedure 2023-34 setting forth the inflation adjusted transfer tax exemptions for 2024. The BEA will be $13,610,000—an increase of $690,000. The increase means that in 2024, an individual may make gifts during life or at death totaling $13,610,000 without incurring gift or estate tax; a married couple will be able to transfer $27,220,000 of assets free of transfer taxes. The GST Exemption under section 2631 of the Code will also increase to $13,610,000.

The annual gift tax exclusion provided by Code section 2503 will increase in 2024 to $18,000 per donee (or $36,000 if spouses elect gift-splitting).

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When a taxpayer contributes $250 or more to a charitable organization, in order for the taxpayer to claim an income tax charitable deduction the organization must provide the taxpayer with a contemporaneous written acknowledgment of the gift.  I.R.C. § 170(f)(8)(A).  The acknowledgment must include (i) the amount of cash and a description (but not the value) of any property other than cash contributed, (ii) an explicit statement of whether the donee organization provided any goods or services in consideration for part or all of the gift, and (iii) a description and good faith estimate of the value of the goods or services referred to in clause (ii), or if such goods and services consist solely of intangible religious benefits, a statement to that effect.  I.R.C. § 170(f)(8)(B).

The following recent cases have confirmed the need for strict compliance with the Internal Revenue Code (the “Code”) in connection with securing the charitable deduction.

Izen v. Commissioner, 38 F.4th 459 (5th Cir. 2022).  Taxpayer contributed a 50% interest in a private jet to the Houston Aeronautical Heritage Society and claimed a deduction of $338,080, which was disallowed.  Taxpayer’s income tax return did not include a contemporaneous written acknowledgment of the gift.  Taxpayer subsequently obtained and filed an acknowledgment of the gift, but the Fifth Circuit found it was not contemporaneous and lacked a statement about whether donee provided goods or services in consideration for the gift.  The taxpayer argued substantial compliance.  The court said that while substantial compliance may suffice to meet the requirements imposed by the Treasury, it does not satisfy requirements imposed by the Code.

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On August 30th, the U.S. Department of Labor (DOL) issued a long-awaited proposed rule that if adopted, will substantially expand the ranks of workers eligible for overtime payments for work in excess of 40 hours, as required by the Fair Labor Standards Act (FLSA).

Under present FLSA regulations, certain “white collar” workers who meet minimum salary requirements and perform specified duties may be classified as “exempt” employees ineligible for overtime.  The current salary threshold to qualify for the white collar exemptions is $35,560 annually, and $107,432 for the “highly compensated employee” exemption.  The proposed rule would increase that minimum salary threshold to $55,068 per annum, and $149,988 for highly compensated employees.

How Businesses Will Be Affected

The Immigration Reform and Control Act (IRCA) of 1986 requires all U.S. employers, regardless of size, to complete a Form I-9 upon hiring a new employee to work in the United States. This form serves to verify an employee’s identity and ability to work in the country.

On August 1, 2023, a new Form I-9 was released, which employers must begin to use no later than October 31, 2023. Additionally, employers that verified remote hires’ Form I-9 identity and work authorization documents virtually during the COVID-19 pandemic are required to physically inspect those documents by August 30, 2023. Failure to comply with Form I-9 requirements may result in civil and criminal fines and penalties. It is therefore critical that employers understand and implement Form I-9 requirements in accordance with these recently established deadlines as set forth herein.

Completing Form I-9

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The National Labor Relations Board (“NLRB” or “Board”) is responsible for enforcement of employee rights under Section 7 of the National Labor Relations Act (NLRA) to engage in protected concerted activity, such as organizing unions, discussing wages and discipline, and other terms and conditions of employment.

Many employers are not mindful of the fact that these rights extend to both unionized and non-union workplaces.  With the decline in union membership, the NLRB has increasingly turned its focus away from unionization issues to workplace practices that may run afoul of employee rights under the NLRA, as illustrated by two recent decisions from the Board.

The Landmark Stericyle Decision’s Impact On Employee Handbooks and Other Workplace Rules

Under New Jersey’s Unemployment Compensation Law, employers have long been obligated to provide separating employees with a Form BC-10 which includes instructions for claiming unemployment benefits, and to provide a reason for the employee’s termination when requested by the NJ Division of Unemployment and Temporary Disability Insurance (the “Division”).  Because employers historically ignored or were ignorant of these requirements, the State Legislature amended the Unemployment Compensation Law to include additional reporting requirements and enhanced penalties for those who continue to ignore these obligations.  These changes went into effect on July 31, 2023.

The Employer’s Reporting Obligations

Regardless of the reason for the employee’s separation, immediately upon a separation of employment the employer must:

Mandatory Sexual Harassment Policy Requirements

Since October 2018 New York has mandated employers to adopt written sexual harassment policies and provide yearly sexual harassment training.  The State developed a Sexual Harassment Model Policy and model harassment training materials that employers can use, or employers can develop their own policy and training materials so long as they meet the State’s minimum standards for compliance.

In April 2023 the New York Department of Labor updated its Sexual Harassment Model Policy (the “Model Policy”), model harassment complaint form, and model training materials, which can be found here.  The updated Model Policy

In an effort to combat money laundering and the funding of terrorism in the United States, the U.S. Department of Treasury has implemented the Corporate Transparency Act (“CTA”), which was enacted as part of the Anti-Money Laundering Act of 2020. The CTA is effective January 1, 2024 and will require qualifying companies to report and file certain information with the Financial Crimes Enforcement Network (“FinCEN”). FinCEN plans to store this information in a secure nonpublic database called the Beneficial Ownership Secure System (“BOSS”), however, FinCEN is still developing the infrastructure of this system.

Who Must Report

The CTA requires entities qualifying as “reporting companies” to report the information noted below to FinCEN. Reporting companies are domestic corporations, limited liability companies, or other similar entities (or foreign entities that have filed to do business in the U.S.) that: (1) have 20 or fewer employees, (2) have less than $5,000,000 in gross receipts or sales as reflected in the previous year’s federal tax return, and (3) do not otherwise meet the requirements of one of the exemptions described in the CTA.

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In a recent published decision, Kennedy v. Weichert, the New Jersey Appellate Division addressed the proper classification of fully commissioned real estate salespeople as employees versus independent contractors. The court ruled that these individuals are not subject to the “ABC” test for purposes of determining their classification under the New Jersey Wage Payment Law (“WPL”).

The “ABC” Test:

Under the “ABC” test, workers are presumed to be employees unless the business can show that: (1) it neither exercised control over the worker nor had the ability to exercise control in terms of the completion of the work; (2) the services provided were either outside the usual course of business or performed outside of all the places of business of the enterprise; and (3) the individual is customarily engaged in an independently-established trade, occupation, profession or business. A business’s failure to satisfy any one of the three criteria results in the worker being classified as an “employee” for wage payment and wage and hour purposes.

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On June 29, 2023, a unanimous U.S. Supreme Court issued its decision in Groff v. DeJoy, clarifying employers’ obligations to accommodate employees’ religious practices under Title VII of the Civil Rights Act.  The Court reinterpreted the meaning of “undue hardship” and held that Title VII requires an employer who denies an employee’s request for a religious accommodation to show that the burden of granting an accommodation would result in “substantial increased costs in relation to the conduct of its particular business.”  In doing so, the Court rejected a commonly applied, employer-friendly interpretation that an undue hardship exists if an employer can show that the accommodation would result in “more than a de minimis cost.”

The More Lenient “Undue Hardship” Standard Applied by the Lower Courts:

Under Title VII, employers are required to accommodate an employee’s religious practices unless doing so would impose an “undue hardship on the conduct of the employer’s business.”  In Groff, a postal carrier who was unwilling to work on Sundays because of his religious practices sued his employer (the United States Postal Service), alleging that it could have accommodated his Sunday Sabbath without undue hardship.  Initially, Groff’s position did not include Sunday work.  This later changed, however, causing Gross to transfer to a small postal station that did not make Sunday deliveries.  Once this station began making Sunday deliveries, however, Groff’s Sunday deliveries were redistributed to other workers.  He was disciplined for failing to work on Sundays, and he eventually resigned.  The trial court granted the employer summary judgment, which the Third Circuit Court of Appeals affirmed, finding that exempting Gross from Sunday work resulted in more than a de minimis cost, as the exemption had “imposed on his coworkers, disrupted the workplace and workflow, and diminished employee morale.”

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