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.

The IRS continues to aggressively audit how free meals and snacks offered to employees in many workplaces are treated for federal tax purposes. Recent IRS guidance in this respect is Technical Advice Memorandum 201903017 (the TAM) published this spring. The TAM, which includes both employer-favorable and IRS-favorable provisions, is essentially the first guidance on employer-provided meals and snacks that the IRS has published in nearly two decades. (We previously discussed changes made to the on-site meal and snack deduction rules in the 2017 Tax Cuts and Jobs Act for federal income tax purposes.)

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.