While we do not often report on proposed legislation, two provisions in the bill the House Ways and Means voted out of Committee on May 14th (and which was voted out of the House Budget Committee on May 18th) are worthy of attention, as they reflect how two of President Trump’s campaign promises are beginning to take shape. Sections 110101 and 110102 of the Ways and Means Committee’s “One, Big, Beautiful Bill” would give certain workers an above-the-line deduction for “qualified tips” and “qualified overtime compensation” for taxable years beginning after December 31, 2024, and ending for taxable years beginning after December 31, 2028. Assuming the effectives dates relate to the service provider’s returns, and most service providers have a calendar year return and are on the cash method of accounting, the deduction would apply to tips and overtime paid in 2025 through 2028. This means the deductions are proposed to be retroactive and proposed to apply to amounts paid even before enactment of the bill.

As an above-the-line deduction, service providers will be able to directly reduce their gross income, whether they itemize or take the standard deduction, by the amount of the qualified tips or overtime. Making this deduction available to the worker creates reporting and withholding obligations for the service recipient, as discussed in more detail below. 

In order to be deductible as qualified overtime compensation, the payment must be overtime paid as required under section 7 of the Fair Labor Standards Act that is in excess of the regular rate (as used in that section) at which such individual is employed. Qualified overtime compensation does not include any amount treated as a qualified tip.

In order to be deductible, qualified tips generally must be paid voluntarily to a person who works in an occupation which traditionally and customarily received tips on or before December 31, 2024. The Secretary of the Treasury is directed to provide a list of occupations that traditionally and customarily received tips in 2024 and before. As proposed, the deduction for qualified tips applies for both employees receiving a Form W-2, and independent contractors receiving a Form 1099-K or Form 1099-NEC, and includes amounts reported by the business on Form 4137. Those whose personal business provides services in accounting, health, law, actuarial science, athletics, brokerage services, consulting, financial services, or the performing arts would not be allowed to claim the tip deduction. In the case of tips received in the course of a trade or business, the deduction is proposed to be limited to gross receipts from the business less costs of goods sold and expenses allocable to such receipts. The Secretary of the Treasury is directed to prescribe regulations to prevent abuse of the deduction and reclassification of income as tips.Continue Reading No Tax on Tips and Overtime Campaign Promises Take Shape in “One, Big, Beautiful Bill”

  • Enhanced risk for bias suits targeting remote staff for layoffs
  • More ADA claims alleging mishandling of accommodation requests
  • Changes to digital nomad visas in different jurisdictions around the globe, and
  • The critical need to identify where all employees are located when the

Special thanks to co-authors Glenn Fox and Paul DePasquale.

One of the biggest sleeper issues (in my opinion) for US companies when granting equity awards to non-US employees or other service providers is the fact that their heirs may be assessed with US estate tax and be required to file an estate tax return in the US if the individual dies while holding equity awards or shares.

US Estate Tax Exemptions

Individual US taxpayers (i.e., US citizens and non-US citizens who are domiciled in the US) can currently benefit from a significant estate tax exemption: no estate tax is due unless the value of the estate exceeds US$13,610,000 (this is the inflation-adjusted amount for 2024), reduced for taxable lifetime gifts, but doubled for married couples if both spouses’ estates qualify for the exemption. Accordingly, relatively few US estates currently are subject to estate tax. In any event, US employees and their heirs will most likely be well aware of possible estate tax consequences for their assets, including equity awards and shares acquired under a company share plan.Continue Reading A Cautionary Tale: US Estate Tax May be Due on Equity Awards/Shares Held by Non-US Residents

Special thanks to guest contributors: Erik Christenson and Melissa Allchin.

Baker McKenzie’s Labor and Employment, Global Immigration and Mobility, and Tax lawyers review the wide variety of legal issues for employers to consider regarding a temporary or permanent remote work opportunity, and provide tips on how employers can offer employees flexibility while remaining compliant

For a company to effectively expand its global footprint, it’s almost always necessary to engage workers on the ground. The legal risks and opportunities in structuring these relationships differ significantly around the world, and the complexity is further compounded by the intersection with other areas of law, including tax, corporate, intellectual property and employment, to

Special thanks to our guest contributors Anne Batter, Alexandra Minkovich, Joshua Odintz, Christopher Hanna, Etienne Couret and Derek Gumm.

After months of partisan bickering and Senate inaction, Congress finally passed another round of COVID-19 relief legislation as part of the Consolidated Appropriations Act, 2021, P.L. 116-260, (“CAA”), which was signed

Special thanks to guest contributors Narendra Acharya, Nicole C. Calabro, Denise M. Glagau, Sinead M. Kelly, Jennifer Kirk, Barbara Klementz, Lindsay A. Minnis, Aimee Soodan, and Brian K. Wydajewski.

It is almost the end of the calendar year and time for multinational companies to consider the

As the pandemic necessitates continued physical distancing, tech companies worldwide have turned to remote working to ensure the stability of their businesses. This episode of TMT Talk explores the working-from-home phenomenon from a data privacy, tax, and employment standpoint. Join Kate Alexander, Michael Brewer, Michiel Kloes, and Flavia Rebello as they share

With our thanks to Chris Guldberg for this post. 

The financial fallout from the outbreak of COVID-19 has unfortunately forced employers to turn to layoffs and furloughs. Many employers facing these decisions are looking for cost effective ways to mitigate the financial impact on affected employees. A supplemental unemployment benefit plan (“SUB Plan”) may be one way to assist employees while generating some cost savings for the company.

A SUB Plan is a unique type of severance benefit plan that permits employers to supplement state unemployment benefits on an employment tax-favored basis. The employer can make up the difference between an employee’s normal wages and state unemployment benefits and, unlike traditional severance, payments under a SUB Plan are treated as a benefit rather than wages and are thus not subject to FICA or FUTA for the employer or employee.Continue Reading An Alternative to Traditional Severance: SUB Plans

This article was originally published on Law360.com

Developed countries across the globe are increasingly adopting and augmenting paid family leave laws, seeing such laws as a “win-win” for both employers and employees. For employees, paid family leave laws allow new parents to bond with and care for their children in the stressful and crucial initial