Legal Challenge to Federal Overtime Rules

The following article from Reuters relates to the new overtime rules that were scheduled to go in to effect beginning December 1, 2016.  It is unclear at this time what the final outcome of this legal challenge may be given the current political climate.  As always,  we will do our best to try to keep you informed as to significant changes that may affect you and your business.  If you have any questions about how this law change may affect you and your business please do not hesitate to reach out to us at your earliest convenience.

Judge blocks Obama rule extending overtime pay to 4.2 million U.S. workers

By Daniel Wiessner and Robert Iafolla

A federal judge on Tuesday blocked an Obama administration rule to extend mandatory overtime pay to more than 4 million salaried workers from taking effect, imperiling one of the outgoing president’s signature achievements for boosting wages.

U.S. District Judge Amos Mazzant, in Sherman, Texas, agreed with 21 states and a coalition of business groups, including the U.S. Chamber of Commerce, that the rule is unlawful and granted their motion for a nationwide injunction.

The rule, issued by the Labor Department, was to take effect Dec. 1 and would have doubled to $47,500 the maximum salary a worker can earn and still be eligible for mandatory overtime pay. The new threshold would have been the first significant change in four decades.

It was expected to touch nearly every sector of the U.S. economy and have the greatest impact on nonprofit groups, retail companies, hotels and restaurants, which have many management workers whose salaries are below the new threshold.

The states and business groups claimed in lawsuits filed in September, which were later consolidated, that the drastic increase in the salary threshold was arbitrary.

On Tuesday, Mazzant, who was appointed by President Barack Obama, ruled that the federal law governing overtime does not allow the Labor Department to decide which workers are eligible based on salary levels alone.

The Fair Labor Standards Act says that employees can be exempt from overtime if they perform executive, administrative or professional duties, but the rule “creates essentially a de facto salary-only test,” Mazzant wrote in the 20-page ruling.

The states and business groups that challenged the rule applauded the decision.

Nevada Attorney General Adam Paul Laxalt said in a statement that the ruling "reinforces the importance of the rule of law and constitutional government."

The Labor Department said it strongly disagrees with the decision. It remains confident that the entire rule is legal, and it is currently considering its options, department spokesman Jason Surbey said.

The Labor Department can appeal to the New Orleans, Louisiana-based 5th U.S. Circuit Court of Appeals, but that court has stymied the Obama administration before, blocking Obama’s executive actions on immigration in 2015.

In any case, the Labor Department could drop the appeal after Republican President-elect Donald Trump takes office in January.

In August, Trump told the website Circa that the overtime rule was an example of the type of burdensome business regulations he would seek to roll back as president, perhaps by exempting small businesses or delaying implementation.

Even if the rule survived the legal challenge, it could be upended by legislation passed by Congress or withdrawn by Trump’s Department of Labor.

U.S. Chamber of Commerce official Randy Johnson said in a statement that the rule would have been costly and disruptive to businesses.

But Ross Eisenbrey of the left-leaning Economic Policy Institute, which supported the rule, called the decision "extreme and unsupportable."

"It is also a disappointment to millions of workers who are forced to work long hours with no extra compensation, and is a blow to those Americans who care deeply about raising wages and lessening inequality," Eisenbrey said in a statement.

The case is Nevada v. U.S. Department of Labor, U.S. District Court for the Eastern District of Texas, No. 16-cv-731.

(Reporting by Daniel Wiessner and Robert Iafolla; Editing by Alexia Garamfalvi and Leslie Adler)

Due Dates Change for Business Tax Returns

With the signing of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, tax preparers are about to see a shift in the tax filing deadlines for partnerships and C-Corporations that will take effect for tax years beginning after December 31, 2015. 

Calendar year partnerships and S-Corporations will now be due by March 15 (for fiscal year end partnerships and S-Corporations that means by the 15th day of the third month after year end) while calendar year C-Corporations will be due by April 15 (for fiscal year end C-Corporations that means by the 15th day of the fourth month after year end). 

The Act also changed the length of extensions for several of these types of returns along with changing the due date for the FinCEN Form 114, among other things.  Attached is an article published by the Journal of Accountancy that was written by Alistair M. Nevius, JD (the Journal of Accountancy’s editor-in-chief, Tax) which dives into several of the other changes that were a part of the Act the President signed into law on July 31, 2015. 

As always, if you have any questions about how any of these changes will affect you and your business, please don’t hesitate to contact us at your earliest convenience.

Return due dates changed in highway funding bill

By Alistair M. Nevius, J.D.

July 30, 2015


July 31, 2015

The short-term highway funding extension passed by the Senate on Thursday contains several important tax provisions (H.R. 3236). The bill was passed by the House of Representatives, 385–34, on Wednesday, and it now goes to President Barack Obama for his signature. [Update: The president signed the bill into law on Friday, July 31.] The bill modifies the due dates for several common tax returns, overrules the Supreme Court’s Home Concrete decision, requires that additional information be reported on mortgage information statements, and requires consistent basis reporting between estates and beneficiaries.

Due date modifications

The act sets new due dates for partnership and C corporation returns, as well as FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), and several other IRS information returns.

For partnership returns, the new due date is March 15 (for calendar-year partnerships) and the 15th day of the third month following the close of the fiscal year (for fiscal-year partnerships). (Currently, these returns are due on April 15, for calendar-year partnerships.) The act directs the IRS to allow a maximum extension of six months for Forms 1065, U.S. Return of Partnership Income.

For C corporations, the new due date is the 15th day of the fourth month following the close of the corporation’s year. (Currently, these returns are due on the 15th day of the third month following the close of the corporation’s year.)

Corporations will be allowed a six-month extension, except that calendar-year corporations would get a five-month extension until 2026 and corporations with a June 30 year end would get a seven-month extension until 2026.

The new due dates will apply to returns for tax years beginning after Dec. 31, 2015. However, for C corporations with fiscal years ending on June 30, the new due dates will not apply until tax years beginning after Dec. 31, 2025.

These new due dates are generally ones that the AICPA and state CPA societies have been advocating for several years to create a more logical flow of information and help taxpayers and tax professionals in filing timely and accurate tax returns. Under the current due dates, taxpayers and practitioners often have insufficient time to prepare returns because required information from a flowthrough business is not available before the taxpayer’s income tax return is due. AICPA President and CEO Barry C. Melancon, CPA, CGMA, expressed the Institute’s support for due date changes in the act.

The act directs the IRS to modify its regulations to allow a maximum extension of 51/2 months on Form 1041, U.S. Income Tax Return for Estates and Trusts; 31/2 months on Form 5500, Annual Return/Report of Employee Benefit Plan; and six months on Form 990, Return of Organization Exempt From Income Tax, Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, Form 5227, Split-Interest Trust Information Return, Form 6069, Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction, Form 8870, Information Return for Transfers Associated With Certain Personal Benefit Contracts, and Form 3520-A, Annual Information Return of a Foreign Trust With a U.S. Owner.

The due date for FinCEN Form 114 is changed from June 30 to April 15, and for the first time taxpayers will be allowed a six-month extension.

The due date for Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, will be April 15 for calendar-year filers, with a maximum six-month extension.

Additional information on returns relating to mortgage interest

Sec. 6050H is amended to require new information on the mortgage information statements that are required to be sent to individuals who pay more than $600 in mortgage interest in a year. These statements will now be required to report the outstanding principal on the mortgage at the beginning of the calendar year, the address of the property securing the mortgage, and the mortgage origination date. This change applies to returns and statements due after Dec. 31, 2016.

Consistent basis reporting between estate and beneficiaries

The act amends Sec. 1014 to mandate that anyone inheriting property from a decedent cannot treat the property as having a higher basis than the basis reported by the estate for estate tax purposes. It also creates a new Sec. 6035, which requires executors of estates that are required to file an estate tax return to furnish information returns to the IRS and payee statements to any person acquiring an interest in property from the estate.

These statements will identify the value of each interest in property acquired from the estate as reported on the estate tax return. The new basis reporting provisions apply to property with respect to which an estate tax return is filed after the date of enactment.

Overruling Home Concrete in cases of overstated basis

In Home Concrete & Supply, LLC, 132 S. Ct. 1836 (2012), the Supreme Court held that the extended six-year statute of limitation under Sec. 6501(e)(1)(A), which applies when a taxpayer “omits from gross income an amount properly includible” in excess of 25% of gross income, does not apply when a taxpayer overstates its basis in property it has sold.

In response to this decision, the act amends Sec. 6501(e)(1)(B) to add this language: “An understatement of gross income by reason of an overstatement of unrecovered cost or other basis is an omission from gross income.” The change applies to returns filed after the date of enactment as well as previously filed returns that are still open under Sec. 6501 (determined without regard to the amendments made by the act).

Alistair M. Nevius ( is the JofA’s editor-in-chief, tax.

Updated SC Motor Carriers Property Return

On Friday, July 10, 2015, the SC Department of Revenue updated their website to include the new Motor Carriers Property Return (Form PT-441).  The new form reflects the correct tax rate of 2.46% for 2014. 

The form can be accessed on the SC Department of Revenue’s website by clicking on either the “Individual” or “Business” tabs and then by clicking on “Property” and then “Motor Carrier”. 

Please note on page 3 of the Form PT-441 that no penalties will be assessed on returns or payments that are post marked on or prior to August 31, 2015.  The normal due date for these returns is June 30, 2015 – however, due to a delay in mailing the returns to taxpayers the SC Department of Revenue has extended the deadline for filing the 2014 return. 

If you require assistance in preparing your 2014 Form PT-441, please do not hesitate to contact our office at your earliest convenience.

Relief for paying employee’s health insurance premium ended June 30

The Code Section 4980D excise tax was a pretty hot topic at the end of 2014.  For those that don’t know, the Code Section 4980D excise tax is the tax imposed on employers at the rate of $100/day ($36,500 per year) per employee as part of the Affordable Care Act – it applies to employers that pay or reimburse an individual health insurance policy or Medicare premiums for an employee. 

In February of this year, the IRS provided some transition relief to employers to allow them time to review how they were handling these types of arrangements and allow them to get in compliance with the market reforms that apply to group health plans under the Affordable Care Act.  The transition relief expired on June 30, 2015. 

The following is a Federal Tax Weekly Alert Newsletter published by RIA that cautions and reminds small employers of the expiration of the transition relief.  If you are concerned about whether the Code Section 4980D excise tax applies to your reimbursement arrangement, please don’t hesitate to contact us at your earliest convenience.


Small employers cautioned: relief for paying employee’s health insurance premium ended June 30

Small employers—i.e., employers who are not applicable large employers (ALEs)—who reimburse or pay a premium for an individual health insurance policy for an employee should be aware that they may be subject to a $100 per day ($36,500 per year), per employee excise tax. Transition relief from the Code Sec. 4980D excise tax ended June 30, 2015.

Background. The Affordable Care Act (ACA) added ERISA § 715(a)(1) and Code Sec. 9815(a)(1) to incorporate the provisions of part A of title XXVII of the Public Health Service Act (PHSA) into ERISA and the Code, and make them applicable to group health plans and to health insurance issuers providing health insurance coverage in connection with group health plans. The incorporated PHSA sections are sections 2701 through 2728 (i.e., the market reforms). An excise tax is imposed on failures to meet these requirements. (Code Sec. 4980D)

Relief for small employers. As noted in Notice 2013-54, 2013-40 IRB 287, small employers that offered their employees’ health coverage through arrangements that constitute an “employer payment plan” will owe a Code Sec. 4980D excise tax if they fail to comply with the market reforms provisions. Such an arrangement that fails to satisfy the market reforms may be subject to a $100 per day excise tax per applicable employee (which is $36,500 per year, per employee), see

However, because the Small Business Health Options Program (SHOP) Marketplace was still transitioning, and the transition by eligible employers to SHOP Marketplace coverage or other alternatives would take time to implement, Notice 2015-17, 2015-10 IRB 845 (see Weekly Alert ¶  20  02/26/2015 ) provided that the Code Sec. 4980D excise tax would not be asserted for any failure to satisfy the market reforms by employer payment plans that pay, or reimburse employees for, individual health policy premiums or Medicare part B or Part D premiums. This rule applied for 2014 for employers that are not ALEs for 2014, and for Jan. 1 through June 30, 2015 for employers that were not ALEs for 2015.

After June 30, 2015, such employers are generally liable for the Code Sec. 4980D excise tax.

For this purpose, an ALE generally is, with respect to a calendar year, an employer that employed an average of at least 50 full-time employees (including full-time equivalent employees) on business days during the preceding calendar year (see Reg. § 54.4980H-1(a)(4)). In determining whether an employer was an ALE for 2014 and 2015, an employer can determine its status as an ALE by reference to a period of at least six consecutive calendar months, as chosen by the employer, during the 2013 calendar year for determining ALE status for 2014, and during the 2014 calendar year for determining ALE status for 2015 (rather than the entire 2013 calendar year and the entire 2014 calendar year).

Employers eligible for this relief that had employer payment plans weren’t required to file IRS Form 8928 (Return of Certain Excise Taxes Under Chapter 43 of the Code)—for failures to satisfy requirements for group health plans under chapter 100 of the Code, including the market reforms—if those failures were solely as a result of having the arrangements for the period for which the employer is eligible for the relief. IRS states that this relief does not extend to stand-alone health reimbursement arrangements (HRAs) or other arrangements to reimburse employees for medical expenses other than insurance premiums.

Medicare premium reimbursement arrangements. Notice 2015-17 provided that an arrangement under which an employer reimburses (or pays directly) some or all of Medicare Part B or Part D premiums for employees constitutes an employer payment plan, as described in Notice 2013-54, and if such an arrangement covers two or more active employees, it is a group health plan subject to the market reforms. An employer payment plan may not be integrated with Medicare coverage to satisfy the market reforms because Medicare coverage is not a group health plan.

Notice 2015-17 also addressed other topics, including: (a) the treatment, for federal tax and for market reforms purposes, of arrangements reimbursing premiums of 2% S corporation shareholder-employees; and (b) the application of the ACA market reform provisions to provide a TRICARE-related health reimbursement arrangement (HRA), see Weekly Alert ¶  20  02/26/2015.

Excise tax applies after June 30. After June 30, 2015, employers are generally liable for the Code Sec. 4980D excise tax.

2016 Inflation Adjustments for HSAs Released by IRS

Health Savings Accounts, or HSAs, continue to rise in popularity and can be an excellent tax savings tool when properly managed and funded.  On Monday, May 4, 2015, the Internal Revenue Service gave HSAs another little boost with the release of the 2016 inflation-adjusted figures regarding the annual contributions that can be made to an HSA. 

Below is an article by Sally P. Schreiber, J.D. that was published in the Journal of Accountancy Online that goes into some of the details related to HSAs and the changes that have been made to the annual contribution limits for 2016.   As always, if you have any questions, or if you would like to discuss how funding an HSA could benefit you from a tax perspective, please don’t hesitate to contact us at your convenience.

2016 inflation adjustments for HSAs released

By Sally P. Schreiber, J.D.
Journal of Accountancy Online

May 5, 2015

The IRS on Monday issued the inflation-adjusted figures for calendar-year 2016 for the annual contribution limits for health savings accounts (HSAs) and the minimum deductible amounts and maximum out-of-pocket expense amounts for high-deductible health plans (Rev. Proc. 2015-30).

Under Sec. 223, individuals who participate in a health plan with a high deductible are permitted a deduction for contributions to HSAs set up to help pay the individuals’ medical expenses. The contribution deduction limit is subject to an inflation adjustment each year. For 2016, the annual limit on deductible contributions is $3,350 for individuals with self-only coverage (unchanged from 2015) and $6,750 for family coverage ($100 higher than for 2015).
To be eligible to contribute to an HSA, an individual must participate in a “high deductible health plan,” which is defined as a health plan with an annual deductible that is not less than a certain limit each year and for which the annual out-of-pocket expenses, including deductibles, co-payments, and other amounts, but excluding premiums, does not exceed a certain limit each year (Sec. 223(c)). These limits are also subject to annual inflation adjustments.

For 2016, the lower limit on the annual deductible under a high-deductible plan is $1,300 for self-only coverage and $2,600 for family coverage, the same as for 2015. The upper limit for out-of-pocket expenses is $6,550 for self-only coverage and $13,100 for family coverage, both slightly higher than for 2015.

Congress (finally) passes tax extender package

On Tuesday, December 16th, the Senate at long last passed H.R. 5771, by a vote of 76 to 16.

The legislation includes the “Tax Increase Prevention Act of 2014” (TIPA), which was passed by the House on December 4th by a vote of 378 to 46 – TIPA extends through 2014 over fifty currently expired “extender” provisions, including the increased Section 179 provisions and the 50% bonus depreciation deduction.

The tax package also includes H.R. 647, the “Achieving a Better Life Experience (ABLE) Act of 2014,” which was passed by the House on December 4th, by a vote of 404 to 17. ABLE establishes a new type of tax-advantaged savings program for individuals with disabilities. The bill will be sent on to the President for his signature – it is expected that the tax provisions will be quickly signed into law. 

Obviously, this comes as a huge relief to many businesses and taxpayers.  However, the next step will be to wait and see how quickly the States retroactively adopt these provisions.  As always, Burch Oxner Seale Co. stands ready to assist our clients in navigating the complexities of both the Federal and State Tax Codes.  If you have any questions, or if we can be of any assistance, please do not hesitate to contact us at your earliest convenience. 

New Standard Mileage Rates Now Available; Business Rate to Rise in 2015

The Internal Revenue Service issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

  • 57.5 cents per mile for business miles driven, up from 56 cents in 2014
  • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014 
  • 14 cents per mile driven in service of charitable organizations

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously). Details on these and other special rules are in Revenue Procedure 2010-51, the instructions to Form 1040 and various online IRS publications including Publication 17, Your Federal Income Tax.

Important decisions for Corporate Officers of Closely-Held Corporations coming up in 2015…


On June 6, 2014, the SC Legislature added Section 41-27-265 to the SC Code of Laws.  Beginning January 1, 2015, Section 41-27-265 exempts corporate officers from unemployment benefits unless the employer elects coverage pursuant to specified procedures.  Specifically, the section states that services performed by a person appointed or otherwise serving as an officer for a corporation pursuant to Article 4, Chapter 8, Title 33 shall not be considered services in employment.  However, the section does permit a corporation to elect coverage for all its corporate officers.  The election must be approved by the SC Department of Employment and Workforce. 

The SC Department of Employment and Workforce has begun notifying employers of this important change.  In addition, the SC Department of Employment and Workforce has created a link for Frequently Asked Questions related to Corporate Officers.  The link is

What does this mean to Closely-Held Corporations?  It means that the Corporate Officers would now be exempt from having to pay State Unemployment Insurance unless the employer elects to cover them.  This also means that Corporate Officers that are no longer covered by State Unemployment Insurance would be ineligible for unemployment benefits. 

This may sound like a pretty simple decision, but there are other factors to consider.  Corporate Officers not covered by State Unemployment Insurance will lose their Federal Unemployment Tax Act (FUTA) Tax Credit.  That credit is currently 5.4% of the first $7,000 of taxable wages, or $378.  So, South Carolina’s taxable wage base (which is scheduled to increase to $14,000 on January 1, 2015), the federal wage base for FUTA, the corporation’s federal and state unemployment rate, and the amount that is paid to the Corporate Officers are all factors that need to be considered when making the calculation on whether to elect in or out of State Unemployment Insurance for Corporate Officers. 

As always, the staff of Burch, Oxner, Seale stands ready to assist you in making the calculations, and we will be glad to help you navigate the decision making process.

New streamlined process for 501(c)(3) applications

With all the drama in D.C. centered around the Lois Lerner lost email/computer crash scandal, few people have noticed another major change that has occurred in the IRS Exempt Organization Division. 

That change is the implementation of a shorter and easier application form that is supposed to streamline what some might have considered a more cumbersome process of obtaining an organization’s 501(c)(3) tax exempt status. 

That new form is the Form 1023-EZ, Streamlined Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. 

Click the link below to read an article written by Amy Wang, CPA for AICPA Insights that can give you some insight into how the IRS has revamped the tax-exempt application process. 

As always, if we can assist you with preparing or answering questions about your organization’s application for tax-exempt status, please give us a call.

Educational Credit for Exceptional Needs Children Extended

The State of South Carolina has extended the Educational Credit for Exceptional Needs Children for the fiscal year 2014-2015.  The state has appropriated $8 million dollars of credit that is available to qualifying individuals who make a qualifying charitable contribution to a Scholarship Funding Organization.  There are a number of tax benefits available to individuals who avail themselves of this opportunity. 

We will be glad to review with you the projected tax impact of making a donation to one of the qualifying Scholarship Funding Organizations, and we can assist you with your application for the credit.  Please remember that this program is administered by the South Carolina Department of Revenue on a first come, first served basis.  Please give us a call or send us an email at your earliest convenience, and we will be glad to discuss this opportunity with you.