Build Back Better, 80/20 Rule on Tip Credit

Build Back Better Act Framework Released

Yesterday, President Biden released the Build Back Better Framework, a $1.75 trillion plan featuring major investments in child care, healthcare, clean energy, earned income tax credits, education, and more social services. The spending proposal includes offsets, such as a new 15% corporate minimum tax and a 1% surcharge on corporate stock buybacks.

While the National Restaurant Association is still evaluating the plan and eagerly seeking the legislative details, we wanted to share an update of some key tax pieces of the Build Back Better Framework:

• The cap on Section 199A deduction is not included. Last month, the House Ways & Means Committee approved a cap on the deduction at $500,000 in net income in order to raise $78 billion. Restaurants oppose a cap on Sec. 199A, and continue to closely monitor this issue.
• The repeal of the stepped up basis is not included. If enacted, family-owned businesses could be subject to a new capital gains tax when the business ownership transfers after death. Restaurants oppose repealing the stepped up basis.
• A corporate tax rate increase is not included. Last month, the House Ways & Means Committee approved an increase from the current 21% to 26.5%. Restaurants oppose a corporate tax rate increase.
  • However, the Build Back Better Framework would create a “Corporate Minimum Tax” of 15% minimum tax on businesses with more than $1 billion in financial statement book income. This would raise an estimated $325 billion.

 
Topline Summary

On workforce issues, the Framework invests up to $40 billion in community colleges and their training programs, with the goal of creating sector-based training opportunities and Registered Apprenticeships. The Labor Department’s annual spending on workforce development will be increased by 50% for each of the next five years. Universal preschool for all 3- and 4-year olds would be funded for six years, with estimates that six million children could see access to pre-K.

For the supply chain, there are proposed clean energy tax credits for utility-scale clean energy, transmission and storage, and commercial vehicles. There is also $110 billion set aside to support domestic supply chain technology for solar, batteries, and advanced materials. The Framework also establishes tax credits to purchase electric vehicles made with union labor.

The Framework does not include replenishment for the Restaurant Revitalization Fund (RRF). Additionally, the Framework does not include a national paid leave program nor the labor penalties similar to those outlined in PRO Act legislation.

The Build Back Better Framework is designed to win support from Democratic lawmakers. President Biden is calling on Congress to take up this legislation in addition to the Bipartisan Infrastructure Investment and Jobs Act, which passed the Senate in August.

The Association is still reviewing the Framework as it continues in the legislative process, and welcomes feedback from our members. Stay tuned for more updates in the coming days.

U.S. Department of Labor Issues 80/20 Final Rule

Yesterday, the U.S. Department of Labor (DOL) announced its Dual Jobs final rule that, as expected, restores the Obama-era “80/20” rule, effectively revoking the Trump administration rule that the National Restaurant Association successfully secured to provide regulatory relief for the industry. Under the final rule, an employer can take a tip credit only when the worker is performing tip producing work or when:  

A tipped employee performs work that directly supports tip producing work for less than 20 percent of the hours worked during the employee’s workweek. Therefore, an employer cannot take a tip credit for any of the time that exceeds 20 percent of the workweek. Time for which an employer does not take a tip credit is excluded in calculating the 20 percent tolerance. 
A tipped employee performs directly supporting work for not more than 30 minutes. Therefore, an employer cannot take a tip credit for any of the time that exceeds 30 minutes. 

The final rule becomes effective December 28, 2021. 

As you know, this arbitrary rule creates mass confusion and enormous compliance challenges. Over the years, it has been a hotly litigated topic and it obviously remains to be seen if the final rule will receive deference from federal judges ruling on these types of lawsuits.

The Restaurant Law Center is evaluating its options regarding a potential legal challenge. We will follow up with you in the coming days on new developments.

Click here to review the final rule. Read more from Nation's Restaurant News.

Reminder - Enhanced Enforcement Expected for Halloween Weekend

As Halloween festivities ramp up, operators should be vigilant to ensure they are complying with all relevant regulations, including:

• Mask requirements for all patrons when they are not actively eating or drinking
• Maintaining occupancy limits; counter systems at the door are encouraged
• Necessary clearance at emergency exits
• No alcohol sales to minors or to intoxicated persons

Read more about city of Chicago liquor license inspections and top tips for liquor licensees. Review common violations from the Illinois Liquor Control Commission (ILCC) here.

New Date - Chicago Chef's Hall of Fame Dinner

Join the IRA on Monday, December 6 at the Chicago Culinary Museum and Chefs Hall of Fame annual dinner at Joe's Live in Rosemont. The 2021 event theme is Inspirational Women in the Hospitality Industry.  

We are excited to honor IRA Executive Vice President Mary Kay Bonoma, who is being recognized as an Industry Leader. Also being honored at the event: Sarah Grueneberg, Chef of the Year; Meg Galus, Pastry Chef of the Year; Ina Pinkney, Legendary Chef.

Click here to purchase tickets.

Watch On Demand - Webinar on the Upcoming Federal Vaccination Mandate for Businesses and Guest Policy Considerations

Thank you to everyone that attended and our panelists from Laner Muchin and the Cook County Department of Public Health for joining our webinar yesterday on what employers need to know about the upcoming federal workplace vaccine mandate for employers with 100+ employees and what to consider requiring vaccinations for all guests.

Click here to watch the webinar recording. Click here to download the slide presentation.

Palmer Place Recognized for Donating 10,000+ Meals

Palmer Place in LaGrange has been recognized by Beds Plus service organization for their efforts to provide over 10,000 meals to people experiencing homelessness during COVID-19.

The IRA would like to commend Former IRA Chairman Steve Palmer and his team at Palmer Place for their leadership and generosity to help those in need.