Regulatory update me rv3 - 6-25-12

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Information provided by National Restaurant Association and Georgia Restaurant Association

Regulatory Update

Mike Ruberti

June 25, 2012

Georgia Restaurant Association

Agenda

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Federal Issues:

– Health Care Law

– Restaurant Depreciation

– Credit/Debit Card Swipe-Fee Reform

– NLRB Ambush-Election

– Tax Reform

– Immigration

– Tip Credit Notice

Agenda

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State (Georgia) Issues:

– HB 100 (Tax Court)

– HB 347 (Unemployment)

– HB 432 (Paid Sick Leave)

– HB 683 (Wage Garnishment)

Health Care Law

Starting in 2014, the Patient Protection and Affordable Care Act’s employer mandate requires

businesses with 50 or more full-time-equivalent employees to offer an “affordable” health plan that

offers “minimum value” to full-time employees and their dependents or face penalties.

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The U.S. Supreme Court is currently reviewing constitutional questions related to the PPACA. The

Court could strike down the entire law or rule on parts of the law (i.e., employer mandate). The

court’s decision is expected any day.

If the law stays in place, employers must have plan decisions made and systems set by mid-2013 for

open enrollment seasons for plan years that begin January 1, 2014.


Restaurant Depreciation

From 2005 to the end of 2011, a special temporary provision in the tax code allowed restaurants to

depreciate the cost of improvements and new construction over 15 years, rather than 39 years.

Congress usually included this measure as part of an annual tax “extenders” package.

Congress let the 15-year depreciation provision expire at the end of 2011. Restaurateurs now must

depreciate construction/renovation costs over 39 years.

A 15-year tax depreciation schedule provides restaurateurs with additional cash flow which allows

them to fund additional improvements and/or hire additional employees.

There are ongoing legislative efforts to make the 15 year depreciation schedule permanent.

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Credit/Debit Card Swipe-Fee Reform

Restaurateurs worked for years to address uncontrolled increases in debit-card swipe fees. Congress

passed the Durbin Amendment in 2010 to ensure that the fees merchants pay when guests pay by debit

card are “reasonable and proportional” to the cost of processing debit transactions.

The Federal Reserve issued a final rule to implement the Durbin reforms, effective October 1, 2011,

whereby the rule imposes a first-time cap on covered merchant debit swipe fees. The cap is 21 cents per

debit transaction, plus .05% of the transaction. While this wasn’t as good for merchants as the 12-cent

cap the Fed originally proposed, it’s a significant drop from the average 44 cents that merchants paid per

debit transaction before October 1.

Some merchants with lower-ticket transactions have seen debit swipe fees rise since October 1 as a result

of the cap. There is an outstanding lawsuit against the Federal Reserve that seeks to force the Federal

Reserve to adjust the rule for the law’s intended purposes.

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NLRB Ambush-Election

The NLRB’s controversial “ambush election” regulation would change the union election

process partly by speeding up the time between when a union petition is filed and when employees

vote on it.

The NLRB’s ambush-election regulation would cut union elections to as short as 10 days, from

petition to vote. The median timeline for union elections in the accommodations and foodservices

industry — the sector that includes restaurants — is currently 41 days.

The Federal District Court for District of Columbia ruled in May that the NLRB lacked a quorum,

so the rule has been delayed.

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Tax Reform

Revenue-raisers are already being discussed. Cutting tax rates is a priority but carries a price tag.

To pay for reducing tax rates, Congress is already discussing broadening the tax base; increasing taxes

on dividends/capital gains; scaling back deductions and credits; and potentially subjecting large flow-

through entities to corporate taxes.

As an industry with a significant number of flow-through entities, restaurants could be

disproportionately affected by some tax proposals. Measures to treat larger flow-throughs like

corporations, for example, could have an important effect on restaurants. Restaurants would also be

hit harder if Congress changed tax provisions now available to all businesses, such as Section 179

expensing for equipment and other purchases; depreciation rules; and tax credits such as the Work

Opportunity Tax Credit or the Section 45(B) FICA Tax Tip Credit, an employer-based solution to help

capture under-reported tip income.

A simpler tax code with lower rates is a positive step, but tax reform must take the restaurant

industry’s diversity into account. Restaurants aren’t a one-size-fits-all industry. Tax reform should be

accomplished in a comprehensive manner.

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Immigration

H.R. 2885, the Legal Workforce Act, would create a uniform federal E-Verify system for all

employers with a strong safe harbor for businesses and the opportunity for employers to rectify

paperwork errors without any penalties being imposed. The legislation would also preempt state

and local E-Verify mandates.

However, Congress is at a stalemate and appears unable to act on comprehensive immigration reform.

Employers need a uniform federal E-Verify system that’s efficient, accurate and easy to use.

In Georgia, E-Verify is the law for all employers with 11 or more employees. The effective date for

this law varies depending on the number of employees.

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Tip Credit Notice

On May 29, 2012, a Federal court ruled DOL followed correct procedures concerning the notice

employers must provide to tipped employees about the federal tip credit.

To take a tip credit, employers must notify tipped employees in advance about the tip credit.

Notice requirements are now more detailed.

We recommend written notice.

Failure to comply can result in significant financial risks and/or criminal penalties.

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State (Georgia) Issues

HB 100 (Tax Court): GRA supported, bill successfully passed on April 9, 2012.

Provides restaurants with a streamlined resolution of tax issues and alleviates unpredictability in recent

proliferation of audits. A separate entity (referred to as a Tax Tribunal) under the Office of State

Administrative Hearings will oversee tax disputes involving decisions by the Georgia Department of

Revenue. The tax court will help reduce time and money spent by restaurants in trying to resolve tax

issues.

HB 347 (Unemployment): GRA neutral, bill successfully passed on May 2, 2012.

Cuts the length of state unemployment benefits but increases rates of unemployment insurance

for employers. The purpose of this law is to help the state pay back the federal government the over

$700 million it borrowed to help pay for unemployment benefits during the recession. Though the bill is

supposed to be less burdensome for employers, the GRA does not support the rate increases but does

support stabilization of the fund. Restaurants should be prepared for their state unemployment taxes to

increase.

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State (Georgia) Issues

HB 342 (Paid Sick Leave): GRA opposed, bill dead in session.

Though the bill did not require employers to offer sick leave, the bill would have placed mandatory

restrictions on those that did. The GRA supports flexibility for restaurants to determine their own

benefits for their employees.

HB 683 (Wage Garnishment): GRA supported, bill successfully passed on February 7, 2012.

HB 683 clarifies Georgia garnishment proceedings so that employers are now able to answer wage

garnishments instead of having to defer them to an attorney. This will save restaurants thousands of

dollars in legal fees.

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Resources / Q&A

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Helpful Websites:

– www.restaurant.org

– www.garestaurants.org

– www.dol.gov

– www.wagehour.dol.gov

Questions?

Education

Regulatory update me rv3 - 6-25-12