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“In the Know”
FEI’s Private Company Roundtable Email Update
June 25, 2010
This is the inaugural edition of Financial Executive International’s In the Know. Designed specifically for FEI’s Private Company Roundtable, In the Know will provide a glimpse of what legislative and regulatory changes are being considered by our elected officials in Washington, DC. The point of this monthly email service is to provide our Roundtable members with the level of insight and analysis that they expect from FEI. In reading this, our members will become accustomed to being “in the know” on the vital issues that are important to private businesses. In addition, In the Know will recap past Roundtable meetings and discuss upcoming events and opportunities for Roundtable members to get involved in a larger capacity.
As the Roundtable continues to gear up and expand its presence, please feel free to let FEI’s Washington, DC government affairs office know about the issues that are impacting your businesses as this will assist in guiding the creation of upcoming programming opportunities that are aimed specifically at private companies.
Sincerely,
Tim Anglim and Don Robillard
Co-Chairs, Private Company Roundtable
Roundtable Recap
The Roundtable held its first quarterly conference call on June 2, 2010. An engaged audience of over 100 private company members joined the call to hear from Congressman Lee Terry (R-Neb.) and Kathleen Black of the Senate Small Business Committee. Congressman Terry informed the group about current proposals being debated in Congress including Congress’ unwillingness to pass a budget resolution for the first time since 1974. He touched on the estate tax and his concerns that there could be no action on it in 2010, which increases the tax to 55% with a $1 million exemption in 2011. Roundtable members actively questioned the Congressman on issues ranging from health insurance mandates, the repeal of LIFO accounting, and the physician’s fee cut.
Kathleen Black, Finance and Tax Advisor for Ranking Member Olympia Snowe (R-Maine) of the Senate Small Business Committee, spoke to the group on legislation currently taking place in the Senate. Black mentioned the small business jobs bill that is taking shape in the Senate Small Business Committee. It would include provisions for increasing cash flow, 179 expensing, bonus depreciation, and job creation activities. Reiterating Congressman Terry’s point, Black discussed there being no estate tax solution in the bill. With the midterm elections quickly approaching, Black was unsure about tax reform proposals in 2010. Roundtable members engaged Ms. Black on the topics of the Small Business Administration and the value-added tax.
Issue Analysis: Is the Health Care Debate Over, or Only Beginning?
After the Roundtable conference call on June 2, members participated in a survey to discuss issues that were important to their companies. Over 75 percent of respondents mentioned health care reform as being most important. Members were concerned about the impact that companies will see from the Patient Protection and Affordable Care Act that was signed into law by President Obama on March 23, 2010. Private companies need to know the facts in order to be best prepared for the changes that are headed our direction. Most provisions in the bill are expected to take effect as early as 2013. Many companies are already being impacted with rising health care costs. Businesses need to begin preparing now to better stay ahead of the curve.
Penalties on Employers: Starting in 2014, the health care reform legislation will impose a new set of penalties on firms that have 50 or more full-time employees that have employees enrolled in the subsidized coverage that is offered in the newly created health insurance exchange. Subsidies will be available to any individual who makes under $43,000 a year, or $88,000 a year for a family of four. An employee will be eligible if: the employer does not offer coverage, the employer does not cover 60 percent of the health care expenses, or if the employee share of health care costs exceed 9.5 percent of income.
If the employer does not offer coverage, the employer will be subject to a $2,000 per year penalty for each employee (companies are given a waiver on the first 30 employees.) If an employer does offer coverage, but has employees who receive individual subsidies, the penalty is the lower of $3,000 per full-time employee receiving a subsidy or $2,000 per full-time employee.
High Cost “Cadillac” Health Care Plans: By 2018, high-cost health insurance plans (those that exceed $10,200 for individuals and $27,500 for families) will be taxed at 40 percent. The tax will be paid by the issuer of the insurance for an insured plan. If an employer self-insures, the tax would be paid by the plan administrator (the employer or insurance company.)
Business Information Reporting: The health care legislation expands on current reporting rules. On W-2 reporting, employers will be required to report on the value of each employee’s health insurance coverage. This includes the value of all employer-sponsored plans including medical, dental, and vision coverage. Reporting on this provision begins on December 31, 2010. If your company has assets of $1 billion or more, the legislation increases the required payment of estimated tax in the third quarter of 2014 by 15.75 percent. This satisfies budget reconciliation rules requiring deficit reduction in both the first and second five-year periods of the legislation.
Beginning in 2012, under a little discussed mandate of the health care reform legislation, businesses will be required to report all payments in excess of $600 for services or merchandise to the Internal Revenue Service on a Form 1099. The provision was inserted into the bill to help offset the cost of the bill, and requires companies to report to the IRS payments of more than $600 a year. Congress estimates that that this will raise $2 billion in previously unreported income from contractors and small businesses. Many fear that it will cause companies to be inundated with a large amount of paperwork.
3.8% tax on High-Income Households: A new 3.8% Medicare tax on investment income starting in 2013 would hit those making over $200,000 a year. Capital gains, dividends, interest, annuities, royalties and rents are some examples of the investment income that would be taxed.
Call to Action
As the Roundtable a progresses, FEI is looking to engage our membership in helping educate Congress on key issues that have been discussed by the Private Company Roundtable. The group will be able to help impact legislation that affects private businesses by engaging our elected officials through calls, letter writing, emails, and potentially in-person meetings. In doing so, the voice of the Roundtable will help guide important, upcoming legislative and regulatory proposals in Washington. Stay tuned to this section in future In the Know updates to find out how you can actively become involved in helping impact proposals that are important to your business.
Upcoming Events/Roundtable News
Our next Roundtable teleconference will be in September (date and speaker TBD) and will take place before what is shaping to be historic midterm elections, where both political parties risk a shake up as the anti-incumbent wave continues to engulf anyone tied to Washington. As a way to keep our membership engaged between now and September, FEI will be expanding programming with other conference calls, webcasts, and in-person meetings that will provide the Roundtable with additional programming, assuring that you remain “in the know.” Stay tuned to your inbox for announcements on upcoming events.
Other important items to keep on your calendar:
· At the end of June, FEI will be sending out its quarterly newsletter “Insights, Observations, and Updates.” This will provide a more detailed account of what is happening in Washington.
· On September 20-21, 2010, FEI will hold its inaugural Washington Policy Conference in Washington, DC. The conference will provide a unique opportunity to FEI members to share information, ideas and experiences on current regulatory and legislative initiatives with high-ranking government officials and industry experts. Our goal is to bring together business and government leaders and discuss a number of issues, including:
- Prospects for tax reform and its impacts on America’s competitiveness.
- Exploring varying business risks and opportunities on the horizon.
- New legislation and regulations and their impact on senior-level financial executives and their companies.
- U.S. fiscal and monetary policy discussed with officials from the Federal Reserve and the Office of Management and Budget.
To register for the conference, click here.
For further information on the Private Company Roundtable, or to discuss upcoming events, please contact Tyler Roberts, Policy Analyst, at troberts@financialexecutives.org or 202.626.7807.
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