Brian Dake

IRS Issues Guidance on Per Diem Rates and the Temporary 100% Deduction for Food or Beverages from Restaurants

Yesterday, the Internal Revenue Service today issued Notice 2021-63 to make clear how the temporary 100% business deduction for food or beverages from restaurants applies to taxpayers properly applying the rules of Revenue Procedure 2019-48  for using per diem rates.

Previously, the IRS issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020, which added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants, as long as the expense is paid or incurred in 2021 or 2022.

For a taxpayer properly applying the rules of Revenue Procedure 2019-48, Notice 2021-63 provides a special rule that allows the taxpayer to treat the full meal portion of a per diem rate or allowance as being attributable to food or beverages from a restaurant beginning January 1, 2021, through December 31, 2022.

OSHA Suspends Implementation and Enforcement of Vaccine Mandate Pending Litigation

Yesterday, the Occupational Safety and Health Administration (OSHA) announced it is suspending all implementation and enforcement efforts related to the Emergency Temporary Standard (ETS) on mandatory COVID-19 vaccination and testing in the workplace.

The announcement follows the Nov. 12, 2021 order from the Fifth Circuit Court of Appeals staying enforcement of the ETS pending a final ruling on its legality.

OSHA intends to resume implementation and enforcement of the ETS following litigation, if permitted.


President Biden Signs $1.2 Trillion Bipartisan Infrastructure Bill into Law

President Joe Biden signed the more than $1 trillion bipartisan infrastructure bill into law on Monday.

The package will put $550 billion in new funds into transportation, broadband and utilities. Biden’s signature follows years of failed efforts in Washington to overhaul physical infrastructure, improvements that advocates have said will boost the economy and create jobs.

The legislation will put $110 billion into roads, bridges and other major projects. It will invest $66 billion in freight and passenger rail, including potential upgrades to Amtrak. It will direct $39 billion into public transit systems. The plan will put $65 billion into expanding broadband, a priority after the coronavirus pandemic left millions of Americans at home without effective internet access. It will also put $55 billion into improving water systems and replacing lead pipes.

IRS Provides Tax Inflation Adjustments for Tax Year 2022

Last Thursday, the Internal Revenue Service today announced the tax year 2022 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2021-45 PDF provides details about these annual adjustments.

Highlights of changes in Revenue Procedure 2021-45:

The tax year 2022 adjustments described below generally apply to tax returns filed in 2023.

The tax items for tax year 2022 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married couples filing jointly for tax year 2022 rises to $25,900 up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for tax year 2022, up $600.
  • The personal exemption for tax year 2022 remains at 0, as it was for 2021, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
  • Marginal Rates: For tax year 2022, the top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly).The other rates are:
    35%, for incomes over $215,950 ($431,900 for married couples filing jointly);
    32% for incomes over $170,050 ($340,100 for married couples filing jointly);
    24% for incomes over $89,075 ($178,150 for married couples filing jointly);
    22% for incomes over $41,775 ($83,550 for married couples filing jointly);
    12% for incomes over $10,275 ($20,550 for married couples filing jointly).
    The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly).
  • For 2022, as in 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
  • The Alternative Minimum Tax exemption amount for tax year 2022 is $75,900 and begins to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption begins to phase out at $1,079,800). The 2021 exemption amount was $73,600 and began to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption began to phase out at $1,047,200).
  • The tax year 2022 maximum Earned Income Tax Credit amount is $6,935 for qualifying taxpayers who have three or more qualifying children, up from $6,728 for tax year 2021. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
  • For tax year 2022, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $280.
  • For the taxable years beginning in 2022, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $2,850. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $570, an increase of $20 from taxable years beginning in 2021.
  • For tax year 2022, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,450, up $50 from tax year 2021; but not more than $3,700, an increase of $100 from tax year 2021. For self-only coverage, the maximum out-of-pocket expense amount is $4,950, up $150 from 2021. For tax year 2022, for family coverage, the annual deductible is not less than $4,950, up from $4,800 in 2021; however, the deductible cannot be more than $7,400, up $250 from the limit for tax year 2021. For family coverage, the out-of-pocket expense limit is $9,050 for tax year 2022, an increase of $300 from tax year 2021.
  • The modified adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit provided in § 25A(d)(2) is not adjusted for inflation for taxable years beginning after December 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).
  • For tax year 2022, the foreign earned income exclusion is $112,000 up from $108,700 for tax year 2021.
  • Estates of decedents who die during 2022 have a basic exclusion amount of $12,060,000, up from a total of $11,700,000 for estates of decedents who died in 2021.
  • The annual exclusion for gifts increases to $16,000 for calendar year 2022, up from $15,000 for calendar year 2021.
  • The maximum credit allowed for adoptions for tax year 2022 is the amount of qualified adoption expenses up to $14,890, up from $14,440 for 2021.

Wisconsin’s Drop in State-Local Tax Burden Among Nation’s Largest

Over the past 20 years, almost no state has seen a greater drop in its tax burden than Wisconsin, which also saw its ranking among states fall from fourth to the middle of the pack. Depending on how it is measured, the drop in Wisconsin’s state and local taxes as a share of personal income was the largest or nearly the largest nationally since 1999.

New federal data confirm the remarkable decline in Wisconsin’s state and local tax burden over the past two decades, which has exceeded that of almost all other states. The Forum and one of its predecessor organizations – the Wisconsin Taxpayers Alliance – have long tracked this metric, which we define as annual taxes paid to state and local governments here as a percentage of residents’ personal income.

In 1999, state and local governments took in $17.4 billion from taxpayers – about 12.2% of total personal income in the state (the fourth–highest percentage in the country). By 2019, the $30.6 billion in total taxes accounted for just 10.3% of personal income (23rd in the nation). If the state’s tax burden were as large today as it was in 1999, taxpayers in Wisconsin would be paying billions of dollars in higher taxes to fund additional state and local services.

The decline in the state and local tax burden is due in part to growth in the economy and personal income following the Great Recession – where that growth exceeded the increase in actual tax collections the burden fell. In addition, while sales taxes, corporate income taxes, motor vehicle license fees, and other taxes have all shown declines as a share of personal income from 1999 to 2019, the majority of the decline can be attributed to a drop in individual income taxes and property taxes as a share of income.

Since 2011, the state generally has restricted the percentage increase in municipal and county property taxes used for operations to a community’s rate of net new construction, which at the statewide level has been below 1.7% since 2008. The state has also limited revenues for school districts, including property taxes, and made cuts to property taxes for technical colleges and personal property while also repealing the state levy. In addition, the state passed a series of income tax cuts since 1999, including decreases in marginal rates, the elimination of one tax bracket, the exemption of Social Security income from taxation as well as most income from manufacturing and agricultural production, decreases in capital gains taxes, and numerous other changes.

Federal Unemployment Insurance Benefit Slowed Employment Growth

Shortly after the advent of the COVID-19 pandemic, Congress passed the CARES Act, a $2.2 trillion bill designed to alleviate the negative economic consequences of government-mandated shutdowns. Included in the bill was a $600 weekly federal unemployment bonus payment on top of the state benefits that unemployed workers already could receive.

Since the combined federal/state unemployment insurance benefit was greater than the weekly wages of many employees, some economists worried that it might depress employment growth. The Badger Institute decided to examine whether the federal bonus payments served as a disincentive to workers returning to jobs once the economy rebounded.

During the throes of the crisis, when many restaurants, retail establishments and other businesses were closed, the boost helped people weather job losses. But to prevent the supplemental benefits from discouraging a return to the workforce, lawmakers set them to expire after six months.

That changed in August 2020 when the Trump administration, via executive order, extended the benefit at half of the original $600 rate. The American Rescue Plan, which passed in March 2021, extended this $300 weekly benefit until Sept. 6, 2021 — although states had the discretion to end it earlier, and many did.

We first examined what happened to labor markets when the federal benefit decreased from $600 to $300 a week. We find no evidence that this affected the labor markets to a significant degree.

In June, a number of governors took steps to end the federal portion of unemployment insurance in their states. Ultimately, 22 states ceased to provide the supplemental benefits. The remaining 28 states and the District of Columbia kept the federal supplement in place after July 1.

The variation between states that extended benefits to September and those that did not gave us a second opportunity to measure the supplement’s impact on labor markets.

We compared the two sets of states to see if their labor markets differed during the three months when the unemployment insurance benefits differed.

Our early analysis showed that there is a modicum of evidence that the higher benefits did affect employment levels, at least once labor market demand picked up. We compared the unemployment rate and its changes across the two groups of states and observed that in the three months before the July 1 cutoff, the states that were to continue to provide supplemental benefits saw their unemployment rate fall by 0.26%, while the states that would soon end the benefits saw theirs fall by an average of 0.07%.

In Wisconsin, which maintained the federal bonus until it expired on Sept. 6, the unemployment rate has remained virtually unchanged for the past six months at 3.9% even as the national unemployment rate fell an entire percentage point, from 6% to 5%.

Overall, in the 22 states that did eliminate the supplemental benefits earlier, the unemployment rate fell by 0.33% over the next three months, compared to a 0.22% drop for the states that continued providing the supplement.

The differences are modest but statistically significant.


Annual Inflation Hits 30-Year High

Consumer prices grew far faster than expected in October, according to data released Wednesday by the Labor Department.

The consumer price index (CPI), which tracks inflation for a range of staple goods and services, rose 0.9 percent last month and 6.2 percent in the 12-month period ending in October, the highest rate in the U.S. in 30 years.

Much of the year’s inflation had been driven in specific sectors hit hard by the pandemic and related shortages, such as automobiles, lumber, rented housing and energy. But price growth picked up broadly across the economy in October, and accelerated sharply for energy and food.

“The monthly all items seasonally adjusted increase was broad-based, with increases in the indexes for energy, shelter, food, used cars and trucks, and new vehicles among the larger contributors,” the Bureau of Labor Statistics explained.

Energy prices rose a staggering 4.8 percent in October, led by a 1.6 percent increase in gasoline prices, while food prices rose 0.9 percent. Most of the higher food inflation came from sharp increases for meat prices, while shelf-stable goods saw lower price growth.

DWD Awarded $3 Million U.S. Department of Labor Grant for Job-Seeker IT upgrades

The Wisconsin Department of Workforce Development (DWD) has been awarded a $3 million grant from the U.S. Department of Labor to support its comprehensive upgrade and modernization of the Job Center of Wisconsin system and an internal case management system to better connect job seekers with employment opportunities.

The Comprehensive and Accessible Reemployment through Equitable Employment Recovery National Dislocated Worker grant will benefit workers affected by the COVID-19 pandemic and subsequent labor market disruption. DOL announced the availability of $43 million nationwide for the grant in June 2021, with a maximum award of $3 million.

The projects are expected to be implemented by late 2023. The work represents another major component of DWD’s comprehensive effort to improve service for customers – employers, job seekers, current employees and those experiencing disruption in their employment. In recent months, DWD also has introduced improvements to its virtual Job Center of Wisconsin, added a chatbot feature to help job seekers and employers connect, entered into a partnership with Google Cloud to expedite processing of unemployment insurance claims; and contracted with Flexion to overhaul its legacy Unemployment Insurance processing system.

Federal Appeals Court Blocks COVID-19 Vaccine-or-Test Mandate for Employers

A federal appeals court Saturday temporarily halted the Biden administration’s COVID-19 vaccine requirement for businesses with 100 or more workers.

The U.S. 5th Circuit Court of Appeals granted an emergency stay of the requirement by the federal Occupational Safety and Health Administration that those workers be vaccinated by January 4, 2022, or submit to masking and weekly testing requirements.

Louisiana Atty. Gen. Jeff Landry said the action stops President Biden “from moving forward with his unlawful overreach.” Such circuit decisions normally apply to states within a district — in this case, Mississippi, Louisiana and Texas — but Landry said the language employed by the judges gives the decision a national scope.

The 5th Circuit, based in New Orleans, said it was delaying the federal vaccine requirement because of potential “grave statutory and constitutional issues” raised by the plaintiffs. The government must provide an expedited reply to the motion for a permanent injunction on Monday; petitioners must reply Tuesday.

Wisconsin Businesses Sue Biden Administration Over Vaccine-or-Test Mandate

Yesterday, the Wisconsin Institute for Law & Liberty (WILL) sued the Biden administration in federal court, on behalf of two Wisconsin businesses, challenging the Occupational Safety and Health Administration’s (OSHA) sweeping new vaccine-or-test mandate for businesses with 100 or more employees. OSHA’s emergency rule, issued November 4, requires businesses of a certain size to require proof of vaccination or regular COVID-19 tests for their employees. Companies that do not comply face penalties of over $13,000 per violation, or over $136,000 for a willful violation.

The lawsuit was filed in the Seventh Circuit Court of Appeals. Federal law requires lawsuits that challenge OSHA emergency rules to be filed in the Court of Appeals, rather than in a federal district court, where lawsuits typically originate.

The Quotes: WILL President and General Counsel, Rick Esenberg, said, “This new rule is illegal and unconstitutional. It circumvents the normal legal process, along with Congress, to claim emergency powers to impose a mandate on American business. However you feel about the COVID vaccine or even the very different question of a vaccine mandate, the Biden administration is claiming an extraordinary power to rule by decree that could be used in the future in almost unlimited and unforeseeable ways.”

Steve Fettig, Secretary and Treasurer of Tankcraft and Plasticraft, said, “The order is unconscionable. OSHA does not know how to run our companies. We do. OSHA does not know how to keep our employees safe. We do. And we have done so successfully since the start of the pandemic without the interference of a federal bureaucracy. We respect our employees’ fundamental right to make their own private, difficult medical choices.”