Legislative Newsletter – December 2015 Issue
Bringing you the hottest topics in today’s laundry industry
Section 179 Deduction Limit Expanded to $500,000
The Protecting Americans from Tax Hikes (PATH) Act of 2015 recently passed both the House and Senate – thus, expanding the Section 179 deduction limit to $500,000 from the previous $25,000.
As detailed at Section179.org, Section 179 will be at the $500,000 level permanently. Businesses exceeding a total of $2 million of purchases in qualifying equipment will have the Section 179 deduction phase-out dollar-for-dollar and completely eliminated above $2.5 million. Additionally, the Section 179 cap will be indexed to inflation in $10,000 increments in future years.
In addition, 50 percent bonus depreciation will be extended through 2019. Businesses of all sizes will be able to depreciate 50 percent of the cost of equipment acquired and put in service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019.
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment from gross income from the year the equipment was purchased, rather than writing off the depreciation of the equipment over several years. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves. Qualifying property includes equipment (machines, etc.) purchased for business use, tangible personal property used in business, air conditioning and heating units, business vehicles with a gross vehicle weight in excess of 6,000 pounds, computers, software, office equipment and office furniture.
Equipment has to be purchased and put into service by December 31.
“There is no single item in the tax code more crucial to incentivizing small-business investment than Section 179 expensing,” said National Small Business Association President and CEO Todd McCracken. “But, for years, small-business owners’ ability to plan for these investments has been held hostage by a dysfunctional Congress that has time and again failed to address these critical tax provisions in a timely or long-term manner, forcing many to hold off on growing their business.
“Today, more small businesses cite administrative burdens as their number-one issue with the federal tax code than do the actual financial cost. A major factor in the growing complexity is various sunsets, expiring, and extended tax laws passed by Congress. Infusing permanency into one of the most highly used small-business tax benefits is a critical step forward in easing tax complexity.”
Lawmakers Focus on Employment Legislation in 2015
This year, state legislators across the country focused increasingly on employment legislation, introducing bills that would impose mandates on employers such as paid sick leave, pay equity, fair scheduling and a multitude of other requirements. Legislators were largely unsuccessful in implementing these programs in 2015, but these ideas have gained traction at the local level where these proposals are becoming more widespread. Expect to see these issues expand further at the state and local levels in 2016.
Paid Sick Leave: Currently, four states – California, Connecticut, Massachusetts and Oregon – mandate that private-sector employers provide paid sick leave to their workers. Oregon became the most recent state to provide paid leave to employees in July when Gov. Kate Brown signed legislation requiring employers with 10 or more employees to provide 40 hours of paid sick leave per year to employees. The number of localities requiring paid sick leave also was on the rise in 2015, including Montgomery County, Md.; Philadelphia and Pittsburgh, Pa.; and Tacoma, Wash.
In 2016, many more cities and states are expected to introduced paid sick leave proposals. Recently, New York, Virginia and Wisconsin introduced legislation that will carry into 2016. Proponents of paid sick leave in Michigan are gathering signatures to certify a ballot initiative in the 2016 elections.
Paid Family Leave: Paid family leave laws are also in place in three states – California, New Jersey and Rhode Island. These states use state disability insurance programs to fund their programs.
Under the California model, the program is funded by a 1 percent payroll tax on employees. Qualified workers collect benefits from the state’s disability insurance program and can take six weeks off and receive about half of their normal salary (up to a maximum of $1,100 a week). However, only a few states have disability insurance programs (Hawaii, New York, as well as California, New Jersey and Rhode Island), and the difficulty of setting up a paid family leave program without a pre-established disability insurance program in the state has slowed the spread of paid family leave mandates.
Nonetheless, family leave is popular and state lawmakers continue to push for the programs. In 2015, legislators in Connecticut, Massachusetts and Washington, D.C. proposed paid family leave bills. The legislation in D.C., as introduced, would be the most generous in the country and provide almost all full- and part-time employees in the District with 16 weeks of paid leave to bond with a newborn or adopted child, recover from an illness, recuperate from a military deployment or care for ill family members. Workers earning up to $52,000 a year would earn full pay, while those earning more would receive a base of $1,000 per week plus 50 percent of their income after that, for a maximum of $3,000 per week.
Along with the debate on the D.C. bill, which will carry into 2016, several states are likely to introduce paid family leave legislation. Lawmakers have already filed two paid family leave bills in Florida for the 2016 session, and lawmakers in Wisconsin recently introduced legislation that will carry into the new year as well.
Pay Equity: In 2015, seven states enacted legislation to promote equal pay between men and women: California, Connecticut, Delaware, Illinois, New York, North Dakota and Oregon.
The law in California requires employers to affirmatively demonstrate that employees doing “substantially similar” work receive equal pay. Currently, California requires equal pay for jobs that are exactly equal. Under the new law, employers could potentially face a growing number of lawsuits. The bill would also prohibit employers from regulating employee discussion of wage information and from retaliating against employees who have filed pay equality claims.
Thus far, Missouri has pre-filed a bill for the 2016 session that would prohibit paying wages less than those paid to the opposite gender for similar work. Given the speed with which the issue progressed this year, it is highly likely that several more states will consider proposals aimed at closing the gender wage gap in 2016.
Fair Scheduling: In November 2014, San Francisco enacted the “Retail Workers’ Bill of Rights,” a broad-based bill that included “fair scheduling” provisions, which were quickly replicated in legislative proposals throughout the country at both the state and local level. Under many of these “fair scheduling” or “predictive scheduling” proposals, employers would be required to post employee schedules at least two weeks in advance. If any changes are made within this time frame, employers would have to pay their employees varying amounts of “predictability pay” (frequently four hours, or half a shift) to compensate them for this change.
In 2015, eleven states and four localities (Albuquerque, N.M.; Emeryville, Calif.; Minneapolis, Minn.; and Washington, D.C.) introduced bills that would impose scheduling mandates on employers. So far, no states or localities beyond San Francisco have successfully adopted “fair scheduling” laws; however, most of the bills introduced in the 12 state legislatures this year will remain active in 2016. As activists have continued to promote this issue, it will likely proliferate further next year.
Illinois, Pennsylvania Budget Impasses Drag On
States are required to pass budgets each year. Most got their budgets completed by the July 1 deadline – but, as of press time, not Illinois and Pennsylvania.
“I’ve been doing this for 25 years, and I can’t recall ever seeing two states enter December without adopting a budget for the fiscal year,” said Arturo Perez, a fiscal analyst for the National Conference of State Legislatures, in a report at CNNMoney.com.
Both states face the same problem: Republicans and Democrats who can’t work together. Illinois has a new Republican governor who is fighting a state legislature controlled by Democrats. Pennsylvania has the reverse – a new Democratic governor battling a Republican-led legislature.
Unlike the federal government, states are required by law to pass balanced budgets. That’s where the problems arise. Both the states are largely stuck over how to close budget shortfalls – by raising taxes or making cuts?
In Pennsylvania, Gov. Tom Wolf is pushing a multibillion-dollar tax increase to close a long-term budget deficit and boost aid to schools and human services. The governor’s plan features a proposal to expand sales tax to previously exempted services, including self-service laundry. This broadening of the sales tax base is designed to provide $3.8 billion in property tax relief.
Thus far, the state’s Republican leaders haven’t agreed to any sort of tax increase and are pressing Wolf for larger concessions on an overhaul of public pension benefits, as well as on wine and liquor sales.
In Illinois, Sen. Michael Noland has sponsored a bill that specifically places a tax on laundry and drycleaning services. This bill has been co-signed by Illinois Senate President John Cullerton and Senate Majority Caucus Whip Mattie Hunter.
Such a tax would result in what is essentially a gross receipts tax that, depending on where a store is located, will represent from 6 percent to 10.25 percent of that business’ gross receipts.
The ILCLA has hired the firm of Nicoly and Dart, LLC to lobby the state legislature on the industry’s behalf.
Of course, such legislative battles are expensive, and funds are critical to finance this effort. To make a donation to the Illinois tax fight, call ILCLA President Paul Hansen at (773) 436-1994, or visit: coinlaundry.org/ilcla. To donate to the Pennsylvania cause, call DVCLA President Brian Holland at (267) 394-2944, or visit: coinlaundry.org/dvcla.
What’s more, the CLA is asking laundry owners to contact their local state senators and representatives to voice their concern over this topic, as well as to explain the devastating impact a sales tax would have on their small businesses and the communities they serve.
The CLA has developed a concise set of talking points to which laundry owners can refer during such discussions. These talking points are at: coinlaundry.org/advocacy/stop-laundry-tax.
Some States Place Limits on the Number of Bills Introduced
Did you know that some states limit the number of bills state legislators can introduce?
For the upcoming 2016 legislative session, although 30 states have no limit on the number of bills lawmakers may introduce for 2016, 16 states have established some kind of restriction. (Four states don’t have a regular session scheduled in 2016.)
The nature of these limitations can vary significantly from state to state. Some have establishes simple per-legislator bill caps, such as California restricting legislators to 40 bills per biennium and Colorado keeping lawmakers to five. Other states (AZ, LA, MT, TN and VA) base their restrictions on the date: Arizona legislators have unlimited introductions until the fourth day of the session, after which they are limited to seven introductions. Still others place limits based on the chamber (FL, HI, IN, OK, TN, VA and WY), with the Senate typically allowed to introduce more bills than the House. Several states (CT, IN, ME and WY) vary their limits by whether it’s an odd or even year, typically corresponding to either a budget or non-budget session.
Not surprisingly, states with these restrictions consider fewer bills overall.
Other factors impacting a state’s bill volume include the number of legislators on the roster, how often the legislature convenes (Texas’ enormous bill volume is attributable in part to the legislature meeting just once every other year), the length of the session (Arkansas’ and Oregon’s sessions in even-numbered years are abbreviated, budget-only sessions with fewer bills) or the population (less-populated states like as AK, DE, MT, ND, SD and VT tend to have less bill volume than more populous states like NY).
Where did these limits come from?
Legislatures are likely trying to limit the legislative volume in an effort to hold down administrative costs and to help ensure that legislators are able to give each bill its due attention. They’ve been around for quite a while, too. In fact, the National Conference of State Legislators report that bill introduction limits have existed for decades, with Nebraska appearing to begin the trend in 1971.
A 1985 Los Angeles Times article provides further insight into the rationale behind the policy. Driven by huge number of introductions from the previous year (a single legislator had introduced 143 bills), lawmakers argued that establishing limit was essential to keeping down the capitol’s administrative costs.
The activity levels of lawmakers who flood the system with legislation have become controversial in the Capitol. It costs an average of $4,000 to introduce and process a bill, critics say, so the record 6,394 measures introduced during the 1983-84 legislative session cost taxpayers more than $25 million.
These costs will have only gone up in the last 30 years. An article from the Wyoming Tribune Eagle from 2011 reported that per-bill costs could range from $453 to $39,795, with the dollar value increasing with the length, complexity and controversy of the bill. (It’s important to note that these costs will necessarily vary by state, given the differing legislative procedures, salaries and other factors that vary by state).