Protecting Employee Award Tax Exemptions
By Deanna Ting
January 25, 2013
This year, the Incentive Federation (IF) is gearing up to continue fighting to protect tax provision 274(j), which allows employers to deduct the cost of employee achievement awards.
Section 274(j) of the Internal Revenue Code recently came under attack when the bipartisan panel spearheaded by Erskine Bowles and Alan K. Simpson recommended to eliminate all tax entitlements, including 274(j). Bowles and Simpson argued that eliminating 274(j) would save the federal government an estimated $400 million. Although President Obama had formed the Simpson-Bowles commission, he never fully embraced the plan’s specifics. When the plan came up for vote in the House in April 2012, it was defeated.
Given the tenuousness of the current U.S. economy and the recent narrowly avoided fiscal cliff, the IF is still concerned that 274(j) is under threat. The impact of an eliminated 274(j) would be felt not only in the incentive industry but in many industries throughout the U.S., says Michelle M. Smith, an IF director and vice president of business development at O.C. Tanner. “There’s a boatload of research that shows that incentive and recognition programs are good for business.” She adds, “If these programs go away, there will be less demand for incentive merchandise, too.”
To prevent the removal of 274(j), the IF has spent the last three to four years lobbying members of Congress to understand the benefits of service awards and safety
programs. This year will be no different, says Smith. “This year, 2013, is extremely significant for us,” she says. “Both sides want to address tax reform, and there’s this bipartisan philosophy out there that suggests eliminating all tax entitlements is a good solution.” Smith notes that because there is a large contingency of freshman senators and representatives — 12 new senators and 82 new representatives in the House — the IF is waiting to see how the new members of the 113th Congress settle in to their new roles before it begins lobbying them aggressively.
In its lobbying efforts, the IF has raised money — all of which is directly applied toward lobbying efforts in Washington, D.C. Working with the membership lists of various incentive organizations, it has also assembled a “political map” that lets members of Congress know just how many of their constituents would be affected if 274(j) were removed.
Smith says the IF is currently researching the economic impact of 274 (j) and is also developing marketing materials for members of Congress and the incentive industry as a whole. She says, however, that the best way to fight to keep the legislation is for individual members of the incentive industry to take action.
“Legislative advocacy needs to be on the strategic plan, not just for companies in our industry but in every industry,” Smith says. “There’s so much legislation being created. We can’t sit on our hands and hope someone else will come in and solve it. It’s important to make sure your voice is heard and that you are informed yourself.”
She adds: “The IF is committed to making sure everyone understands what the issues are, what the impact could be, and how to help out. We hope people will be moved to action. The greatest thing that could hurt us is if we do nothing. We need to at least try to control our own destiny.”
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