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Early Priority for the Biden Administration: Improving Infrastructure

The Biden administration has officially been in office for 100 days.

In what is typically a period characterized by a flurry of executive orders that establish early policy priorities, President Joe Biden has understandably focused much of his energy on one of the most pressing challenges the United States has faced in generations: bringing an effective end to the COVID-19 crisis.

During the first three months in office, the Administration has been able to accelerate vaccination distribution after a record-speed vaccine development process, offering hope of a world less impacted by the spread of the pandemic.

However, with 100 days now in the rearview mirror, the Biden administration is setting its sights on the future—one in which the United States still faces both short- and long-term challenges that would be daunting for any administration. From continuing to chip away at a COVID-heightened unemployment rate to addressing domestic and social unrest to thinking through a climate change strategy, the Administration has its hands full over the next few years. With a challenging midterm election on the horizon, the motivation to advance its agenda quickly and decisively is top of mind.

For business leaders, the intersection between politics, economy, consumer behavior, public health, social issues and environmental issues has never been so large—or important. Businesses will continue to be tested in ways that they could not have imagined just a few years ago. Those that can navigate these challenges well will come out ahead.

While there are dozens of policies that will unfold over the next four years, there are several key areas for leaders to watch in the short term and consider for future opportunities and challenges that arise. One of these key areas is outlined below.

Priority: Building Back Better

On the campaign trail, then-candidate Biden outlined his vision of an infrastructure plan dubbed the “Build Back Better” plan.

The new bill, announced in full in late March as the American Jobs Plan, includes several proposed investments in both traditional and modern infrastructure systems.

  • Roads & bridges
  • Public Transport
  • Ports
  • Airports
  • Nationwide electric vehicle charging grid
  • Water Systems
  • Electric Grid Upgrades
  • Increased Broadband Access

In addition, President Biden is pushing for investment in care for elderly and disabled Americans, new affordable housing and schools, and funding for manufacturing, R&D and job training.

The Biden administration has argued that decades of a lack of investment has left the United States lagging behind others when it comes to competitiveness on the global stage. In particular, the Administration sees this as an opportunity to level the playing field, financing more projects in rural and disadvantaged communities, with a focus on sustainability and “clean infrastructure” investments.

Infrastructure is often seen as a “both-sides-of-the-aisle” issue, yet an agreement has recently been hard to come by. Whether President Biden and his team—particularly Vice President Kamala Harris and Transportation Secretary Pete Buttigieg—will be able to galvanize both sides of the aisle to come together on this shared goal of fixing the widely acknowledged problem of the United States’ aging infrastructure remains to be seen.

Interested to see what else the Biden administration is prioritizing? Read this article from BDO.

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Succession Planning Flowchart

Utilize this flowchart to discover where you are in the process of succession planning. This chart includes links to in-depth videos about succession planning. For more information about leadership succession, contact ATA Employment Solutions.

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Organizing and Utilizing Human Capital

When looking at the individuals in your company, their roles will fall into one of four categories: critical, core, supporting or misaligned. Let’s look at each of these in detail to assist you in mapping out responsibilities.

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How to Plan for Leadership Succession

Although more than 30% of family-owned businesses transition successfully to the second generation, just 12% of those businesses are viable for the third generation, and a mere 3% are operating by the fourth generation, according to Family Business Review. This video series explores practical ways to think outside the box when planning the future of your business such as outsourcing employee functions and creating a strategic succession plan.

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Employee Newsletter Helpful Articles

Look at your employee handbook with fresh eyes

For businesses, so much has changed over the past year or so. The COVID-19 pandemic hit suddenly and companies were forced to react quickly — sending many employees home to work remotely and making myriad other tweaks and revisions to their processes. Understandably, you may not have fully documented all the changes you’ve made. But you should; and among the ideal places to do so is in your employee handbook.

Now that optimism is rising for a return to relative normalcy, why not look at your handbook with fresh eyes and ensure it accurately represents your company’s policies and procedures.

Legal considerations

Among the primary reasons companies create employee handbooks is protection from legal challenges. Clearly written HR policies and procedures will strengthen your defense if an employee sues. Don’t wait to test this theory in court: Ask your attorney to review the legal soundness of your handbook and make all recommended changes.

Why is this so important?

A supervisor without a legally sound and updated employee handbook is like a coach with an old rulebook. You can’t expect supervisors or team members to play by the rules if they don’t know whether and how those rules have changed. Make sure employees sign a statement acknowledging that they’ve read and understood the latest version of your handbook. Obviously, this applies to new hires, but also ask current employees to sign a new statement when you make major revisions.

Motivational language

Employee handbooks can also communicate the total value of working for your company. Workers don’t always appreciate the benefits their employers provide. This is often because they, and maybe even some managers, aren’t fully aware of those offerings. Your handbook should express that you care about employees’ welfare — a key point to reinforce given the events of the past year. It also should show precisely how you provide support. To do so, identify and explain all employee benefits. Don’t stop with the obvious descriptions of health care and retirement plans. Describe your current paid sick time and paid leave policies, which have no doubt been transformed by federal COVID relief measures, as well as any work schedule flexibility and fringe benefits that you offer.

Originality and specificity

One word of caution: When updating their handbooks, some businesses acquire a “best in class” example from another employer and try to adopt it as their own. Doing so generally isn’t a good idea. That other handbook’s tone may be inappropriate or at least inconsistent with your industry or organizational culture. Similarly, be careful about downloading handbook templates from the Internet. Chances are you’ll have no idea who wrote the original, let alone if it complies with current laws and regulations.

Document and guide

Your employee handbook should serve as a clearly written document for legal purposes and a helpful guide for your company’s workforce.

Our family of firm company, ATA Employment Solutions, can provide guidance on updating business guidelines and employee handbooks. Click here for more information on ATAES. ATA CPAs can help you track your employment costs and develop solutions to any challenges you face as you look at your human capital with fresh eyes. Visit our website to learn more about ATA’s bookkeeping and client accounting services.  © 2021

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Helpful Articles News Tax

Child Tax Credit

The American Rescue Plan Act (ARPA) expands the child tax credit amounts and eligibility requirements for tax year 2021. The credit is increased from $2,000 to $3,000 per qualifying child ($3,600 for children under age 6). The definition of a qualifying child is expanded to include a child who has not turned 18 by the end of 2021. The credit is fully refundable for a taxpayer with a principal place of abode in the U.S. for more than one-half the tax year, or for a taxpayer who is a bona fide resident of Puerto Rico for the tax year.

The additional $1,000 credit amount per qualifying child ($1,600 per qualifying child under age 6) begins to phase out at a rate of $50 for each $1,000 when a single filer’s modified adjusted gross income (MAGI) exceeds $75,000 ($150,000 for joint filers and $112,500 for head of household filers). A single filer with one qualifying child over age 6 will phase out of the increased credit amount if the taxpayer’s MAGI exceeds $95,000. Similarly, situated joint filers will phase out of the increased credit amount if their MAGI exceeds $170,000.

After application of the phase-out rules for the temporarily increased credit amount, the remaining $2,000 of credit is subject to the phaseout rules under existing law ($400,000 for joint filers and $200,000 for all other filers). A single filer with one qualifying child will phase out of the remaining credit if his or her MAGI exceeds $240,000, while joint filers with one qualifying child will phase out of the remaining credit if their MAGI exceeds $440,000.

The ARPA directs the IRS to establish a program in which monthly advance payments equal to 1/12th of the estimated 2021 Child Tax Credit amount will be paid to the taxpayer during the period July 2021 through December 2021. The remaining 50% of the annual estimated amount will be claimed on the 2021 tax return. Initially, the advanced amount will be determined based on a taxpayer’s 2019 or 2020 tax filing. However, upon receipt of a more recent tax filing or other taxpayer-provided eligibility information, the IRS may modify the advance amount.

The IRS announced on March 12, 2021 that it is reviewing implementation plans for the ARPA and that it will be issuing guidance on relevant provisions. We will share more news with clients as further guidance is released about 2021 child tax credits. Contact your ATA representative for any questions.

 

 

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IRS Issues Guidance for Claiming Employee Retention Credit in 2021

The IRS on April 2, 2021, issued additional guidance for employers claiming the employee retention credit (ERC) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as modified in December 2020 by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act). The ERC is designed to help eligible businesses retain employees by offering a credit against employment taxes when qualified wages and healthcare expenses are paid during the COVID-19 pandemic.

Notice 2021-23 provides additional guidance for taxpayers to use when preparing credit claims and explains the changes to the employee retention credit for the first two calendar quarters of 2021, including:

Increased Credit Amount

  • Eligible employers may now claim a refundable tax credit against the employer share of social security tax equal to 70% of the qualified wages paid to employees after December 31, 2020 and before January 1, 2022.
  • The maximum employee retention credit available is $7,000 per employee per calendar quarter, for a total of $14,000 for the first two calendar quarters of 2021.

Broadened Eligibility Requirements

  • Employers who suffered a 20% decline in quarterly gross receipts compared to the same calendar quarter in 2019 are now eligible.
  • A safe harbor is provided allowing employers to use prior quarter gross receipts compared to the same quarter in 2019 to determine eligibility.
  • Employers not in existence in 2019 may compare 2021 quarterly gross receipts to 2020 quarters to determine eligibility.
  • The credit is available to some government instrumentalities, including colleges, universities, organizations providing medical or hospital care and certain organizations chartered by Congress.

Determination of Qualified Wages

  • Employers with 500 or fewer full-time employees in 2019 may include all wages and health plan expenses as “qualified wages.”
  • The Relief Act strikes the limitation that qualified wages paid or incurred by an eligible employer with respect to an employee may not exceed the amount that employee would have been paid for working during the 30 days immediately preceding that period (which, for example, allows employers to take the ERC for bonuses paid to essential workers).

Advance Payments

  • Employers with fewer than 500 full-time employees will be allowed advance payments of the ERC during a calendar quarter in which qualifying wages are paid. Special rules for advance payments are included for seasonal-employers and employers that were not in existence in 2019.

ERCs have become a regular discussion with ATA clients as they can be a relief to businesses who have been impacted by COVID-19. Please contact your ATA representative with further questions and guidance on this opportunity.

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Construction Helpful Articles Memphis, TN Nashville, TN

The Post-Covid Urban Revival: What’s Next For Big Cities?

Today, more than four out of five people in the United States live in cities and urban areas. Over the country’s long history of urbanization, cities like New York, San Francisco and Chicago swelled not only in population, but also in their prominence as American cultural icons. That cachet helped these metropolises thrive even when economic conditions were challenging elsewhere, providing landlords and other commercial real estate stakeholders with a level of stability and security smaller cities couldn’t match.

In recent years, though, these storied cities started falling victim to their own success. Unebbing demand for limited residential and commercial space led to skyrocketing costs, and near-constant expansions and enhancements to government services necessitated new fees and higher taxes. At the same time, the emergence of remote working meant that people didn’t have to move to these uber-expensive cities to work for the companies that called them home. New technology, combined with cost of living and quality of life concerns, chipped away at that old preeminence, and businesses and individuals started choosing Atlanta over New York, Denver over Chicago and Austin over San Francisco. A Brookings Institution study found that population growth in the country’s largest urban areas dropped by almost half through the 2010s.

Download the below article to find out how the COVID-19 pandemic amplified some of the disadvantages of living and working in densely populated cities and accelerated migration to smaller cities and more rural areas.

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Construction Helpful Articles

Is a COVID-19 Baby Boom in the Cards for Real Estate?

The impact of blackouts, national emergencies, recessions and other singular or cyclical events on the U.S. birth rate has been a subject of study and interest since the Baby Boomer phenomenon displayed the far-reaching effects a population surge can have on everything from consumer spending to federal budget allocations. As such, there has been conjecture on what effect the pandemic may have on population growth and what the resulting impact on the real estate and construction industries may be.

The Baby Boomer generation, typically defined as those born between 1946 to 1964, was a boon to mid-century suburban development. Construction of homes soared as enticements to live in suburban communities, including tax breaks, home loans and mortgage subsidies, successfully generated demand. As families moved to the suburbs, there was a commensurate need to supply affordable housing and to build schools and amenities and the infrastructure to serve them.

Between the 1950s and 2010s, the suburban population grew from one-quarter to more than half of all Americans. The generation essentially created and defined many of the lifestyle values and habits that have arisen out of suburban life, which the majority of Americans now enjoy today.

As Boomers have aged, their changing preferences have continued to be felt on real estate and construction. Until recently, Boomers comprised a significant cohort of the urban and multifamily rental markets as they threw off the burdens of home ownership in favor of lighter living and to be closer to their children and grandchildren. A side effect of this is a boost to the self-storage facility market as downsizing into smaller living spaces requires external space to house decades of accumulated belongings.

Post-War Population Surge as Analogue

One of the reasons the baby boom happened, experts say, is because, after the conclusion of two world wars, Americans were optimistic that the economy would improve. The United States was positioned somewhat uniquely in that, apart from the bombing of Pearl Harbor, it escaped the kind of damage that had ravaged war-torn Europe. Infrastructure was intact and in place, for example. Amid the promise of post-war economic security, Boomers expanded their spending habits: U.S. gross national product doubled between 1940 and 1960.

Not just the reality of the economy’s performance, but people’s perception of economic performance and their future prospects likely will play a significant role in the decision to have children this time around. In the current economic climate, sentiments are far less rosy than they were post-WWII. U.S. population growth has been on the decline for the last ten years, notably beginning around the Great Recession. Polls have shown that among Millennials, the decision to delay having children or to have fewer children than desired arises from feelings of economic insecurity: the high expense of child care, student debt and concerns about the economy and financial stability. While the proclivities of Generation Zers remain to be seen, given the uncertainty of the current economic recovery, this may not change anytime soon.

COVID-19 Implications

Early indications point toward population growth in underdeveloped nations but population contraction in the United States and other developed nations. These early U.S. indicators make sense given the number of job losses and uncertainty about job growth and the ongoing uncertainty about an economic recovery. How will the U.S. real estate market adapt to a population contraction?

Today, Boomers own two out of five U.S. homes, and every day, 10,000 people turn 65 years old. Because some Boomers have migrated toward urban living and others are aging in place, the conditions may be ripe for significant residential vacancies when the pandemic-related population contraction meets the end of the Boomers’ actuarial life. Such oversupply would mean the dawn of a buyer’s market not only in the suburbs but also in urban environments. This will make residential buying decisions based on “location, location, location” even more important and will, in turn, ripple into other sectors of real estate, including commercial and industrial.

Leaders in the real estate and construction industries should pay close attention to the U.S. population and migration trends. This analysis will become more important as Boomers age and the population contraction impacts the market cycle. Real estate leaders should also consider further diversification of their holdings and activity if their portfolios show concentration in a market that may see vulnerabilities given potential trends.

 

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May 17 Reminder

Individual taxpayers get extra time to file their 2020 tax returns and pay their taxes because of the pandemic. The IRS announced that the federal income tax filing and payment due date has been extended from April 15 to May 17, 2021.

The automatic extension applies to individuals, including those who pay self-employment tax. No penalties or interest will be added if all taxes due are paid by May 17. Even so, the IRS urges taxpayers to consider filing as soon as possible, especially those who expect refunds.

This relief doesn’t apply to corporate returns or estimated tax payments due on April 15, 2021. It also doesn’t apply to state tax payments or deposits or payments of any other types of federal tax.

For any additional guidance, speak to your ATA representative.