Tracking legal, legislative, and regulatory developments impacting the racing and performance industry.
PRI’s dedicated advocacy team based in Washington, DC, works nonstop to protect motorsports. We are currently tracking several initiatives on the federal and state levels, including an update on tax credits for businesses participating in trade shows, rules related to hiring independent contractors, and employee retention tax credits.
Urge Congress To Support Tax Credits For Trade Shows
As previously reported (see PRI Magazine, May 2021), a PRI-supported bill was introduced in Congress that would provide tax credits to cover 50% of the expenses associated with exhibiting or attending a trade show, such as the PRI Trade Show in Indianapolis. The bipartisan Hospitality and Commerce Job Recovery Act of 2021 (H.R.1346/S.477) would help businesses participate in trade shows and the millions of men and women employed in the tourism industry.
There is growing bipartisan support for the legislation. H.R.1346, has 80 cosponsors (42 Republicans and 38 Democrats). If enacted into law, it would provide PRI Trade Show buyers and exhibitors with a tax credit for 50% of the cost of attending or exhibiting at the 2022, 2023, and 2024 events.
“This bill would help increase the number of attendees and exhibitors at the PRI Show. The stimulative impact of the legislation would lead to more hotel nights filled, busier restaurants, and additional spending in Indianapolis and cities across the country. It is crucial to hotels and service/hospitality businesses,” said PRI Vice President of Government and Legal Affairs Daniel Ingber.
PRI exhibitors and attendees should ask their employees to send a letter to their federal lawmakers in Washington, DC, by visiting votervoice.net/SEMA/campaigns/81675/respond.
Trump Administration’s Independent Contractor Rule Officially Withdrawn
The Biden Administration has finalized a new rule to withdraw the independent contractor regulation issued in the closing days of the Trump Administration.
“Gig workers are at the heart of the debate—from Uber drivers to other types of flexible, temporary, or freelance jobholders. At issue is making sure there is clarity in defining whether a worker is an employee or independent contractor so that the relationship is unquestioned by the IRS or state tax collectors,” Ingber said.
While the issue may be revisited in the future, the US Department of Labor (DOL) is currently reverting to previous guidance on distinguishing whether an individual should be classified as an independent contractor or employee. Specifically, the DOL deferred to the seven-factor “economic realities” guidance test issued in 2008 and based on court cases. Factors to be considered include:
• The extent to which the services rendered are an integral part of the principal’s business
• The permanency of the relationship
• The amount of the alleged contractor’s investment in facilities and equipment
• The nature and degree of control by the principal
• The alleged contractor’s opportunities for profit and loss
• The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor
• The degree of independent business organization and operation
In recent years, the increase in independent contractors who perform on-demand services, such as drivers, freelance writers, and other gig workers, has placed a focus on the definition. Company employees have protections under the Fair Labor Standards Act (FLSA) such as minimum wage and overtime compensation that do not apply to independent contractors.
“There are benefits to hiring an independent contractor such as defining a specific work product to be accomplished within a budgeted amount and time period—with no further obligation,” Ingber said. “There is usually no question whether you are hiring an independent contractor since it is frequently for a specific outsourced duty (website design, construction, payroll) for which the contractor has other clients, has control over their schedules, has a limited and defined duty, and is otherwise independent. However, watch to see if circumstances change over time whereby the relationship could be considered employer/worker when applying the Seven Factors Test. In that case, a company should review the situation since there is an obligation to collect and pay taxes and benefits. If not sure, consult your attorney or accountant.”
For more information, contact Stuart Gosswein at email@example.com.
Take Advantage of the Employee Retention Tax Credit
Racing businesses are urged to take advantage of a COVID-19 economic relief program enacted in 2020 and expanded this year—the Employee Retention Tax Credit (ERTC)—designed to help employers that suffered significant financial losses or that were closed due to a government order but continued to pay workers who were unable to perform their duties.
2020: The tax credit is equal to 50% of up to $10,000 in qualified wages paid between March 12–December 31, 2020. The total credit is capped at $5,000 per employee and applies against employment taxes on wages paid to all employees. There is a 100-employee limitation. Credit is available if the employer had a fully or partially suspended operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority due to COVID-19; or the employer experienced a significant decline (more than 50%) in gross receipts during the calendar quarter.
2021: The tax credit applies to all four quarters of 2021. The credit is now equal to 70% of up to $10,000 in qualified wages per quarter (including health plan expenses). This means the tax credit is potentially $28,000 per employee ($7,000 for each quarter). Employers who have experienced a 20% or more decline of gross receipts in a quarter, compared to the same quarter in 2019, can apply. For 2021, the size limitation was increased to employers with 500 or fewer employees (up from 100 workers).
“Many companies are not aware of this program enacted to help businesses retain workers,” Ingber said. “Racing businesses, in fact, all small businesses suffering an economic downturn in the last two years should take advantage of this program. The program was enacted so that companies can use the cash that is not sent to the IRS to address other financial needs.”
Under the expanded ERTC program, a business that obtained a PPP loan can claim the ERTC if wages paid with PPP funds are excluded for the purpose of calculating the ERTC. The IRS issued new guidance for employers on the rules that will apply to the ERTC for the first two quarters of 2021 at irs.gov/pub/irs-drop/n-21-23.pdf. Additional IRS coronavirus relief information is available at irs.gov. Employers should work with their accountant and payroll preparer to confirm ERTC eligibility and file the adjusted Form 941 tax deposit.