Monday Morning Minute
In This Issue
Business Meal and Entertainment Deductions Under the Trump Tax Cuts
Some Best Practices on Sexual Harassment in Light of the EEOC's Suit Against O'Reilly
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                  May 13, 2019


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The Tax Cuts and Jobs Act of 2017 (TCJA) eliminated the deduction for entertainment as a business expense, but kept the deduction for business meals.  The IRS has not proposed regulations explaining the differences.  In the meantime, I
RS Notice 2018-76 should be reviewed as a guidelines to understand the differences in tax deductibility of deductible meals, and entertainment expenses that are considered nondeductible. The notice clarifies that taxpayers may deduct 50 percent of a business meal expense that meets these five requirements:
  1. The expense is an ordinary and necessary expense under [Code section] 162(a).
  2. The expense is not lavish or extravagant under the circumstances.
  3. The taxpayer, or an employee of the taxpayer, is present at the [meal].
  4. The [meal is] provided to a current or potential business customer, client, consultant, or similar business contact.
  5. For meals provided in conjunction with nondeductible entertainment, the meal expenses are "stated separately" from the entertainment expenses (i.e., the meals is not included in the cost of the entertainment).
The IRS Notice warns against inflating meal expenses to obtain a deduction for entertainment expenses in order to circumvent the TCJA's repeal of the deduction for entertainment expenses. The notice several examples that illustrate when meals will remain deductible when provided in conjunction with entertainment.  No deadline for promulgation of the new rules has been set. 
The EEOC filed a lawsuit against O'Reilly Automotive Stores, Inc. d/b/a O'Reilly Auto Parts in U.S. District Court for the Middle District of Florida after conciliation failed.  

In its suit, it alleges that a supervisor along with other employees subjected female employees at an O'Reilly store in Orlando to a hostile work environment.  The hostile work environment included asking women for oral sex and telling them to bend over.  It also included allegations of such inappropriate physical touching as grabbing buttocks, pinning females to tables and brushing up against them in the stock aisles. 

The EEOC further alleges that when brought to its attention, O'Reilly did nothing to curb the harassment and even went so far as to retaliate against the women who complained.  On at least one occassion, the EEOC further alleges a woman felt she had no other option but to resign.  
O'Reilly is headquartered in Springfield, Missouri with over 70,000 employees in over 4,500 stores nationwide.

The take aways are simple:  in this new work environment with a heightened awareness of sexual harassment in our society generally (through things such as the #metoo movement) coupled with laws requiring sexual harassment training, be prepared as an employer to: 

1. require solid, at least annual training, for employees on sexual harassment including reporting mechanisims which includes a way to bypass supervisors and managers who may be the subject of such allegations (unless your local or state law requires it more frequently);  

2.  get training, at least annually, for all supervisors and managers to help them understand their unique role in the company when it comes to harassment complaints (unless your local or state law requires it more frequently); 

3.  hold supervisors and managers to a higher level of accountability not only in cooperating in fair and unbiased investigations but a duty to report things he or she sees in the workplace which may qualify as harassment; 

4.   make sure those charged with investigation of workplace harassment complaints are well versed in how to conduct a lawful and unbiased investigation, paying special attention to requirements in a unionized work force;   

5.  make sure all company policies concerning harassment are clearly written and distributed to all employees, including the required reporting procedures.  Policies, where appropriate should include discipline for failure to report.    

Regardless of size of company (O'Reilly is a rather large company), if you have a decentralized work force or several smaller locations, executive and human resource oversight may be difficult.  Therefore an employer depends upon and trusts those who are in charge at those locations.  In doing so, it is especially important to make sure there is accountability at all levels.  Accountability must be achieved through targeted training as well as clearly written and consistently communicated expectations of the policies and consequences.  

These are just a few tips to help in this era as sexual harassment charges are on the rise. Contact any Spognardi Baiocchi attorney of your choice to discuss further. 

SPOGNARDI BAIOCCHI llp is a law firm dedicated to partnering with companies of all sizes to address the full spectrum of legal concerns for its business.  Our commitment is to find common sense solutions that fit each clients' unique situation to labor, employment, human resources and general business needs. 

With over 50 combined years of experience among its 2 founding partners in these areas, we can assist businesses in developing custom solutions to today's tough issues.  And as litigators, who combined have over thousands of trials  "under their belts" before state and federal courts as well as administrative agencies (such as the NLRB) you will find no better advocate and partner. 


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