News and Events

If you are a Pennsylvanian who receives the annual Property Tax/Rent Rebate payment, you are receiving a one-time bonus for 2021 that is equal to 70% of your original rebate amount. This is due to the passing of Act 54 calling for use of funds from the federal American Rescue Plan Act (ARPA) to provide additional support to Pennsylvanians who receive these annual rebates.

Learn more.

On August 16, 2022, President Joe Biden signed into law the $739 billion Inflation Reduction Act of 2022 (IRA).  This new law is a budget reconciliation bill that projects to raise $739 billion in revenue from tax increases to cover $369 billion in increased climate spending, $64 billion in increased health care spending, and approximately $300 billion in deficit reduction.

The key new taxes included in the law are a 15 percent minimum tax on certain corporations, a one percent tax on stock repurchases, and an extension of the IRC Section 461(l) excess business loss limitation. The Act also includes an $80 billion increase in Internal Revenue Services (IRS) funding, including $45 billion for enforcement and audits. The law also includes new and enhanced energy credits for individuals and businesses.

The major tax provisions include:

INDIVIDUAL TAX PROVISIONS

Affordable Care Act – Premium Tax Credit (PTC)

American Rescue Plan Act (ARPA) beneficial rules extended to apply for 2023-2025 (Increased PTC credits and availability to families over 400% of the poverty line)

Excess Business Losses

Extended two more years, now expires for tax years ending before 1/1/2029

IRS FUNDING

Approximately $80 billion in total, with $45 billion for enforcement and $25 billion for operations support. Treasury Department officials have said they do not plan to increase audits on small businesses or households making under $400,000 a year. However, we believe that they will be targeting S-Corps and smaller partnerships much more than they have in the past.

HIGHLIGHTED ENERGY TAX CREDITS AND DEDUCTIONS

Nonbusiness energy property credit (12/31/22)

• Credit increased from 10% to 30% of the amount paid by the taxpayer for qualified energy efficiency improvements (doors, windows, skylights, insulation, heat pumps, water heaters, furnaces, water boilers, etc.)  Roofs are no longer qualified property.
• Repeals the $500-lifetime limit and now has a $1,200 annual limitation instead

Residential energy efficient property credit (12/31/22)

• Increases credit for qualified expenditures made by a taxpayer for residential energy efficient property (solar electric, solar water heating, fuel cell, small wind energy, geothermal heat pump, biomass fuel, and battery storage technology).  The credit is extended through 2034.

New qualified plug-in electric drive motor vehicles credit (12/31/22)

• Credit amount – $3,750 for meeting the critical minerals requirement and $3,750 for meeting the battery component requirement. AGI limitations apply.
• Repeals manufacturer limitations so additional vehicles qualify.  The vehicles that qualify must now be assembled in the US.  Vehicles that now qualify changed effective with the signing of the bill.  There is an exception for a contract entered into prior to 8/15/22 for a vehicle that no longer qualifies.

Credit for previously owned “clean” vehicles (12/31/22)

Possible credit amount – lesser of $4,000 or the amount equal to 30% of the sale price with respect to such vehicle. AGI limitations apply.

New §45W Qualified Commercial Credit Clean Vehicle Credit

Starting in 2023, the commercial vehicle credit is a great option for a business, especially for a business owned by a higher-income individual, as there are no income limits for this tax credit. The maximum credit amount is $7,500 for vehicles weighing less than 14,000 pounds, and $40,000 for all other vehicles. It qualifies as a business vehicle by being subject to depreciation.

Energy efficient commercial building deduction (section 179D) (12/31/22)

Now uses an applicable dollar value (ADV) multiplication formula to calculate a potentially higher deduction amount.

CORPORATE TAX PROVISIONS

New 15% Corporate Alternative (“Book”) Minimum Tax (12/31/22)

• Only about 150 companies expected to be impacted
• Applies if the average adjusted financial statement net income for the past three years exceeds $1 billion (aggregation rules apply)
• Effective for tax years beginning after 12/31/2022

New 1% excise tax on the repurchase of corporate stock (12/31/22)

• Impacts “covered” corporations whose stock traded on an established security market
• Applies to the fair market value of stock repurchased during the entire tax year
• Exceptions for tax-free reorganizations, repurchases of $1 million or less, ESOPs, RICs, REITs, dividends

MODIFICATION OF EXISTING Research CREDIT

For tax years beginning after December 31, 2022, the §41 research credit allowed against payroll tax liabilities for certain start-up businesses increases from $250,000 to $500,000.

While much of the above new law is not specifically tax related, there are pieces of this legislation that will affect you as taxpayers. We will stay on top of this legislation and make sure you are taking advantage of any benefits you are eligible for in the coming months. If you have any questions please call us at 215-723-4881 or contact us online.

Ever since it was last amended in 2006, the Pennsylvania Minimum Wage Act established a fixed overtime rate for all salaried, non-exempt employees in Pennsylvania. That will change starting August 5, 2022, when Pennsylvania’s overtime regulations for salaried, non-exempt employees will better align with the Federal Fair Labor Standards Act (FLSA).

What does this mean? Rather than using the “fluctuating workweek” calculation for the overtime pay for salaried, non-exempt employees, Pennsylvania employers will be required to base overtime pay on a 40-hour work week, no matter how many hours the employee works in each week or the amount they are paid. Under this new rule, overtime pay is calculated by taking the total of the employee’s pay for that week and dividing it by 40 hours. The employer must then pay 1.5 times that rate for any time worked beyond 40 hours. This new overtime pay calculation will also apply to hourly employees.

Employee classifications that continue to be exempt are executives, administrative personnel, and professionals.

If you would like to discuss what this means for you and your business, call us at 215-723-4881 or contact us online.

Change is on the way in the Commonwealth of Pennsylvania for employees who receive part of their compensation in tips. Starting August 5, 2022, a new set of rules will bring changes to minimum wage, tips subject to credit card deductions, tip pooling, and compensation related to service charges.

To start, the rules define a “tipped employee” as a person “who works in an occupation that ‘customarily and regularly’ receives tips” such as hospitality, catering, restaurant, bartending, and salon employees.

What do these rule changes mean for the tipped employee, their employer, and the employer’s patrons?

Minimum Wage

Under these new rules, Pennsylvania employers are required to ensure that the base hourly wage plus tips equals at least $7.25 per hour, since $7.25 is the current minimum wage in the Commonwealth.

If a tip-credited employee earns less than $7.25 per hour, including their base hourly wage plus tips, the employer must make up the difference as required by the Pennsylvania Minimum Wage Act so that their hourly earnings (base hourly wage plus tips) equal at least $7.25 per hour. Up until these new rules, the base hourly wage for tipped workers was always $2.83.

The new regulation states that employers can only take a tip credit for employees that make $135 per month in tips (Under federal law and previous Pennsylvania law, that rate was $30 a month.). Because $135 is a higher standard than the federal threshold, the Pennsylvania requirement applies.

If an employee does not meet the definition of a “tipped worker” and does not receive $135 per month in tips, the worker does not qualify for the reduced $2.83/hour minimum wage.

80/20 Rule

The long-followed standard of the 80/20 rule is now a regulation in Pennsylvania and as such better aligns with federal regulation on tipped worker duties.

This regulation permits employees to be a “tipped employee” if that employee does not spend more than 20% of the 7-day previously established workweek performing duties that do not directly generate tips.

Tip Pooling

Employers are not required to use tip pooling but they are permitted to do so, as long as they make sure that all tipped workers are aware that the system is in use. Both tipped workers and non-tipped workers can be included except for:

• Individuals with ownership or partnership interest in the business.
• Employees who meet any part of the executive employee duties test in federal code 29 C.F.R. Part 541.100(2)-(4).
• If an employer takes a tip credit, it must exclude any employee who does not spend at least 80% of their daily work performing duties that customarily or regularly generate tips.
• If an employer pays everyone in the tip pool the minimum wage, it may include employees who do not spend at least 80% of their daily work performing duties that customarily or regularly general tips.

Credit Card Deductions

Patrons may not realize this, but credit card tip deductions are common in the hospitality industry. That is until now. Under these new rules, if a customer adds the tip to their check and pays for the entire amount with a credit card the employer may no longer deduct the credit card transaction fee from the tip.

Service Charges are Now Regulated

There are times when a hospitality business will add a “service charge” to a bill. These service charges are not tips, they are sometimes used for administrative purposes and in some cases do not even go to the employees.

Pennsylvania’s new rules require that an employer charging a service fee for administration of a banquet, special function, or package deal must notify the patrons of the charge:

• Stating this policy in the event contract or on the menu used by the patron.
• The statement must advise that the service charge is for administration and does not include a tip to be distributed to the employee(s).
• The final bill provided to the patron must contain a separate line item for tips.
• The employer is permitted to distribute service charges to their workers but not in the form of a tip.

If you have questions about how this will affect your hospitality business, we’re happy to help. Call us at 215-723-4881 or contact us online.

Please join us in congratulating Andrew Shapowal on earning the designation of Accredited Investment Fiduciary (AIF®). This designation assures clients that those responsible for managing or advising on investor assets have a fundamental understanding of the principles of fiduciary duty, the standards of conduct for acting as a fiduciary, and a process for fulfilling fiduciary responsibility. This AIF® certification demonstrates that Andrew has met the requirements to earn and maintain this widely respected credential.

Andrew, a Certified Public Accountant, began working at Canon Capital in 2021. In 2022, he began working in our Wealth Management division as part of a long-term transition into the field. In addition to earning his AIF® designation, he is currently pursuing the Personal Financial Specialist (PFS) credential. He also holds a Certificate in Blockchain and Digital Assets.

If you have any current needs regarding your investment or retirement plans, please feel free to contact our Wealth Management department via phone at 215-723-4881 or online.

From our clients who entrust us to serve them to our incredible team, we are filled with gratitude as we celebrate 35 years of Canon Capital Management Group. We look forward to many more years of serving our clients and community.

Effective July 1, 2022, the Philadelphia City Wage Tax will decrease for both residents and non-residents:

• Wage Tax for Residents of Philadelphia: 3.79% (.0379)
• Wage Tax for Non-residents of Philadelphia: 3.44% (.0344)

The non-resident City Wage Tax applies to those employed by a Philadelphia-based entity.

This change must be in place for all paychecks dated after June 30, 2022.

Please contact us at 215-723-4881 with any questions.

Beginning July 1, 2022, the IRS is increasing the standard mileage rate for business use of a vehicle to 62.5 cents per mile. This is a 4-cent increase from the rate of 58.5 cents per mile that took effect in January 2022.

The standard mileage rate for use of a vehicle for a medical or moving expense will increase from 18 cents per mile to 22 cents per mile.

The rate for every mile driven in service of charitable organizations remains at 14 cents per mile.

Need help tracking your mileage? Revisit this blog post where we make recommendations of easy-to-use online tools to track the quantity and types of miles you drive throughout the year.

Questions? We are here to help. Call 215-723-4881 or contact us online.

When considering the Ukraine/Russia crisis, Canon Capital’s Wealth Management team primarily considers different scenarios and evaluates the risk to both our portfolio construction and specific investments.  The goal is to minimize downside exposure while remaining in a position to take advantage of upside gains. We have particularly looked at our investments’ exposure to interest rate risk, as this crisis has the potential to accelerate measured inflation and central banks’ reactions to those readings. Commodity exposure was also scrutinized at our most recent session, as Russia has a particularly outsized presence in energy and metals.  While a reasonably contained conflict will probably have minimal impact on corporate earnings, companies with specific exposure to the Russian economy may be impacted.  Should the conflict escalate, there is potential for a greater impact on macroeconomic factors, and though we think it unlikely at this juncture, it is still a scenario that we will be vigilant for and take appropriate steps to adjust for, if necessary.

Bradley Barnhorst, CFA, is a Canon Capital Investment Advisory Committee Member, Chair of Finance at DeSales University, and an Author.