Introduction 

As your trusted advisors, we at Linkenheimer LLP strive to keep you informed about the latest legislative developments that could impact your business and personal financial planning. In this edition, we highlight significant pending legislation at both the state and federal levels that may affect our clients, including business owners, winery and restaurant owners, and individuals. We have not received any updates regarding potential federal adjustments for PG&E payments and Research & Development expense capitalization, and unfortunately, we remain pessimistic about any forthcoming changes. As a result, beginning July 1, 2024, we will proceed with finalizing the returns that were on hold pending this legislation. 

State-Level Proposed Legislation 

  • California AB 1181: Minimum Wage Increase 

AB 1181 proposes to increase the state minimum wage to $16 per hour for all employees, regardless of the size of the business, by January 1, 2025. For small business owners, this could mean higher payroll costs and a need to revisit pricing strategies and workforce management. 

  • California AB 543: Paid Family Leave Expansion 

AB 543 seeks to extend the duration of paid family leave from 8 weeks to 12 weeks. Businesses, particularly those in the hospitality industry, may need to adjust their staffing and leave policies to accommodate longer absences. 

  • H.R. 4970 – Protect Innocent Victims Of Taxation After Fire Act

This bill, sponsored by Congressmen Doug LaMalfa and Mike Thompson, aims to exempt all wildfire relief payments, including those from the PG&E Fire Victims Trust, from federal income taxes. This legislation is significant for wildfire survivors in Northern California, providing them with much-needed financial relief and certainty. The bill has passed the House Ways and Means Committee and is awaiting further action.

  • H.R. 7024 – Tax Relief for American Families and Workers Act of 2024

This broader tax bill includes provisions affecting R&D expenses. Notably, it delays the amortization of domestic research and experimental expenditures until after December 31, 2025, reinstating the ability to expense these expenditures immediately. This change is designed to support innovation and economic growth by making it easier for companies to invest in research and development​.

Non-Tax Related Legislation To Be Aware Of 

  • Workplace Violence Prevention (SB 553) 

Effective July 1, 2024, SB 553 mandates that all California employers establish and maintain a comprehensive workplace violence prevention plan. This includes procedures for reporting and responding to violent incidents, employee training, and maintaining a log of all incidents. This legislation is aimed at enhancing workplace safety across various industries​. 

  • Non-Compete Agreements (AB 1076 and SB 699) 

These bills prohibit the use of non-compete agreements in employment contracts. AB 1076 specifically requires employers to notify current and former employees by February 14, 2024, that any non-compete clauses in their contracts are void. This legislation reinforces California’s strong stance against non-compete agreements, which are seen as restrictive to employee mobility and innovation​ 

Federal-Level Legislation 

  • Proposed Changes to the Tax Cuts and Jobs Act (TCJA) 

Congress is considering amendments to the TCJA, which may include higher corporate tax rates and changes to individual income tax brackets. Business owners should prepare for potential increases in tax liabilities and explore tax planning opportunities to mitigate the impact. For more information on possible changes to the TCJA, click here. 

  • SECURE Act 2.0 

The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 aims to expand retirement savings options and increase the required minimum distribution (RMD) age to 75. High-net-worth individuals may benefit from additional time to grow their retirement accounts, but should also be aware of the new compliance requirements. 

  • The Green New Deal 

Though still in the proposal stage, the Green New Deal includes provisions that could affect businesses in the agriculture and hospitality sectors. This includes potential changes to energy usage regulations and incentives for adopting sustainable practices. Business owners should stay informed and consider early adoption of green technologies to benefit from potential tax incentives. 

Action Items 

  • Review and Adjust Payroll: Ensure your payroll systems are ready for the potential increase in minimum wage. Consider conducting a wage audit to understand the impact on your business. 
  • Update Estate Plans: High-net-worth clients should consult with their estate planning advisors to adjust their plans in light of the proposed state estate tax. 
  • Revise Leave Policies: Prepare for the potential extension of paid family leave by revisiting your staffing policies and leave management practices. 
  • Tax Planning: Engage in proactive tax planning to prepare for potential changes to federal tax laws. This includes reviewing deductions, credits, and other tax-saving opportunities. 
  • Sustainability Initiatives: Explore opportunities to adopt sustainable practices in anticipation of potential federal incentives and regulations. 

Conclusion 

Staying informed about pending legislation is crucial for effective financial planning and business management. At Linkenheimer LLP, we are committed to providing you with the insights and strategies needed to navigate these changes. If you have any questions or need personalized advice, please do not hesitate to contact us.