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Saturday, December 18, 2010

House Resolution Extends Tax Cuts and Employee Benefit Provisions

Merry Christmas!
House Resolution Extends Tax Cuts and Employee Benefit Provisions

By Tommy Eden

On Dec. 17, 2010 President Obama signed H.R. 4853 which is a 74 page document that extents the Bush tax cuts for all Americans and contains a multitude of business tax benefits. It will take accountants weeks to sift through the Resolution as it has many cross references. A quick evaluation reveals as follows: 1) extends current income tax rates for two years; 2) reduces employees' share of Social Security payroll taxes from 6.2 percent to 4.2 percent for one year; 3) extends unemployment benefits; 4) preserves the existing amounts that employers can provide their employees in tax-free parking and transportation subsidies; and 5) preserves existing employer provided adoption assistance.

Employee Transit Subsidies: employers can help cover employees' costs of tokens, vouchers, fare cards, and cash for riding buses, trains, subways, or streetcars to and from work. Employer provided transit subsidies can reduce commuting costs, reduce tardiness associated with driving to work and enhance recruitment efforts where commuting is expensive or transportation is not available to employees. Employers can provide up to $230 per month in transit subsidies and $20 in bicycle commuting allowance. Checkout IRS Publication 15-B for additional information at

Employer Adoption Assistance: Federal law sets a maximum annual limit on the amount of employer-provided adoption assistance that can be excluded from employees' income or that can be taken as a tax credit by employees ( I.R.C. § 137(a)) Internal Revenue Bulletin: 2010-42 provides some helpful information. If employers pay or reimburse employees more than the maximum adoption assistance amount, excess amounts must be included in employees' wages. For tax years beginning Jan. 1, 2011, until Dec. 31, 2012, the maximum adoption assistance amount that can be provided by employers and excluded from employees' income or that an employee can take as a tax credit is $13,360 ($12,170 in 2010). Adoption assistance amounts are phased out for employees who have modified adjusted gross incomes above $182,200 and are eliminated for employees who have incomes above $225,201. Check out IRS Rev. Proc. 2010-40 for additional information at

Employer Provided Tuition Assistance: Section 127, which allows employees to exclude up to $5,250 a year in employer-provided tuition assistance for undergraduate and graduate-level courses has been extended for two-year years. The advocacy group the Society for Human Resource Management (SHRM) supported a permanent extension of Section 127. I am proud to say that I was part of our local Chapter's support team with the Alabama Congressional Delegation.

Common Sense Counsel: an employer would be wise to use the services of a CPA or tax attorney to sift through the various employer provided tax benefits and employee benefit extensions. It is definitely a Resolution worth reading.

Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at or 334-246-2901. Blog at