GNYADA December 2016 Newsletter

Proposed IRS Regulations Could Impact Estate Planning

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The IRS recently proposed regulations that would eliminate discounts that are being used by dealers in estate planning. The new rules would prohibit estate taxes from being calculated on a marked-down value, when an entity, such as a dealership, is being passed to an heir in phases. If adopted, the rules would apply whenever family members own or control more than 50% of a family- owned business, limited liability company, or limited partnership. The rules consider “family members” to include: The donor of a gift n

The donor’s spouse Any ancestors or descendants of the donor or their spouse The donor’s siblings Any spouse of an ancestor, descendant, or sibling

The regulations would also increase the value of an individual's estate, if they changed their position from majority to minority control, within three years prior to their death. The American Institute of CPAs has asked the IRS to withdraw its proposal, but this is unlikely to happen. Though a firm effective date is not yet known, dealers who are considering making gifts of a family- owned dealership or related businesses are advised to speak with their tax attorney or accountant to determine the impact the proposed rules will have on their plans.

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Certain provisions that limit the rights of a business’s owner would be disregarded when determining its value, as would any valuation of the business that is below what the IRS considers its “minimum value.” The “minimum value” is the net equity of the business (market value of the assets, minus liabilities) multiplied by the percentage ownership. These provisions would disallow a “minority discount” for lack of control.

New Federal OT Regulations Blocked — Now What?

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A Texas federal judge barred the U.S. Department of Labor (DOL) from implementing its new rule that would have roughly

week / $39,000 per year

based on the proposed increase to $47,476 annually / $913 weekly. NYS OT Threshold Increase Still In Effect The State Department of Labor’s incremental raise of New York’s overtime exemption threshold is still effective, beginning on December 31. The new NYS exemption thresholds will be as follows: NYC Dealers (10 or fewer employees): $787.50 per week / $40,950 per year n NYC Dealers (11 or more employees): $825 per week / $42,900 per year Dealers in Westchester, Nassau, and Suffolk Counties: $750 per n n

Dealers in Other Regions: $727.50 per week / $37,830 per year Over the next several years, dealers around the State (based on their region) are advised to revisit the OT exemption statuses of their employees to ensure compliance with these changing State thresholds, which will ultimately raise higher than the proposed federal thresholds. Even though the U.S. DOL’s new rule is currently blocked, the Association will closely monitor its status as well, as further develop- ments may cause it to go into effect at a later time. n

doubled the federal threshold for “white collar” overtime exemption to $913 per week and $47,476 annually (up from $455 per week / $23,660 annually). The lawsuit challenging the DOL’s rule was filed by twenty-one states and a variety of business groups, including NADA. Until further notice, the existing federal "white collar" salary thresholds remain at $23,660 annually / $455 weekly. Dealers do not need to make employee compensation adjustments

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • December 2016 7