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The Legal Side of Recognition, Rewards, and Incentives
Length: 1 hour, 5 Minutes
The incentive, rewards, and recognition marketplace continues to evolve. Studies have shown that merchandise programs continue to outperform cash-based programs in the incentive, reward, and recognition marketplace for a variety of reasons. Yet, even within the realm of successful programs, change is inevitable. While the future is difficult to predict, one potential shift is toward more individualized reward and recognition programs, especially customized, less scalable programs that use use technology to reward and motivate employees.
The Incentive Federation was established in 1984 as the legislative arm of the incentive marketplace. As part of its function of monitoring legislative and regulatory developments, the Federation also has an educational function. In this capacity, the Federation has also sponsored and conducted research that raises the profile of incentive marketplace.
There have been considerable legislative and regulatory changes during the last few years. This presentation will focus on the tax and legal treatment of various incentive, reward and recognition programs and current legal/regulatory issues of importance. It will focus on tax-advantaged safety and service awards programs, which were under attack in the House version of the Tax Cuts and Jobs Act of 2017. Fortunately, through a well-timed legislative initiative, we were able to convince important members of the Senate Finance Committee to retain section 274(j), which provides preferential tax treatment for safety and service awards programs, as an important tool for businesses that wanted to reward ad protect their employees.
This presentation will also review how different types of businesses and industries understand the (a) regulatory/compliance, (b) tax, or (c) compensation issues that might arise among the various incentive, reward, and recognition programs available to them. In doing so, it will discuss a recent IRF survey that seeks to measure responses across various industries to legal, regulatory, and compliance issues that might have to be addressed depending on the type and nature of the program. While responses in that survey varied somewhat, overall, respondents too frequently identified legal and regulatory issues where none exist. As a result, this survey may raise some questions and concerns regarding whether there is an adequate understanding of regulatory/compliance, tax, or compensation issues in the incentive marketplace, and what can be done to educate end users in the proper use of incentives.
This presentation was part of the 2019 RPi Virtual Conference sponsored by CA Short Company, Peerless Performance, and Inspirus.
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George Delta, Counsel, The Incentive Federation, Inc.
George Delta advises clients on a variety of corporate and individual tax issues including mergers and acquisitions, the tax treatment of complex financial transactions, tax planning, commercial transactions, cancellation of indebtedness issues, the innovative use of net operating losses, the taxation of pass-through entities, and lobbying and government affairs. Mr. Delta has expertise in various aspects of the incentive, promotion, and reward and recognition fields, including safety and service achievement awards, gift cards, escheat law, sweepstakes, the taxation of awards and incentives, and sales taxation. He is counsel to the Incentive Federation Inc. and has represented trade associations in the incentive, promotion, and reward and recognition fields, as well as other tax-exempt organizations. He also has expertise in commercial transactions involving the Internet, including the taxation of such transactions, and in negotiating, drafting, and managing performance contracts and contracts for the sale and purchase of intellectual property and other goods and services. He has represented clients before the Internal Revenue Service, the U.S. Tax Court, state tax courts, and state tax agencies. He has published numerous tax articles, articles on gift cards and the law of escheat, and co-authored the treatise, Law of the Internet (Wolters Kluwer 4th ed. 2017).
In addition, Mr. Delta assists individuals, families, and small business owners with their estate planning needs. He prepares estate plans, including wills, various types of revocable and irrevocable trusts, powers of attorney, and advance medical directives, each specifically tailored to the individual needs of the client. Mr. Delta also advises business owners, from formation and corporate governance to business succession planning, including the purchase and sale of small to mid-size businesses.
