Keeping your eye on the changing business environment is critical for protecting your family business’ success today – and its prosperity well into the future. That includes staying up-to-date on changing tax and regulatory requirements that affect your industry and your organization.
We know that these considerations are at the forefront of our clients’ minds, and 2024 brings several significant changes at both federal and state levels.
Here is a brief overview of what you need to know:
Tax Changes
It is important to note that while we have provided a general overview here, it is also crucial for family business owners to consult their tax advisors.
A tax expert can help you understand how these updates could impact your specific federal business tax liability or state obligations.
Federal Updates:
- Federal income tax rate increase: While not yet enacted, there is a proposal to increase the income tax rate from 21 to 28 percent, potentially making U.S. corporations among the
highest taxed developed countries in the world. This is an important development to watch, because if implemented, it could have an outsized impact on family businesses. - Business loan deductions: The federal limit on business loan deductions has increased to 35 percent of adjusted taxable income, up from 30 percent.
- Bonus depreciation reduction: The first-year special bonus depreciation, which was 100 percent in 2022 and 80 percent in 2023, has further reduced to 60 percent in 2024.
- Pass-through deductions: Self-employed individuals and owners of pass-through entities can deduct 20 percent of their federally qualified business income, subject to taxable income limitations.
- Standard mileage rate: The federal standard mileage rate for business driving reimbursement is now 67 cents per mile – largely related to inflation and other rising costs.
- Clean energy credits: Clean energy credits can now be traded for monetary value, providing an opportunity for family businesses to explore new avenues for savings.
- Estate and gift tax exemption: The federal estate and gift tax exemption, currently around $13 million, will reduce to $5 million after 2025, emphasizing the importance of succession planning. In fact, succession planning around this change can be huge for small businesses.
We would certainly stress that everyone give the last bullet point some thoughtful reflection, even if your succession planning efforts are farther out.
No matter where you are in your process, this may be a good time to speak to your financial advisors and understand the benefit of acting sooner rather than later.
State Updates
In Texas, taxable entities with annualized total revenues less than $2.5 million are no longer required to file a no-tax-due report, which will provide some much-needed relief for small family businesses.
OSHA and EPA Regulation Updates
On top of changes to the tax code, family businesses need to stay vigilant about new regulations from both the Occupational Safety and Health Administration and the Environmental Protection Agency to make sure they remain compliant.
For many years, family business owners have been acutely aware of increasing trends toward more stringent regulations. And while these regulations have made a meaningful difference in many ways, they certainly can be difficult to manage – so it is important to stay on top of changes.
In fact, compliance with OSHA and EPA regulations is crucial for family businesses to maintain their reputation and avoid costly penalties – that range from $16,000 to $160,000 per incident.
Here is what you can expect in 2024:
EPA Voluntary Disclosure
Businesses now have 21 days to voluntarily disclose regulatory violations to the EPA and have their penalties waived. We would advise that businesses take advantage of this disclosure option when they can, in order to avoid costly penalties.
New OSHA Guidelines
Below is a summary of updated guidelines that could affect family businesses:
- Mental health programs: New guidelines around obtaining resources for mental health programs and employee support initiatives.
- Technology standards: Updated OSHA standards address safety requirements concerning new technology in machinery and equipment.
- Hazardous material handling: Stricter guidelines are in place for the handling, storage, and disposal of hazardous materials, along with increased training requirements.
- Safety training: Expect more rigorous and frequent safety training requirements across various industries, as well as more stringent enforcement and penalties. So, you may well be seeing the EPA on an inspection basis a lot more often than in the past.
- Digital record requirements: Digital accessible record requirements for workplace incidents and safety measures, including for remote workers, are now mandatory.
- Modern safety helmets: OSHA now emphasizes the use of modern safety helmets over traditional hard hats.
Navigating New Commercial Business Regulations
- Financial Crimes Enforcement Network registration: Small businesses with fewer than 20 employees and less than $5 million in sales must complete FinCEN registration within the current calendar year. This is intended to better ensure transparency and accountability for financial fraud. In addition, it is intentionally focused on small businesses, because all indications are that most financial fraud occurs within small businesses.
- Payment app reporting: Businesses using payment apps like Venmo must report payments exceeding $600 to vendors – these reporting requirements have been deferred to the end of 2024. If you are not already tracking these types of payments within your accounting systems, now would be the time to prepare.
- Protecting Business Value: Family businesses will no longer be able to protect their value through the use of non-compete agreements with exiting employees. The Federal Trade Commission has determined that, with the exception of senior executives, existing non-compete agreements with employees are unenforceable. Moving forward, non-compete agreements for employees at any level will be banned. More expansive nondisclosure agreements could potentially mitigate risk – but taking action that will help protect the value of your business, while avoiding penalties for non-compliance, should be top-of-mind for every family business owner.
Staying informed about regulatory updates is essential for any family business to thrive within the rapidly changing commercial landscape.
If you would like support as you navigate these reforms, our team at Ferguson Alliance stands ready to help.
With our years of experience as trusted family business advisors, we can offer insight and perspective into protecting the longevity of your organization, no matter the regulatory climate.
Call today to set up a consultation.