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Tax Implications When Leaving a Partnership

When a partner leaves a business, the resulting transaction can take the form of a payment to the retiring partner to redeem his or her share of the business, or a sale of that share of the business to the remaining partners. Either way, the person who leaves obtains cash or property while the partners who remain increase their share of the assets on a proportional basis. While the end result appears to be the same, however, the tax implications can be quite disparate.

When the retiring partner receives a redemption payment, Section 736 of the Internal Revenue Code comes into play, determining firstly whether the income will be treated as a capital gain/loss or ordinary income, and secondly whether the remaining partners can deduct a percentage of their redemption payments.

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Transit Benefits Required for Illinois Employers

Another wrinkle for employers in the Chicago area.

Businesses located in the six-county Chicago area near public transit routes operated by the Regional Transportation Authority (RTA) that have at least 50 employees will be required as of Jan. 1, 2024, to provide their full-time employees with pre-tax public transit benefits.

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Long-Term Temps to be Paid Like Employees

Both Illinois employers that contract with temporary labor service agencies, and those agencies themselves that do business in the state, should review staffing contracts and ensure compliance with relevant policies and procedures under amendments to the Illinois Day and Temporary Labor Services Act signed by Governor J.B. Pritzker, which took effect immediately.

The amendments to HB 2862 hold that temporary workers assigned to a third-party client for more than 90 days are entitled to wages and benefits—or the cash equivalent of benefits—equivalent to the lowest-paid employee at that client who performs the “same or substantially similar” work. If no such person exists, temp workers must be paid the same as the lowest-paid employee with the closest seniority level to the temp.

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Supreme Court Ruling on Religious Reasons

Small businesses and other employers are likely to find it more difficult to refuse requests for religious accommodations after the U.S. Supreme Court’s ruling in a recent case, Groff v. DeJoy, which concerned a postal worker who unsuccessfully requested to be off-the-clock every Sunday—when the post office still makes deliveries for Amazon—citing his Evangelical Christian faith.

Gerald Groff, a Pennsylvania man, nonetheless kept being put on the schedule for Sundays and disciplined for not working while his co-workers were stretched thin attempting to cover his routes. He resigned, sued, lost his case and lost again on appeal—but the Supreme Court’s unanimous ruling in June established a higher standard for employers who claimed they would face an “undue hardship” to make religious accommodations.

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You Can, But Should You?

To begin with, employers thinking about using AI such as ChatGPT during hiring and selection need to familiarize themselves with the technology at a conceptual level, and then look closely at—and understand well enough so they can explain to others—how AI integrates with their recruiting tools and practices.

A key piece of state legislation in Illinois pertaining to the use of AI is the Artificial Intelligence Video Interview Act (820 ILCS 42/1), which lays down various stipulations for the recording of video interviews and subsequent use of AI while evaluating said recordings.

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Aret Smart Contracts Smart?

Imagine if the paper on which your business’ contracts are written could somehow come to life and automatically send payments to your collectors—and receive payments from your debtors—at the appropriate times, as different provisions of said contract are triggered.

That’s more or less how electronic smart contracts, self-enforcing pieces of computer code set up to execute on the blockchain, more efficiently streamline certain processes. While sometimes legally enforceable, they have their drawbacks and will probably never completely replace traditional legal contracts.

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Are Non-Competes Really Enforceable?

Most non-compete agreements between employers and employees violate the National Labor Relations Act, according to a May 30 memo from Jennifer A. Abruzzo, general counsel for the National Labor Relations Board.  Such agreements, which bar employees from taking certain types of positions or running certain types of businesses after leaving their current positions, specifically run afoul of Sections 7 and 8(a)(1) of the act, she wrote.

Section 7 provides that employees have a “right to self-organization, to form, join or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” Abruzzo noted.  As such, under most non-competes, employers engage in an unfair labor practice that violates Section 8(a)(1) because they “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in [S]ection 7.”

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Crypto-300x251The pros and cons of accepting Bitcoin and other online payments for small businesses

What are the risks of small businesses taking payments in Bitcoin and other cryptocurrencies? What are the rewards?

But first, for the uninitiated, what are cryptocurrencies in the first place? They are decentralized digital exchange media that enable buyer-to-seller transactions to take place without a bank or other third-party processor involved. No matter how small your business is, you can take payments over this medium, as more than 30% of U.S. small businesses now do, according to data from Skynova. Bitcoin and Etherium are among the most commonly used.

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AI-300x251If the robots start taking over, you can’t necessarily expect the government to protect you.

That isn’t to say the public sector isn’t paying attention.  President Biden and Vice President Harris met recently with CEO’s of Microsoft, Alphabet Google’s and other leading artificial intelligence companies and pushed the message that AI products—particularly the generative AI found in trending apps like ChatGPT—must have safety protocols built in place before they’re released.

Among the current and potential risks that Biden, who is himself a ChatGPT user, warned about include those to individuals, society at large, and the country’s national security—ranging from violations of privacy, to skewed decisions about employment, to misinformation campaigns, to outright scams.

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