APPLIES TO As Indicated

EFFECTIVE As Indicated

QUESTIONS? Contact HR On-Call (888) 378-2456

Quick Look Tax deduction for employee tips up to $25,000 for tax years 2025 through 2028. Tax deduction for employee overtime wages up to $12,500 for single filers, $25,000 for joint filers for tax years 2025 through 2028. Calculation options expand for the paid family and medical leave tax credit for businesses.

Discussion

The “Big Beautiful Bill” was signed by the President on July 4^th. Significant changes impacting employers relate to employee deductions for tips and overtime and expanded paid family and medical leave tax credit. The key points are summarized as follows.

 

Tip Tax Deduction and Credit Extension

 

Tipped employees are eligible for a tax deduction on tips received up to $25,000 annually. The deduction is subject to incremental reduction if the employee’s income exceeds $150,000 for individual filers/$300,000 for joint filers. Tips received must be reported on employee W-2s in order to take advantage of the tax deduction. If the employee is married, they must file a joint return to take advantage of the tax deduction.

The term “qualified tips” means cash tips, paid via cash or charge or received through tip sharing, in an occupation that customarily receives tips, such as food servers, bartenders, hotel staff, and beauty services. Tips must be paid voluntarily by the customer and cannot be in certain industries, like health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, and brokerage services. A comprehensive list of qualifying tipped occupations is expected to be published by the Department of Treasury by October 2. The tip tax deduction is available for tax years 2025 through 2028.

Additionally, the FICA Tip Credit is extended to beauty service employers, including barbering and hair care, nail care, esthetics, and body and spa treatments. Section 45B of the Internal Revenue Code allows employers of employees engaged in specified food and beverage services (now including beauty services) to reduce their taxable business income by claiming a tax credit for a portion of the Social Security and Medicare (FICA) taxes they pay on tips that employees receive directly from customers.

Overtime Tax Deduction

 

Employees are allowed a tax deduction, up to $12,500 for individual filers/$25,000 for joint filers, for overtime wages reported on employee W-2s. The deduction is subject to incremental reduction if the employee’s income exceeds $150,000 for individual filers/$300,000 for joint filers. If the employee is married, they must file a joint return to take advantage of the tax deduction.

 

“Qualified overtime compensation” means overtime compensation paid to an individual as required under the Fair Labor Standards Act (FLSA). It only applies to the amount in excess of the regular rate at which the individual is employed. For purposes of the FLSA, this refers to overtime pay provided for time worked over 40 hours in a week and only covers the overtime pay portion which is 0.5 times the regular hourly rate. The overtime deduction does not include qualified tips. The overtime tax deduction is available for tax years 2025 through 2028.

 

PFML Tax Credit

 

Internal Revenue Code § 45S provides a tax credit for employers who provide paid family and medical leave (PFML) to qualifying employees. The PFML tax credit historically applied to wages paid in tax years 2018 to 2025.

 

For tax years beginning in 2026, the Bill expands the credit calculation, at the employer’s choice, to either the percentage of wages paid to qualifying employees while they’re on PFML leave, or a percentage of premiums paid during the taxable year for the employer’s PFML insurance policy, if applicable. For the second option, the payment rate under the insurance policy may be used regardless of whether any qualifying employees were on PFML leave during the taxable year.

 

Additional revisions were made to the aggregation rule defining a “single employer” for purposes of receiving the tax credit and providing an exemption to the requirement to have a written leave policy in order to claim the tax credit. The Bill also expands the definition of “qualifying employees” from those who have been employed for at least a year, to also include, at the employer’s option, employees who have been employed for “not less than 6 months.” Qualified employees must also be employed for at least 20 hours per week.

 

Other Business Tax Credits

 

Additional tax credits were expanded or modified for things like business meals, business property, and domestic research. Employers should review the changes with their tax professional.

 

Action Items

1. Review the Bill here.
2. Separately track tips in payroll to prepare for reporting on W-2s.
3. Separately track federal overtime amounts subject to deduction to prepare for reporting on W-2s.
4. Consult with a tax professional on expanded or modified business tax credits.

 

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase

APPLIES TO All Employers

EFFECTIVE As Indicated

QUESTIONS? Contact HR On-Call (888) 378-2456

Quick Look On June 27, 2025, the United States Supreme Court ruled that lower courts who issued nationwide injunctions against the Executive Order limiting birthright citizenship exceeded their authority. F, M, and J nonimmigrant visas applicants must set their social media privacy settings to “public” for enhanced screening and vetting. On June 9, 2025, USCIS instructed its officers to proceed with adjudicating “all pending benefits request filed by aliens who are or were paroled into the United States under Uniting for Ukraine (U4U), the parole processes for Cubans, Haitians, Nicaraguans, and Venezuelans (CHNV Parole Program), and Family Reunification Parole (FRP) processes to a final agency action.” On June 17, 2025, DHS began sending termination notices via email for Cubans, Haitians, Nicaraguans, and Venezuelans under the CHNV Parole Program. On July 1, 2025, USCIS’s termination of the TPS program for Haitians was blocked by a federal district court.

Discussion

Changes to the immigration status of United States workforce continue to occur at the federal level. Below is a summary of the most recent developments.

 

U.S. Supreme Court Restricts Application of Injunctions on Executive Order Limiting Birthright Citizenship

 

On June 27, 2025, the United States Supreme Court ruled that lower courts who issued nationwide injunctions against the Executive Order limiting birthright citizenship exceeded their authority. Executive Order No. 14160, issued January 20, 2025, sought to remove birthright citizenship for those born to mothers unlawfully present in the U.S. or on temporary visas unless the child’s father is a lawful permanent resident or U.S. citizen, effective February 19, 2025. Legal challenges immediately followed, with plaintiffs arguing that the Executive Order violates the Fourteenth Amendment’s Citizenship Clause and Nationality Act of 1940. Several lower courts issued nationwide injunctions against the implementation of the Executive Order while the underlying cases worked their way through the judicial process.

 

In reaching its ruling, the Court looked to whether a universal injunction is justified as an exercise of equitable authority. First, the Judiciary Act of 1789 did not grant federal courts this power. Citing precedence, the Court “has held that the statutory grant encompasses only those sorts of equitable remedies ‘traditionally accorded by courts of equity’ at our country’s inception.” Second, universal injunctions were also not similar to any relief available in the Court of Equity in England at the time of the U.S.’s founding. Early U.S. federal court cases did not deviate from the English approach and also only issued relief benefitting the named plaintiff. As a result, the Executive Order cannot be enforced against the specific plaintiffs (e.g., states, organizations and individuals) who have brought challenges, but it may be applied elsewhere while pending further action.

 

In its ruling, the Court made clear that it was not addressing the constitutionality of the Executive Order, and only whether the nationwide injunctions were broader than necessary and exceeded the lower courts’ authority. Employers will need to continue monitoring the status of the underlying cases at issue as the constitutionality of the Executive Order is addressed during the course of litigation.

 

Social Media Screening for Student and Exchange Visitor Visas

 

After temporarily pausing processing of F, M, and J nonimmigrant visas, the U.S. Department of State released new guidance on its enhanced social media screening and vetting. F and M visas are student visas while J visas are exchange visas, typically issued to visiting teachers or professors at institutions of higher education. The Announcement of Expanded Screening and Vetting for Visa Applicants issued June 18, 2025, instructs these specific visa applicants to set their social media privacy settings to “public” for screening based on national security interests. The cited reason is to make sure the visa process does not approve for admission those who intend to “harm Americans and our national interests, and that all applicants credibly establish their eligibility for the visa sought, including that they intend to engage in activities consistent with the terms for their admission.” The guidance also states that previously paused visa application interviews will also resume scheduling.

 

Administrative Pause Lifted for Ukraine and FRP Parolees with Termination Notices for CHNV Parole Program

 

On June 9, 2025, USCIS instructed its officers to proceed with adjudicating “all pending benefits request filed by aliens who are or were paroled into the United States under Uniting for Ukraine (U4U), the parole processes for Cubans, Haitians, Nicaraguans, and Venezuelans (CHNV Parole Program), and Family Reunification Parole (FRP) processes to a final agency action.” This instruction complies with a court order from the U.S. District Court for the District of Massachusetts that required USCIS to resume nationwide processing of immigration benefits applications from the above-named program beneficiaries. This means applicants can receive additional benefits like work permits, adjustment of status, TPS designation, asylum approval, or continued maintenance of parole status, pending application approval. However, on  June 17, 2025, DHS began sending termination notices via email for Cubans, Haitians, Nicaraguans, and Venezuelans under the CHNV Parole Program. These notices revoke parole status and work authorization effective immediately. Employers enrolled in E-Verify will receive notification after logging into their accounts and generating a Status Change Report. If an employment authorization document (EAD) was revoked, employers should use Supplement B to reverify employees who can provide another valid EAD. This is in line with a May 30, 2025 ruling from the U.S. Supreme Court in Noem v. Svitlana Doe lifting the U.S. District Court for the District of Massachusetts’s April 14, 2025 preliminary injunction that blocked termination of the CHNV program.

 

Termination of Haiti TPS Protections Blocked

 

On July 1, 2025, USCIS published the Termination of the Designation of Haiti for Temporary Protected Status. Citing a review of country conditions, USCIS determined Haiti no longer continues to meet the conditions for Temporary Protected Status (TPS) designation and will terminate TPS as of September 2, 2025 instead of the February 3, 2026 extension date provided by the Biden Administration. There was an immediate legal challenge, and also on July 1, the U.S. District Court for the Eastern District of New York temporarily blocked the termination. The court stated that the Secretary of the Department of Homeland Security exceeded her authority by announcing early termination of the program. This ruling is expected to be appealed.

 

Action Items

1. Reverify work authorization for Form I-9 for expiring or expired EADs.
2. Review business operations for impacts due to delays caused by enhanced screening and vetting of visa applicants.
3. Consult with legal counsel regarding workers with expired or terminated work authorization.

 

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase

APPLIES TO Qualified Religious Employers

EFFECTIVE June 5, 2025

QUESTIONS? Contact HR On-Call (888) 378-2456

Quick Look A state’s unemployment tax exemption for religious organizations cannot favor one religion over another.

Discussion

In Catholic Charities Bureau Inc. v. Wisconsin Labor and Industry Review Commission, the U.S. Supreme Court said that a state’s exemption from unemployment taxes must be neutrally applied to religious organizations.

 

There, the Wisconsin unemployment insurance tax exempted organizations “operated primarily for religious purposes” that are controlled by a church. The Catholic Charities Bureau (CCB), a nonprofit organization affiliated with the Roman Catholic Diocese of Superior, Wisconsin, was denied an exemption from the state tax because its activities were not “primarily for religious purposes,” namely it did not proselytize and its services were not limited to Catholics. The Wisconsin Supreme Court upheld exclusion of the organization from the state tax exemption. Even though it recognized that the organization’s charitable works were religiously motivated, it failed to account for the fact that the organization’s faith barred it from satisfying the proselytization and limited service criteria uniquely imposed by the state.

 

The U.S. Supreme Court said that the state unemployment law violated the First Amendment of the U.S. Constitution as applied. Specifically, government laws cannot favor some religions over others. Wisconsin’s denial of the tax exemption imposed a “denominational preference by differentiating between religions based on theological lines.” Religious choices around proselytization and whether to serve only co-religionists are “fundamentally theological choices driven by religious doctrine.” Ultimately, the Court said that a law that differentiates between religions along theological lines is textbook denominational discrimination. Further, the reason for denying the exemption under Wisconsin law was not narrowly tailored to further a compelling government interest.

 

In its decision, the Supreme Court also noted that the Wisconsin tax exemption parallels the Federal Unemployment Tax Act. Although the federal version of the law was not at issue here, this ruling could be expanded upon by future courts to apply to other government tax exemption laws.

 

Action Items

1. Review tax exemptions with legal counsel for appropriate application.

 

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase

APPLIES TO All Federal Contractors

EFFECTIVE June 27, 2025

QUESTIONS? Contact HR On-Call (888) 378-2456

Quick Look The Office of Federal Contract Compliance Programs’ (OFCCP) Director Catherine Eschbach sent an email to all federal government contractors inviting them to voluntarily provide information about their efforts to wind down their affirmative action programs operating under Executive Order 11246.

Discussion

The Office of Federal Contract Compliance Programs’ (OFCCP) Director Catherine Eschbach sent an email to all federal government contractors inviting them to voluntarily “provide information about their efforts to wind down compliance with the [Executive Order] 11246 regulatory scheme and ensure full compliance with the Nation’s non-discrimination laws.” Executive Order 11246, issued by President Johnson in 1965, prohibited discrimination based on race, color, religion, sex and national origin and required federal contractors to maintain affirmative action plans to ensure equal employment opportunities. This Executive Order was revoked on January 22, 2025 by President Trump’s Executive Order 14173, which eliminated the requirement for affirmative action plans for women and minorities and directed the OFCCP to cease enforcement of Executive Order 11246.

 

The purpose of the Director’s email is for federal contractors to provide an explanation of how they are complying with the requirement to cease their affirmative action plans for women and minorities operating under the previous Executive Order 11246. However, the submission of this information is entirely voluntary. The email also does not state what the OFCCP intends to do with this information or why a federal contractor would want to voluntarily comply. Federal contractors who want to comply with the request should consult with their legal counsel prior to providing any information to the OFCCP.

 

It is important to note that Executive Order 14173 does not change federal contractor requirements to comply with statutory-based mandatory affirmative action plans for veterans and those with disabilities. The Director’s inquiry also does not address this requirement.

 

Action Items

1. Consult with legal counsel prior to providing any information to the OFCCP.

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase

APPLIES TO All Employers with Employees in IL, IN, and WI

EFFECTIVE June 10, 2025

QUESTIONS? Contact HR On-Call (888) 378-2456

Quick Look A federal court upheld prison sentences for two managers who falsified safety records, highlighting that misleading OSHA or other administrative agencies can lead to criminal charges.

Discussion

On June 10, 2025, in U.S. v. Derrick Clark and Shawn Mesner, the Seventh Circuit U.S. Court of Appeals upheld the criminal convictions of two managers at Didion Milling following a fatal 2017 explosion at the company’s Wisconsin facility. The ruling serves as a warning to employers that misconduct in accurate recordkeeping and during safety inspections can result in criminal prosecution, prison time, and substantial financial penalties.

 

In this case, the appellate court affirmed the convictions of the company’s former VP of Operations and former Food Safety Superintendent, who previously received prison sentences for knowingly submitting false environmental compliance documents, aiding in the submission of falsified OSHA records, and falsifying sanitation logs and misleading auditors. The circumstances centered around Didion’s dust collection tracking and sanitation schedule. Specifically, evidence was presented at trial indicating that Derrick Clark, VP of Operations, had received emails warning about inaccurate recordkeeping and truthful reporting, but had still signed off on reports with falsified logs that were written by others. There was also testimony that he helped another employee to remove information from logs that were subject to an audit and failed to disclose the removed information during the agency audit. Additionally, evidence was presented that Shawn Mesner, Food Safety Superintendent, falsified safety logs and misled auditors. The convictions were challenged on appeal on mostly evidentiary grounds that ultimately did not succeed.

 

This case serves as a powerful reminder that OSHA inspections can have serious legal consequences beyond administrative penalties. If investigators uncover falsified records, obstruction, or deceptive conduct, the matter can quickly escalate into a criminal prosecution by the Department of Justice. Supervisors and managers are not immune from liability, meaning those who sign off on compliance documents or direct others in recordkeeping can face criminal charges, even if they did not personally falsify the records. Simply remaining silent in the face of known falsehoods may be enough to support a conviction for aiding and abetting.

 

Action Items

1. Implement regular safety and compliance training for supervisors and managers.
2. Conduct periodic internal audits of company records.
3. Consult with legal counsel on identified issues with compliance documents.

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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase