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Executive Directors Message
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PIF TRAINING CANCELLED
STIMULUS AGREEMENT GETTING CLOSER
HAVE YOU BEEN VISITED BY THE REFORMULATED GASOLINE SURVEY ASSOCIATION?
STRENGTHEN U.I. FUND
BIDEN'S FAMILY BUSINESS TAX PLANS FOR AMERICA
SELF-SERVE GAS IN THE NEWS
TWO FINAL YEAR-END REMINDERS
PIF TRAINING CANCELLED
Unfortunately, due to the impending storm and State of Emergency declared by the Governor, we made the decision to cancel our PIF class scheduled to take place this Wednesday and Thursday. We do plan on rescheduling this class to a future date. If you have an employee in need of this certification, please email us at training@njgca.org to request future class dates.
STIMULUS
Last week we updated you on the current battle in D.C over another COVID stimulus package. The latest update as of this writing looks like Congress is getting closer to a bipartisan deal, as they must pass a new spending bill by Friday night at midnight in order to avoid government shutdown. The plan looks like it will include additional unemployment benefits and another round of direct stimulus payments in addition to another round of PPP loans for small businesses. Thank you to those of you who responded to our call to action to reach out to Congress and urge them to come to an agreement. I can tell you that these letters are meaningful coming from small business owners and legislators do consider the voices of their constituents, especially the small business community, when making important decisions. This is likely to be determined by this weekend.
REFORMULATED GASOLINE SURVEY ASSOCIATION
We were contacted this week by a member who had received a visit from a staffer of the Reformulated Gasoline Survey Association (RFGSA). This is an independent non-profit national group set up by the oil companies about 25 years ago to monitor compliance with a variety of fuel standards. While they are not part of the government, they do work closely with the federal Environmental Protection Agency (EPA). We contacted the association, and yes they are legit and not part of any kind of scam. If an employee of the group visits your location they will have a letter of introduction from the RFGSA and should also have a letter from the EPA verifying that they are there to collect samples of your fuel. Importantly, they are required to pay you for the fuel they take as a sample. Since it is not a part of the government they cannot fine a station which refuses to sell them a sample of fuel, however they will report it to the EPA--who are likely to then come and investigate to see if the fuel being sold does not meet regulations. The last thing anyone should want is the EPA to come down and start turning over rocks at your business. You can read more about this group at their website http://www.rfgsa.org.
U.I. FUND MEASURES
We have previously notified you that our Small Business Coalition has been pushing hard to get relief from a probable increase in taxes paid by employers for Unemployment Insurance. Last week the coalition sent a letter to Governor Murphy urging him to consider two measures that would strengthen the Unemployment Insurance Fund. First, he must sign into law A-4853/S-3011, which would provide relief to employers who have been struggling throughout the pandemic by spanning the $1 billion in increased payroll taxes NJ employers are expecting to pay in 2021 over a three-year period. Governor Murphy could also dedicate any potentially unused CARES Act funding to the Unemployment Insurance Trust Fund to alleviate these tax increases. This must be done before the December 30th deadline, so immediate action is needed. To read the full letter sent to the governor, CLICK HERE.
FAMILY BUSINESS TAX
Thank you to our friends at SSDA for the following analysis of President-elect Biden's plans for how family businesses are taxed once he is in office. I felt it was important to share the entire analysis with you to see what we will be up against with the new president's administration:
Joe Biden's Death Tax Plan:
Biden would return to 2009 law for the death tax ($3.5 million exemption and 45% rate vs. $11.7 exemption for individuals/$23.4 million for couples in 2021 and 40% rate). According to the JCT, this change would more than triple the number of taxpayers currently subject to the death tax. Joe Biden's other proposed tax increases would compound the financial and compliance burden on next generation family business owners.
Step up in basis repeal
Joe Biden has proposed repealing the step up in basis provision of the law. ATR has catalogued the President-elect advocating for eliminating step up on the stump several times. As an example, consider a family distribution business started with no basis that has grown to a $50 million business with locations and jobs across several regions. If step up in basis were repealed, upon the sale of the business, the next generation of ownership would owe capital gains taxes on the full $50 million in appreciation throughout the lifetime of the business, instead of, as current law calls for, having the basis "stepped-up" to its current fair market value on the date of the previous owner's passing. Stepping up the basis of property protects next generation business owners from the potential double whammy of paying a 40% death tax and then another large capital gains tax upon the sale or future passing on of the business.
Capital Gains Due at Death
Death is not predictable in the same way a planned sale is which makes the estate tax hard to plan for and pay. When a business owner passes away, under the Biden plan, inheritors would now owe capital gains taxes as if a profitable sale of the family business had occurred upon the owner's death in addition to death taxes. This would add yet another layer of complexity to the tax code for family businesses at the worst possible time.
Taxing Capital Gains as Ordinary Income
The potential tax increase on family businesses will be compounded by the Biden plan to tax capital gains as ordinary income. A part owner of a large family business making over $1 million in income would potentially have to pay the ordinary income tax rate on a small business they inherited at death versus the capital gains tax rate. Let's step back and consider an example with all of the above factors worked in.
Example, Current Law vs. Biden tax plans:
John is second generation part-owner of a family distribution company valued at $50 million, started by his father with no basis. The company makes an annual profit of $1 million per year with taxes paid by John and his father.
Let's consider a scenario where John's father, the majority owner of this company, dies in 2021 under current law vs. under the Biden tax plan. John who has been running the family business for his father is set to inherit the company, with the goal of keeping it running, protecting jobs, and staving off a fire-sale to a publicly traded multi-national company.
John's tax obligations under current law, post Trump tax cuts:
If John's father used the full 2021 estate tax exemption with spousal portability of $23.4 million, about half of the business would be protected from death taxes. John while attempting to keep workers employed and the business running would still need to come up with $10 million for death taxes (40% estate tax rate on roughly $25 million over current exemption). Upon paying this huge tax bill to Uncle Sam, John would inherit the company and have the basis of the company "stepped up" upon inheritance to its fair market value of $50 million. No additional capital gains or income taxes would be due by the estate or heir. In some states an additional state estate/inheritance tax may be due.
Assets left after taxes: Roughly $40 million
John's tax obligations after the potential Biden tax increases:
Under Joe Biden's death tax plan, ($3.5 million exemption and 45% rate, with no spousal portability), John's goal of preserving jobs in the family business becomes much more difficult. Before paying the death tax, John must first pay capital gains taxes due at death on the $50 million business. Capital gains for taxpayers making more than $1 million would be taxed at ordinary income rates, a proposed 39.6% under the Biden tax plan. Additionally, the 3.8% net investment income tax created by the Affordable Care Act would likely still apply, increasing the tax rate to 43.4%. Since our hypothetical next generation business owner John now makes $1 million as the sole owner of the family business according to pass-through rules, his inheritance of the business is now taxed at the maximum income tax rate.
Business value: $50 million
Capital gains tax rate: 43.4%
Capital gains tax owed: $21.7 million
After paying the capital gains due at death, John must also pay the death tax on the remaining assets in the estate. Instead of coming up with $10 million under current law, John must now pay Uncle Sam an additional $11.2 million in death taxes under the Biden tax plan in addition to $21.7 million for capital gains taxes.
Value of remaining estate: $28.3 million
Estate tax exemption: $3.5 million
Taxable estate: $24.8 million
Estate tax rate: 45%
Death tax owed: $11.2 million
Taken altogether the Biden tax hikes would shrink the $50 million business all the way down to $17.1 million versus $40 million under current law. That's not factoring in state transfer taxes.
Under a fully implemented Biden tax plan, John is having to at a minimum shut down branches, sell assets, and lay off employees to keep the business running. For many family businesses operating on tight margins, coming up with any spare cash is a struggle and that extreme level of taxation would be nearly impossible to overcome. That's a look at what's at stake for the treatment of family businesses under a possible Biden administration tax plan.
After Senate control is decided on January 5th, SSDA-AT will set its legislative priorities for the 117th Congress we'll be working with our Senate partners to oppose any roll back of the Tax Cuts and Jobs Act proposed by the Biden administration.
We expect 2021 to be an active year for the death tax, step up in basis, and protecting other technical changes relating to estate planning so please stay tuned for more frequent updates as we gear up to protect family businesses from these policies.
SELF-SERVE
I'm not sure what sparked the interest at 101.5, but coincidentally two of their talk show hosts chose to write opinion pieces on the self-serve gas issue within days of each other this week. Both articles mention NJGCA and our point of view that orange cones blocking pumps not in use due to lack of employees can be used by customers to pump their own gas and that we should allow our customers to choose if they want full- or self-service gas. You can read Jeff Deminski's article HERE and Steve Trevelise's article HERE.
TWO FINAL YEAR-END REMINDERS
We are running out of time in 2020 and newsletters to provide reminders to you, so consider these our final two reminders to those of you the following applies to:
On January 1st, 2021 the state minimum wage will increase to $12 an hour. For a business with fewer than six employees, the rate increases to $11.10 an hour. Remember to inform your payroll company BEFORE January 1st of any necessary changes, as they will not do this automatically.
The deadline for decommissioning your Stage II Vacuum Assist Vapor Recovery Systems is December 23rd, 2020. Some of you may have received an email from us regarding this. If you have received this letter and have not taken action, make sure you contact us immediately if you are in need of assistance.
Be Well -
Sal Risalvato
Executive Director
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Training Class Schedule
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All classes held at NJGCA HQ -- 4900 Route 33 West, Wall Township, NJ 07753
Contact Nick De Palma at Nick@njgca.org to inquire about additional class dates |
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News Around The State
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12/14/20
If Gas Goes Up Again, and It Will, We Need To Pump Our Own (Opinion)
Gov. Phil Murphy, who never met a tax he didn't like, has to decide along with other governors in the Northeast and Mid-Atlantic whether to sign on for a new regional cap-and-trade program aimed at reducing transportation pollution in part by taxing it. Politicians believe they can tax their way out of all problems. After all, it's not their money we're talking about, it's yours. . . What would make me breathe easier is to be able to pump my own gas. According to Sal Risalvato, who's the executive director of the New Jersey Gasoline and Convenience Automotive Association, not only could we save money, but wouldn't even need a gas tax. "At the pump, gas today, based on the cost of labor, would be about 15 cents (a gallon less)," Risalvato said on my show back in October. "And I say in some instances 20 cents a gallon less. So if you went to a self-serve pump, you'd be saving 15 or 20 cents a gallon."
12/14/20
Murphy USA to Buy QuickChek for $645 Million
Murphy USA, which operates gas stations under the Murphy USA and Murphy Express brands, has agreed to acquire family-owned QuickChek Corp. and its 157 c-stores in an all-cash deal for $645 million, the companies announced today. QuickChek, founded in 1967 and based in Whitehouse Station, N.J., is a family-owned company that operates c-stores, including 89 locations with fuel, throughout New Jersey, New York's Hudson Valley and Long Island. In October, QuickChek was named among the top 10 in USA Today's Best Gas Station Brand list. In August, the c-store announced a delivery deal with DoorDash to deliver its complete foodservice menu and provide contactless payment to customers in New Jersey and New York.
12/11/20
I'm Pro-Choice (On Self-Serve Gas)
Now when you see this sort of thing you might think it's because those pumps have a separate underground tank which ran dry. That's not the case. As explained on our show by Sal Risalvato, executive director of the NJGCA (they represent independent gas station owners), the dreaded orange cones are almost always out for one reason only. They didn't have enough manpower to tend to all the islands on a given shift. It's the same as at a restaurant when you're still on the wait list and you complain that you see empty tables only to have it explained to you that servers called out and they're short a person or two. Why am I bringing this up? Well, because I'm pro-choice. I believe in self-serve gas. But it doesn't have to be all or nothing. I believe (and so does Sal Risalvato, by the way) that you can have both full-serve and self-serve at the same gas station.
12/11/20
California Invests in Hydrogen Fuel Infrastructure
This week, the California Energy Commission (CEC) approved a plan to invest as much as $115 million to increase the number of fueling stations in the state that support hydrogen fuel cell electric vehicles (FCEVs). The funding nearly doubles the state's investments to date and will help California nearly achieve its goal to deploy 200 public hydrogen fueling stations, the CEC said. The plan also supports Gov. Gavin Newsom's executive order phasing out the sale of new gasoline-powered passenger vehicles by 2035 by providing essential infrastructure to meet the fueling needs of the increasing number of zero-emission vehicles (ZEV) anticipated on the road in the next decade. While battery electric vehicles (BEV) are the most common ZEV in the state, more than 8,000 FCEVs have also been leased or sold.
12/11/20
NJ Top Insurer Horizon Built On 1932 Rules; Here's What A Change Would Mean For You
Horizon Blue Cross Blue Shield of New Jersey, stifled in an attempt a year ago to change its corporate structure, is trying again, saying it needs more flexibility to compete in the rapidly changing healthcare industry. Bills introduced in the state Senate and Assembly would allow the not-for-profit insurance company to convert to a not-for-profit mutual holding company that is owned by its members. Horizon said the move would both help it innovate and protect its long-standing mission to serve the community - a claim met by skepticism by consumer advocates. Newark-based Horizon is New Jersey's biggest health insurance company with 3.6 million members. In 2018, the insurer had $13 billion in revenue and 5,300 employees. The proposal marks the latest bid by Horizon to unbind itself from rules that it says are outdated. The company was set up as a nonprofit in 1932 and considered the insurer of last resort, agreeing to cover New Jerseyans who otherwise couldn't get insurance in the marketplace.
12/10/20
COVID-19 to Disrupt Consumer Behaviors Through 2025
The COVID-19 pandemic will have a long-term impact on the retail sector, disrupting consumer shopping behaviors through 2025, according to a new report from Edge by Ascential. The report, "Future of Retail Disruption," highlights factors that will disrupt long-established structures and practices within the retail sector, and Edge by Ascential analysts recommend ways retailers can address those changes. Changes include an increase in online shopping and convenience, increased demand for healthy options and new technology in stores.
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Energy Information Agency Weekly Retail Gasoline Prices
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Each week, the Energy Information Administration publishes a list of average gasoline prices for the previous three weeks. NJGCA will begin including this list with the Weekly Road Warrior. Remember, these prices are reflective of self-serve everywhere except NJ.
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Classifieds: For Sale and Help Wanted Ads
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Parts For Sale: Incon TS-1000 tank monitor works well just taken out of service. Printer is aprox 2 months old. Also, Incon 8, tank probes. System replaced because on an Exxon upgrade. Call John Twin Towers Exxon (201) 224-8444
 
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