On August 12, Hirsch Roberts and Weinstein (HRW) published a client alert to inform members about the impact the “One Big Beautiful Bill” (OBBBA) may have on employers. The brief outlines changes to tax and benefit provisions, along with immigration enforcement and changes to Medicaid.
HRW stated that the tax provisions of the OBBBA are some of the most-anticipated changes for employers, which will include no taxes on overtime pay. Beginning in 2025, an employee who works “qualified overtime” is eligible to deduct up to $12,500 on their federal income taxes.
The deduction will only apply to overtime required under the Fair Labor Standards Act (FLSA) that is in excess of the individual’s regular rate (i.e., only the “half” of “time and a half”). State-mandated overtime or contractually required overtime that is not also required under the FLSA (for example, same day overtime in states such as California and Colorado, or under a collective bargaining agreement) does not count. This provision is temporary, only affecting tax years 2025 through 2028, and will need to be extended by Congress to continue.
Secondly, HRW outlined how the increased funding for immigration enforcement could impact employers. Multiple federal agencies such as Immigration and Customs Enforcement (ICE) and the Department of Homeland Security (DHS) will see an increase in funds, and this allocation is funding for additional ICE agents, specifically targeted toward ICE’s enforcement and deportation operations.
It is anticipated that this funding may dramatically increase the number of I-9 audits to which employers are subject as well as increased ICE raids at workplaces. Therefore, employers are recommended to be familiar with their and their employees’ rights and responsibilities, have clear procedures in place in case of an audit or raid, and conduct a check of their current compliance with immigration law.
Finally, the OBBBA adds minimum work requirements for those receiving Medicaid benefits, stated HRW. As a condition of eligibility for medical assistance, an individual must demonstrate “community engagement” as determined in accordance with criteria established by the Secretary of the Treasury through regulation.
Community engagement is defined to include up to 80 hours per month of work, community service, work programs, educational programs, or any combination of such activities. Community engagement can also be established by having a monthly income that is not less than the federal minimum wage multiplied by 80 or, for seasonal workers, an average monthly income over the preceding six months that is not less than 80 times the minimum wage.
The community engagement requirement applies to all individuals receiving Medicaid unless an exemption applies (for example, if the individual is receiving inpatient hospital services). These new requirements may result in increased human resources involvement when it comes to verifying or documenting employee hours. It could lead to more people seeking employment, especially for low-skill and lower-paying jobs, but on the flip side, could result in people losing coverage due to their inability to demonstrate compliance with the requirements.
To read the full client alert, please click here.
For more information or any additional questions regarding this information please click here for a full list of HRW team members.
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