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What is the most important provision for employers in comprehensive immigration reform legislation?

 
 
 
 

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Issues

Health Care

Position: OPPOSED– SPECIFICALLY EMPLOYER MANDATES
Status: ENACTED

History
The Patient Protection and Affordable Care Act (PPACA) was signed into law on March 30, 2010. The new law imposes numerous requirements on both individuals and employers and will have a substantial impact on the franchising community.

On Jan. 19, 2011, the House of Representatives passed a bill repealing PPACA in its entirety. Less than a week later, the Senate voted on a similar proposal which failed to pass. Sen. Orrin Hatch (R-UT) and Reps. Charles Boustany Jr. (R-LA-07), Pat Tiberi (R-OH-12) and John Barrow (D-GA-12) have also introduced the American Job Protection Act (S. 20, H.R. 1744), which the NFA supports and which repeals the employer mandate provisions contained in PPACA.

As Congress continues to address health care, regulations are being issued to implement certain provisions of the law. Specific regulations regarding the employer mandates have yet to be released.

Summary
In regard to employer obligations, PPACA requires franchisees employing 50 or more “full-time equivalent employees” (FTEEs) either provide “minimum essential” health care coverage for those full-time employees or pay a penalty.

FTEEs include part-time employees and is based on a 30-hour-per-week schedule. For example, two part-time employees each working 15 hours per week is equivalent to one full-time employee. Once the 50 FTEE threshold is met, employers must provide minimum essential coverage, which is defined as (1) providing “essential health benefits”; (2) limiting cost sharing and (3) covering at least 60 percent of all costs (has an actuarial value of 60 percent).

While employers with less than 50 FTEEs each month are exempt from all requirements (and the majority of BURGER KING® franchisees have many more than 50 employees), those who meet the threshold must provide coverage or pay penalties for non-compliance. Penalties range from $2,000 per full-time employee per year (for employers who provide no coverage) to $3,000 for each employee who receives a tax credit for participating in the exchange over choosing the employer’s coverage. Note that the employer does not pay a penalty for his or her first 30 full-time employees.

Position

The NFA supports efforts to repeal PPACA in its entirety. Absent full repeal, the NFA supports repeal of the employer mandates contained in the law.


Immigration

Position: SUPPORT
Status: LEGISLATION INTRODUCED

Summary
The restaurant industry employs 12.8 million individuals; while immigration reform is of critical importance to the restaurant industry, comprehensive immigration reform will likely not be addressed until after the 2012 elections. Because of an increasing and conflicting number of state laws, however, leading members of Congress are focusing on the electronic verification of employees in the workforce, specifically through the E-Verify system. While the business community supports immigration reform, provisions such as federal preemption, employer protections, identity fraud protection and a more accurate reporting system are vital to ensure employers are not held responsible for policing their industries.

History
Last year, Sens. Charles Schumer (D-NY) and Lindsey Graham (R-SC) presented an outline of their ideas for tax reform and vowed to introduce comprehensive immigration legislation. But when Congress became engrossed in health care reform, immigration fell to the wayside. Since that time, several states, includingAlabama,Tennessee,Louisiana andNorth Carolina, have passed laws mandating the use of the E-Verify system, creating a patchwork of differing legal requirements across the country.

In early June 2011, Rep. Lamar Smith (R-TX-21) filed the Legal Workforce Act (H.R. 2164), a bill which would mandate use of the E-Verify system for all employers while preempting current state requirements. Creating a presumption of good faith, the Legal Workforce Act provides a safe harbor for employers who rely on the information received from the E-Verify system and does not require reverification of current employees. Finally, the bill allows for preverification of employees and creates a biometric pilot program to address the issue of identity theft in the employment verification process.

The NFA supports the use of an electronic verification system which is accurate, efficient, consistent and provides protections for employers who rely and act on the information received.

Position

The NFA supports the Legal Workforce Act without amendments, as it creates one federal requirement and addresses identity theft while protecting employers who rely on data received and act in good faith.


Regulatory Reform

Position: SUPPORT – SPECIFICALLY WITH REGARD TO NLRB
Status: LEGISLATION INTRODUCED

Summary

Each year, federal agencies issue approximately 4,000 new regulations at an annual cost of nearly $1.1 trillion, according to the U.S. Chamber of Commerce. This amount is roughly equivalent to allU.S.individual and corporate income taxes paid annually and represents a huge hidden tax on the American public.

The National Restaurant Association reports it costs business owners with fewer than 20 employees about $10,585 a year per employee to comply with federal regulations. While regulatory agencies issued 3,573 final rules in 2010, Congress passed and the president signed only 217 bills into law. The distribution of lawmaking power is being increasingly delegated to unelected bureaucrats at administrative agencies. Congress must address this so as to minimize the burdensome impact on small business owners.

History
Over the last several years, the National Labor Relations Board (NLRB) has been actively attempting to circumvent the legislative process by regulating the workplace. In 2011, they attempted to block Boeing from adding a new assembly plant inSouth Carolina, a right-to-work state as opposed to the heavily unionized state ofWashington.

Other unprecedented proposals include mandating posters emphasizing union organizing rights be posted in places of employment, initializing “quickie elections” for employee unionization and the re-evaluation of key labor rulings which recognize employer rights.

These recent actions are unprecedented and illustrate an overreaching by regulatory agencies to manage and influence the private sector with union activities.

Position

The NFA supports efforts to reduce federal regulations, particularly those that hamper job growth. Specifically, the NFA is concerned the NLRB has overstepped its bounds in introducing numerous proposals to regulate unionization of the workplace.


Rest Area Commercialization

Position: OPPOSE
Status: LEGISLATION INTRODUCED

Summary
When Congress created the Interstate Highway System in 1956, community leaders feared local businesses, jobs and tax bases would shrink because travelers would bypass their cities and towns. As a result, Congress passed a law which prohibits interstate rest areas built after Jan. 1, 1960 from offering commercial services such as food and fuel.

As a result of this law, there are now more than 97,000 businesses located less than a quarter of a mile from interstate highways at exit interchanges – directly marketing to highway travelers. For BURGER KING® alone, there are 1,400 restaurants located half a mile or less from an interstate highway exit. These businesses collectively employ nearly 2.2 million people and contributed more than $22.5 billion in state and local taxes in 2010.

Earlier this year, a number of states asked the federal government to overturn the law as a way to raise revenue. Repealing this law would allow state governments to sell food and fuel from highway rest areas and pull customers away from local businesses.

History
On June 20, 2011, Sen. Mark Kirk (R-IL) introduced the Lincoln Legacy Infrastructure Development Act (Lincoln Legacy Act - S. 1300). In October 2011, its companion (H.R. 2971) was introduced in the House of Representatives by Rep. Randy Hultgren (R-IL-14). The Lincoln Legacy Act allows states to request permission from the Department of Transportation (DOT) to commercialize rest areas, funneling five percent of the revenues from the commercialized rest areas back to DOT to fund activities related to public-private partnerships.

While the incorporation of the Lincoln Legacy Act into larger transportation and appropriations bills has been suggested, attempts have been unsuccessful. Although many members of Congress understand the concerns of businesses along the interstate highway system, they are under increasing pressure from states to change or roll back the law.

Rest area commercialization will transfer the point of sale away from a competitive environment, hurt existing interstate-based businesses and kill jobs. It will also impact businesses in nearby small towns and counties, which pay more than $600 million a year to local governments as a result of this income. This money helps fund schools, police and fire departments and other local services.

Position

The NFA opposes the Lincoln Legacy Infrastructure Development Act as it will destroy jobs while devastating franchisees who have developed their business models, invested and operated as a result of the current law.


Tax Reform

Position: SUPPORT
Status: LEGISLATION INTRODUCED

History
Both the White House and congressional leaders have stated that fundamental tax reform is a key legislative priority for the 112th Congress. While an overly complex tax code and ever-increasing tax burdens seem to fall on the backs of franchisees, many in Congress believe cutting tax credits will help solveAmerica’s debt problems. As a result, the extension of tax incentives, such as the Work Opportunity Tax Credit (WOTC) and the 15-year restaurant depreciation schedule, are being increasingly threatened. One alternative is to recommend lower corporate and individual tax rates.

Summary
WOTC: The Work Opportunity Tax Credit (WOTC) encourages employers to hire people who may traditionally experience more difficulty finding jobs. Employers who hire workers from targeted groups – including former welfare recipients – are eligible for a federal income tax credit of 40 percent of no greater than $6,000 of the qualifying employee’s wage—equivalent to up to $2,400 per year per employee. Currently, WOTC expires on Dec. 31, 2011. The NFA believes permanently extending WOTC would incent franchisees to hire more employees while helping more disadvantaged workers transition toward self-sufficiency.

DEPRECIATION: The federal tax code currently allows restaurant owners to depreciate original building costs, renovations and improvements over a 39.5-year schedule. Over the past few years, however, Congress has allowed for a temporary 15-year depreciation schedule for these costs, which convenience and grocery stores currently enjoy on a permanent basis. The NFA supports legislation (S. 687, H.R. 1265) which would make permanent the 15-year depreciation schedules for renovations, improvements and new construction. By shortening the depreciation schedule, Congress gives operators cash flow to reinvest in their businesses and to create more jobs.

LOWER TAX RATES: Keeping corporate and individual tax rates low is important for BURGER KING® franchisees. Whether organized as an S or C corporation, many small businesses are currently struggling to increase net profits. After-tax income is an important source of capital for increasing jobs and reinvesting in the business. As a result, lowering the tax rate for both individuals and corporations will create stability, increase jobs and reinvigorate the economy.

Position

The NFA supports a permanent 15-year depreciation schedule for restaurants as well as a permanent extension of the WOTC. Tax incentives like these and lowered corporate and individual tax rates would increase investment and stimulate job growth.


“Profit Per Employee" Metric

Position: Support
Status: Proposed

Summary

For years, legislators and regulators have used inconsistent metrics to determine whether a company should be classified as a “small business” in the eyes of the law. Measures often used, such as total number of employees and annual sales, fail to recognize the dramatic disparity between low-margin industries (such as restaurants and others in the service sector) and higher-profit business models in industries such as manufacturing, financial services and technology. A new metric that saves jobs and businesses is needed. Profit Per Employee (PPE) is a more equitable measurement of a “small business” because it measures an employer's ability to absorb the cost of a mandate without the need to cut jobs or close locations.

History
PPE is the best indicator of an employer’s ability to absorb the additional costs associated with legal mandates. By simply dividing a business’ net profit by its total number of employees (numbers already provided by employers to the Internal Revenue Service), PPE provides a simple and more accurate solution to help prevent job loss and encourage job creation.

New research shows the tremendous disparity between PPE in various industries. For example, in 2008, the oil and gas industry’s PPE was $308,686; the software industry averaged $127,200 and the banking industry’s PPE was $60,392. In comparison, employers in the restaurant industry averaged a mere $3,000 profit per employee. These drastically differing PPEs reflect the need to redefine “small businesses” by their ability to absorb the costs imposed rather than selecting an arbitrary number such as annual sales or number of employees.

Position

The NFA supports the PPE metric as it is the best indicator of an employer’s ability to absorb additional costs, provides a more consistent and fair standard and helps protect jobs.