Legal/Legislative/Regulatory Updates

The IRS Issues Legal Advice Regarding Customer Loyalty and Rewards Programs

George Delta, IFI’s Legal Counsel, has provided his bi-monthly Legal Update for IFI members. The topic covered relates to customer loyalty and rewards programs, so if you sell, offer or manage those types of programs, George’s update offers some valuable information for you, your customers and especially the accounting professionals you rely on.

The Associate Chief Counsel of the IRS has recently issued Legal Advice setting forth its position that an accrual method taxpayer cannot account for the costs of redeeming points in its “hybrid coupon” customer rewards program under the Treasury rules that apply to “premium” coupons.  This legal advice memorandum is important to companies that operate loyalty programs, because if their programs can meet the definition of a “premium” coupon, they would be allowed to deduct their reasonable estimated redemption costs from gross receipts with respect to sales with which they issue points.  (The regulations in question are old, and they refer to trading stamps or premium coupons instead of their current equivalent, points).

In effect, if you can get the points issued under your loyalty program to meet the definitional requirements of “premium coupons,” you can estimate and currently deduct your redemption costs.  Otherwise, you can only deduct the cost of points as customers redeem them.  Deduction upon redemption is the normal rule, so the IRS wants to limit the scope of what constitutes a “premium coupon.”

For a more complete explanation of the IRS advice on rewards programs, click here.

Federation Response to OSHA Safety and Health Program Management Guidelines

The Occupational Safety and Health Administration (“OSHA”) has issued a revised draft of OSHA Safety and Health Program Management Guidelines. OSHA invited public comment to their proposed revisions and the Incentive Federation and some Federation members have written to OSHA to express opposition to OSHA’s criticism of safety incentive programs. The Draft Guidelines state in a note that, “Incentive programs for workers or managers that tie performance evaluations, compensation, or rewards to low injury and illness rates can discourage injury and illness reporting. Point systems that penalize workers for reporting injuries, illnesses, or other safety or health concerns have the same effect, as can mandatory drug testing after reporting injuries. Effective safety and health programs recognize positive safety and health activities, such as reporting hazardous conditions or suggesting safer work procedures.” To see the Incentive Federation’s response click here

2016 1st Quarter Legislative Update

The Incentive Federation’s 2016 Quarterly Legislative Update is now available for your review. Learn the latest developments and implications about a long running legal battle regarding a Colorado law that addresses sales tax to be paid and collected by out-of-sate retailers. Click here