HOT TOPICS FOR PEOs HEADING INTO 2025

Our industry is always navigating state and federal legislation, regardless of which party is in power. In 2024, the delayed processing of ERTC claims rightfully took center stage. Now, as we look ahead into 2025, there are additional issues we need to focus on to help our small business customers thrive.

While we will remain vigilant in our work on ERTC claims, here are a few top-of-mind areas for our federal advocacy next year:

TCJA & Section 174: In 2017, Congress passed the Tax Cuts and Jobs Act (TCJA), which changed tax rates for both individuals and corporations. Many of these 2017 changes expire at the end of 2025, and if Congress does not act, more than $4 trillion in tax increases will take effect in 2026. Some favorable TCJA provisions for small businesses have already expired—like the ability to immediately deduct R&D expenses rather than capitalizing and amortizing them over a period of years (Section 174).

20% Small Business Tax Deduction (Section 199A): This TCJA provision is also set to expire in 2025. Deductions like this one directly impact the community that we serve. It’s no secret how valuable this can be for small business owners, especially in terms of leveling the playing field for smaller family-owned businesses vs. big businesses paying corporate rates.

R&D Tax Credits: Arm-in-arm with the above efforts, we should look at how we can help expand small business access to R&D tax credits. These credits encourage continued innovation at small businesses and help put cash in their pockets so they can grow and scale.

At the end of August, NAPEO sent a letter to the Chair and Ranking Member of the House Ways and Means Committee and the Senate Finance Committee outlining three priorities: payroll tax credit liability, the modernization of aggregate taxpayer processing, and requesting statutory certainty that PEO clients are eligible for Section 199A. Looking ahead, we will continue to engage with key stakeholders in Washington, and I am optimistic about our ability to serve as a key voice for small businesses on a range of critical tax and policy issues in 2025.

On the state-level advocacy side, we’ll need to stay focused on statutorily ensuring our ability to offer our large group health plans to our small business customers. Thus far in 2024, we have realized success in this area in two states (Kansas and Ohio) and have made progress toward that goal in a third (Massachusetts). For the continued prosperity of our industry, we must continue to work towards state statutory certainty in other states like Maryland and Georgia.

It’s one thing to stay tuned in, it’s another to influence impact. With that, I encourage and invite your involvement not only on the government affairs committees within NAPEO but also participation in our Political Action Committee (PAC). We are never short on issues impacting our industry—our PAC is critical to our ability to effectively advocate for PEOs and small business issues. You can learn more about how to get involved here.