H.R. 4740: No Tax on Overtime for All Workers Act

The bill known as the "No Tax on Overtime for All Workers Act" aims to amend the Internal Revenue Code of 1986 to enable businesses to deduct certain overtime compensation payments from their taxable income. Here are the key components of the bill:

Overview of the Bill

This legislation proposes allowing a tax deduction for "qualified overtime compensation." It specifically defines qualified overtime compensation as:

• Any overtime pay mandated under section 7 of the Fair Labor Standards Act of 1938 that exceeds the regular rate of pay for the employee.
• Any extra compensation paid to an employee at a rate of at least one and a half times their regular pay for work that surpasses a standard number of hours within a specified timeframe, and that is based on an agreement made before the work commenced.

Details of Overtime Compensation

The bill identifies qualified overtime compensation in two main categories:

• Type A: Overtime pay required under existing labor laws that exceeds the regular pay rate.
• Type B: Payments made to employees for working beyond their standard hours, under an agreement that was established before the work period. This agreement must indicate that the standard work hours are at least 40 hours per week.

Effective Date

The proposed amendments to the tax code will take effect for taxable years starting after December 31, 2024.

Impact on Entities

This legislation is intended to provide employers with tax relief related to paying overtime wages, potentially encouraging businesses to offer more overtime opportunities by making it financially easier to do so.

Relevant Companies

None found