Relocation

Taxing Mobility

How the Tax Cuts and Jobs Act is hurting relocation programs.

Sarah Fister Gale

L

ast year, President Donald Trump signed into law a sweeping corporate tax cut that has upended relocation budgets for many companies.

The Tax Cuts and Jobs Act, which Congress passed in December 2017, eliminated tax exemptions for many costly aspects of employee relocation programs including the shipment of household goods, storage and final moving expenses. “Anything other than a home sale is now taxable,” noted Cindy Madden, director of Cartus Global Consulting in Danbury, Connecticut.

70%
of companies say immigration is a bigger problem than last year, due in part to visa complexity and political influences.

That translates to significant extra cost, either for the employee or the employer or both. The loss of these exemptions can add thousands of dollars to moving expenses. Even when companies cover the added cost through “tax protection,” the government views this as additional income, which could boost employees into a new tax bracket, Madden said.

The change led to a lot of chaos at the start of the year as relocation managers tried to figure out what impact it would have on their programs and how to deal with it. Most companies decided to cover the added taxes for 2018 but plan to revisit the decision in 2019, she said. “Things are calm for now, but we expect a lot of changes next year.”

Relocation experts expect to see some upheaval in the types of packages offered and the scope of costs covered as companies look for ways to manage the tax burden and costs in general. The changes will vary depending on who’s moving and why, said Steve Nurney, a partner and relocation expert at consultancy Mercer in Norwalk, Connecticut.

70%
of companies say immigration is a bigger problem than last year, due in part to visa complexity and political influences.

That translates to significant extra cost, either for the employee or the employer or both. The loss of these exemptions can add thousands of dollars to moving expenses. Even when companies cover the added cost through “tax protection,” the government views this as additional income, which could boost employees into a new tax bracket, Madden said.

The change led to a lot of chaos at the start of the year as relocation managers tried to figure out what impact it would have on their programs and how to deal with it. Most companies decided to cover the added taxes for 2018 but plan to revisit the decision in 2019, she said. “Things are calm for now, but we expect a lot of changes next year.”

Relocation experts expect to see some upheaval in the types of packages offered and the scope of costs covered as companies look for ways to manage the tax burden and costs in general. The changes will vary depending on who’s moving and why, said Steve Nurney, a partner and relocation expert at consultancy Mercer in Norwalk, Connecticut.

“Some companies will go to lump sum programs, especially for early career employees, because there is longer a benefit to providing deductible services,” he said. They may also consider temporary assignments and/or remote work opportunities to give lower level employees an opportunity to take on stretch assignments with the added cost and disruption of a move.

‘ANYTHING OTHER THAN A HOME SALE IS NOW TAXABLE.’

— CINDY MADDEN, CARTUS GLOBAL

Others are likely to reduce the overall number of relocations, focusing their investments on higher level executives and those on a fast-track career path.

“Some companies feel like they need to offer certain employees these experiences, and they are willing to pay more to ensure their success,” he said. Even if that means offering fewer relocations overall.

“Capped moves” may be another trend to re-emerge, suggested Madden. Instead of giving lump sums of cash to employees to spend as they like, these programs cap relocation spending to a certain limit, but the spending is doled out through services offered with the company picking up the tab. Companies also usually provide advice on what services will fit their budget. It’s a way to offer flexible options with more guidance, though Madden argues than these programs can be difficult to manage as they are based on cost estimates. If employees underestimate how much they need to move, or it takes longer to find a home, they can be left with unexpected bills, she said. “It’s a lot of work with no guarantees.”

They Need Help

With so many options to choose from, companies will rely on their vendors to help them figure out how to adapt their flexible service offerings and manage costs while still giving employees the support they need. That will likely include more online consulting tools and calculators to help employees make better choices, according to Madden. “Employers want every relocation experience to be positive, and providing more time with consultants will help them make the best use of that money.”

42%
of companies say tax compliance related to mobility has become a larger concern.

Employers are also looking for ways to provide more information about relocation opportunities and mobility program to employees. A recent survey from Wakefield Research found that more than 40 percent of professionals weren’t even sure if their companies had relocation opportunities (even though 99 percent of them do). “Companies need to do a better job of communicating with employees about these programs,” Nurney said. “In today’s world of information, everyone expects full transparency.”

He urges companies and relocation vendors to build out their mobility portals so employees can see what positions are open and what assistance the company will offer to help them make those moves. “Working abroad is seen as a perk that can help attract and keep the best talent,” he said. The more companies can be transparent about these opportunities and what support the company is willing to offer, the more valuable these programs will be.

42%
of companies say tax compliance related to mobility has become a larger concern.

Employers are also looking for ways to provide more information about relocation opportunities and mobility program to employees. A recent survey from Wakefield Research found that more than 40 percent of professionals weren’t even sure if their companies had relocation opportunities (even though 99 percent of them do). “Companies need to do a better job of communicating with employees about these programs,” Nurney said. “In today’s world of information, everyone expects full transparency.”

He urges companies and relocation vendors to build out their mobility portals so employees can see what positions are open and what assistance the company will offer to help them make those moves. “Working abroad is seen as a perk that can help attract and keep the best talent,” he said. The more companies can be transparent about these opportunities and what support the company is willing to offer, the more valuable these programs will be.


Sarah Fister Gale is a writer in the Chicago area. To comment, email editors@workforce.com.