Guest Column - November/December 2012

What Tax Reform Means for the Incentive Marketplace

By George B. Delta, Esq.


In these difficult economic times replete with layoffs, offshoring of jobs, wage concessions and furloughs, employers need to look for creative ways to keep their remaining employees engaged and motivated. During times of economic uncertainty, creative companies turn to incentive and recognition programs to motivate and reward performance. Even though incentive and recognition programs can play a vital part in the success of a business, they are sometimes misunderstood and become the targets of unfair criticism from those who know better, but more often from those who do not.

In recent years, incentive travel has borne the brunt of such criticism as being lavish, wasteful and unnecessary. Bank incentive travel programs were the target of public scorn three or four years ago, because critics believed that recipients of federal bailouts should not be sending even valued employees to conferences and retreats to reward them for exemplary performance. Some folks went as far as to say that having their jobs should be reward enough for bank employees.

More recently, the horribly mismanaged incentive travel program of the General Services Administration came under congressional scrutiny. Likewise, the annual conference for the judges of the U.S. Court of Appeals for Ninth Circuit received criticism from members of both parties, because it was being held in Hawaii instead of a more modest destination. Yet, for all of the criticism, incentive travel plays an important role in rewarding and revitalizing employees, even judges and other federal workers.

In broad terms, incentive and recognition programs help American business generate positive financial results through people. Business improves when employees and customers are recognized, rewarded and engaged through programs that are structured and implemented properly with clearly defined goals. Effective incentive and recognition programs have proven returns, and more than half of American businesses use motivation programs as part of their strategies.

Just as our industry began making headway in educating Congress and the executive branch on the power of incentives and recognition programs, the potential overhaul of the tax code surfaced as another threat to disrupt the use of incentives by eliminating section 274(j) of the Internal Revenue Code, which provides tax preferential treatment for safety and service award programs. The repeal of this provision would greatly harm the incentive marketplace.

Fortunately, the Incentive Federation, the umbrella organization founded in 1984 to promote and protect the incentive field, has been working to educate Congress on the importance of safety and service award programs for American businesses. The Federation actively monitors legislation that could affect the use of incentive and related promotional programs and works to protect their use. With the help of some of its members, the Incentive Federation has been working to build support among members of Congress and their staffs by educating them on the power of safety and service award programs and why section 274(j) should not be repealed.