Federal News Roundup for Sept. 26, 2025

IRS Outlines ‘No Tax on Tips’ Eligibility, Details What Tips Are ‘Qualified’

The Internal Revenue Service (IRS) on Monday, Sept. 22, took the next steps toward mobilizing President Donald Trump’s “no tax on tips” vision and campaign promise by publishing a proposed regulation in the Federal Register titled “Occupations that Customarily and Regularly Received Tips; Definition of Qualified Tips,” which:

Lists 68 qualifying tipped occupations for which workers can claim a deduction on their “qualified tips.”
Clarifies what tips qualify for the new deduction.

The IRS will accept comments on the 71-page document until Oct. 23.

The proposed list of “eligible jobs” is virtually identical to a “preliminary” list released Sept. 2 by the IRS and the U.S. Department of the Treasury. Within the proposal, listed jobs are:

Divided into eight industry categories:
- Beverage and food services
- Entertainment and events
- Hospitality and guest services
- Home services
- Personal services
- Personal appearance and wellness
- Recreation and instruction
- Transportation and delivery
Identified by Treasury Tipped Occupation Code (TTOC) title and Standard Occupational Classification (SOC) System Code(s).

Under the “no tax on tips” provision within the H.R. 1 law (otherwise known as the One Big Beautiful Bill Act), eligible tipped employees, including those who itemize and don’t itemize their taxes, can claim a tax deduction up to $25,000 per year, effective in the 2025 through 2028 tax years. The deduction is limited based on adjusted income and phases out for individuals with a modified adjusted gross income (MAGI) that exceedst $150,000 ($300,000 for joint filers).

The Sept. 22 proposed rule details that “qualified” tips are:

“Cash tips … received from customers or, in the case of an employee, through a mandatory or voluntary tip-sharing arrangement, such as a tip pool, that are paid in a cash medium of exchange, including by cash, check, credit card, debit card, gift card, tangible or intangible tokens that are readily exchangeable for a fixed amount in cash (such as casino chips), and any other form of electronic settlement or mobile payment application that is denominated in cash. Cash tips do not include items paid in any medium other than cash, such as event tickets, meals, services or other assets that are not exchangeable for a fixed amount in cash (such as most digital assets).”
“Amounts paid by customers for services that are in excess of the amount agreed to, required, charged or otherwise reasonably expected to have to be paid for the services in an arm’s-length transaction.”
“Paid voluntarily and without any consequence in the event of nonpayment, are not the subject of negotiation and are determined by the payor. … Thus, service charges, automatic gratuities and any other mandatory amounts automatically added to a customer’s bill by the vendor or establishment are not qualified tips, even if the amounts are subsequently distributed to employees.”

Senate Confirms Aronowitz as Benefits Agency Leader

The Senate voted 51-47 on Sept. 18 to confirm Daniel Aronowitz’s nomination to lead the Employee Benefits Security Administration (EBSA) within the Department of Labor (DOL).

EBSA was created to protect the rights and benefits of participants in employer-sponsored retirement and health plans. It pursues this through education, compliance assistance and enforcement of the Employee Retirement Income Security Act of 1974 (ERISA).

Aronowitz’s bio on the EBSA website states he has 35 years of experience in the professional liability industry as a coverage lawyer and underwriter, and is a “fiduciary liability expert, thought leader and advocate for sponsors of employee benefit plans.”

EBSA Provides Additional Opinion on Alternative Assets in 401(k) Plans

EBSA continued to clarify its stance on retirement investment options in defined contribution plans by issuing an advisory opinion on Tuesday, Sept. 23. The opinion specifically addresses “when lifetime income investment options can be considered qualified default investment alternatives under federal law.”

The advisory opinion follows President Trump’s Executive Order 14330, “Democratizing Access to Alternative Assets for 401(k) Investors,” which directed EBSA to reexamine its guidance on fiduciary duties under ERISA in connection with making asset allocation funds that include alternative asset investments available to participants.

The advisory opinion leans heavily into the concept of investment alternatives and concludes that broad interpretation within an individual’s lifetime income strategy program meets the department’s requirements under ERISA Section 404(c)(5) and the implementing regulation at 29 CFR 2550.404c-5(e).

DOL Switches Acting Leaders of Wage and Hour Division

The DOL’s Wage and Hour Division (WHD) on Monday, Sept. 22, affirmed that James Macy has become its acting administrator, replacing previous acting administrator Donald M. Harrison III, while the confirmation process continues for nominee Andrew Rogers.

Rogers, a former WHD senior advisor, is currently serving as the EEOC’s acting general counsel. He is President Trump’s pick to lead the agency that is responsible for enforcing laws such as the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA).

Harrison assumed the acting administrator role on April 1. During his tenure, he issued internal guidance that changed the DOL’s approach to wage-and-hour enforcement, including a Field Assistance Bulletin that directed WHD staffers to revert to an older, more business-friendly standard for determining independent contractor status. He also rescinded a previous administrative policy that allowed the division to seek liquidated (double) damages against employers during administrative investigations.

Macy joins the WHD after spending more than 40 years as a lawyer representing employers, municipalities and school districts in all aspects of employment and municipality law.

Supreme Court Refuses to Hear Appeal from Fired NLRB Member

The U.S. Supreme Court on Monday, Sept. 22, declined to take up the expedited appeal of Gwynne Wilcox, who was fired from her position on the National Labor Relations Board (NLRB) in January by President Trump.

Wilcox had contested that the president’s actions were illegal under the precedent set in the 1935 Supreme Court decision Humphrey’s Executor v. United States. In that landmark case, the court had ruled members of independent government agencies cannot be forcibly removed without cause. In addition, the National Labor Relations Act states NLRB members can only be removed for “neglect of duty or malfeasance in office, but for no other cause.”

The Supreme Court did not explain its decision; however, this move — along with similar ones related to members of the Federal Trade Commission and Merit Systems Protection Board — underscored the conservative majority’s bent to giving broad deference to the president over staffing of independent agencies that exercise significant executive authority.

The NLRB, which was created to protect workers’ rights to organize (i.e., unionize) and bargain collectively over the terms of their employment (i.e., wages and hours, working conditions), has operated without a quorum since Wilcox’s firing. Trump recently nominated a pair of labor lawyers to fill two of the three vacant seats on the five-member panel.

House Bill Aims to Add Step Therapy Rules for Health Plans

Five members of the House of Representatives — Republicans Rick Allen (Georgia), Mariannette Miller-Meeks (Iowa) and Bob Onder (Missouri), and Democrats Lucy McBath (Georgia) and Raul Ruiz (California) — on Sept. 19 reintroduced the Safe Step Act, a bill to ensure American healthcare consumers can “safely and efficiently access the best treatment available by improving step therapy protocols.”

Step therapy is a prior-authorization policy that requires patients to try and fail on one or more insurer-preferred treatments before coverage is granted for the medication originally prescribed by their clinician.

According to the bill sponsors, “While intended to reduce unnecessary utilization, these protocols too often force a trial-and-error approach that can jeopardize patient health, increase administrative burdens and undermine continuity of care.”

This bill requires a group health plan to establish an exception to medication step therapy protocol in specified cases. Such a protocol establishes a specific sequence in which prescription drugs are covered by a group health plan or a health insurance issuer.

Under the legislation, a request for such a protocol exception must be granted if:

An otherwise required treatment has been ineffective;
Such treatment is expected to be ineffective and delaying effective treatment would lead to irreversible consequences;
Such treatment will cause or is likely to cause an adverse reaction to the individual;
Such treatment is expected to prevent the individual from performing daily activities or occupational responsibilities;
The individual is stable based on the prescription drugs already selected; or,
There are other circumstances as determined by EBSA.

The bill requires a group health plan to implement and make readily available a clear process for an individual to request an exception to the protocol, including required information and criteria for granting an exception. It also further specifies timelines under which plans must respond to such requests.

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