Tax Update: November 2018

Tax Reform

IRS releases proposed regulations for Qualified Opportunity Zones
The IRS released proposed regulations and a Revenue Ruling providing guidance on the newly created Qualified Opportunity Zones.

Investing in opportunity zones under the 2017 Tax Act
Taxpayers need to consider the tax benefits (deferral and possible exclusion) of investing realized gains in opportunity zone funds.

Cushioning the double-tax blow: the section 962 election
Double tax on dividends received by United States shareholders from foreign corporations addressed via TJCA through section 962.


Trending in Tax

Capital expenditures are not meeting expectations
How tax laws affect a company’s growth and cash flow depends on management’s priorities. The key is investing for the long term.

South Dakota v. Wayfair and manufacturing: 3 misconceptions debunked
The Wayfair decision goes beyond just retail and can impact manufacturers that sell exempt to resellers or distributors.


Tax Planning

2018 year-end tax considerations for businesses
A business guide to tax considerations for 2018 and beyond to help the middle market make smart, informed decisions.


Special Interest

The Real Economy: Volume 45
Developing markets face growing risks that present a clear and present danger to middle market firms.

tax expert using a calculator to calculate tax rates for qualified opportunity zones

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news as well as updates pertaining to the Tax Cuts and Jobs Act. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Tax Alert: U.S. Supreme Court Rules on Wayfair Case

On June 21, 2018, the U.S. Supreme Court issued its decision in South Dakota v. Wayfair, Inc., the most recent and direct challenge by a state to the physical presence nexus standard, adopted/continued in Quill v. North Dakota over 25 years ago.

Their decision eliminated the physical presence requirement for sales tax nexus purposes.  Specifically, the South Dakota law states that remote sellers (those without any physical presence in the state) who have either more than $100,000 of in-state taxable sales of products/services annually or have consummated 200 or more separate transactions annually are required to register with the state and collect and remit sales taxes to South Dakota on those transactions.

It is important to note that the Court did not formally hold that the thresholds in South Dakota’s law are the new standard, or even that there is any standard. The ruling, simply, was that physical presence in a given state is no longer required for a state to require sellers of property and services within that state to collect and remit sales taxes.

Several states, in anticipation of the Wayfair case, had previously adopted economic nexus provisions for sales and use taxes and there are others whose laws are contingent on the decision in the Wayfair case. Some states also had cases pending in their respective courts waiting for the Supreme Court’s ruling to come down.

It is important to remember that the Supreme Court remanded the case back to the lower court for a decision as to the impact of the Commerce Clause (for “undue burden”, etc.) of the Constitution. It is therefore possible that the S.D. law will be modified pending the outcome of that case. If the lower Court finds in favor of S.D., then its statute will likely become the standard for other states to follow. A similar result will occur (although without the protection of a court decision ratifying the Commerce Clause provisions thereby subjecting them to future litigation if another taxpayer decides to challenge them) if the parties settle prior to litigation.

So, what’s next? Good question. It appears that states with laws requiring some threshold level of economic (but not physical) contact before they assert sales tax nexus for a remote seller would not be in violation of the Wayfair decision. That said, there were other provisions in the South Dakota law, namely no retroactive liability and compliance with the Streamlined Sales and Use Tax Agreement which will need to be evaluated on a state-by-state basis.

Accordingly, each state (and locality for that matter) MAY decide to come up with their own economic nexus thresholds, which may or may not comport with the S.D. law. If different, this would potentially open the state to future challenges on the Commerce Clause issue.

As a result of the Wayfair decision, many states are re-evaluating their nexus statutes and Congress has been discussing responses as well.

For businesses no longer protected from sales tax nexus due to this decision, the following are some questions that will need to ultimately be addressed in all the states they sell into, according to the statutes passed (or to be passed) in those states:

Do we meet any of the threshold tests?

Are our services or products taxable?

Are we required to register in each state we sell into?

What are the correct tax rates?

Are there local taxes in addition to state level taxes?

How often must a return be filed and what are the available methods for filing?

When will the first sales taxes be due?

How complete is our system for tracking exemption certificates?

Do we need to purchase a software solution to handle this and, if so, how much will that cost?

Do we need to hire more staff to accommodate this increase in our compliance obligation?

Might we have to collect and remit sales taxes in a state that does not have economic nexus standards currently in place?

Can states make sales tax collection retroactive? Likely not, but one never knows.

As you can see, this issue is very much unsettled at the moment. Following are some actions that businesses should take sooner rather than later:

  • Understand the states and localities that you currently sell into. Make sure that you have some reliable method of capturing the amount of sales and the number of transactions into each state and locality. Shortly, ignorance will not be an excuse for non-compliance in states where you may not have previously been required to file.
  • If your products are for re-sale, be sure that you have updated your Resale Certificates, and that you have a process for doing so periodically.
  • If you have physical nexus in a state and have not been filing there, immediately evaluate the costs of compliance versus continued no compliance. Voluntary Disclosure Agreements may prevent penalties in some cases, and prevent unlimited look back, but you have to go to the state. Once they find you, it’s too late. And states are all on high alert for non-compliance.
  • Monitor the states into which you sell for changes to their nexus legislation.
  • For states where you are currently filing, be sure you actually ARE collecting the correct amount of tax when and where you should, and remitting it on a timely basis.

As always, if you would like to discuss this further, please contact us.

 

Supreme Court of the United States building in Washington, DC, SCOTUS has issued decision in South Dakota v. Wayfair

Disclaimer

Tax Alert: Responding to South Dakota v. Wayfair

The U.S. Supreme Court has issued its highly anticipated decision in South Dakota v. Wayfair, overruling Quill’s physical presence sales tax nexus standard. This decision will have significant implications for almost all industries, but especially consumer products (retailers) and industrial products.

With a new sales tax nexus standard established, more states will require all retailers that sell within their borders to collect that state’s sales tax. About a dozen states have already addressed economic nexus laws or regulations.

The Wayfair case moved through the court system at a blistering pace. Even with a decision from the nation’s highest court, very little is settled. Under the U.S. Constitution, Congress may have the authority to implement a remote seller solution or codify the physical presence standard into federal law. Whether Congress takes up the issue is a “wait-and-see” proposition.

However, Wayfair has created many more questions than answers. Adapting your business to the new sales and use tax landscape will take time, even though you may need to react quickly.

To learn more, please read RSM’s alert, U.S. Supreme Court kills Quill physical presence or contact us directly to discuss how Wayfair may affect your business.

 

Supreme Court of the United States building in Washington, DC, SCOTUS has issued decision in South Dakota v. Wayfair

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
https://rsmus.com/what-we-do/services/tax/state-and-local-tax/sales-and-use-tax/u-s–supreme-court-kills-quill-physical-presence.html

Disclaimer

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Tax Update: July 2017

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Is state tax reform coming in waves?
Contending with several quarters of weak growth in overall state tax collections, between 25 and 40 states are facing revenue shortfalls. The budget season is heating up with a flurry of legislation proposed to close those budget gaps for the 2018 fiscal year.
Read more

Personal tax planning in anticipation of reform: What you should know (and do)
Join us July 18 to learn about the implications of potential tax reform on income, estate and life insurance planning and the ways to prepare for it.
Read more

Tax Court holds taxpayer not liable for accuracy-related penalties
A taxpayer’s reliance on a tax professional to prepare accurate tax return was reasonable, thus taxpayer was not liable for penalties.
Read more

Economic sales and use tax nexus laws
Economic sales and use tax nexus laws are gaining momentum as states make a direct challenge to traditional physical presence standards.
Read more

Canada identifies US partnerships that it will treat as corporations
Canadian Revenue Agency provides list of factors considered when determining certain U.S. partnerships should be treated as corporations.
Read more

Net operating losses: One size does not fit all
Proper diligence when it comes to the state application of net operating losses can help maximize tax benefits and minimize errors.
Read more

What business owners need to know about value before selling
Learn how to view the value of your business through the eyes of a buyer and what you can do today to plan for a successful transaction.
Read more

Employers with self-insured health plans owe PCOR fee by July 31, 2017
Read more

Tax planning for ESOP-owned S corporations
Read more

Navigating nuances in transfer pricing
Read more

Apportionment of net recognized built-in gains in California
Read more

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

Tax Update: April 2017

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Border tax would mean sweeping changes for middle market
The proposed border adjustment tax and corporate tax reform would be the most sweeping change to the tax code since 1986.
Learn more

Beware of traps with paid time off policies
Some common paid time off (PTO) policy features cause taxable income to unexpected parties at unexpected times.
Read the article

What to do if you are the victim of tax identity theft
Step-by-step guidance for victims of tax identity theft and a general overview of identity theft warning signs.
Learn more

Economic sales and use tax nexus laws
Economic sales and use tax nexus laws are gaining momentum as states make a direct challenge to traditional physical presence standards.
Read the article

Employment tax and employee benefits: 5 issues for growing companies
A growing workforce means growing tax and employee benefit challenges. When do workforce decisions create tax conversations?
Find out more

Key considerations when selling your business
Details matter when selling to a third party. Know your answers to important succession planning questions to achieve a successful sale.
Learn more

Are local tax prepayment benefits worth it?
Read more

Don’t forget the tax benefits of certain capital investments (video)
Read more

Comprehensive tax reform could call into question US tax treaties
Read more

Updated IRS audit guide gives insight to golden parachute treatment
Read more

 

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

Tax Update: March 2017

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Timing of tax reform
While the process is notoriously fluid and unpredictable, it appears it will likely be late 2017 before we have final tax reform legislation.
Learn more

The House Tax Reform Blueprint: What would the building inspector say?
Don Susswein explores the potential impact of the domestic proposals found in the House GOP Tax Reform Blueprint.
Read more

Understand common complexities when applying bonus depreciation
While the concept of bonus depreciation is fairly simple, taxpayers should be aware of the complicated underlying rules.
Learn more

How well do you understand your equity compensation options?
Equity compensation plans can provide powerful incentives. Learn the various plans available and how they can meet your compensation goals.
Download the article

Partnership audits: What you should do now
Join us for an informative webcast as we discuss what you can do now to prepare for changes in partnership audit rules in 2018.
Register now

3 big questions about your business succession plans
Planning for and managing through a business succession means thoughtfully and objectively answering three important questions.
Watch now

Co-sourcing and the corporate tax function: Getting it right (video)
Read more

More states requiring driver’s license data as e-file fraud protection
Read more

A quest for transparency: Transfer pricing for the new economy (video)
Read more

Research tax credit: Increased scrutiny follows credit permanence
Read more

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

Tax Update: February 2017

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Border Adjusted Tax proposals may impact exporters and importers
A new destination-based tax regime may be part of comprehensive tax overhaul, but details remain unclear.
Read more

New revenue recognition guidance is looming
Even though the tax rules have not changed, a change in book recognition could create a change in the tax method of accounting.
Read more

Employee stock ownership from three perspectives (video)
Employee stock ownership plans can be attractive to business owners, employees and companies overall. Anne Bushman discusses the benefits.
Watch now

Final rules require 5472s from foreign-owned disregarded entities
Read more

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

Tax Update: November 2016

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

4 tax issues driven by organic growth
Taxation of internally-generated profits can vary. Capital investments in new products, services or facilities can create tax opportunity or risk.
Read more

Managing your personal wealth after leaving a closely held business
Business succession financial planning requires introspection. You must quantify core capital needs and define estate and charitable goals.
Read more

US Supreme Court to hear Delaware unclaimed property check dispute
Twenty-three states challenge the escheat of MoneyGram official checks, claiming instruments should have escheated to state of purchase.
Read more

FATCA and other year-end global information reporting considerations
Read these tips for internationally active taxpayers on FATCA classifications, preparation for CRS reporting and more.
Read more

Business succession planning: Why it is critical to revisit your plan now
The ins and outs of estate planning strategies and key provisions of the proposed regulations to section 2704 and how to prepare.
Read more

Current issues and opportunities for ESOP companies
The ESOP community remains vibrant with maturing ESOPs and many beginning to explore the possibility.
Read more

6 steps to solving the country-by-country reporting challenge
Learn a straightforward six-step process to help U.S. multinationals address new IRS country-by-country reporting requirements.
Read more

Draft remote seller legislation provides unique federal solution
Read more

Review your tax technology now to avoid headaches tomorrow
Read more

Follow new guidance when correcting qualified retirement plan errors
Read more

Apple’s influence on international tax policy
Read more

Capitol Hill

Source: RSM US LLP
Used with permission as a member of the RSM US Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

Tax Update: October 2016

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit and we understand how important timely updates are to our clients. As a member of the McGladrey Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Employment tax and employee benefits: 5 issues for growing companies
A growing workforce means growing tax and employee benefit challenges.
Read more

Are you ready for your business’ succession?
Important owner readiness considerations.
Read more

2017 fixed asset management primer
Assess and improve your fixed asset strategy and implement best practices that can maximize efficiency, accuracy and benefits.
Read more

International tax controversy: New developments and opportunities
Our tax professionals will discuss new IRS developments that affect international tax controversy matters in this webcast.
Read more

Proposed 2704 regulations have significant life insurance implications
Proposed 2704 regulations: Loss of discounts could materially impact liquidity needs and planning with existing policies.
Read more

Frequently asked questions on country-by-country reporting (CbCR)
A guide for multinational corporations regarding country-by-country reporting questions and BEPS.
Read more

First steps to finding the right tax department resource balance
Redesigning your tax department? Assess your current state first. These three questions will help direct you to optimal tax resource management.
Read more

Retailers must be mindful of gift card tax pitfalls
Retailers should assess gift card procedures including an annual review of reporting, sales tax, unclaimed property and more.
Read more

Is your sales force creating nexus around the country?
Read more

Foreign federal contractors must act quickly to avoid 2% excise tax and penalties
Read more

Will your health plan trigger IRS penalties?
Read more

Source: RSM US LLP
Used with permission as a member of the McGladrey Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.

Tax Update: July 2016

At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit and we understand how important timely updates are to our clients. As a member of the McGladrey Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Federal

  • Plan sponsors must pay health plan fee by July 31, 2016
  • Grantor’s death can compromise S corporation’s status
  • Potential tax traps for employees who become partners
  • How research tax credits are limited for partners and S corporation shareholders
  • Proposed regulations could affect subchapter S status
  • Look for upcoming ‘hot dog stand’ guidance on corporate spin-offs
  • Controlling shareholder is liable as a transferee for corporate level tax
  • IRS addresses deferred revenue treatment in taxable stock acquisition

International Tax

  • Global survey reveals BEPS middle market impact
  • Multinationals with Indian or Singapore investments should evaluate whether to change investment structures

State and Local Tax

  • Oklahoma eliminates ‘double’ state and local tax deduction

Source: RSM US LLP
Used with permission as a member of the McGladrey Alliance
http://rsmus.com/our-insights/newsletters/tax-digest.html

Disclaimer

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our service offerings, please contact us directly.