Tax Update: June 2019

Trending in Tax

Are a dip in rates and an uptick in tax proposals a call to action?
Favorable estate planning rules in place to 2026 would be less so in 2021 under some Democrats’ proposals. The applicable federal rates used for intra-family loans, sales to defective trusts and other planning techniques also decreased a bit. Time to consider the what ifs?

Tax implications of hard forks and airdrops
Not all digital assets are received through an exchange; airdrops and hard forks create another layer of complexity for taxpayers. These new elements trigger a key question that every taxpayer who engages with the blockchain and digital asset marketplace should want answered.

10 mistakes business owners make when thinking about whether to exit
Alleviate the stress of your business sale or transition by addressing 10 key missteps many business owners make.

Health savings accounts: A tax-free way to pay for medical expenses
Health savings accounts are a valuable tool for saving money for medical expenses since they offer a triple tax benefit. These personal accounts also offer opportunities for individuals to accumulate funds for their retirement years.

 

Computer with phones and pens

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 Update: May 2019

Trending in Tax

IRS offers further clarity in opportunity zone regulations
The new revenue guidance has cleared the way for businesses and investors to invest in opportunity zones and drive economic growth.

International tax considerations for the blockchain industry
Carefully consider international blockchain enterprise structuring in light of the Tax Cuts and Jobs Act.

The verdict is in: Weighing GILTI is key for multinational businesses
Understanding the impact GILTI will have on your multinational organization may maximize tax planning opportunities and minimize risk.

Exploring the undefined: Trade or business
The enactment of TJCA creates pressure on taxpayers to distinguish what qualifies as a trade or business for tax purposes.

Section 1202: Effects of capital contribution on closely held corps
Understanding the importance of section 1202 and consequences of capital contributions to closely held corporations.

Revisiting at-risk rules for partnerships
Proposed sec. 465 regulations provide significant guidance and detailed examples of the application of the at-risk rules for partnerships.

Qualified transportation fringe benefit under tax reform
Review the changes made to the qualified transportation fringe benefit and loss of deductions by the TCJA under tax reform.

Proposed regulations contain key foreign tax credit transition rules
Changes to the international tax system will require U.S. taxpayers to navigate important foreign tax credit transition rules.

 

person sitting by computer holding pencil

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 Update: April 2019

Trending in Tax

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

District Court decision uploads imposition of willful FBAR penalty
Court imposes substantial “willful” penalty for failure to file FBAR where taxpayer fails to consult tax advisor regarding foreign account.

Structuring deals in the era of TCJA and BEPS
Legislation relating to the Base Erosion and Profit Shifting (BEPS) Action Items has resulted in expanded tax due diligence engagements.

Top tax considerations for manufacturers in 2019
Tax planning in an evolving marketplace can be challenging. What are the top tax issues and new rules that manufacturers should focus on?

man point to a printed chart with computer and calendar out

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 Update: March 2019

Trending in Tax

U.S. Supreme Court to hear Kaestner trust tax nexus case
High court to decide whether in-state beneficiary of nonresident trust is sufficient for the Due Process Clause. The U.S. Supreme Court will revisit state tax nexus for the second year in a row after granting North Carolina’s petition for certiorari in North Carolina Department of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust.

Opportunity zone investors can’t forget about local tax incentives
To make opportunity zone projects financially viable, developers need to consider state and local tax credits beyond QOZ incentives. Numerous programs offer developers tax abatements, deferrals and incentives in the same economically distressed areas as QOZs. These extra incentives will make opportunity zone projects more attractive to investors and may bring new capital deeper into the areas that need it most.

New election may provide enhanced interest deduction to multinationals
Special election in new interest regulation may benefit CFCs. The Tax Cuts and Jobs Act (TCJA) enacted a limit on the deductibility of business interest expense (the section 163(j) limitation).

What US companies need to know about Making Tax Digital
US companies with VAT obligations in the United Kingdom should understand and prepare to comply with Making Tax Digital. The transition to Making Tax Digital represents one of the most fundamental changes to the United Kingdom (UK) tax system in a generation.

Supreme Court of the United States to hear Kaestner tax nexus case

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 Update: February 2019

Tax Reform

Final regs highlight actions for taxpayers using 20 percent deduction
Critical action items taxpayers need to take.


Trending in Tax

Tax issues arise when employers pay employee business travel expenses
Business travel arrangements require employers to carefully analyze and determine proper tax treatment for employees.

Why we call it business transition planning
What is the secret to a successful business succession and transition for owners? It starts with a sound plan.

The gift tax exemption coast is clear. Time to go back into the water?
Knowing that there will be no loss of the benefit of using the higher exemption before 2026, we consider some ways and means of using it.

writing in note pad and calculator out

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 Update: January 2019

Tax Reform

New year, new law, new challenges
Complexity of the Tax Cuts and Jobs Act and technology delays at the IRS may force taxpayers to extend filings. At a minimum, taxpayers should be prepared to extend and file their returns later in the year, even if they have previously filed by the March or April 15 deadlines. Taxpayers should consult their tax adviser and make a plan to address the appropriate timing and additional steps necessary to file their 2018 returns.


Trending in Tax

Tax reform’s impact on business and professional services firms
Business and professional services firms face challenges due to tax reform, but there are opportunities to maximize the benefits, too.

Post-Wayfair misconceptions and technology companies
The Wayfair decision doesn’t just affect online retailers. Technology businesses must address resulting state sales taxes, too.

Tax deduction for pharmaceutical drug inventory
Enhanced tax deduction may be available for drug inventory contributions made to certain charitable organizations.

Nonqualified deferred compensation plan FAQs for employers
When setting up or managing nonqualified deferred compensation plans, employers should consider several key questions.

 

tax preparer typing on computer and using calculator

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 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 Update: September 2018

Tax Reform
A closer look at the new pass-through deduction proposed regulations
Initial thoughts, observations and insights on several key areas of the new pass-through deduction proposed regulations.

Trending in Tax

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

How to structure executive compensation in a competitive market
Effective executive compensation includes strategy, a mix of components and metrics closely aligned with the organization’s goals.

Ninth Circuit finds transferee liability in asset sale
Former shareholders found liable for tax from asset sale as transferees because the subsequent stock sale lacked economic substance.

 

Book on desk open with pen

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. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Tax Update: August 2018

Tax Reform
U.S. tax reform international implications
RSM’s Ramon Camacho and Ayana Martinez discuss the TCJA and BEPS with BEPS Global Currents.
Estate planning subsequent to the enactment of tax reform
Estate planning strategies to help minimize future estate, gift and generation-skipping taxes for estates in excess of the exemption. This article explores tips and traps associated with estate planning strategies to consider.

Trending in Tax

Frequently asked questions on country-by-country reporting
A guide for multinational corporations regarding country-by-country reporting questions and base erosion profit shifting. These regulations are based on model legislation from the Organisation for Economic Co-operation and Development (OECD) and are part of the project addressing base erosion and profit shifting (BEPS).

Stock options and section 409A: Frequently asked questions
An explanation of the section 409A considerations that companies need to be aware of when issuing stock options.

Economic Insight 

The Real Economy: Volume 44
In this issue we discuss the growing risk to key industries and the middle market economy. The hit to the economy caused by the taxes on imports and exports will spread asymmetrically across the industrial ecosystems that make up the domestic economy. Based on our conversation with officials in Washington, it is apparent that the middle market will bear a disproportionate burden of adjustments from trade tariffs and should prepare accordingly.

 

two people with laptops, pencils, and paper, planning for tax reform international implications

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. 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

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