The 11th Circuit Court of Appeals recently ruled that leases of commercial real estate within casinos owned by the Seminole Tribe of Florida to non-Indian corporations are not subject to Florida sales tax. Florida imposes sales tax on commercial rent payments. However, the Court of Appeals upheld the decision of the federal district court and found that Florida’s commercial rental tax when applied to land on Indian reservations is preempted by federal law. More specifically, the court ruled that the Indian Reorganization Act of 1934 prohibits state taxes on indian land rights, including a tax on the lease of indian land rights. The full opinion can be found here: http://media.ca11.uscourts.gov/opinions/pub/files/201414524.pdf
The Internal Revenue Code prescribes minimum imputed interest rates and time-value-of-money factors applicable to certain loan transactions and estate planning techniques. These rates are tied formulaically to market interest rates. The Internal Revenue Service updates these rates monthly.
These are commonly applicable rates in effect for September 2015:
Short Term AFR (Loans with Terms <= 3 Years) 0.54%
Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years) 1.77%
Long Term AFR (Loans with Terms >9 Years) 2.64%
7520 Rate (Used in many estate planning vehicles) 2.2%
If you are, or someone that you know is, considering transferring an ownership interest in a family controlled entity the best time may be now. Speculation abounds over the impact that potential new regulations may have on the valuation of a closely held business interest. For several years, the Treasury Department’s “Greenbook” contained a Revenue Proposal entitled, “Modify Rules on Valuation Discounts.” Based on recent comments made by IRS and Treasury officials, it is possible that new proposed regulations will be issued by the middle of next month. In some cases the Treasury has made proposed regulations effective as soon as they are issued, which could occur in this case as long as the regulations are not otherwise modified when they are finalized. When issued, many practitioners believe that the proposed regulations will reduce the amount of the lack of control and lack of marketability discounts that appraisers apply when valuing family-controlled entities.
With the lack of clear guidance available, it is impossible to know how significant an impact the potential new regulations may have. The best guidance likely comes from last time the proposal was contained in the Greenbook, which read as follows:
This proposal would create an additional category of restrictions (“disregarded restrictions”) that would be ignored in valuing an interest in a family-controlled entity transferred to a member of the family if, after the transfer, the restriction will lapse or may be removed by the transferor and/or the transferor’s family. Specifically, the transferred interest would be valued by substituting for the disregarded restrictions certain assumptions to be specified in regulations. Disregarded restrictions would include limitations on a holder’s right to liquidate that holder’s interest that are more restrictive than a standard to be identified in regulations. A disregarded restriction also would include any limitation on a transferee’s ability to be admitted as a full partner or to hold an equity interest in the entity. For purposes of determining whether a restriction may be removed by member(s) of the family after the transfer, certain interests (to be identified in regulations) held by charities or others who are not family members of the transferor would be deemed to be held by the family. Regulatory authority would be granted, including the ability to create safe harbors to permit taxpayers to draft the governing documents of a family-controlled entity so as to avoid the application of section 2704 if certain standards are met. This proposal would make conforming clarifications with regard to the interaction of this proposal with the transfer tax marital and charitable deductions.
When additional guidance is provided, or the proposed regulations are released, we will provide an update discussing the potential impacts of the regulations.
The Florida Legislature recently passed a bill, CS/HB 749, which implements certain changes in the operations of Continuing Care Communities (“CCCs”) in Florida, effective October 1, 2015. Some of these changes include:
· CCCs must be accredited by the Office of Insurance Regulation (“OIR”) without stipulations or conditions before OIR can waive statutory requirements.
· Each CCC must establish a residents’ council created for the purpose of representing residents on matters set forth in the statutes. Previously, the establishment of a residents’ council was optional.
· Certain financial disclosures must be made to the president or chair of the residents’ counsel.
· Several technical provisions are now required for resident contracts that are entered into on or after January 1, 2016.
These are just a few of the changes that are required for CCCs under the new laws. The full text of the bill is available here. For more information on how to make sure your CCC is ready for these new changes, please give us a call or email.
How do Florida’s residential property tax rates rank among the states? A recent study by the non-profit Tax Foundation ranks the effective owner-occupied residential property tax rates of all fifty states. To provide a meaningful comparison, the study takes into account percentage value increase limitations (like Florida’s “Save Our Homes” cap) and exemptions (like Florida’s “Homestead Exemption”).
The study ranked Florida twenty-five out of the fifty states, with a 1.06% average effective tax rate after taking into account exemptions and limitations. Hawaii’s 0.28% mean effective tax rate ranked lowest. New Jersey’s 2.38% mean effective tax rate was the highest, followed by Illinois, New Hampshire, and Connecticut, respectively.
Three of the four states with the highest property tax rates also impose significant state income taxes. While we wish Florida ranked at the bottom of the property tax rate list with Hawaii, we are grateful Florida does not impose a personal income tax in addition to its property tax.