Monthly Archives: September 2017

Why the President’s Latest Tax Reform Proposal Isn’t Even Nine Times Very Little

In April, the last time tax reform bubbled into the news cycle, we discouraged readers from paying much attention. President Trump’s “proposal” was this single page of bullet points that told us too little to evaluate its merit.

Tax reform returned to headlines this week, with the President offering this nine-page proposal.

If we use the “number-of-pages” method to evaluate work product, we might expect the new plan to include nine times as much meaningful information. Even if we discount the new document three and one-half pages for including a cover page and five pages only half-full of text, we might hope the new plan offers five and one-half times the information we gathered from April’s one-page plan.

It doesn’t. The new plan largely replicates the prior plan’s bullet points, adding some additional nontechnical explanation and a more impressive presentation format. It adds little, if anything.

Our advice hasn’t changed.  Don’t get excited.  Don’t exert energy seeking substance about tax reform just yet.

E. John Wagner, II
jwagner@williamsparker.com
941-536-2037

IRS Declines to Follow Tax Court Decision Liberalizing Reverse 1031 Exchanges

Last year on the blog, we reported a Tax Court decision approving “reverse” 1031 Exchanges in which a taxpayer acquires replacement property more than 180 days before disposing of relinquished property.

The IRS recently announced it will not follow the Tax Court decision, and may seek future challenges in other courts to overturn it. This limits the Tax Court decision’s impact until the courts establish more precedent.

The IRS announcement should not, however, deter all taxpayers needing more than 180 days to dispose of relinquished property from attempting 1031 Exchanges. In any reverse 1031 Exchange transaction, a person unrelated to the taxpayer must hold the replacement property or relinquished property until the ultimate buyer acquires the relinquished property. The Tax Court decision and IRS announcement only affect transactions in which an agent or straw man holds the replacement or relinquished property for the taxpayer in the interim period, without bearing risks normally associated with property ownership. Sometimes a taxpayer can find an unrelated person willing to bear some of the benefits and burdens of ownership for the property, differentiating the arrangement from an agent or straw-man structure. This opens the door to a taxpayer taking the position a longer holding period may exist, even if financing or other arrangements remain in place between the interim titleholder and the taxpayer.

The IRS announcement can be read at irs.gov.

E. John Wagner, II
jwagner@williamsparker.com
941-536-2037

Hurricane Irma Tax Deadline Relief

The Internal Revenue Service has announced that tax relief will be available to individuals who live in, and businesses whose principal place of business is located in, 37 different Florida counties affected by Hurricane Irma, including Sarasota and Manatee counties. Taxpayers who live outside the disaster area may also qualify for relief if they have records necessary to meet a deadline located in the disaster area.

The tax relief offered includes additional time to file certain tax returns, additional time to make certain tax payments, and additional time to perform other time-sensitive actions. If an enumerated tax return, tax payment, or other action for which relief has been granted was previously due on or after September 4, 2017 and before January 31, 2018, taxpayers will now have until January 31, 2018 to perform that action without incurring penalties. This relief would apply to businesses with filing extensions until September 15 and individuals with filing extensions until October 16 for their 2016 income tax returns.

Affected taxpayers may also be entitled to claim disaster-related casualty losses and deduct personal property losses not covered by insurance or other reimbursements on either their current year or prior year tax returns. Taxpayers should include the Disaster Designation “Florida, Hurricane Irma” at the top of the relevant 2016 tax form(s).

The Internal Revenue Service will also waive certain fees for tax return copy requests and may consider appropriate relief in the event a tax collection or tax audit matter has been impacted by Hurricane Irma.

A full list of the counties whose residents and businesses may be entitled to tax relief can be accessed here: https://www.irs.gov/newsroom/tax-relief-for-victims-of-hurricane-irma-in-florida.

Nicholas A. Gard
ngard@williamsparker.com
(941) 552-2563

Should I Pay Exempt Employees Who Miss Work Due to Bad Weather Conditions?

As Florida prepares for a potential direct hit by Hurricane Irma, employers have many concerns. At some point, when decisions have been made about if a business will stay open and if goods or people need to be moved out of harm’s way, the following question will most likely be asked: “Should I pay exempt employees who miss work due to bad weather conditions?”

When it comes to deductions from exempt employees’ salaries it is easy to get into trouble.  The general rule is that an exempt employee is entitled to receive his or her entire salary for any workweek he or she performed work. This means, if the worksite closes for a partial week due to bad weather conditions (such as a hurricane), and the exempt employee has worked during that workweek, the employee is entitled to his or her full salary. However, if the employer has a leave benefit, such as PTO, and the employee has leave remaining, the employer can require the employee to use paid time off for this time away from work. If the employee does not have any remaining leave benefit, he or she must be paid.

If the work site remains open during inclement weather and an employee is absent (even if due to transportation issues), the employee can be required to use paid time off.  If the employee does not have any paid time off remaining, the employer may deduct a full-day’s absence from the employee’s salary. For a more detailed explanation see this opinion letter from the U.S. Department of Labor.

As for non-exempt employees, the FLSA only requires that employees be paid for the hours they actually work. However, those non-exempt employees on fixed salaries for fluctuating workweeks, must be paid their full weekly salary in any week for which work was performed.

 

Jennifer Fowler-Hermes
jfowler-hermes@williamsparker.com
941-552-2558

This post was originally published on Williams Parker’s Labor & Employment Blog. To receive updates regarding labor and employment news and insight, subscribe here

Applicable Federal Rates for September 2017

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 2017:

Short Term AFR (Loans with Terms <= 3 Years)                                          1.29%

Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years)                    1.94%

Long Term AFR (Loans with Terms >9 Years)                                              2.6%

7520 Rate (Used in many estate planning vehicles)                                     2.4%

Here is a link to the complete list of rates: https://www.irs.gov/pub/irs-drop/rr-17-17.pdf.

E. John Wagner, II
jwagner@williamsparker.com
941-536-2037