Author Archives: Jamie Koepsel

The Republican Tax Plan Is Out. What Now?

On November 2, 2017, House Republicans unveiled their widespread rewrite of the U.S. Tax Code. The tax plan, called the Tax Cuts and Jobs Act of 2017, is a 429-page bill that provides changes to many aspects of tax law including the corporate tax rate, individual tax rates, the taxes levied on pass-through businesses such as partnerships, and estate taxes. While the bill is unlikely to be signed into law in its present form, certain key provisions of the proposal highlight the direction Republicans hope to take the U.S. Tax Code.

A notable provision is the slashing of the corporate tax rate from its current 35 percent rate to a new 20 percent rate. While earlier proposals considered a temporary rate reduction, the current proposal would make this tax cut permanent. Another much-discussed change is the introduction of a 25 percent tax rate for pass-through businesses such as partnerships and S-corporations. Most items of active income being passed through a business to partners or shareholders would be taxed at a maximum 25 percent rate, rather than the current 39.6 percent minimum rate.

The new tax plan also provides significant changes to how individuals are taxed. Key provisions reduce the seven individual tax brackets to four brackets of 12 percent, 25 percent, 35 percent, and 39.6 percent. The 39.6 percent top bracket will only apply for married couples earning at least $1 million a year or individuals earning at least $500,000 a year. The estate tax exemption would be raised to $11.2 million from its current $5.6 million amount, with the estate tax repealed entirely by 2024.

This is only the beginning of tax reform. The bill must still pass the Senate and be approved by the President, a tall task even if Republicans control each aspect of the legislative process. The reaction of Senators, and more importantly the reaction of voters, will determine whether the tax plan is passed, amended, or rejected entirely.

Jamie E. Koepsel
jkoepsel@williamsparker.com
(941) 552-2562

Tax Residency and the 2017 World Rowing Championships

The Sarasota-Manatee area recently hosted the 2017 World Rowing Championships, bringing nearly a thousand athletes from seventy countries to the world class rowing facilities at Nathan Benderson Park. The tax consequences of such a visit were probably far from the thoughts of the rowers, coaches, support teams, and fans arriving from all over the world. At what point should someone consider how their visits to the United States could create tax problems? Could you owe tax to the United States just by visiting the country for a rowing competition?

The United States taxes the worldwide income of those who are United States citizens and residents. Generally, any person born or naturalized in the United States will be considered a United States citizen. A person will be considered a resident of the United States by receiving U.S. permanent resident status in the way of a green card or by meeting the substantial presence test. Frequent visitors to this country or those who stay in the country for extended periods must be aware of how the substantial presence test could affect their residency status.

The substantial presence test looks at the number of days a person has spent in the United States over the past three years. Seasonal visitors to the United States, those who make frequent trips to the country for business purposes, or those who vacation in the United States may all establish residency by spending too many days on U.S. soil.

Those in the United States competing in sports may have a slight glimmer of good news. Professional athletes receive a partial exception from counting days for the substantial presence test, but only for days where a professional athlete is temporarily in the United States to compete in a charitable sporting event that is organized to benefit a tax-exempt charity, contributes 100 percent of the proceeds to charity, and uses volunteers for substantially all the work needed to run the event.

If the 2017 World Rowing Championships was your first and only trip to the United States then you likely won’t run into residency problems. But those that have fallen in love with the Sarasota-Bradenton area and plan to return for more visits need to be aware of how your stay in the United States could create tax consequences.

Jamie E. Koepsel
(941) 552-2562
jkoepsel@williamsparker.com