Tag Archives: business tax

Business Tax Changes Under the Tax Cuts and Jobs Act

The Tax Act passed at the end of 2017 brought with it a number of changes to how businesses both big and small are to be taxed moving forward. While the most visible change has been the lowering of the corporate tax rate to a flat 21 percent rate, most businesses should be able to find additional benefits from changes in how business equipment is to be depreciated, how net operating losses can be carried forward into future years, and what improvements to non-residential real property are eligible for an immediate deduction.

A recent presentation given to FICPA discusses the aspects of the Tax Act, other than the Qualified Business Income Deduction, which are most likely to affect the tax savings of your business.

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

Join Us: FICPA’s The Tax Cuts and Jobs Act CPE Seminar May 1

Williams Parker will lead a discussion on the Tax Cuts and Jobs Act tomorrow for the FICPA Gulf Coast Chapter at the Sarasota Yacht Club. Beginning at 8:30 a.m., the seminar will focus on the new carried interest rules, the new Section 199A qualified business income deduction, changes in the estate and gift tax and certain international provisions, and updates on tax controversy and IRS practice and procedure. Presenting on these topics will be attorneys from our Estate Planning, Corporate, and Tax practices. Three CPE credits will be provided.

John Wagner is a board certified tax attorney and chair of Williams Parker’s Corporate and Tax practices. He represents executives, entrepreneurs, and real estate investors in tax, transactional, capital raising, estate planning, and estate administration matters.

Michael Wilson is a board certified tax attorney with Williams Parker in Sarasota. He practices tax, corporate, and business law handling sophisticated tax planning and tax controversy matters and advising clients on their most significant business transactions.

Jamie Koepsel is a corporate and tax attorney with Williams Parker in Sarasota. His experience includes handling federal and state tax issues for individual and business clients.

Daniel Tullidge is a trusts and estates attorney with Williams Parker in Sarasota. He focuses on taxation, estate planning, and estate and trust administration.

Nicholas Gard is a corporate and tax attorney with Williams Parker in Sarasota. His experience includes work on a variety of tax matters, including federal tax litigation, tax disputes with the Internal Revenue Service at the examination and appeals levels, and international tax issues involving tax treaties, transfer pricing, and cross-border investments and business operations.

When:
Tuesday, May 1, 2018
8:30 – 11:30 a.m.
(Add to calendar)

Where:
Sarasota Yacht Club
1100 John Ringling Blvd, Sarasota, FL 34236

Breakfast and CPE credits will be provided. 

Register now at FICPA.org or by phone at (800) 342-3197.

We look forward to seeing you tomorrow as we share technical information, new developments, and practical advice on the Tax Cuts and Jobs Act.

A Little Clarity for Non-U.S. Persons Selling Partnership Interests

A Spanish translation of this post appears below. La traducción al español de este artículo aparece a continuación.

The Tax Cuts and Jobs Act provided clarity to a question of how to treat gain or loss from the sale or exchange of a partnership interest held by a foreign person. The IRS, through Revenue Ruling 91-32, previously provided that “the gain realized by a foreign partner upon disposing of its interest in a U.S. partnership should be analyzed asset by asset and, to the extent any such asset would give rise to effectively connected income, the departing partner’s pro rata share of such gain should be treated as effectively connected income.” The Tax Court disagreed with the findings of Revenue Ruling 91-32 in Grecian Magnesite Mining, Industrial & Shipping Co., SA v. Commissioner of Internal Revenue and instead held that income, gain, or loss from the sale or exchange of a U.S. partnership interest by a foreign person will only be attributable to a U.S. office, and thus taxed as effectively connected income, if the U.S. office is a material factor in the production of such income, gain, or loss in the ordinary course of business of that U.S. office.

Rather than waiting for courts to come to a consensus as to how to treat gain or loss from a foreign person’s sale of a partnership interest, the Tax Cuts and Jobs Act amended the previous tax law and took the position of Revenue Ruling 91-32. Now if a partnership has a U.S. office and a foreign person sells an interest in such a partnership, then an asset-by-asset analysis will need to be conducted to determine how much of the gain or loss from such a sale will be subject to U.S. taxes.

For more information regarding the Tax Act, please see our recent related blog posts linked below:

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

Un poco de claridad para personas no estadounidenses que ofrecen a la venta su participación en una sociedad americana (también conocida como “U.S. Partnership”)

La ley de recortes fiscales y empleos de 2017, conocida como el “Tax Cuts and Jobs Act,” dió claridad a la cuestión de cómo tratar las ganancias o pérdidas de capital generadas después de la venta o intercambio de capital de una sociedad americana (“U.S. partnership”) en poder de una persona no estadounidense.

El IRS (Servicio de Impuestos Internos), a través de la Resolución de Impuestos 91-32, sostenía que las ganancias generadas por un socio extranjero al vender o transferir su parte en una sociedad americana debían ser analizadas activo por activo y, en la medida en que las ganancias de cualquier activo estuviesen vinculadas a una actividad realizada en los Estados Unidos, las ganancias de dicho socio (medidas en proporción a su participación en la sociedad) debían ser tratadas como ingresos efectivamente vinculados a una actividad realizada en los Estados Unidos.

El tribunal de impuestos no estuvo de acuerdo con la forma en que la Resolución de Impuestos 91-32 fue interpretada en el caso de Grecian Magnesite Mining, Industrial & Shipping Co., SA v. Commissioner of Internal Revenue. El tribunal sostuvo que los ingresos, ganancias, o pérdidas generadas en la venta o intercambio de la participación de una sociedad americana por una persona extranjera debían ser atribuibles solamente a una oficina ubicada en los Estados Unidos y ser tratadas como ingresos efectivamente vinculados, solamente si la oficina ubicada en los Estados Unidos era indispensable para la producción de dichos ingresos, ganancias, o pérdidas en el curso ordinario de los negocios de la oficina ubicada en los Estados Unidos.

En lugar de esperar a que los tribunales llegaran a un consenso en cuanto a cómo tratar las ganancias o pérdidas generadas en la venta de capital de una sociedad en propiedad de una persona extranjera, la reforma fiscal de 2017 modificó la ley tributaria anterior y asumió la regla establecida por la Resolución de Impuestos 91-32. Ahora, si una sociedad tiene una oficina ubicada en los Estados Unidos y una persona extranjera vende su participación en tal sociedad, un análisis de cada activo debe ser conducido para determinar el monto de las ganancias o pérdidas sujetas a impuestos en los Estados Unidos.

Traducción por Juliana Ferro, Abogada

A Guide to the Toll Charge of the Tax Act

Shareholders in foreign businesses could find themselves hit with an immediate tax on offshore earnings under the recently passed “Tax Act,” officially known as “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.”  Before the Tax Act, most foreign income earned by US shareholders through foreign corporations would only be subject to US taxes when the foreign income was paid to those US shareholders as dividends. The Subpart F rules were a way for the United States to capture some of this offshore income in the US tax base, but careful planning meant many US shareholders with foreign companies could keep money offshore and out of the US tax system for years. Some estimates put the amount of this offshore money at nearly $3 trillion, so any change to how the United States treats foreign taxes would look into how best to address these offshore earnings.

The Tax Act will look to capture some of this offshore income through a one-time immediate increase in the Subpart F income of certain US persons investing in foreign corporations.  The amount of income immediately taxed by the United States will increase by the greater of (i) accumulated post-1986 deferred foreign income determined as of November 2, 2017, or (ii) the accumulated post-1986 deferred foreign income determined as of December 31, 2017.  The tax rate on this deferred foreign income will be 8 percent for non-cash E&P and 15.5 percent for cash E&P.  This one-time tax has been referred to as a “Toll Charge” for how it may allow offshore income to flow back into the United States.

The Toll Charge is not a routine E&P calculation for US shareholders of foreign corporations.  Year-by-year ownership percentages, whether E&P is cash or non-cash, and the availability of certain foreign tax credits will all affect the final tax due.  The Tax Act has allowed for the payment of the Toll Charge in installments if sufficient cash to make payments is unavailable.

For more information regarding the Tax Act, please see our recent related blog posts linked below:

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

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

Follow-Up to Florida Sales Tax Rate on Commercial Leases is Reduced

We previously blogged that the Florida Legislature enacted a reduction to the state sales tax rate on commercial real property leases from 6% to 5.8% effective January 1, 2018. The language of the new statute is unclear as to whether the rate decrease would apply to current leases. However, we have confirmed with a representative of the Florida Department of Revenue that they interpret the rate reduction as applying to current leases for periods after December 31, 2017.

Michael J. Wilson
mwilson@williamsparker.com
941-536-2043

Florida Sales Tax Rate on Commercial Leases is Reduced

Governor Rick Scott signed House Bill 7109 on May 25, 2017, which reduces the state sales tax rate on commercial real property leases from 6% to 5.8% effective January 1, 2018. However, this rate decrease will not apply to current leases, because the bill provides that the tax rate in effect at the time the tenant occupies or uses the property is applicable, regardless of when a rent payment is due or paid. The bill does not change the local option sales tax, which is imposed in 0.5% increments. So, for example, the applicable rate in Sarasota County for leases commencing on or after January 1, 2018, would be 6.8% (instead of the current 7%). Florida is the only state that charges sales tax on the lease of commercial real property.

Michael J. Wilson
mwilson@williamsparker.com
941-536-2043