As I previously reported, on May 4, 2021, Washington State Governor Jay Inslee signed Senate Bill 5096 ("SB 5096") into law, creating the state's first capital gains tax. It is set to go into effect on January 1, 2022.
The new law has had a turbulent ride during its infancy. Before Governor Inslee could even sign the bill into law, opponents to the legislation filed a lawsuit in the Superior Court of Washington for Douglas County, challenging the new tax regime as a tax on income – a violation of the state’s constitution. The plaintiffs in that case seek to enjoin the taxing authorities from assessing and collecting the tax or otherwise enforcing the new law.
The Oregon Society of Certified Public Accountants (OSCPA) will be hosting its 2021 Annual Real Estate Conference as a live webcast on Wednesday, June 9, 2021. I’ve been a frequent speaker at the OSCPA’s conferences over the past 30+ years. This year, I am looking forward to present on “Section 1031 Exchanges: A Look At Recent Developments and Other Tax Deferral Alternatives.”
For the second year in a row, the due date for the filing of income tax returns and the payment of taxes was extended. For most taxpayers, the extended deadline brought glee. For the tax return preparation community, however, while the extended time period was undoubtedly necessary, it offered little relief. Instead, it served to prolong the busiest and most stressful time of year.
On May 4, 2021, Washington Governor Jay Inslee signed Senate Bill 5096 ("SB 5096") into law, creating a capital gains tax regime in Washington. The bill has had a brief, but colorful journey so far. It appears that the journey is continuing.
Will Washington's capital gains tax be here to stay? At this point, it is anyone's guess.
SB 5096 was originally introduced to the Washington State Senate on January 6, 2021. It was passed by the Senate on March 6, 2021, after a hearing in the Senate Committee on Ways and Means, three readings and some floor amendments. The bill's passage margin in the Senate was narrow, receiving 25 affirmative votes and 24 negative votes.
On April 25, 2021, the Washington State Legislature passed Senate Bill 5096 (SB 5096). The bill was immediately sent to Governor's Inslee's desk for signature. It brings a new tax regime to the state of Washington.
Before we go into the details surrounding the new tax, I have to mention that it was challenged even before the governor had the opportunity to sign it into law. A group of potentially affected taxpayers filed a lawsuit in Douglas County, Washington, to strike down the new law as being unconstitutional. So, it is possible that SB 5096 will never breathe life.
Knowing that the new tax regime is under attack, it is still important to have a good understanding of it in the event it survives the battle.
Last week, we reported on Maryland’s new gross receipts tax on revenues derived from digital advertising services (the “Tax”), the first of its kind in the nation. Affected taxpayers and tax practitioners alike can breathe a sigh of relief—the Tax will not apply to tax years beginning before 2022. Additionally, the broadcast news industry secured a significant victory by obtaining an exclusion from the Tax.
During the COVID-19 pandemic, the federal government enacted three major pieces of legislation to provide financial relief to individuals and families. The American Recovery Plan Act (“ARPA”), the most recent legislation, provides the third round of Economic Impact Payments (“EIPs”), also referred to as stimulus payments (and “recovery rebates” in the acts), to millions of Americans.
Maryland recently enacted the nation’s first tax on digital advertising. The new tax, the Digital Advertising Gross Revenues Tax (the “Tax”), became law on February 12, 2021.
The Tax has been surrounded by controversy from the very moment it was introduced in the Maryland House of Delegates. In fact, a lawsuit to prevent the Comptroller of the Treasury of Maryland from enforcing the Tax was recently filed by a group of affected taxpayers.
Oregon State Senator Fred Girod, a Republican from Stayton, Oregon (District 9), is sponsoring Senate Bill 787 ("SB 787"). If passed, SB 787 would repeal the Oregon Corporate Activity Tax (the "CAT"). So far, the bill does not appear to have much momentum behind it, but time will tell.
Cats have a "righting reflex," allowing them to twist in midair if they fall from a high place so that they can land upright on their feet. Because of this uncanny ability to potentially avoid disaster, it is often said cats have nine lives. Well, the CAT has avoided death in the Oregon Legislature already on a number of occasions. The question is whether the CAT can avoid another attempt to repeal it once and for all.
Senator Girod is a strong advocate for making a quality college education affordable for all students. He is not, however, a friend of the CAT. SB 787 is aimed at killing the CAT.
It is not unreasonable to anticipate that there will be a federal tax policy transformation following a change in the political control of the White House, the U.S. Senate and the U.S. House of Representatives. What may be unreasonable, however, is making knee-jerk tax planning decisions in anticipation of possible modifications to the Internal Revenue Code (the "Code"). Reactionary planning, unless it is well thought out and is based upon sound business judgment, could end up being disastrous. During the present times, tax advisors and their clients need to be cautious in their tax planning and any related decision-making.
Looking through a lens solely focused on federal taxation, it seems that commentators, tax advisors and taxpayers alike are all worried about the future. Possible tax policy changes on the horizon that are being bantered about include:
Larry J. Brant
Larry J. Brant is a Shareholder in Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, But It Isn’t Free Of Potholes," New York University 80th Institute on Federal TaxationVirtual Event, 11.18.21
- To be rescheduled
- "The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, But It Isn’t Free Of Potholes," OSCPA Farming, Ranching & Agribusiness ConferenceBend, OR, 6.2.22-6.3.22