- Posts by Steven Nofziger
PrincipalSteve assists businesses, individuals and nonprofit organizations with a variety of business and tax matters.
Steve’s business practice includes business entity formation, governance, ownership transfers, business ...
Like other commentators, we have been writing extensively about the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the historic $2.2 trillion relief package enacted last month by lawmakers in the wake of the COVID-19 pandemic.
In a prior post, we provided a summary and analysis of numerous tax provisions of the CARES Act.
In this post, we expand on our previous coverage of the CARES Act relative to net operating losses (“NOLs”), and provide an overview of new guidance issued by the IRS.
NOTICE 2020-23
On April 9, 2020, the U.S. Secretary of the Treasury issued Notice 2020-23. It greatly expands the tax compliance relief previously granted to taxpayers in response to the COVID-19 pandemic.
Background
On March 13, 2020, President Trump issued an emergency declaration, instructing the U.S. Secretary of the Treasury to relieve taxpayers from certain tax compliance deadlines during these horrific times.
Code Section 7508A grants Treasury authority to postpone the time to perform certain acts required under the Code for taxpayers affected by a federally declared disaster (as defined in Code Section 165(i)(5)(A)).
The U.S. Department of Labor (the “DOL”) issued, effective April 6, 2020, temporary rules (“Rules”) relative to the Families First Coronavirus Response Act (the “FFCRA”). The Rules focus on the “Small Employer Exemption” (defined below). Importantly, the DOL’s guidance answers several questions that have been the topic of debate among many business owners, tax advisors and commentators.
Background
As discussed in prior posts, the FFCRA went into effect on April 1, 2020. The legislation contains a number of tax provisions that fund the FFCRA’s mandatory paid leave provisions.
A Succinct Summary of the Key Tax Provisions
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (colloquially, the “CARES Act” or the “Act”). The CARES Act is a historic $2.2 trillion relief package enacted by lawmakers in the wake of the COVID-19 pandemic. The Act is more than 880 pages in length and contains a multitude of provisions, all of which are intended to support individuals and businesses during these horrific times.
We have attempted to provide our readers with a broad overview of the most significant tax provisions of the Act. If a provision is potentially applicable to a given situation, please read the entire provision of the Act to affirm its application.
Yesterday, like other commentators, we reported that, in accordance with its terms, the Families First Coronavirus Response Act (“Act”) is effective on April 2, 2020. Please be aware, the U.S. Department of Labor (“DOL”) posted on its website a statement that the Act is effective on April 1, 2020. We assume this is not a premature April Fool’s joke. Accordingly, since DOL is the agency enforcing the non-tax aspects of the Act, we advise employers to ready themselves for the new law one day earlier than expected. It is better to be safe than sorry!
President Trump signed the Families First Coronavirus Response Act (the “Act”) on March 18, 2020. The Act becomes effective April 2, 2020, and contains a number of tax provisions that fund the Act’s mandatory paid leave provisions.
This blog post summarizes the Act’s paid leave and associated employer tax-related benefits. The Act is broad in application, creating complexity. In general, it applies to employers with fewer than 500 employees. We have attempted to dissect the Act in bite-sized, easily understandable chunks, removing the complexities whenever possible.
Earlier this week, a local tax practitioner asked us whether it was true that the City of Portland no longer allows depreciation deductions resulting from an election under Section 754 of the Internal Revenue Code of 1986, as amended (the “Code”), for purposes of computing tax under the City of Portland Business License Tax (“BLT”) and the Multnomah County Business Income Tax (“BIT”). The answer we gave was “yes.” Of course, the response we received from the practitioner was “why.” That question is more difficult to answer than the original question. Nevertheless, we present this blog post to remind tax practitioners of the City’s position on this issue and to discuss the implications of the City’s new position.
We are taking a break from our multi-post coverage of Opportunity Zones to address a recent, significant piece of Oregon tax legislation.
On May 16, 2019, Governor Kate Brown signed into law legislation imposing a new “corporate activity tax” (“CAT”) on certain Oregon businesses. The new law expressly provides that the tax revenue generated from the legislation will be used to fund public school education.
Although the new tax is called a “corporate” activity tax, it is imposed on individuals, corporations, and numerous other business entities. The CAT applies for tax years beginning on or after January 1, 2020.
To help defray the expected increased costs of goods and services purchased from taxpayers subject to the CAT that will assuredly be passed along to consumers, the Oregon Legislative Assembly modestly reduced personal income tax rates at the lower income brackets.
BACKGROUND
Sections 1400Z-1 and 1400Z-2 were added to the Internal Revenue Code of 1986, as amended (the “Code”) by the Tax Cuts and Jobs Act. These new provisions to the Code introduce a multitude of new terms, complexities and traps for the unwary.
The first new term we need to add to our already robust tax vocabulary is the phrase “Qualified Opportunity Zones” (“QOZs”). The Code generally defines QOZs as real property located in low-income communities within the US and possessions of the US. Additionally, to qualify as a QOZ, the property must be nominated by the states or possessions where the property is located and be approved by the Secretary of Treasury.
The Service issued proposed regulations corresponding to IRC § 199A today. As discussed in a prior blog post, IRC § 199A potentially allows individuals, trusts and estates to deduct up to 20% of qualified business income (“QBI”) received from a pass-through trade or business, such as an S corporation, partnership (including an LLC taxed as a partnership) or sole proprietorship.
BACKGROUND
Deduction
The deduction effectively reduces the new top 37% marginal income tax rate for business owners to approximately 29.6% (i.e., 80% of 37%) in order to put owners of pass-through entities on a more level playing field with owners of C corporations who now have the benefit of the greatly reduced 21% top corporate marginal tax rate under the Tax Cuts and Jobs Act (“TCJA”). The concept sounds simple, but the application is complex. The new Code provision contains complex definitions and limitations, requires esoteric calculations, and is accompanied by many traps and pitfalls.
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Larry J. Brant
Editor
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at 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; Tulsa, Oklahoma; and Beijing, China. Mr. Brant is licensed to practice in Oregon and Washington. 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.
