The NYU 76th Institute on Federal Taxation (IFT) is taking place in New York City on October 22-27, 2017, and in San Francisco on November 12-17, 2017. This year, I will be presenting my latest White Paper, The Built-in Gains Tax Revisited. My presentation will include a discussion about the history of the tax; application and impact of the tax; ways to avoid or potentially minimize the tax; the complexities of Code Section 1374 and the regulations promulgated thereunder; valuation issues; planning opportunities; traps that exist for the unwary; relevant cases and rulings; and practical tax practitioner guidance.
The IFT is one of the country's leading tax conferences, geared specifically for CPAs and attorneys who regularly are involved in federal tax matters. The speakers on our panel include some of the most preeminent tax attorneys in the United States, including Jerry August, Terry Cuff, Wells Hall, Karen Hawkins, Stephen Looney, Stephen Kuntz, Mark Peltz and Bobby Philpott. I am proud to be a part of IFT.
This will be my fifth year as an IFT presenter, and I am speaking as part of the Closely Held Business panel on October 26 (NYC) and November 16 (San Francisco). As in previous years, the IFT will cover a wide range of fascinating topics, including tax controversy, executive compensation and employee benefits, international taxation, corporate taxation, real estate taxation, partnership taxation, taxation of closely-held businesses, trusts and estates, and ethics.
I hope you will join us this year for what will be a terrific tax institute. Looking forward to seeing you in either New York or San Francisco!
View the complete agenda and register at the NYU 76th IFT website.
For more than a year, I have been discussing the potential that Oregon lawmakers will pass a corporate gross receipts tax. On May 26, 2017, we discussed recent events that would lead a reasonable person to believe that the dream of a corporate gross receipts tax was definitely alive and well in Oregon. In fact, the passage of it certainly appeared to be gaining steam in the legislature. Maybe that is not the case – at least for now.
Late yesterday, Oregon Democrats announced that they are abandoning any efforts to enact a corporate gross receipts tax this year as they have been unable to garner adequate legislative support to pass such a measure. Article IV, Section 25 of the Oregon Constitution requires a three-fifths majority of all members elected to each house of the legislative assembly to pass bills for raising revenue and that the presiding officer of each respective house sign the bill or resolution. So, it appears a three-fifths vote in favor of a corporate receipts tax in each the house and the senate is not currently attainable.
After Oregon Measure 97’s drubbing at the polls in November 2016, for many, it suggested the quashing of any notion of a gross receipts tax in the state. For Oregon Senator Mark Hass (D) and Representative Mark Johnson (R), it got them thinking creatively about alternatives to such an approach, spawning Legislative Concept 3548, and subsequently, the births of Senate Joint Resolution 41 and House Bill 2230. Both resemble the now defunct Measure 97—and in the same way can be viewed as a hidden sales tax, essentially. While finding a palatable path to reform is certainly a tall order, the new tax proposals could pose a serious threat to the Oregon business community and present a thorny solution to addressing the state’s budgetary needs.
In an April 2017 State Tax Notes article, titled “The Idea That Would Not Die: Beyond Oregon’s Measure 97,” my colleague Michelle DeLappe and I discuss these new Oregon tax proposals and their key differences with Measure 97, the benefits and shortcomings of a gross receipts tax, and the likelihood of a gross receipts tax in Oregon becoming a reality.
As I reported previously, Oregon Measure 97 was overwhelmingly defeated by voters in the state’s general election this past November. It certainly appeared that the voters spoke loudly and clearly on November 8, 2016, when they voted to defeat the ill-designed amendments to the Oregon corporate minimum tax regime contained in Measure 97. Flaws in the legislation included:
- Measure 97 contained a corporate alternative tax based on Oregon gross receipts – a tax that has no relationship to profits.
- Measure 97 proposed a corporate alternative tax applicable only to C corporations. S corporations, entities taxed as partnerships and Oregon benefit companies would have escaped the proposed tax altogether.
- While Oregon benefit companies would have escaped the proposed tax, non-Oregon benefit companies were to be subject to the tax. As a result, Measure 97 was clearly in conflict with the Interstate Commerce Clause.
Enter Legislative Concept 3548
On February 13, 2017, Oregon Senate Finance Committee Chairman Mark Hass (D) requested that Legislative Concept 3548 (“LC 3548”) be released. LC 3548 is a legislative referendum to amend the Oregon Constitution in order to create a “Business Privilege Tax” based on gross receipts. It looks a lot like Measure 97. There are, however, some key differences, including:
As a general rule, in accordance with IRC § 162(a), taxpayers are allowed to deduct, for federal income tax purposes, all of the ordinary and necessary expenses they paid or incurred during the taxable year in carrying on a trade or business. There are, however, numerous exceptions to this general rule. One exception is found in IRC § 280E. It provides:
“No deduction or credit shall be allowed for any payment paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any state in which such trade or business is conducted.”
Actual or constructive receipt of the exchange funds during a deferred exchange under IRC Section 1031 totally kills an exchange and any tax deferral opportunity. Treasury Regulation Section 1031(k)-1(f)(1) tells us that actual or constructive receipt of the exchange proceeds or other property (non-like-kind property) before receiving the like-kind replacement property causes the exchange to be treated as a taxable sale or exchange. This is the case even if the taxpayer later receives the like-kind replacement property. In accordance with Treasury Regulation 1.1031(k)-1(f)(2), a taxpayer is in constructive receipt of money or property if it is credited to his, her or its account; set apart for the taxpayer’s use; or otherwise made available to the taxpayer.
Larry J. Brant
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; 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.