William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

COVID Weekly by William Byrnes and Robert Bloink (Friday May 29, 2020)

Posted by William Byrnes on May 28, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals.

Apply now for fall courses that begin in August: Enterprise Risk Analytics; Information Security Risk Management; Terrorism Risk Management; International Tax Risk Management, Data, and Analytics II; International Tax & Tax Treaties I and II; Securities Regulation; Investment & Portfolio Management; Financial Innovation (and Risk)

Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 

 

 Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
This week we have more information about the CARES Act, including details on qualified plan loans and health expenses paid by employers for furloughed workers. We also have the annual updates to the HSA numbers that will be in effect for 2021. How was your Memorial Day?
Calculating CARES Act Qualified Plan Loans & The One-Year Look-back Rule

The CARES Act allows plan sponsors to double the qualified plan loan limit for qualified individuals. Plan loans made between March 27, 2020 and September 23, 2020 are limited to the lesser of (1) $100,000 or (2) 100% of the participant’s vested account balance. Despite this, even if the individual is qualified, plan sponsors must remain aware of the one-year look-back rule For more information on the qualified plan loan rules, visit Tax Facts Online. Read More

2021 HSA Inflation-Adjustments

The IRS has released Revenue Procedure 2020-32 with the 2021 inflation adjusted amounts for taxpayers who contribute to health savings accounts (HSAs). For more information on the contribution limits that apply to HSAs, visit Tax Facts Online. Read More

Treasury Allows Tax Credit for Health Expenses of Furloughed Workers

Clearing up confusion (and revising initial guidance), the Treasury has announced that if an employer continues to pay an employee’s health insurance costs during a furlough period, the employer is entitled to claim a tax credit with respect to those expenses. This is the case even if the employer is not currently paying the employee’s wages. For more information on the employee retention tax credit, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-087
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TaxFacts Covid-19 Weekly by William Byrnes and Robert Bloink (Friday May 22, 2020)

Posted by William Byrnes on May 22, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for fall courses that begin in August: Enterprise Risk Analytics; Information Security Risk Management; Terrorism Risk Management; International Tax Risk Management, Data, and Analytics II; International Tax & Tax Treaties I and II; Securities Regulation; Investment & Portfolio Management; Financial Innovation (and Risk) Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
This week brings two updates that may affect employee benefits. The first is that mid-year changes to cafeteria plan elections are permissible. This includes FSA and dependent care accounts, which may be important as both healthcare and childcare expenditures for many people are wildly different than what they had anticipated at the end of 2019. The IRS also made some temporary FSA changes permanent. Finally in some non-COVID updates (yes there is some!), the IRS released proposed rules that change how some administrative expenses incurred by trusts and estates can be deducted.
IRS Provides Relief for Cafeteria Plan Participants in Response to COVID-19

Under normal circumstances, cafeteria plans are not permitted to allow participants to make mid-year election changes except in limited situations. Notice 2020-29 permits employees to allow certain mid-year elections made during calendar year 2020 that would otherwise be impermissible, including changes to salary reduction contribution elections. For more information on the mid-year election rules for cafeteria plans, visit Tax Facts Online. Read More

IRS Makes Temporary & Permanent Changes to the FSA Grace Period Rules

IRS Notice 2020-33 and Notice 2020-29, released concurrently, provides relief with respect to unused funds in a flexible spending account. Under Notice 2020-29, if an employee has unused amounts remaining in a health FSA or a dependent care assistance program at the end of a grace period (or plan year) ending in 2020, a cafeteria plan may permit employees to apply those unused amounts to pay or reimburse medical care expenses or dependent care expenses incurred through December 31, 2020. Notice 2020-33 makes a change to the carryover rules that apply to health FSAs, so that the amount that can be carried over to the following year will equal 20 percent of the maximum inflation-indexed salary reduction amount under Section 125 (increasing the carryover amount from $500 to $550 for 2020). For more information on the rules governing health FSAs, visit Tax Facts Online. Read More

IRS Proposes Rules Allowing Deduction of Administrative Fees for Trusts & Estates

The IRS has released proposed regulations that would permit the deduction for certain administrative fees incurred by trusts and estates (including the S portion of an ESBT). The guidance addresses the treatment of these expenses in light of the suspension of all miscellaneous itemized deductions for 2018-2025 under the 2017 tax reform legislation. For more information on the tax treatment of trusts and estates, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Tax Policy, Taxation, Wealth Management | Tagged: , , | Leave a Comment »

TaxFacts Covid-19 Intelligence Weekly by William Byrnes and Robert Bloink (May 18, 2020)

Posted by William Byrnes on May 18, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: Legal Risk Management; Intro to Risk Management; FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 

 Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

The devil is in the details, but where exactly? This week we are starting to see how the broad changes in the recent spate of COVID-19 legislation will be administered. We have new notices on loan forgiveness procedures (did you get your PPP loan yet?), COBRA and Medicare, and FFCRA paid leave issues.

The Finer Points of PPP Loan Forgiveness

Loan forgiveness offers powerful assistance to those small businesses who were actually able to receive Paycheck Protection Program loan funds. However, loan forgiveness is not without its costs. While amounts forgiven will not be included in income under the usual cancellation of indebtedness rules, business owners may not be entitled to their typical business deductions either. Notice 2020-32 clarifies that otherwise allowable deductions are disallowed if the payment of the expense (1) results in loan forgiveness under the PPP loan program and (2) the income associated with the loan forgiveness is excluded from income under CARES Act Section 1106(i). For more information on implications of loan forgiveness, visit Tax Facts Online. Read More

New Q&A on CARES Act Qualified Plan Loans & Distributions

The IRS released the first Q&A in what is likely to be a series of guidance on the CARES Act retirement-related provisions. One overarching issue is the IRS confirmation that plan sponsors can rely upon past guidance issued in response to Hurricane Katrina in 2005 and the RMD waiver in 2009 for help implementing the CARES Act provisions. Under initial guidance, individuals are only eligible for COVID-19 related distributions or loans if they themselves are impacted (qualification cannot currently be based on a spouse or dependent’s job loss). The Q&A also clarifies that increased loan limits are currently available between March 27, 2020 and September 22, 2020. Further, the guidance confirms that the loan and distribution relief is optional for plan sponsors–and sponsors can elect to adopt one provision and not another (including the loan repayment option). For more information on the CARES Act loan provisions, visit Tax Facts Online. Read More

New COBRA Notice in Light of Growing Employment Litigation

The DOL released a revised COBRA general notice and election notice on May 1, 2020, in response to increasing furloughs and layoffs in the wake of COVID-19–and a growing risk of employment litigation. Employers are not required to post the new notices, but may wish to in light of the evolving situation. These new notices add information about how Medicare eligibility impacts COBRA eligibility (highlighting the fact that COBRA coverage is usually secondary to Medicare). Employers who use the model notices are deemed to comply with COBRA notice requirements. For more information on COBRA coverage election requirements and COVID-19, visit Tax Facts Online. Read More

Moving to Reopen, Employers Begin Evaluating FFCRA Leave Provisions

Now that many more employers are beginning to evaluate whether to reopen as governments relax restrictions, those who have been closed for upwards of two months will have to evaluate whether they must provide paid leave under the FFCRA as COVID-19 continues to spread. The FFCRA paid sick leave and expanded FMLA provisions only applied to employers who continued to operate in the wake of the pandemic–employees who were simply laid off or furloughed were required to seek unemployment benefits. Upon first glance, the new paid leave requirements under the FFCRA seem to provide 12 weeks of paid time off for most small business employees. However, the benefit triggers differ depending on whether the employee is claiming (1) 80 hours paid sick leave or (2) expanded relief under the FMLA. For more information on the benefit triggers, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s Covid-19 TaxFacts Intelligence Weekly for May 7, 2020

Posted by William Byrnes on May 7, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: Legal Risk Management; Intro to Risk Management; FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 

 Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.

Some interesting updates this week. We already knew that NOLs could be applied retroactively under the CARES Act, but now it seems that corporate AMT credits (remember those?) can be, as well.

Also, the last item on extending the COBRA election period might end up being a big deal. Importantly, the election period (the period that you have to decide whether to take the COBRA benefits) has been extended for an unknown amount of time. There has always been a risk of “moral hazard” with the election period since you can wait to see if you need the coverage before making the decision to commit to paying the premiums. However, that risk seemed low when the election period had a hard cut-off at sixty days. Now the election period is extended to sixty days after the end of the COVID-19 national emergency, which doesn’t seem to be likely to occur anytime soon. It will be interesting to see how group health carriers react to this change.

CARES Act Provides NOL Relief for Struggling Businesses

The CARES Act allows corporations to carry back net operating losses (NOLs) incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax). Post-tax reform, these NOLs could only be carried forward. For tax years beginning prior to January 1, 2021, businesses can offset 100% of taxable income with NOL carryovers and carrybacks (the 80% taxable income limitation was lifted). With respect to partnerships and pass-through entities, the CARES Act amended the effective date for the new excess business loss rules created by the 2017 tax reform legislation. The new rules will only apply beginning in 2021 (rather than 2018). Pass-through taxpayers who have filed a return reflecting excess business losses will presumably be entitled to refund by filing an amended return, absent guidance to the contrary. For more information, visit Tax Facts Online. Read More

CARES Act Permits Penalty-Free Payroll Tax Deferral for Employers

The CARES Act allows both employers and independent contractors to defer payment of employer payroll taxes without penalty. Importantly, employers with fewer than 500 employees are entitled to withhold payroll taxes as an advance repayment of the tax credit for paid sick leave and expanded FMLA leave under the FFCRA. Under the CARES Act payroll tax deferral, employers are permitted to defer the employer portion of the payroll tax on wages paid through December 31, 2020 for up to two years. Payroll taxes are generally due in two installments under CARES: 50% by December 31, 2021 and the remaining 50% by December 31, 2022. Economic hardship is presumed, meaning the employer does not have to produce documentation establishing that COVID-19 impacted the business. Payroll tax deferral options apparently apply to all employers, regardless of size. However, employers who have loans forgiven under the CARES Act Payroll Protection Loan program are not eligible for the deferral. For more information, visit Tax Facts Online. Read More

CARES Act Employee Retention Tax Credit

The CARES Act creates a new refundable tax credit designed to help employers who retain employees during the COVID-19 health crisis. The credit is taken against employment taxes and is equal to 50% of the first $10,000 of qualified wages paid to the employee. The credit is available for calendar quarters where either (1) operations were either fully or partially suspended because of a government-issued order relating to COVID-19 or (2) the business’ gross receipts declined by more than 50% when compared to the same calendar quarter in 2019. For more information, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Tax Policy, Taxation | Tagged: , | Leave a Comment »

Covid-19 Stimulus: Are Tax Credits or SBA Loan Forgiveness Better for a Small Business After IRS Denies Tax Deductions If Loan Forgiven (Notice 2020-32)?

Posted by William Byrnes on May 3, 2020


 

Professor William Byrnes of Texas A&M’s School of Law discusses the IRS’ Notice 2020-32 (issued April 30, 2020) denying tax deductions for payroll and other operational expenses for small business owners that take advantage of the tax-free loan forgiveness program (PPP) of the SBA. William Byrnes then presents an example when a small business may be better off using the combined Employee Retention Tax Credit (CARES Act), the Families First Act Tax Credit, and the deferral of payment of payroll tax instead of the SBA loan forgiveness.

See my article below this post for additional analysis: The IRS Just Issued Notice Denying Deductions for PPP Loan Forgiveness and Its Dead Wrong

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Byrnes & Bloink’s Covid-19 TaxFacts Weekly of April 30, 2020 (Special Notice – IRS Just Issued Notice Denying Deductions for PPP Loan Forgiveness and Its Dead Wrong)

Posted by William Byrnes on April 30, 2020


           Prof. William H. Byrnes

The IRS released on April 30th Notice 2020-32 wherein the IRS interprets general tax law principles to deny business deductions (under Internal Revenue Code Section 162) for the wage and related expenses when the business takes advantage of the SBA’s PPP loan forgiveness.

The IRS Notice is a wrong interpretation of how CARES Section 1106 (see below) and by implication, Internal Revenue Code Section 108 (discharge of indebtedness), works, as well as how Congress intends CARES to work. Congress clearly intends CARES’ SBA loan proceeds to ameliorate Covid-19s damage to small business’ earnings (and thus mitigate the Covid-19 economic recession) by pushing cash flow into, and through, small business.

The IRS is approaching this issue from a perspective that exempting from income the discharge of debt of small businesses and also allowing a deduction for the wage expenses is a ‘double benefit’ and double benefits are not allowed.  Yet, this is exactly what many tax credits allow – a double benefit created from deducting the expenses that generate the tax credit.  A small business that uses the maximum Sick Leave tax credit of $5,110 (Families First Act) and the $5,000 employee retention tax credit for CARES (these two tax credits may be combined) will receive the $10,110 refundable tax credit excluded from gross income AND ALSO a deduction from the small business owner’s gross income (albeit this deduction is reduced by $5,000 to reflect the Employee Retention credit amount yet no reduction is required for the Families First tax credits) which is worth the small business owner’s tax rate – federally either 37% or 29.6%. with the extra Section 199A 20% deduction for business income (see some of Robert and my Tax Facts Intelligence articles on 199A and Covid-19 at ThinkAdvisor).  In New York or California, states with high personal income tax rates, the business expenses deduction is worth more than say, Texas or Florida that do not tax personal income.

So the IRS Notice creates discrimination for many small businesses in favor of the $10,110 refundable tax credits of Families First and CARES in relation to the SBA PPP Loans. Most of the House and Senate certainly did not intend to ‘give with one hand and take back with the other’ regarding the SBA Loans.  Had Notice 2020-32 been published before the additional SBA funding, Congress would have been forced to take a stance on what it intended. Now we must wait until the next relief bill for Congress to confront this issue.

The IRS cites IRC Section 265 for its argument to deny the deduction for the CARES Act’s SBA PPP forgiven amount. The IRS contends that the CARES Act Section 1106 creates a “class of exempt income”.  Section 265 denies business income deductions under Section 162 when the income in question falls into a class of exempt income. But if CARES creates a class of income, then that class is of ‘debt income’ and debt is excludable from gross income.  The IRS’ erroneous interpretation can be stretched that all business deductions should be denied by Section 265 when those expenses are funded by debt income. Even the interest payments on the SBA loans should not be deductible based on this approach.

CARES Act Section 1106‘s Loan Forgiveness exclusion from income is in the same vein as Section 108’s exclusion from income for discharged debt.  Section 108 does not create a class of income for purposes of Section 265. Administratively it would be very burdensome for the IRS to reach back to open tax years and clawback deductions for expenses funded by the discharged debt. Congress knows how to deny tax allowances when it intends to do so because Congress included denying certain allowance items in Section 108, but not a denial of tax deductions.  Congress included proportional reduction of net operating loss, of general business tax credits (under Section 38), among other items, relative to the amount of loan forgiveness to overall income that generated the tax allowances.

CARES ACT Section 1106 states “(i) TAXABILITY.—For purposes of the Internal Revenue Code of 1986, any amount which (but for this subsection) would be includible in gross income of the eligible recipient by reason of forgiveness described in subsection(b) shall be excluded from gross income.”

Section 108 states “(a) Exclusion from gross income (1) In general Gross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of the taxpayer if …”.

Statutorily speaking, why did Congress specifically include that the SBA loan forgiveness is exempt from gross income if Congress intended that the deductions would be disallowed?  Based on the IRS’ logic, if Congress had not included the exclusion then the expenditure for wages would be deductible and would offset the discharged debt, a washout.  So Congress did not need to do anything to achieve the result that the IRS claims that Congress intended by doing something.

Take an example of a New York business.*  Should a New York business choose SBA loan forgiveness or the sick leave plus employee retention tax credits? (Note New York’s decoupling whereby New York has chosen to deny some of the relief of the CARES Act may impact the analysis but I am leaving that aside).  For a business with, by example, 100 employees, a combined $10,000 credit (rounding down) per employee is worth $1,000,000 of tax-exempt tax credit. To generate the $10,000 of tax credit, the business had to pay at least $15,000 in wages, so $1.5 million in wages for the 100 employees.  At the combined federal rate of 37% and New York highest rate of 8.82%, the wage expense generates a deduction of $458,200 (because the wage deduction must be reduced for the $5,000 of Employee Retention tax). But the employer also paid 06.2% social security tax and 01.45% medicare tax, a combined 07.65% which provides an additional $76,500 deduction (again excluding the Employee Retention tax credit portion). The deduction probably exaggerates the Covid-19 loss for the year that may, pursuant to the new NOL provision for CARES, be clawed back from the previous tax years because the Tax Cuts and Jobs Act is suspended for 2020 losses. Combined benefit of $1,534,700 for the business.

An SBA PPP loan forgiveness for the wage amount of $1.5 million is worth exactly that, $1.5 million. Wage deduction lost.  Thus, in this scenario, the tax credits may generate more net benefit than the SBA Loan. And if the IRS argument for Section 265 is carried out, then the interest expense on the SBA loan must be denied, which I estimate will be in the neighborhood of $52,500 until forgiven (maybe the interest will be returned vt the SBA to mitigate the disparity caused by the IRS – I am unclear if the SBA can forgive the interest as well).

What if a small business is insolvent which is just an accounting definition of debt exceeding asset?  Generally, a small business with the SBA loan is going to be insolvent.  Cash flow is king so the issue of asset book insolvency is not actually relevant to running the business.  But for Section 108 it allows exemption from gross income the amount of canceled debt as well as the deduction for the expenses financed by the canceled debt.  Perhaps then, any small business seeking the SBA loan forgiveness needs to obtain an accountant’s letter of business insolvency to trump Notice 2020-32 then file Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness?

Insolvency calculation:
Total liabilities immediately before the discharge – FMV of total assets* before the discharge = Extent to which the taxpayer is insolvent
(Assets includes bankruptcy exempt assets e.g. retirement account and interest in a pension plan).

And because the tax credits can be captured from the Employer’s Social Security portion of the payroll tax, while the cash flowing of the payroll is still an issue, it is less of an issue, albeit the payroll tax on the $1.5 million is just under $80,000 so not significant. However, the business may request an advance refund of the tax credits as the business spends the wages (Form 7200, Advance Payment of Employer Credits Due to COVID-19). Thus, with the advance tax credit refund, the cash flow challenge is addressed. Regardless, the small business may obtain the CARES Act SBA Small Business Interruption Loan – just not the loan forgiveness that eliminates the deductions according to the IRS.

While tax credits are difficult for taxpayers but the SBA loan process is certainly not straight forward and neither is the forgiveness process, for those businesses that managed to obtain the SBA PPP loans.  Depending on the size of the loan and the business’ 2020 wages, the SBA loan may not be more beneficial than the tax credits, or at least, not substantially more.

Thank goodness that the calculations necessary to determine which path is better for the small business will require expensive advice from a tax advisor.  Congress certainly intended that CARES is to ameliorate (the temporarily) lost tax advisory fees resulting from the push back of the tax filing season, right?

May 1 at 3:00 pm CARES Act Webinar – Small Business Incentives – Register w/ the Tarrant County Bar Association
William Byrnes and Neal Newman, Texas A&M School of Law
– SBA PPP, Obtaining Loan, Tax-Free Forgiveness, Tax Deduction Expenses?
– Employee Retention Tax Credit and Payroll Tax Deferral?

* I’m simplifying the numbers, factors, and how tax is determined to represent the broader point. One factor is by example the potential Section 199A deduction of 20% of qualifying business income.  This factor may impact the outcome of the calculation if, by example, a business would generate positive qualfied business income instead of a loss because of the SBA PPP loan forgiveness exemption from income without corresponding deductions. In such a case, the additional 20% deduction would need to be added to the business’ benefit column.  However, I think that most businesses will suffer a 2020 loss year with or without SBA loan forgiveness because of loss of revenues from late February through the 3rd quarter.

On May 1st my esteemed colleague, Low Income Tax Clinic Director Professor Bob Probasco, a 30-year tax litigator veteran, responded as follows: You have a valid argument.  But from the perspective of a tax litigator, rather than an academic – predicting what will happen rather than what the result should be – I’m not sure it’s that clear.

The analogy to § 108 discharge of indebtedness is not exact and could be distinguished by a court.  The link between the § 108 and the specific deductions that were “funded” by the indebtedness is not as clear as the link between CARES § 1106 and the specific expenditures required to qualify for the discharge.  Most discharges of indebtedness, outside CARES, are not motivated by the specific use made of the loaned funds, are they?

Similarly, the analogy to tax credits allowed based on the same expenditures that are deducted does not involve exempt income.  In addition, those examples were more clearly intended by Congress.  You can argue that Congress intended to allow the deductions leading to a § 1106 discharge – but it’s an inference, not as clear as Congress explicitly specifying deduction A and credit B, or credit X and credit Y.  The primary purpose of the CARES Act program, and the main benefit to be derived, was the loan foregiveness itself – pre-tax, rather than tax benefit.  Concluding that the income from the foregiveness would not be taxable gives some support for an inference that they intended to allow the deductions as well, but they didn’t actually say that.

The arguments from a policy perspective are stronger, but I’m not sure that would overcome the language of the statute.  Courts tend to interpret the language of the Code literally, and deviate with judicial doctrines like substance over form and economic substance that benefit the government rather than the taxpayer.

As a practitioner, I could have very comfortably argued either side of the question prior to the Notice.  The Notice is going to make the argument for deduction slightly harder.  It could easily go either way in court, but my guess is that a court is at least slightly more likely to agree with the Notice than to allow deduction of those expenses.

           Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
Legislation that is drafted quickly often ends up needing a lot of regulatory and administrative interpretation to help taxpayers adopt the changes in the new rules, and the COVID tax changes are no different.We continue to see actions from the IRS and DOL to clarify the new provisions in COVID-19 legislation. This week those updates include new info on how to enact FFCRA leave (including what to do when employers have concurrent leave policies), the opportunity for partnerships to file amended returns to take advantage of the CARES Act Bonus depreciation fix, and additional flexibility for companies wrestling with the business interest expense deduction under the CARES Act.
 

DOL FAQ Clarify Concurrent Use of FFCRA Leave

The FFCRA implemented a new paid sick leave law and expanded FMLA leave options for employees impacted by COVID-19. Many employers have independent policies in place that provide employees with leave options, and the DOL regulations raised questions about when the employer can require the employee to use that leave prior to, or concurrently with, FFCRA leave. Employers cannot require employees to concurrently use leave during the first two weeks of paid sick leave for non-childcare related reasons. Employers can, under some circumstances, require use of employee leave concurrently with expanded FMLA leave for childcare reasons. Employers are only eligible for tax credits with respect to leave paid out under the new law. If the employer requires the employee to use otherwise available employer-paid leave, the tax credit is unavailable with respect to that portion of the employee’s pay. For more information, visit Tax Facts Online. Read More

Employee Rights After FFCRA Leave

Employers are generally prohibited from retaliating against employees to take paid sick leave or expanded FMLA leave under the FFCRA. However, the law does not protect employees from layoffs or furloughs undertaken for other reasons, such as the general economic downturn. Exceptions exist for key employees and very small employers with fewer than 25 employees. For more information on the exceptions to the FFCRA rules, visit Tax Facts Online. Read More

CARES Act Bonus Depreciation Fix: Amended Returns for Partnerships

The CARES Act provided retroactive relief to partnerships on multiple fronts, including by fixing the so-called “retail glitch” to allow businesses to take advantage of 100% bonus depreciation on qualified improvement property through 2022. Existing law may have prevented partnerships from filing amended Forms 1065 and Schedules K-1. Instead, partnerships would have been required to file an administrative adjustment request, so that partners would not have received relief until filing returns for the current tax year. Revenue Procedure 2020-23 allows partnerships to file amended returns and issue revised Schedules K-1 for 2018 and 2019 to take advantage of retroactive CARES Act relief (and, absent further guidance, even if they are not taking advantage of CARES Act relief). For more information, visit Tax Facts Online. Read More

IRS Guidance on CARES Act Business Interest Elections

The IRS gives businesses substantial flexibility in making and revoking elections related to business interest expense deduction under the CARES Act. For more information about the choices that are available related to the business interest expense deduction, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Tax Policy | Tagged: , , , | Leave a Comment »

Register for May 18th Start of Int’l Tax Risk Management (Data, Analytics & Technology) or FATCA/CRS/AEoI Compliance summer courses w/ Zoom

Posted by William Byrnes on April 27, 2020


Texas A&M International Tax Brochure: https://law.tamu.edu/distance-education/international-tax

  • Join the Texas A&M Aggie alumn network of 500,000+ strong to open doors (and appreciate SEC football).
  • 150+ current graduate enrollment for risk, tax risk, and wealth management curriculum.
  • Experience real-world case studies by industry leaders through an interdisciplinary approach to team learning.
  • Degree options for all tax professionals — lawyers (Master of Laws, LL.M.) and accountants, economists, financial professionals (Master of Jurisprudence, M.Jur.).

Texas A&M, annual budget of $6.3 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

SUMMER 2020 (May 18 through June 30) (register now)

FATCA, CRS, AEoI, Systems and Data3 credits (meet 8:00am Wednesday and 9am Sunday Central Daylight Dallas time zone)

  • Week 1. May 18: FATCA, CRS, and EU: nationality, residency, data sharing: Dr. Bruno Da Silva (Loyens & Loeff) and William Byrnes (TAMU).
  • Week 2. May 25: FATCA/CRS and the Asset Management Industry, intermediaries: Denise Hintzke (Deloitte)
  • Week 3. June 1: FATCA Withholding Compliance, overlap with QI: Denise Hintzke (Deloitte)
  • Week 4. June 8: Documentation FATCA v CRS: Melissa Muhammad (IRS LB&I)
  • Week 5. June 15: FATCA IGAs & CRS Risk Management Melissa Muhammad
  • Week 6. June 23: Financial Institutions Systems And Data: Haydon Perryman (Bank of America, UBS, Barclays, RBS and Lloyds)
  • Week 7 capstone for both Summer courses: “Tax Technology and the future of Tax Departments” Dr. Debora Correa Talutto

International Tax Risk Management I (Data, Analytics & Technology) 3 credits (meet Tuesday and Friday at 8:00am Central Daylight Dallas time zone)

  • Week 1. May 18: General tax risk management approach Dr. Knut Olsen
  • Week 2. May 25: BEPS: Dr. Bruno Da Silva (Loyens & Loeff), and William Byrnes (TAMU).
  • Week 3. June 1: CbCR & Analytics David Deputy, Vertex
  • Week 4. June 8: LOB / PPT / MLI: Dr. Bruno da Silva (Loyens & Loeff)
  • Week 5. June 15: Future of Analytics & Technology from a Risk Management Perspective: Dr. Paula de Witte
  • Week 6. June 23: Interest (thin cap, EBIDTA), Debt/Equity Melissa Muhammad (IRS LB&I)
  • Week 7 capstone for both Summer courses: “Tax Technology and the future of Tax Departments” Dr. Debora Correa Talutto

FALL 2020 (Aug 23 through Nov 23) 3 credits (meet Wednesday and Sunday at 8am Central Daylight Dallas time zone)

Domestic Systems International Tax Risk Management

  • Week 1 Aug 23 maybe Brazil/Canda? (extractive) Oil & Gas ask Susana Bokobo, global tax policy director Repsol
  • Week 2 Aug 30 Mexico Aug 30 Mexico
  • Week 3 Sept 6 India (services)
  • Week 4 Sept 13 China (supply chain)
  • Week 5 Sept 20 Japan Dr. Maji Rhee (Waseda)
  • Week 6 Sept 27 Brazil

International Tax Risk Management II (Data, Analytics & Technology) 3 credits (meet Wednesday and Sunday at 8am Central Daylight Dallas time zone)

  • Week 1 Oct 11 Manufacturing I Niraja Srinivasan Pillar 1
  • Week 2 Oct 18 Manufacturing II (DEMPE & Supply Chain) Niraja
  • Week 3 Oct 25 Manufacturing III (Customs) Niraja
  • Week 4 Nov 1 Tax of Patents / Technology, Dr. Brigitte Muehlmann (Daylight time ends, Wednesday and Sunday at 8am Central Standard Dallas time zone)
  • Week 5 Nov 8 Tax Risk & Tax Technology, Dr. Brigitte Muehlmann
  • Week 6 Nov 15 Tax Risk & Tax Technology, Dr. Brigitte Muehlmann

International Tax & Tax Treaties I: Residency Dr. Bruno Da Silva (Loyens & Loeff), and William Byrnes (TAMU) 3 credits (meet Wednesday and Sunday at 8am Central Daylight Dallas time zone)

  • Week 1 Aug 23 Domestic Tax Rights; Double Taxation; Tax Treaty Allocation Of Tax Rights
  • Week 2 Aug 30 Types Of Taxes; Tax Treaty Interpretation
  • Week 3: Sept 6 Tax Jurisdiction Over Persons, Tax Treaty Interpretation
  • Week 4: Sept 13 Tax Jurisdiction of Corporations; Tax Treaty Interpretation & Application
  • Week 5: Sept 20 Tax Jurisdiction of Entities
  • Week 6: Sept 27 Low Tax Risk: OECD Pillar II, C.F.C., U.S. Tax Reform (GILTI, BEAT) 

International Tax & Tax Treaties II: Source Dr. Bruno Da Silva (Loyens & Loeff), and William Byrnes (TAMU) 3 credits (meet Wednesday and Sunday at 8am Central Daylight Dallas time zone)

  • Week 1 Oct 11 Tax of Business Income (PE, Nexus)
  • Week 2 Oct 18 Tax of Investment Income
  • Week 3: Oct 25 Taxation of Services and Employment Income (including DST)
  • Week 4: Nov 1 Double Taxation and Tax Credits
  • Week 5: Nov 8 Tax Accounting
  • Week 6: Nov 15 Introduction to Management of Tax and Data
  • Capstone Nov 23: Groups Create Client Case Studies

SPRING 2021 (Jan 10 – April 26)

U.S. Tax Risk Management (Data, Analytics & Technology) 3 credits (Wednesday and Sunday at 8am Central Standard Dallas time zone)

  • Week 1 January 10, 2021 Outbound / FDII Melissa Muhammad (IRS LB&I)
  • Week 2 January 17, 2021 Inbound / BEAT Melissa Muhammad
  • Week 3 January 24, 2021 [check the box] Form 1120 Documentation: Neelu Mehrotra: EY
  • Week 4 January 31, 2021 [Subpart F & GILTI, PTEP ] Form 5471 Documentation: Neelu Mehrotra: EY
  • Week 5 February 7, 2021 M&A or topic and Neelu Mehrotra: EY
  • Week 6 February 14, 2021 FTCs; wrap-up: Melissa Muhammad 

E.U. International Risk Management 3 credits (Wednesday and Sunday at 9am Central Daylight Dallas time zone)

  • Week 1 February 28, 2021 General Framework & Fundamental Freedoms
  • Week 2 March 7, 2021 P/S + Interest / Royalty
  • Week 3 March 21, 2021 M&A directive
  • Week 4 March 28, 2021 Cross-Border Losses – Dr. Bruno Da Silva
  • Week 5 April 4, 2021 Free Movement of Capital (investment funds)
  • Week 6 April 11, 2021 ATAD, DAC 6, Abuse – Dr. Bruno da Silva
  • Capstone Week: Build a client case study, wrap up 

Transfer Pricing Risk Management: Tangibles, Methods, Economics, and Data (William Byrnes course material professor)

  • Week 1 January 13 Arm’s Length Standard (v Formulary Approach) Dr. Bruno Da Silva William Byrnes
  • Week 2 Jan 20 CUP & Comparables  Dr. Lorraine Eden
  • Week 3 Jan 27 Cost Plus & Resale Minus  Dr. George Salis
  • Week 4 Feb 3: Comparable Profits Method & TNMM Dr. George Salis
  • Week 5 Feb 10 Profit Split Dr. George Salis
  • Week 6 Feb 17 Best Method Dr. Lorraine Eden 

Transfer Pricing Risk Management: Intangibles and Services (William Byrnes course material professor)

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Byrnes & Bloink’s Covid-19 TaxFacts Weekly of April 24, 2020

Posted by William Byrnes on April 23, 2020


           Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
More significant information about two of the most important changes to come out of the new legislation related to COVID-19.

The first update is an FAQ from the Department of Labor about the exemption from the expanded FMLA paid leave requirements for staff who are out of work for reasons related to a corona virus infection. The new law only applies to businesses with under 500 employees, but contains a vaguely-worded exemption for very small businesses with less than 50 employees and for whom the paid leave requirement would pose a hardship. While some commentators have thought that the exemption might be loosely interpreted to the point of being nearly automatic, the new FAQs require very small businesses to show particular kinds of challenges before the exemption applies.

We also have an update on the definition of “payroll costs” for small businesses applying for PPP loans. This definition is important because the calculation of those costs determine how large of a loan (which is potentially forgivable if certain requirements are met) the business is eligible for.

FFCRA Exemption for Very Small Business Clients

Generally, business owners with fewer than 50 employees can claim an exemption from the paid sick leave and expanded FMLA law if they can show that payment would jeopardize their business as a going concern. DOL FAQ have provided new details, which substantially narrow the availability of the exemption. For more information on the FFCRA paid leave requirements, visit Tax Facts Online. Read More

Telehealth Coverage and HDHP/HSA Eligibility

In response to the evolving COVID-19 pandemic, the CARES Act further expands the pre-deductible services high deductible health plans (HDHPs) may offer. HDHPs are now permitted to cover the cost of telehealth services without cost to participants before the HDHP deductible has been satisfied. For more information on the HDHP qualification rules, visit Tax Facts Online. Read More

Defining “Payroll Costs” for PPP

Taxpayers with fewer than 500 employees are eligible for new “payroll protection loans” administered via the Small Business Administration. In general, the loans may be forgiven (and amounts excluded from income for tax purposes) if used to cover payroll costs. For more information about how “payroll costs” are defined and calculated, visit Tax Facts Online. Read More

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Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).  A 500,000 strong former students association network worldwide of “Texas Aggies” awaits you – just click our advert box to request information.

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Byrnes & Bloink’s Covid-19 TaxFacts Special Edition of April 20, 2020

Posted by William Byrnes on April 20, 2020


           Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
Over the past few weeks Tax Facts has seen a tremendous number of updates that cover the new COVID-19 legislation and related administrative developments. Undoubtedly we will continue to see more of these updates in the weeks and months to come, but we thought now was good time to help our readers catch their breath a little bit by providing a summary of the changes that have been made. This special Tax Facts newsletter is intended to help you navigate through the entirety of the changes that have been made so that you can understand the full breadth of the new tax landscape.

These updates cover (1) the Families First Coronavirus Response Act, (2) the CARES Act, (3) IRS Notices related to the new legislation, and (4) newly released IRS and DOL FAQs that help taxpayers understand how the new rules will be implemented.
Take a look, and as always, check in with Tax Facts the absolute latest in the tax issues affecting insurance, investments, and employee benefits.

Families First Coronavirus Response Act: Paid Sick Leave Benefits for Small Business Employees

The Families First Coronavirus Response Act applies to private employers with fewer than 500 employees (and government employers), and makes several key changes to paid time off laws. The bill: (1) provides eighty hours’ additional paid sick leave for employees (pro-rated for part-time workers) and (2) expands FMLA protections. The additional paid sick leave is capped at $511 per day (total of $5,110) for employees who cannot go to work or telecommute because they (1) are experiencing COVID-19 symptoms and seeking a diagnosis, or (2) are subject to government-mandated quarantine or a recommendation to self-quarantine. The additional paid sick leave is capped at 2/3 of the employee’s pay rate, subject to a maximum of $200 per day or $2,000 total if the employee (1) is caring for or assisting someone subject to quarantine, (2) caring for a child whose school or care provider is unavailable or (3) experiencing “substantially similar conditions” specified by HHS. For more information on the family and medical leave tax credit available for business owners, visit Tax Facts Online. Read More

Families First Coronavirus Response Act: Tax Relief for Small Business Owners

The law contains a tax credit to help small business owners subject to the new paid sick leave and expanded FMLA requirements. The tax credit is computed each quarter, and allows as a credit (1) the amount of qualified paid sick leave wages paid in weeks 1-2, and (2) qualified FMLA wages paid (in the remaining ten weeks) during the quarter. The credit is taken against the employer portion of the Social Security tax. Amounts in excess of the employer Social Security taxes due will be refunded as a credit (in the same manner as though the employer had overpaid Social Security taxes during the quarter). The Act also provides a tax credit for qualified health plan expenses that are allocable to periods when the paid sick leave or family leave wages are paid. For more information on refundable tax credits, visit Tax Facts Online. Read More

CARES Act: RMDs Suspended for 2020, Penalty Waived for Coronavirus Distributions

The CARES Act suspended the required minimum distribution (RMD) rules for 2020–a suspension that applies to all 401(k), 403(b), and certain 457(b) deferred compensation plans maintained by the government, as well as IRAs. The law also contains a provision waiving the 10 percent early distribution penalty that applies to retirement account withdrawals. The relief generally mirrors the relief commonly granted in more localized natural disaster situations. The Act allows employees to take up to $100,000 in distributions from an employer-sponsored retirement plan (401(k), 403(b) or defined benefit plan) or an IRA without becoming subject to the penalty. Unless the participant elects otherwise, inclusion of the distribution in income is spread over three years, beginning with the tax year of distribution. The Act also provides a repayment option, where the participant has the option of repaying the distribution over the three-taxable year period beginning with the tax year of distribution. In this case, the distribution will be treated as an eligible rollover made in a trustee-to-trustee transfer within the sixty-day window. For more information on expanded access to retirement funds, visit Tax Facts Online. Read More

CARES Act: NOL Relief for Struggling Businesses

The CARES Act allows corporations to carry back net operating losses (NOLs) incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax). Post-tax reform, these NOLs could only be carried forward. For tax years beginning prior to January 1, 2021, businesses can offset 100% of taxable income with NOL carryovers and carrybacks (the 80 percent taxable income limitation was lifted). With respect to partnerships and pass-through entities, the CARES Act amended the effective date for the new excess business loss rules created by the 2017 tax reform legislation. The new rules will only apply beginning in 2021 (rather than 2018). Pass-through taxpayers who have filed a return reflecting excess business losses will presumably be entitled to refund by filing an amended return, absent guidance to the contrary. For more information, visit Tax Facts Online. Read More

CARES Act: Penalty-Free Payroll Tax Deferral for Employers

The CARES Act allows both employers and independent contractors to defer payment of employer payroll taxes without penalty. Importantly, employers with fewer than 500 employees are entitled to withhold payroll taxes as an advance repayment of the tax credit for paid sick leave and expanded FMLA leave under the FFCRA. Under the CARES Act payroll tax deferral, employers are permitted to defer the employer portion of the payroll tax on wages paid through December 31, 2020 for up to two years. Payroll taxes are generally due in two installments under CARES: 50 percent by December 31, 2021 and the remaining 50 percent by December 31, 2022. Economic hardship is presumed, meaning the employer does not have to produce documentation establishing that COVID-19 impacted the business. Payroll tax deferral options apparently apply to all employers, regardless of size. However, employers who have loans forgiven under the CARES Act Payroll Protection Loan program are not eligible for the deferral. For more information, visit Tax Facts Online. Read More

CARES Act: Employee Retention Tax Credit

The CARES Act creates a new refundable tax credit designed to help employers who retain employees during the COVID-19 health crisis. The credit is taken against employment taxes and is equal to 50 percent of the first $10,000 of qualified wages paid to the employee. The credit is available for calendar quarters where either (1) operations were either fully or partially suspended because of a government-issued order relating to COVID-19 or (2) the business’ gross receipts declined by more than 50 percent when compared to the same calendar quarter in 2019. For more information, visit Tax Facts Online. Read More

IRS Notice 2020-15: HDHPs Can Pay Coronavirus Costs

The IRS announced that high deductible health plans are permitted to cover the costs associated with the coronavirus. HDHPs can cover coronavirus-related testing and equipment needed to treat the virus. Generally, HDHPs are prohibited from covering certain non-specified expenses before the covered individual’s deductible has been met. Certain preventative care expenses are excepted from this rule. HDHPs will not jeopardize their status if they pay coronavirus-related expenses before the insured has met the deductible, and the insured will remain HSA-eligible. The guidance applies only to HSA-eligible HDHPs. For more information on the rules governing HDHPs, visit Tax Facts Online. Read More

IRS Notice 2020-18: 90-Day Extension of the Federal Tax Payment Deadline

In response to the coronavirus pandemic, the IRS has announced that it will extend the tax payment deadline from April 15, 2020 to July 15, 2020. Interest and penalties during this period will also be waived. The April 15 filing deadline was also extended to July 15, although in separate guidance. Individuals and pass-through business entities owing up to $1 million in federal tax are eligible for the relief, as are corporations owing up to $10 million in federal tax. Individuals who do not anticipate being able to file by July 15 should be aware of their option for requesting a six-month filing extension to October 15. The extension is available by filing Form 4868. For more information on federal tax filing requirements, visit Tax Facts Online. Read More

IRS Notice 2020-23: IRS Expands COVID-19 Extensions

Notice 2020-23 provides expanded relief for taxpayers with a filing or payment obligation arising after April 1, 2020 and before July 15, 2020. Specifically, deadlines are extended to July 15, 2020 for actions required with respect to (1) estate and trust income tax payments and return filings, (2) estate and generation-skipping transfer tax payments and return filings on Form 706 and related forms, (3) gift and generation-skipping transfer tax payments and return filings on Form 709 and related forms, (4) estate tax payments of principal or interest due as a result of an election made under IRC sections 6166, 6161, or 6163 and annual recertification requirements under section 6166. Similarly, taxpayers who faced deadlines with respect to Tax Court actions between April 1 and July 15 have their deadlines postponed until July 15. For more information, visit Tax Facts Online. Read More

IRS FAQ: COVID-19 Filing, Payment Extensions

The IRS FAQ clarifies that the filing and payment extensions (from April 15 to July 15) apply regardless of whether the taxpayer is actually sick or quarantined because of COVID-19. For fiscal year taxpayers with 2019 returns due April 15, the deadline is extended to July 15 regardless of whether April 15 is an original or extended filing deadline. Taxpayers facing filing or payment deadlines that are not April 15 must note that their deadlines have not generally been extended. The relief also does not apply to payroll or excise tax payments (deposit dates remain unchanged, but employers may be eligible for the new paid sick leave tax credit, see Tax Facts Q8550). Taxpayers do not have to do anything to take advantage of the extension—they simply file their returns and make required payments by the new July 15 deadline. Taxpayers who filed and schedule a payment for April 15 must, however, take action to reschedule their payment for July 15 if they wish (by contacting the credit or debit card company if the payment was scheduled directly with the card issuer). For more information, visit Tax Facts Online. Read More

DOL FAQ: Counting Employees for COVID-19 Paid Sick Leave & FMLA Expansion Purposes

A new DOL FAQ provides that an employer is subject to the expanded paid sick leave and FMLA rules if the employer has fewer than 500 full-time and part-time employees. Employees on leave and temporary employees should be included, while independent contractors are not included in the count. Each corporation is usually a single employer. When a corporation has an ownership interest in another corporation, the two are separate employers unless they are joint employers for Fair Labor Standards Act purposes. Joint employer status is based on a facts and circumstances analysis, and is generally the case when (1) one employer employs the employee, but another benefits from the work or (2) one employer employs an employee for one set of hours in a workweek, and another employer employs the same employee for a separate set of hours in the same workweek. For more information on the details provided by current DOL guidance, visit Tax Facts Online. Read More

DOL FAQ: Calculating Sick Pay for Part-Time and Variable Hour Workers Under the Families First Coronavirus Response Act

With respect to the FMLA extension, the rate of pay for part-time employees is based upon the number of hours they would normally be scheduled to work. For employees with variable schedules, pay is based upon a number equal to the average number of hours that the employee was scheduled per day over the 6-month period ending on the date on which the employee takes such leave, including hours for which the employee took leave of any type or (2) if the employee did not work over such period, the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would normally be scheduled to work. As of now, the law provides that leave may not be carried over into 2021. For more information on the law’s requirements, visit Tax Facts Online. Read More

2020’s Weekly Updated Tax Facts Offers a Complete Web, App-Based, and Print Experience for Financial Advisors and Tax Professionals

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s Covid-19 TaxFacts Weekly for April 17, 2020

Posted by William Byrnes on April 16, 2020


online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: Wealth Management; Legal Risk Management; Intro to Risk Management; FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

           Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
More on the COVID-19 legislation and related administrative guidance from the DOL. This week we have updates on business interest deductions, student loan payment info, and DOL guidance on the PTO that was mandated by the new legislation. Are you keeping up?

 

CARES Act: Business Interest Deduction Relief

The CARES Act increases the 30% of adjusted taxable income (ATI) limit on the business interest deduction (as imposed under the 2017 tax reform law) to 50% for corporations in 2019 and 2020. All entities (corporations and pass-throughs) can elect to use 2019 ATI instead of 2020 ATI in determining the 2020 business interest expense deduction, which could increase the business interest deduction for businesses who are likely to see reduced income levels in 2020. For more information, visit Tax Facts Online. Read More

CARES Act Offers Tax-Preferred Student Loan Repayment Assistance Option

The CARES Act includes a provision that gives employers a way to offer tax-preferred student loan repayment assistance to employees. The Act changes the definition of “educational assistance” in IRC Section 127 to also include employer payments to employees of student loan principal or interest. The payments must currently be made before January 1, 2021. The maximum benefit permitted is a $5,250 payment in 2020 (tax-free). For more information on the requirements for establishing a tax-preferred education assistance program, visit Tax Facts Online. Read More

DOL Guidance on Notice Requirements Related to Expanded COVID-19 Paid Time Off

The DOL has released a notice that all employers must conspicuously post to give employees information about federal relief efforts related to COVID-19. The DOL FAQ notes that when employees are working remotely, employers can email or mail the relevant notices. The notice must be provided to all current employees, but only must be provided in English absent future guidance (a Spanish language notice is available on the DOL website). For more information on the COVID-19 relief efforts, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Will New York’s businesses suffer because the state tax system rejected adopting the CARES Act tax reliefs?

Posted by William Byrnes on April 15, 2020


  • Deloitte covers New York’s new budget that purposefully ‘decouples’ from the CARES Act tax relief for New York based business and other states’ business that have income within New York.
  • BDO explains it here as well.
  • Pillsbury here.

Anything that improves the employment of tax professionals, I am for.  Thus, states with their own tax codes that do not correspond to the federal Internal Revenue Code, at least for my students and alumni, are OK by me.  Unless I own a business.  Then it’s maddeningly complex, and compliance expensive, to operate in several tax regimes.

Not saying that the CARES Act provisions made good tax policy sense.  But unless New York state (and city) has something better to offer, the Covid-19 meltdown does not seem like an opportune time to ‘stick it’ to Congress’ because Congress seems to enact ineffectual tax provisions. Not that the typical New York voter understands or cares about 163(j) relief or NOL. And arguably, most voters do not feel sympathy for the large business and investment partnership vehicles (at least until I remind them that it is their retirement accounts that own the majority of the publicly held businesses and investment vehicles, and thus they’ll be working a little longer than they hoped for).

New York based business in particular may come to understand when the CPA / tax advisor informs that on the federal return Covid-19 stimulus relief is allowable but not so on the NY state return. Some NY based businesses are going to feel that their state didn’t have their backs.  Other businesses that are large enough and able because of industry to relocate operations have time a plenty at this moment to think about such relocation.  (Texas will be open for business again soon).

Should a New York business look toward the SBA loan to the tax provisions like the employee retention tax credits? New York’s decoupling (where a state goes its own way) may impact the analysis.  In general, leaving aside the decoupling issue, for a business with by example 400 employees, a $5,000 credit per employee is worth $2,000,000 of tax-free tax credit that can be more beneficial than an SBA Loan.  The SBA loan is not straight forward and regardless, is not in general allowed for business above 500 employees.  The taxpayer must choose either one or the other – the PPP (forgivable employee retention) SBA loan or the employee retention tax credit.  For small employers with less than say 250 employees (not exactly ‘small’ in most American minds) the answer is probably the SBA loan.  But above 250, careful consideration and analyzing the benefits/outcomes of each program must be weighed.

For a business with by example 400 employees, a $5,000 credit per employee is worth $2,000,000 of tax-free tax credit that may be more beneficial than an SBA Loan depending on the ‘facts and circumstances’ of the business. The SBA loan is not straight forward and regardless, is not in general allowed for the business above 500 employees. The SBA loan is allowed, for the small businesses that qualify, for up to 2.5 times a business’ average monthly payroll costs, up to $10 million.  So by example, just to put some numbers to this statement, if a business has 400 employees, and each employee is paid $3,000 a month with benefits (basically 22 days a month at $15 / hour with full medical), the monthly payroll will be $1.2 million. 2.5 times is thus $3 million even. A forgiven tax-free $3 million is great.

The $5,000 worth of employee retention tax credit is only worth $2 million for the 400 employees, right?  Not necessarily.  Maybe but we need to work through the numbers of the business. Another way to look at the value of the tax credit is that it is worth the tax rate cost to generate the income for the taxpayer for which the tax credit offsets the tax due.  Say this taxpayer is a pass-through and pays an effective 33% (after the Internal Revenue Code Section 199A “20% deemed business income deduction” reduces the 37% highest rate, and factoring in the state tax burden).  So the taxpayer’s $2 million credit offsets the tax on $6 million income (assuming the state recognizes the credit).

So now another step in the potential analysis. Let’s say the business recovers and both businesses earn $6 million income.  The business with the SBA loan has $3 million taxfree after forgiveness plus $4 million aftertax, thus $7 million.  The tax credit business has $6 million tax-free. The tax credit company appears worse off but not by the initial $3 million SBA loan, right?  Many other factors are required for the analysis to weigh both paths.  The 2-year deferred payroll tax, whether the business will generate net earnings this year, the SBA additional forgiveness potential for non-employee expenses, whether the SBA loan money has already run out, how long to monetize the tax credits, .. these issues come to mind.

Watch the webinar below or the one forthcoming Thursday, April 16th (Register now for our webinar on Thursday, April 16, at 2:00 EDT)

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Cost-Sharing Post TCJA | The Fiona Show sponsored by Crossborder AI Solution for Transfer Pricing

Posted by William Byrnes on April 14, 2020


Cost-sharing arrangements are subjective at best—even by transfer pricing standards. Over the years, major tech-companies like Xilinx, Amazon, Altera, and now Facebook, have all been victims of their own interpretations of cost-sharing regulations that have been written, re-written, modified, and in some cases, grandfathered to previous or even temporary versions. And that’s all not to even mention the Tax Cuts and Jobs Act. So, does the world have a right to be a little perplexed? We’d say so.

Listen to our recorded webinar in front of a live audience of transfer pricing counsel from large U.S. MNEs representing 10 major industries.  The webinar explores the mis-understood history of cost-sharing, the impact of Covid-19 on stress testing intra-group risk allocation amongst its global value chain, and the likely impact of the TCJA on future cost-sharing arrangements.

Episode 41: Cost-Sharing Post TCJA

Interested in tax risk management, technology, and analytics?  Check out what Texas A&M is doing this Summer International Tax Risk Management Summer Zoom Courses May 18 – July 3 interested in transfer pricing and tax risk management? Check out Texas A&M’s transfer pricing courses

 

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SBA Information on How Much Money, To Whom, to Which States

Posted by William Byrnes on April 14, 2020


Byrnes and Bloink analyze the SBA loans, Tax Credit, and Retirement Planning Impact for Small Business because of Covid-19 economic stimulus (Families First, CARES Acts, IRS Notices) on Thursday, April 16th (Register now webinar)

Texas A&M University School of Law has launched a Covid-19 expert response team.  Listen to Professor Neal Newman and William discussing the Covid-19 SBA forgiveness loans, deferral on paying the employer’s Social Security tax, and the Employee Retention Tax Credit (YouTube). Find the response team members from all disciplines here: Download Texas A&M Coronavirus_Experts

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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SBA (Forgivable) Employee Retention Loan or Tax Credit for Employee Retention? Which is best for my business?

Posted by William Byrnes on April 14, 2020


The IRS provided concrete responses to the COVID-19 virus in the tax field. First, the IRS has now formally extended the income tax filing deadline for tax year 2019 to July 15, as well as the FBAR form, FATCA form, and several other reporting forms initially left out of the IRS extension. Because this is an extension of the actual filing deadline (not just an extension of time to pay owed taxes) it also pushes a number of related deadlines (e.g. for qualified plan contributions) back to July.  April 15ths Estimated Tax Payments for 2020 (the first one) is also postponed. But not the estimated tax payment due June 15th as of yet (I expect Treasury to postpone it as well.  September 15 and January 15, 2021 are the 3rd and 4th required estimated tax payments.

President Trump also signed the Families First Coronavirus Response Act, which creates a paid sick leave program and related tax credits for small businesses, as well as the CARES Act calling for forgivable SBA loans (without tax consequences) or a $5,000 tax credit per employee retained for medium and large size businesses.

Byrnes and Bloink comment from Tax Facts: For a business with by example 400 employees, a $5,000 credit per employee is worth $2,000,000 of tax-free tax credit that can be more beneficial than an SBA Loan.  The SBA loan is not straight forward and regardless, is not in general allowed for business above 500 employees.  The taxpayer must choose either one or the other – the PPP (forgivable employee retention) SBA loan or the employee retention tax credit.  For small employers with less than say 250 employees (not exactly ‘small’ in most American minds) the answer is probably the SBA loan.  But above 250, careful consideration and analyzing the benefits/outcomes of each program must be weighed. Watch the webinar below or the one forthcoming Thursday, April 16th (Register now for our webinar on Thursday, April 16, at 2:00 EDT)

Texas A&M University School of Law has launched a Covid-19 expert response team.  Find the response team members from all disciplines here: Download Texas A&M Coronavirus_Experts  Listen to Professor Neal Newman and William discussing the Covid-19 SBA forgiveness loans, deferral on paying the employer’s Social Security tax, and the Employee Retention Tax Credit (YouTube).

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s Covid-19 TaxFacts Intelligence Weekly for April 10, 2020

Posted by William Byrnes on April 10, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: Legal Risk Management; Intro to Risk Management; FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

 

 

           Prof. William H. Byrnes
        Robert Bloink, J.D., LL.M.
Today we have three big updates from the newly-passed CARES Act. The first allows NOLs for tax years 2018 through 2020 to be carried back five years. This give business who had NOLs and were waiting to carry them forward to future tax years to apply them to past years, potentially resulting in additional tax refunds. The other two updates relate to deferrals and tax credits for payroll taxes in 2020.
CARES Act Provides NOL Relief for Struggling Businesses

The CARES Act allows corporations to carry back net operating losses (NOLs) incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax). Post-tax reform, these NOLs could only be carried forward. For tax years beginning prior to January 1, 2021, businesses can offset 100% of taxable income with NOL carryovers and carrybacks (the 80% taxable income limitation was lifted). With respect to partnerships and pass-through entities, the CARES Act amended the effective date for the new excess business loss rules created by the 2017 tax reform legislation. The new rules will only apply beginning in 2021 (rather than 2018). Pass-through taxpayers who have filed a return reflecting excess business losses will presumably be entitled to refund by filing an amended return, absent guidance to the contrary. For more information, visit Tax Facts Online. Read More

CARES Act Permits Penalty-Free Payroll Tax Deferral for Employers

The CARES Act allows both employers and independent contractors to defer payment of employer payroll taxes without penalty. Importantly, employers with fewer than 500 employees are entitled to withhold payroll taxes as an advance repayment of the tax credit for paid sick leave and expanded FMLA leave under the FFCRA. Under the CARES Act payroll tax deferral, employers are permitted to defer the employer portion of the payroll tax on wages paid through December 31, 2020 for up to two years. Payroll taxes are generally due in two installments under CARES: 50% by December 31, 2021 and the remaining 50% by December 31, 2022. Economic hardship is presumed, meaning the employer does not have to produce documentation establishing that COVID-19 impacted the business. Payroll tax deferral options apparently apply to all employers, regardless of size. However, employers who have loans forgiven under the CARES Act Payroll Protection Loan program are not eligible for the deferral. For more information, visit Tax Facts Online. Read More

CARES Act Employee Retention Tax Credit

The CARES Act creates a new refundable tax credit designed to help employers who retain employees during the COVID-19 health crisis. The credit is taken against employment taxes and is equal to 50% of the first $10,000 of qualified wages paid to the employee. The credit is available for calendar quarters where either (1) operations were either fully or partially suspended because of a government-issued order relating to COVID-19 or (2) the business’ gross receipts declined by more than 50% when compared to the same calendar quarter in 2019. For more information, visit Tax Facts Online. Read More

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International Tax Risk Management Summer Zoom Courses May 18 – July 3

Posted by William Byrnes on April 10, 2020


Want to speak with Admissions or read the brochure? information – click here

FATCA, CRS, AEoI, Systems and Data: 3 credits (Zoom class 8am Wednesday and 9am Sunday Central Daylight Dallas time zone)

  • Week 1. May 18: FATCA, CRS, and EU: nationality, residency, data sharing: Dr. Bruno Da Silva (Loyens & Loeff)
  • Week 2. May 25: FATCA/CRS and the Asset Management Industry, intermediaries: Denise Hintzke (Deloitte)
  • Week 3. June 1: FATCA Withholding Compliance, overlap with QI: Denise Hintzke (Deloitte)
  • Week 4. June 8: Documentation FATCA v CRS: Danielle Nishida (KPMG) / Laurie Hatten-Boyd (KPMG)
  • Week 5. June 15: FATCA IGAs & CRS Risk Management Danielle Nishida (KPMG) or Laurie Hatten-Boyd (KPMG)
  • Week 6. June 23: Financial Institutions Systems And Data: Haydon Perryman (Bank of America, UBS, Barclays, RBS and Lloyds)

International Tax Risk Management I (Data, Analytics & Technology) 3 credits (meet Tuesday and Friday at 8am Central Daylight Dallas time zone) (tentative time)

  • Week 1. May 18: General tax risk management approach Dr. Knut Olsen
  • Week 2. May 25: BEPS: Dr. Bruno Da Silva (Loyens & Loeff).
  • Week 3. June 1: CbCR & Analytics David Deputy Vertex
  • Week 4. June 8: LOB / PPT / MLI: Dr. Bruno da Silva (Loyens & Loeff)
  • Week 5. June 15: Interest (thin cap, EBIDTA), Debt/Equity, Hybrids – TBD
  • Week 6. June 23: Future of Analytics & Technology from a Risk Management Perspective: Dr. Paula de Witte
  • Week 7 capstone for both Summer courses: “Tax Technology and the future of Tax Departments” Dr. Debora Correa Talutto

(Fall course) International Tax Risk Management II (Data, Analytics & Technology) 3 credits (meet Tuesday and Friday at 9am Central Daylight Dallas time zone) (tentative time)

  • Week 1 Oct 11 Manufacturing Supply Chain Tax Risk Niraja Srinivasan
  • Week 2 Oct 18 Manufacturing Value Chain Tax Risk Niraja Srinivasan
  • Week 3 Oct 25 Manufacturing & Customs Risk Niraja Srinivasan
  • Week 4 Nov 1 Tax of Patents / Technology, Dr. Brigitte Muehlmann 
  • Week 5 Nov 8 Tax Risk & Tax Technology, Dr. Brigitte Muehlmann
  • Week 6 Nov 15 Tax Risk & Tax Technology, Dr. Brigitte Muehlmann

FALL 2020 (Aug 23 through Nov 23) 3 credits (meet Tuesday and Friday at 9am Central Daylight Dallas time zone)

Domestic Tax Systems Risk Management

  • Week 1 Aug 23 Oil & Gas tax risk survey of country tax risk Susana Bokobo,
  • Week 2 Aug 30 Mexico Tax Risk
  • Week 3 Sept 6 India Tax Risk (services)
  • Week 4 Sept 13 China Tax Risk
  • Week 5 Sept 20 Japan Dr. Maji Rhee (Waseda) majirhee@waseda.jp
  • Week 6 Sept 27 Brazil Tax Risk

International Tax & Tax Treaties I: Residency Dr. Bruno Da Silva (Loyens & Loeff), and William Byrnes (TAMU) 3 credits (meet Tuesday and Friday at 8am Central Daylight Dallas time zone)

  • Week 1 Aug 23 Domestic Tax Rights; Double Taxation; Tax Treaty Allocation Of Tax Rights
  • Week 2 Aug 30 Types Of Taxes; Tax Treaty Interpretation
  • Week 3: Sept 6 Tax Jurisdiction Over Persons, Tax Treaty Interpretation
  • Week 4: Sept 13 Tax Jurisdiction of Corporations; Tax Treaty Interpretation & Application
  • Week 5: Sept 20 Tax Jurisdiction of Entities
  • Week 6: Sept 27 U.S. Tax Reform / Pillar II

International Tax & Tax Treaties II: Source Dr. Bruno Da Silva (Loyens & Loeff), and William Byrnes (TAMU) 3 credits (meet Tuesday and Friday at 8am Central Daylight Dallas time zone)

  • Week 1 Oct 11 Tax of Business Income (PE, Nexus)
  • Week 2 Oct 18 Tax of Investment Income
  • Week 3: Oct 25 Taxation of Services and Employment Income (including DST)
  • Week 4: Nov 1 Double Taxation and Tax Credits
  • Week 5: Nov 8 Tax Accounting
  • Week 6: Nov 15 Introduction to Management of Tax and Data
  • Capstone Nov 23: Groups Create Client Case Studies

Why Texas A&M University School of Law? found out more by clicking here

  • Join the Aggie alumn network of 500,000+ strong that may open doors and help you elevate your career (and appreciate SEC football).
  • Experience real-world application through an interdisciplinary approach to teaching.
  • Degree options for all tax professionals — lawyers (Master of Laws, LL.M.) and accountants, economists, financial professionals (Master of Jurisprudence, M.Jur.).

Texas A&M, annual budget over $6 billion (FY2020), is the largest U.S. public university, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

Ranked 11th “Best Public Colleges” Money’s Best Colleges Report, 2019

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Byrnes & Bloink’s Covid-19 TaxFacts Intelligence Weekly for April 3, 2020

Posted by William Byrnes on April 3, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: Legal Risk Management; Intro to Risk Management; FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018).

                    Prof. William Byrnes
          Robert Bloink, J.D., LL.M.
Lots of CVOID-19 legislation in the updates this week. The IRS and DOL continue to release new guidance–and update existing guidance–at an unprecedented and fast pace. For the time being, clients and advisors alike should check the actual text of the guidance before taking concrete action to make sure they are operating under the most up-to-date rules.
IRS Releases FAQ on COVID-19 Filing, Payment Extensions

The IRS FAQ clarifies that the filing and payment extensions (from April 15 to July 15) apply regardless of whether the taxpayer is actually sick or quarantined because of COVID-19. For fiscal year taxpayers with 2019 returns due April 15, the deadline is extended to July 15 regardless of whether April 15 is an original or extended filing deadline. Taxpayers facing filing or payment deadlines that are not April 15 must note that their deadlines have not generally been extended. The relief also does not apply to payroll or excise tax payments (deposit dates remain unchanged, but employers may be eligible for the new paid sick leave tax credit, see Tax Facts Q8550). Taxpayers do not have to do anything to take advantage of the extension–they simply file their returns and make required payments by the new July 15 deadline. Taxpayers who filed and schedule a payment for April 15 must, however, take action to reschedule their payment for July 15 if they wish (by contacting the credit or debit card company if the payment was scheduled directly with the card issuer). For more information, visit Tax Facts Online. Read More

Counting Employees for COVID-19 Paid Sick Leave & FMLA Expansion Purposes

DOL FAQ provides that an employer is subject to the expanded paid sick leave and FMLA rules if the employer has fewer than 500 full-time and part-time employees. Employees on leave and temporary employees should be included, while independent contractors are not included in the count. Each corporation is usually a single employer. When a corporation has an ownership interest in another corporation, the two are separate employers unless they are joint employers for Fair Labor Standards Act purposes. Joint employer status is based on a facts and circumstances analysis, and is generally the case when (1) one employer employs the employee, but another benefits from the work or (2) one employer employs an employee for one set of hours in a workweek, and another employer employs the same employee for a separate set of hours in the same workweek. For more information on the details provided by current DOL guidance, visit Tax Facts Online. Read More

Calculating Sick Pay for Part-Time and Variable Hour Workers Under the Families First Coronavirus Response Act

With respect to the FMLA extension, the rate of pay for part-time employees is based upon the number of hours they would normally be scheduled to work. For employees with variable schedules, pay is based upon a number equal to the average number of hours that the employee was scheduled per day over the 6-month period ending on the date on which the employee takes such leave, including hours for which the employee took leave of any type or (2) if the employee did not work over such period, the reasonable expectation of the employee at the time of hiring of the average number of hours per day that the employee would normally be scheduled to work. As of now, the law provides that leave may not be carried over into 2021. For more information on the law’s requirements, visit Tax Facts Online. Read More

RMDs Suspended for 2020, Penalty Waived for Coronavirus Distributions

The CARES Act suspended the required minimum distribution (RMD) rules for 2020–a suspension that applies to all 401(k), 403(b), and certain 457(b) deferred compensation plans maintained by the government, as well as IRAs. The law also contains a provision waiving the 10% early distribution penalty that applies to retirement account withdrawals. The relief generally mirrors the relief commonly granted in more localized natural disaster situations. The Act allows employees to take up to $100,000 in distributions from an employer-sponsored retirement plan (401(k), 403(b) or defined benefit plan) or an IRA without becoming subject to the penalty. Unless the participant elects otherwise, inclusion of the distribution in income is spread over three years, beginning with the tax year of distribution. The Act also provides a repayment option, where the participant has the option of repaying the distribution over the three-taxable year period beginning with the tax year of distribution. In this case, the distribution will be treated as an eligible rollover made in a trustee-to-trustee transfer within the 60-day window. For more information on expanded access to retirement funds, visit Tax Facts Online. Read More

WEBINAR

Small Business Incentives Under the CARES Act:  Will it Help My Business?

Tuesday, April 7, 2020, 12:00 noon – 1:00 p.m. Central

Learn how the CARES Act affects your business.

Texas A&M Law faculty experts share practical, fact-based information regarding how the CARES Act is affecting those of us in Texas in this free webinar.

 

  • Access to and eligibility for loans for small businesses
  • Implications for payroll tax payments and employee tax credits

Presenters:

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Byrnes & Bloink’s Covid-19 TaxFacts Intelligence Weekly for March 26, 2020

Posted by William Byrnes on March 26, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, call or fill in the form https://law.tamu.edu/distance-education/

            William H. Byrnes, J.D.
        Robert Bloink, J.D., LL.M.
Today we are seeing our first concrete responses to the COVID-19 virus in the tax field. First, the IRS has now formally extended the income tax filing deadline for tax year 2019 to July 15. Because this is an extension of the actual filing deadline (not just an extension of time to pay owed taxes) it also pushes a number of related deadlines (e.g. for qualified plan contributions) back to July. President Trump also signed the Families First Coronavirus Response Act, which creates a paid sick leave program and related tax credits for small businesses.

 

Avoid Confusion Over IRS 90-Day Extension of the Federal Tax Payment Deadline

In response to the coronavirus pandemic, the IRS has announced that it will extend the tax payment deadline from April 15, 2020 to July 15, 2020. Interest and penalties during this period will also be waived. The April 15 filing deadline was also extended to July 15, although in separate guidance. Individuals and pass-through business entities owing up to $1 million in federal tax are eligible for the relief, as are corporations owing up to $10 million in federal tax. Individuals who do not anticipate being able to file by July 15 should be aware of their option for requesting a six-month filing extension to October 15. The extension is available by filing Form 4868. For more information on federal tax filing requirements, visit Tax Facts Online. Read More

Coronavirus Act Creates Paid Sick Leave Benefits for Small Business Employees

The Families First Coronavirus Response Act applies to private employers with fewer than 500 employees (and government employers), and makes several key changes to paid time off laws. The bill: (1) provides 80 hours’ additional paid sick leave for employees (pro-rated for part-time workers) and (2) expands FMLA protections. The additional paid sick leave is capped at $511 per day (total of $5,110) for employees who cannot go to work or telecommute because they (1) are experiencing COVID-19 symptoms and seeking a diagnosis, or (2) are subject to government-mandated quarantine or a recommendation to self-quarantine. The additional paid sick leave is capped at 2/3 of the employee’s pay rate, subject to a maximum of $200 per day or $2,000 total if the employee (1) is caring for or assisting someone subject to quarantine, (2) caring for a child whose school or care provider is unavailable or (3) experiencing “substantially similar conditions” specified by HHS. For more information on the family and medical leave tax credit available for business owners, visit Tax Facts Online. Read More

Coronavirus Response Act: Tax Relief for Small Business Owners

The law contains a tax credit to help small business owners subject to the new paid sick leave and expanded FMLA requirements. The tax credit is computed each quarter, and allows as a credit (1) the amount of qualified paid sick leave wages paid in weeks 1-2, and (2) qualified FMLA wages paid (in the remaining 10 weeks) during the quarter. The credit is taken against the employer portion of the Social Security tax. Amounts in excess of the employer Social Security taxes due will be refunded as a credit (in the same manner as though the employer had overpaid Social Security taxes during the quarter). The Act also provides a tax credit for qualified health plan expenses that are allocable to periods when the paid sick leave or family leave wages are paid. For more information on refundable tax credits, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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text of final Covid-19 Senate Bill “Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’.

Posted by William Byrnes on March 25, 2020


2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Professor William Byrnes and Robert Bloink provide for subscribers weekly analysis of tax issues that impact wealth managers and financial planners. Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Final Covid-19 Text of Bill for Senate Vote [PDF Link] Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’.

Tax and Benefits sections of Final Bill described below by Senate Finance Committee (March 25, 2020)

DIVISION A – KEEPING WORKERS PAID AND EMPLOYED, HEALTH CARE SYSTEM ENHANCEMENTS, AND ECONOMIC STABILIZATION

TITLE II—ASSISTANCE FOR AMERICAN WORKERS, FAMILIES, AND BUSINESSES

Subtitle A—Unemployment Insurance Provisions

Section 2101. Short Title
This title is called the Relief for Workers Affected by Coronavirus Act

Section 2102. Pandemic Unemployment Assistance
This section creates a temporary Pandemic Unemployment Assistance program through December 31, 2020 to provide payment to those not traditionally eligible for
unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency.

Section 2103. Emergency Unemployment Relief for Governmental Entities and Nonprofit Organizations
This section provides payment to states to reimburse nonprofits, government agencies, and Indian tribes for half of the costs they incur through December 31, 2020 to pay
unemployment benefits.

Section 2104. Emergency Increase in Unemployment Compensation Benefits
This section provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.

Section 2105. Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States with No Waiting Week
This section provides funding to pay the cost of the first week of unemployment benefits through December 31, 2020 for states that choose to pay recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits.

Section 2106. Emergency State Staffing Flexibility
This section provides states with temporary, limited flexibility to hire temporary staff, rehire former staff, or take other steps to quickly process unemployment claims.

Section 2107. Pandemic Emergency Unemployment Compensation
This section provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after weeks of state unemployment benefits are no longer available.

Section 2108. Temporary Financing of Short-Time Compensation Payments in States with Programs in Law
This section provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100 percent of the costs they incur in providing this short-time compensation through December 31, 2020.

Section 2109. Temporary Financing of Short-Time Compensation Agreements
This section provides funding to support states which begin “short-time compensation” programs. This provision would pay 50 percent of the costs that a state incurs in providing short-time compensation through December 31, 2020.

Section 2110. Grants for Short-Time Compensation Programs
This section provides $100 million in grants to states that enact “short-time compensation” programs to help them implement and administer these programs.

Section 2111. Assistance and Guidance in Implementing Programs
This section requires the Department of Labor to disseminate model legislative language for states, provide technical assistance, and establish reporting requirements related to “shorttime compensation” programs.

Section 2112. Waiver of the 7-day Waiting Period for Benefits under the Railroad Unemployment Insurance Act
This section temporarily eliminates the 7-day waiting period for railroad unemployment insurance benefits through December 31, 2020 (to make this program consistent with the change made in unemployment benefits for states through the same period in an earlier section of this subtitle).

Section 2113. Enhanced Benefits under the Railroad Unemployment Insurance Act
This section provides an additional $600 per week payment to each recipient of railroad unemployment insurance or Pandemic Unemployment Assistance for up to four months (to make this program consistent with the change made in unemployment benefits for states in an earlier section of this subtitle).

Section 2114. Extended Unemployment under the Railroad Unemployment Insurance Act
This section provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after weeks of regular unemployment benefits are no longer available (to make this program consistent with the change made in unemployment benefits for states in an earlier section of this subtitle).

Section 2115. Funding for the Department of Labor Office of Inspector General for Oversight of Unemployment Provisions
This section provides the Department of Labor’s Inspector General with $25 million to carry out audits, investigations, and other oversight of the provisions of this subtitle.

Section 2116. Implementation
This section gives the Secretary of Labor the ability to issue operating instructions or other guidance as necessary in order to implement this subtitle, as well as allows the Department of Labor to waive Paperwork Reduction Act requirements, speeding up their ability to gather necessary information from states.

Subtitle B – Rebates and Other Individual Provisions

Section 2201. 2020 recovery rebates for individuals
All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate. In addition, they are eligible for an additional $500 per child. This is true even for those who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits.

For the vast majority of Americans, no action on their part will be required in order to receive a rebate check as IRS will use a taxpayer’s 2019 tax return if filed, or in the
alternative their 2018 return. This includes many low-income individuals who file a tax return in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit. The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.

Section 2202. Special rules for use of retirement funds
Consistent with previous disaster-related relief, the provision waives the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1, 2020. In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions. Further, the provision provides flexibility for loans from certain retirement plans for coronavirus-related relief.

A coronavirus-related distribution is a one made to an individual: (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.

Section 2203. Temporary waiver of required minimum distribution rules for certain retirement plans and accounts
The provision waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to
individuals who would otherwise be required to withdraw funds from such retirement accounts during the economic slowdown due to COVID-19.

Section 2204. Allowance of partial above the line deduction for charitable contributions
The provision encourages Americans to contribute to churches and charitable organizations in 2020 by permitting them to deduct up to $300 of cash contributions, whether they itemize their deductions or not.

Section 2205. Modification of limitations on charitable contributions during 2020
The provision increases the limitations on deductions for charitable contributions by individuals who itemize, as well as corporations. For individuals, the 50-percent of
adjusted gross income limitation is suspended for 2020. For corporations, the 10-percent limitation is increased to 25 percent of taxable income. This provision also increases the limitation on deductions for contributions of food inventory from 15 percent to 25 percent. Section 2206. Exclusion for certain employer payments of student loans The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.

Subtitle C – Business Provisions

Section 2301. Employee retention credit for employers subject to closure due to COVID-19
The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.

The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

Section 2302. Delay of payment of employer payroll taxes
The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Social Security Trust Funds will be held harmless under this provision.

Section 2303. Modifications for net operating losses
The provision relaxes the limitations on a company’s use of losses. Net operating losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.

Section 2304. Modification of limitation on losses for taxpayers other than corporations
The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.

Section 2305. Modification of credit for prior year minimum tax liability of corporations
The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act, but corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.

Section 2306. Modification of limitation on business interest
The provision temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020. As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.

Section 2307. Technical amendment regarding qualified improvement property
The provision enables businesses, especially in the hospitality industry, to write off immediately costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of the building. The provision, which corrects an error in the Tax Cuts and Jobs Act, not only increases companies’ access to cash flow by allowing them to amend a prior year return, but also incentivizes them to continue to invest in improvements as the country recovers from the COVID-19 emergency.

Section 2308. Temporary exception from excise tax for alcohol used to produce hand sanitizer
The provision waives the federal excise tax on any distilled spirits used for or contained in hand sanitizer that is produced and distributed in a manner consistent with guidance issued by the Food and Drug Administration and is effective for calendar year 2020

 

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for March 19, 2020

Posted by William Byrnes on March 20, 2020


2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Editor’s Note: New rulings from the IRS help clarify that COVID-19 expenses can be paid by HDHPs (before the deductible has been met) and FSAs can pay for genetic testing when the information is intended to be provided to a medical professional for treatment purposes. Note that the decision on genetic testing comes in the form of a PLR that addresses some rather unique facts, so it may not be very broadly applicable. We also have a new (and regrettably timely) ruling on worthless securities.
IRS Announces HDHPs Can Pay Coronavirus Costs

The IRS announced that high deductible health plans are permitted to cover the costs associated with the coronavirus. HDHPs can cover coronavirus-related testing and equipment needed to treat the virus. Generally, HDHPs are prohibited from covering certain non-specified expenses before the covered individual’s deductible has been met. Certain preventative care expenses are excepted from this rule. HDHPs will not jeopardize their status if they pay coronavirus-related expenses before the insured has met the deductible, and the insured will remain HSA-eligible. The guidance applies only to HSA-eligible HDHPs. For more information on the rules governing HDHPs, visit Tax Facts Online. Read More

Tax Court Rules on Deduction

The Tax Court held that a worthless securities deduction may be permitted even if the entity that issued the securities still held some value. In a complex case involving a number of rounds of financing over several years, the court found it was reasonable to believe that a junior interest may be worthless if there are not funds to pay currently, or anticipated in the future, the senior interests. For more information on the worthless securities deduction, visit Tax Facts Online. Read More

IRS Finds Health FSA Can Reimburse a Portion of Ancestry Genetic Testing

In a private letter ruling (applicable only to the taxpayer requesting the ruling), the IRS found that a portion of the ancestry genetic test could be reimbursed by the health FSA. In the redacted PLR, the IRS discussed whether the genetic testing service could be classified as medical care. The taxpayer’s goal was to provide genetic information to their healthcare provider, but it was impossible to purchase the genetic information without also purchasing the ancestry services. The IRS found that portions of the testing may be considered medical care, although ancestry reports could not be classified as reimbursable medical care. The IRS directed the taxpayer to use a “reasonable method” to allocate between medical and non-medical services. For more information on health FSAs, visit Tax Facts Online. Read More

Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, call or fill in the form https://law.tamu.edu/distance-education/

 

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SBA to Provide Disaster Assistance Loans for Small Businesses Impacted by Coronavirus (COVID-19)

Posted by William Byrnes on March 17, 2020


SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance for a small business. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.

  • These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.
  • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.

Process for Accessing SBA’s Coronavirus (COVID-19) Disaster Relief Lending

  • The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state’s or territory’s Governor, SBA will issue under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.
  • Any such Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available to small businesses and private, non-profit organizations in designated areas of a state or territory to help alleviate economic injury caused by the Coronavirus (COVID-19).
  • SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance.
  • Once a declaration is made for designated areas within a state, the information on the application process for Economic Injury Disaster Loan assistance will be made available to all affected communities.
  • SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response, and the SBA is strongly committed to providing the most effective and customer-focused response possible.

See §121.201   What size standards has SBA identified by North American Industry Classification System codes?

The size standards described in this section apply to all SBA programs unless otherwise specified in this part. The size standards themselves are expressed either in the number of employees or annual receipts in millions of dollars unless otherwise specified. The number of employees or annual receipts indicates the maximum allowed for a concern and its affiliates to be considered small.  By example, a hotel that does not exceed $35 million gross revenue is a small business whereas a B&B Inn or a full-service restaurant may not exceed $8 million in revenue.

Even tax law firms can qualify for SBA loans. The office of lawyers that do not exceed $12 million in revenue is a “small” law firm. But tax preparation services? Allowed up to $22 million in revenue.

For additional information, please contact the SBA disaster assistance customer service center. Call 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail disastercustomerservice@sba.gov(link sends e-mail).

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (March 16, 2020)

Posted by William Byrnes on March 16, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, call or fill in the form https://law.tamu.edu/distance-education/

Editor’s Note: Reconciliation abounds! You need to reconcile your advance premium tax credit payments, the Supreme Court needs to reconcile the ACA without the individual mandate, and employers need to reconcile employee withholdings with the new regs.
Do you (or your clients) receive advance premium tax credit payments? If you haven’t squared them away with 2019 income levels that might delay the return. Also, with new withholding regs it’s a good idea for employers to take a second look at employee allowances.
Finally, the Supreme Court will (again) look at the constitutionality of the ACA. Recall that the last time this happened constitutionality hinged on Congress’ ability to tax, with Chief justice Roberts noting that the Aca was clearly tax legislation since the individual mandate penalty was implemented through the tax code. Now that the individual mandate has been repealed, how will the ACA fare under additional scrutiny? Tune in next year to find out!
And wash your hands!
Tax Season Tip: Failure to Reconcile Advance Premium Tax Credit Payments May Delay Returns

The IRS has released guidance reminding taxpayers who received advance payments of their premium tax credit throughout the year of their obligation to reconcile those payments with respect to their actual household income levels for 2019. Taxpayers have the option of choosing to have premium tax credits applied directly to their monthly insurance premiums. For more information on the premium tax credit, visit Tax Facts Online. Read More

Supreme Court to Once Again Consider ACA Viability

The U.S. Supreme Court has agreed to hear arguments and rule on the continued constitutionality of the Affordable Care Act. The Court may decide whether the remainder of the ACA is constitutional absent the individual mandate. Arguments in the case are set to be heard in October, after the election, and a decision is unlikely before 2021. For more information on the individual mandate, visit Tax Facts Online. Read More
Determining the Employer’s Obligations Under the New Proposed Withholding Regulations

The regulations are clear that the employer is not required to ascertain whether the withholding allowance claimed by the employee is greater than those to which the employee is actually entitled. However, the IRS (or published guidance) may direct an employer to submit employees’ withholding certificates (or the certificates relating to groups of employees) to the IRS. Further, the IRS may notify the employer that an employee is not entitled to claim more than a certain withholding allowance. For more information on the new withholding regulations, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Pensions, Retirement Planning, Taxation | Tagged: , | Leave a Comment »

What will be the impact of the 2017 Tax Cuts Act, Covid-19 (coronavirus), a Zombie Apocalypse, on Estimated Tax due by April 15?

Posted by William Byrnes on March 15, 2020


If a zombie apocalypse does not emanate from the illness known as Covid-19 caused by the coronavirus, then we still need to plan for our 2020 tax payments.  It is likely that taxpayers with business or investment income will be able to reduce the 2020 quarterly estimated tax payments that will be due April 15 this year, June 15, September 15, and January 15 of 2021.  Why?

2019 was a good income year for most taxpayers earning investment and business income.  But 2020 will likely be a depressed income year, maybe even a recession (for those not eaten by zombies). Thus, estimated tax payments to avoid a penalty, generally, 90% of the tax that is estimated to be due for 2020, should be much reduced from the 2019 level paid. (Contrarian investor taxpayers that shorted the market may actually need to make higher estimated taxpayers because the contrarians are likely to have a great capital gain year).

What are the changes enacted in the Tax Cuts and Jobs Act of 2017 that, because of the coronavirus, impact 2020’s estimated tax payments?

  • A taxpayer’s ability to reduce tax because of a net operating loss (“NOL”) in 2020 has been reduced by the TCJA. An NOL resulting in 2020 cannot be applied to taxes paid in the previous two-years of 2019 and 2018 to claw those taxes back.  Before the TCJA, the NOL “carry-back” of two-years was allowed.  NOLs may still be carried forward.  Excess NOL in 2020 may be used to reduce 2021’s income and thus tax due.

However, the TCJA even modifies how much NOL may be used to reduce 2020’s taxable income.  Starting in 2018, the TCJA modified the tax law on “excess business losses” by limiting losses from all types of business for noncorporate taxpayers. An “excess business loss” is the amount of a taxpayer’s total deductions from business income that exceeds a taxpayer’s “total gross income and capital gains from business plus $250,000 for an individual taxpayer or $500,000 for married taxpayers filing a joint return.”  Said another way, the business loss in 2020 is limited to a maximum of $250,000 for an individual taxpayer. Yet, the remainder does not evaporate like a vampire stabbed with a stake in the heart.  The remainder may be carried forward to 2021.  The remainder is called a “net operating loss” or NOL.

But the TCJA has another limitation for the carry forward of an NOL.  The NOL may only be used in 2021 to reduce the taxpayer’s taxable income by 80%.  The remainder NOL in 2021, if any, that resulted from 2020’s original loss and 2021’s limitation to just 80% of taxable income may again be carried forward, to 2022, yet again subject to the 80% of taxable income limitation.  The NOL may keep rolling forward indefinitely, subject to the 80% limitation until it is all used.

  • High net wealth taxpayers that generate gross receipts greater than $26 million may be subject to the TCJA’s limitation of interest expense for 2020. The TCJA included a rule that limits the amount of interest associated with a taxpayer’s business income when the taxpayer has on average annual gross receipts of more than $26 million since 2018.  The limitation does not apply to a taxpayer whose business income is generated from providing services as an employee, and a taxpayer that generates business income from real estate may elect not to have the limitation apply.

The amount of deductible business interest expense that is above a taxpayer’s business interest income is limited to 30% of the taxpayer’s adjusted taxable income (called “ATI”).  For 2020, ATI will probably be significantly lower than in 2019 and 2018. A taxpayer calculated ATI taking the year’s taxable income then reducing it by the business interest expense as if the limitation did not apply. The remaining amount is then further reduced by any net operating loss deduction; the 20% deemed deduction for qualified business income, any depreciation, amortization, or depletion deduction, and finally, any capital loss.  The business interest expense allowable for 2020 is 30% of that remainder.  The lost business income resulting from the coronavirus in 2020 may lead the remainder to be zero, and 30% of zero is zero.  Like the NOL above, the business interest expense if not usable in 2020 does not vanish. It carries forward to 2021 and each year thereafter, applying the same limitation rules each year.

  • Many taxpayers may end 2020 in a capital loss position if the stock market does not fully recover by December.  If a taxpayer’s capital losses are more than the year’s capital gains, then $3,000 of that loss may be deducted from the taxpayer’s 2020 regular income.  Remaining capital loss above the $3,000 may be carried forward to apply against 2021 income, and so on until used up.
  • The IRS may offer taxpayers more time beyond the April 15th deadline to file and pay 2019’s tax in 2020.  The filing and payment for 2019, and estimated tax for 2020, is due on or before April 15. But the IRS has indicated that it may extend that deadline.  A taxpayer may, regardless, file a request for a six-month extension on or before April 15, 2020, that is automatically granted if filed on time. But any tax owing for 2019 will still be due April 15, 2020, after which interest begins to be charged by the IRS to the taxpayer’s tax debt.   Check the IRS website here for whether, because of the coronavirus, it has extended the payment deadline beyond April 15, 2020.  Can the IRS extend the deadline, legally? Yes. Because Congress enacted a section of the Internal Revenue Code (our tax law) “§ 7508A” which is aptly named “Authority to postpone certain deadlines by reason of Presidentially declared disaster or terroristic or military actions”.  The President declared an official national emergency (see here).
  • Taxpayers are not required to exhaust the deductible required by a high-deductible health plan (called “HDHP”) before using the HDHP to pay for COVID-19 related testing and treatment.

I have four tax policy suggestions for Congress that it can include in a taxpayer coronavirus relief bill. I welcome acronym suggestions for this proposed bill’s name, especially a creative bill name whose acronym is “Zombie” or “Eat Brains”. The four tax relief suggestions that will mitigate damage caused by Covid-19 are:

Proposal 1 (stop medical bankruptcy): In 2020 the itemized deduction for medical expenses is reduced by 7.5% of a taxpayer’s AGI.  For 2020, I propose eliminating the 7.5% reduction of medical expenses attributed to the coronavirus or any 2020 flu (or zombie bite), such as hospitalization.  Medical diagnosis should suffice. Not going to be used by many people.  But the people who do use will really need it – those that do not awake as zombies that is.

Proposal 2 (stop restaurant bankruptcy): The administration proposes the suspension of the Social Security and Medicare payroll tax to jump-start consumer spending, presumably after the removal of quarantine orders to stay indoors or at least six feet away from each other. Not very targeted.  Someone like me may just shift the payroll tax relief and use it instead to upward adjust my 403(b) retirement savings for 2020, taking advantage of my full $19,500 contribution allowance for 2020 (and because I am 50 years old or older – add another $6,000 retirement ‘catchup’ to that $19,500 for a full $25,500),  Not only have I not spent the money to help the economy rebound, I have reduced my tax due for 2020 because my retirement contributions reduce my taxable income.  I have saved tax twice!! While I quite like that idea personally, I feel empathy for all the local restaurant owners who may go bankrupt unless I go out to eat at more local restaurants once I assured that 2020 was not the year of the zombie apocalypse.

A better-targeted proposal to save our nation’s local restaurants and the local farmers that supply them is to allow taxpayers an itemized deduction up to $1,000 for an individual and $2,000 for a married filing jointly 2020, beyond the standard deduction, of 100% of restaurant meals expense between June 1 and October 31, at U.S. restaurants with the last three years gross annual receipts averaging less than [$5 million – whatever is reasonable so that big chains are not included, Small Business Administration uses a maximum of $8 million for full-service restaurants (NAICS 722511)- I’m OK with that].  I know – many reasons not to do this, such as Americans will become hooked on eating out at local restaurants. Wait, why is that a bad thing?  And we will need to address the tax abusers who will order one slice of pizza and 20 bottles of wine, to go. So maybe the maximum meal receipt must be set at $100 per meal receipt per adult. That should allow plenty of food for a couple, and alcohol, and leave enough for the children to still have mac & cheese. Plus it requires ten different restaurant trips. Local restauranteurs and the local farmers can hold out hope that 2020 will not require filing for bankruptcy protection.  November is Thanksgiving when people eat out anyway, at least in the restaurants that have remained open.  By the way, I am purposely leaving business out of this.  Business has a 50% business meal deduction anyway. And my policy suggestion is about Americans being social and not talking business at the dinner table (and perhaps not politics either).

Proposal 3 (stop hotel bankruptcy): And let’s not forget about locally-owned hotels with average gross receipts below $8 million (SBA uses $35 million for hotels and $8 million for B&B Inns so maybe I am way off base with just $8 million – see NAICS subsector 721 Accomodation). A $500 itemized deduction for 2020 for a U.S. hotel stay (not Air BnB homes or apartments, actually licensed hotels/BnB Inns) for an individual or couple between June 1 and October 31. Might not buy a weekend at the Ritz but the Ritz probably exceeds the small business amount of revenue a year.  Is it sound tax policy? Huey Long (I’m from Louisiana) promised a chicken in every pot and a car in every yard.  I promise a get-a-way weekend at a small(ish) hotel.

Proposal 4 (keep employees employed): A tax credit (I am not sure the right amount, let the Labor Secretary decide, something around $5,000 an employee) to employers of less than 500 employees who do not reduce the monthly payroll of the employees, or fire any employees, between June 1 and September 30. October 1 employers start thinking about Christmas hiring for the shopping season.  I can imagine some mathematically-inclined employees thinking “I am going to walk into my boss’ office and projectile vomit because the cost of losing the tax credits for firing me is too high.” OK, so firing ‘for cause including projectile Zombie vomiting on the boss ‘ will be allowed without loss of the tax credit.  Now if a business wants to expand and hire a lot of employees up to 500 that’s great.  I propose that all employees employed and start fulltime work before June 1st qualify for a reduced $4,000 tax credit (basically $1,000 a month of employment for June through September).

These four proposals are enough to keep the economy, restaurants, hotels, and employees out of recession and bankruptcy.  But I have more proposals not currently part of the current bill, but common sense dictates should be (well, maybe not).  Why have we heard nothing from the House to encourage donations of toilet paper rolls to local shelters?   And why hotels and restaurants, but not spas?  I’ll leave it to the politicians (and lobbyists) to argue about.  Meanwhile, I look forward to receiving your comments while I set up my anti-zombie chicken wire barricade around the yard.

I’ll be covering these and related issues in my weekly Tax Facts Intelligence Newsletter.

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Tax Policy, Taxation, Uncategorized | Tagged: , , , , , | Leave a Comment »

International Tax Risk Management case studies online Summer and Fall courses for 2020

Posted by William Byrnes on March 6, 2020


Want to join one of the case study teams for the international tax risk management courses taught live online, using Zoom, by industry’s recognized tax risk leaders and leading tax authors?  The courses are for tax attorneys, accountants, or economists and count toward the Texas A&M’s Master and LL.M. degrees in residence and online.

The class of a maximum of 18 students will be grouped into teams of 3 students each. The 6 teams meet using Zoom to prepare a weekly presentation to respond to a real-world post-BEPS client study. Then all teams meet twice together each week ‘in live session class’ via Zoom with the industry case study topic expert professor and the course professor, 9:00am – 10:30am Dallas Central time to discuss and present the case study solutions. Students are provided without charge the learning and textbook materials, videos with PPT, and podcasts, and granted access to a large online law & business/tax database library including Lexis, Bloomberg, IBFD, Kluwer/CCH, Thomson, BvD, S&P, among many other tax and financial data resources.

To apply for the international tax courses, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax  (applications require university transcripts delivered by May 15).

Strength of the Aggie Network: Texas A&M, annual budget over $6 billion (FY2020), is the largest U.S. public university, with the renown Aggie former students network exceeding 500,000 around the world, Texas A&M is 1 of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and 1 of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space!

 

SUMMER 2020 (May 18 through June 30)

FATCA, CRS, AEoI, Systems and Data: 3 credits (meet Wednesday and Sunday at 9am Central Daylight Dallas time zone)

Week 1. May 18: FATCA, CRS, and EU: nationality, residency, data sharing: Dr. Bruno Da Silva (Loyens & Loeff), and William Byrnes (TAMU).

Week 2. May 25: FATCA/CRS and the Asset Management Industry, intermediaries: Denise Hintzke (Deloitte)

Week 3. June 1: FATCA Withholding Compliance, overlap with QI: Denise Hintzke (Deloitte)

Week 4. June 8: Documentation FATCA v CRS: Danielle Nishida (KPMG) / Laurie Hatten-Boyd (KPMG)

Week 5. June 15: Danielle Nishida (KPMG) or Laurie Hatten-Boyd (KPMG)

Week 6. June 23: Financial Institutions Systems And Data: Haydon Perryman (Bank of America, UBS, Barclays, RBS and Lloyds) 

International Tax Risk Management I (Data, Analytics & Technology) 3 credits (meet Tuesday and Friday at 9am Central Daylight Dallas time zone)

Week 1. May 18: BEPS: Dr. Bruno Da Silva (Loyens & Loeff), and William Byrnes (TAMU).

Week 2. May 25: Interest (thin cap, EBIDTA):

Week 3. June 1: CbCR & Analytics David Deputy, Vertex

Week 4. June 8: LOB / PPT / MLI: Dr. Bruno da Silva (Loyens & Loeff)

Week 5. June 15: General tax risk management approach Dr. Knut Olsen

Week 6. June 23: Future of Analytics & Technology from a Risk Management Perspective: Dr. Paula de Witte 

FALL 2020 (Aug 23 through Nov 23) 3 credits (meet Wednesday and Sunday at 9am Central Daylight Dallas time zone)

Domestic Tax Systems Risk Management

Week 1 Aug 23 Canada (extractive)

Week 2 Aug 30 Mexico (manufacturing)

Week 3 Sept 6 India (services)

Week 4 Sept 13 China (supply chain)

Week 5 Sept 20 Japan Dr. Maji Rhee (Waseda) (comps and secret comps)

Week 6 Sept 27 UK (financial services) 

International Tax Risk Management II (Data, Analytics & Technology) 3 credits (meet Wednesday and Sunday at 9am Central Daylight Dallas time zone)

Week 1 Oct 11 Technology industry (Dell) Pillar 2 – CFC, GILTI, related

Week 2 Oct 18 Manufacture

Week 3 Oct 25 Oil & Gas

Week 4 Nov 1 Tax of Patents / Technology, Dr. Brigitte Muehlmann (Daylight time ends, Wednesday and Sunday at 8am Central Standard Dallas time zone)

Week 5 Nov 8 Tax Risk & Tax Technology, Dr. Brigitte Muehlmann

Week 6 Nov 15 Tax Risk & Tax Technology, Dr. Brigitte Muehlmann   

International Tax & Tax Treaties I: Residency Dr. Bruno Da Silva (Loyens & Loeff), and William Byrnes (TAMU) 3 credits (meet Wednesday and Sunday at 9am Central Daylight Dallas time zone)

Week 1 Aug 23 Domestic Tax Rights; Double Taxation; Tax Treaty Allocation Of Tax Rights

Week 2 Aug 30 Types Of Taxes; Tax Treaty Interpretation

Week 3: Sept 6 Tax Jurisdiction Over Persons, Tax Treaty Interpretation

Week 4: Sept 13 Tax Jurisdiction of Corporations; Tax Treaty Interpretation & Application

Week 5: Sept 20 Tax Jurisdiction of Entities

Week 6: Sept 27 Pillar 1 And 2 (Taxation of Digital; Min Effective Tax)

 International Tax & Tax Treaties II: Source Dr. Bruno Da Silva (Loyens & Loeff), and William Byrnes (TAMU) 3 credits (meet Wednesday and Sunday at 9am Central Daylight Dallas time zone)

Week 1 Oct 11 Tax of Business Income

Week 2 Oct 18 Tax of Investment Income

Week 3: Oct 25 Taxation of Services and Employment Income

Week 4: Nov 1 Double Taxation and Tax Credits (Daylight time ends, Wednesday and Sunday at 8am Central Standard Dallas time zone)

Week 5: Nov 8 Tax Accounting

Week 6: Nov 15 Introduction to Management of Tax and Data

Capstone Nov 23: Groups Create Client Case Studies

SPRING 2021 (Jan 10 – April 26)

U.S. Tax Risk Management (Data, Analytics & Technology) 3 credits (Wednesday and Sunday at 8am Central Standard Dallas time zone)

Week 1 January 10, 2021 Outbound / FDII Melissa Muhammad

Week 2 January 17, 2021 Inbound / BEAT Melissa Muhammad

Week 3 January 24, 2021 [check the box] Form 1120 Documentation: Neelu Mehrotra: EY

Week 4 January 31, 2021 [Subpart F & GILTI, PTEP ] Form 5471 Documentation: Neelu Mehrotra: EY

Week 5 February 7, 2021 M&A or topic and Neelu Mehrotra: EY

Week 6 February 14, 2021 FTCs; wrap-up: Melissa Muhammad 

E.U. International Risk Management 3 credits (Wednesday and Sunday at 9am Central Daylight Dallas time zone)

Week 1 February 28, 2021 General Framework & Fundamental Freedoms

Week 2 March 7, 2021 P/S + Interest / Royalty

Week 3 March 21, 2021 M&A directive

Week 4 March 28, 2021 Cross-Border Losses – Dr. Bruno Da Silva

Week 5 April 4, 2021 Free Movement of Capital (investment funds)

Week 6 April 11, 2021 ATAD, DAC 6, Abuse – Dr. Bruno da Silva

Capstone Week: Build a client case study, wrap up 

Transfer Pricing Risk Management: Tangibles, Methods, Economics, and Data (William Byrnes course material professor)

Week 1 January 13 Arm’s Length Standard (v Formulary Approach) Dr. Bruno Da Silva & William Byrnes

Week 2 Jan 20 CUP & Comparables  Dr. Lorraine Eden

Week 3 Jan 27 Cost Plus & Resale Minus  Dr. George Salis

Week 4 Feb 3: Comparable Profits Method & TNMM Dr. George Salis

Week 5 Feb 10 Profit Split Dr. George Salis

Week 6 Feb 17 Best Method Dr. Lorraine Eden 

Transfer Pricing Risk Management: Intangibles and Services (William Byrnes course material professor)

Week 1 March 2 Intangibles Royalty Rates CUT and CPM  Dr. Debora Correa Talutto

Week 2 March 16 CSA Intangibles Buy In/Out Dr. George Salis & William Byrnes

Week 3 March 23 Digital Business Unitary Apportionment Dr. Bruno Da Silva

Week 4 March 30 Digital Value Chain, Internet of Things Dr. Lorraine Eden

Week 5 April 6 U.S. v OECD v UN Manual case study Extractive Industries, Financing Hafiz Choudhury

Week 6 April 13 Restructuring the Business, Services case study Hafiz Choudhury

Capstone Hand-On Week with Financial databases April 20 – 26: Thomson OneSource, BvD (Moodys), and CrossBorder AI Solutions Dr. Debora Correa Talutto & William Byrnes

Posted in Courses | Tagged: , , | Leave a Comment »

Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (March 5, 2020)

Posted by William Byrnes on March 5, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/

Editor’s Note: Litigation on breaches of fiduciary duties in qualified plans has increased dramatically in the past few years, and this week sees an interesting decision from the Supreme Court reducing the statute of limitations where the employee has actual knowledge of the breach. In contrast, the IRS indicates that there is no statute of limitations for employer ACA violations. For more on these topics and many others, log in to Tax Facts for the latest.
U.S. Supreme Court Rules on Statute of Limitations for Fiduciary Breach

The U.S. Supreme Court, in the widely watched Intel case, agreed with former employees that an employer cannot shorten the time period over which plan participants can sue by simply posting relevant information online or sending information in the mail. In most cases, plan participants have six years to bring a lawsuit for fiduciary breach. However, that window is shortened to three years from the date the participant had “actual knowledge” of the fiduciary violation. For more information on investment diversification requirements for 401(k)s, visit Tax Facts Online. Read More

IRS Releases Regs on Post-Reform Deduction for Business Meals and Entertainment

The IRS released regulations governing the post-tax reform treatment of the deduction for business meals and entertainment expenses. The regulations generally mirror guidance release in 2018 and 2019 on the deduction. As such, taxpayers may continue to deduct 50 percent of their business-related food and beverage expenses that are not lavish or extravagant. For more information on the post-reform deduction, visit Tax Facts Online. Read More

IRS: No Statute of Limitations on ACA Penalties for Large Employers

In usual scenarios, when a taxpayer files a return reporting certain information to the IRS, that filing triggers the start of a limitations period after which the IRS can no longer challenge the information in that return (generally, three years). However, the IRS has recently clarified that this rule does not apply with respect to ACA penalty taxes owed by applicable large employers—because there is no actual return that they file in order to report those taxes. This is the case despite the fact that ALEs have certain reporting obligations via annual Forms 1094-C and 1095-C. For more information on how penalties are assessed, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (Jan 31, 2020)

Posted by William Byrnes on January 31, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin late May  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/

SECURE Act and Extenders Bill

As a part of the year-end budget package, Congress passed the long-awaited SECURE Act and also addressed the recently neglected extenders provisions. The SECURE Act contains a number of provisions that will impact nearly every American. Some of the highlights include:

·  Pushing the age when required minimum distributions (RMDs) from retirement accounts must begin from 70 1/2 to 72.
·  Permitting contributions to traditional retirement accounts at any age (previously, taxpayers were not permitted to contribute after age 71).
·  Limiting the value of inherited IRAs, so that most accounts inherited by non-spouse beneficiaries must now be distributed within 10 years (rather than over the lifetime of the beneficiary).
·  Increasing the retirement plan start-up credit for small businesses who offer a retirement savings option (to $5,000 per year or $5,500 if auto-enrollment provisions are included).
·  Expanding multiple employer plan (MEP) options so that unrelated employers can join together to offer retirement savings options to employees.
·  Requiring plans to provide annual lifetime income estimates to certain retirement plan participants.

The bill signed into law also extends many tax provisions, known as “extenders”, through the 2020 tax year. Some of those provisions include the Work Opportunity Credit, the new Family and Medical Leave Credit created by the 2017 tax reform legislation and the ability to treat mortgage insurance premiums as qualified residence interest for tax deduction purposes. Additionally, the bill lowers the medical expense threshold back to 7.5% through 2020. We will provide more information on the individual provisions of the SECURE Act and how the law will impact planning for clients as we move into 2020. For more information on the credits extended by the year-end spending bill, visit Tax Facts Online. Read More

Appeals Court Finds ACA Individual Mandate Unconstitutional

The Fifth Circuit Appeals Court ruled that the ACA individual mandate is unconstitutional. However, it declined to invalidate the entire law. Instead, the case was remanded back to the lower court for more detail on other aspects of the law, including the employer mandate that continues in effect. For more information on the individual mandate, visit Tax Facts Online. Read More

IRS Releases Proposed Regulations on TCJA Executive Compensation Deduction Limits

As a follow up to interim guidance released in August, 2018, the IRS has released proposed regulations that clarify the definitions of covered employee, publicly held corporation and applicable employee remuneration. For more information on the new limits that apply, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (Jan 30, 2020)

Posted by William Byrnes on January 30, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin late May  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/

Editor’s Note:
A couple of interesting developments this week. The NAIC action towards creating a best interest standard for annuity sales follows moves by several states (most notably New York with its new Regulation 187) to create similar rules. While the NAIC has not yet taken any definitive action in this area, in the words of Bob Dylan “you don’t need a weatherman to know which way the wind blows.”

We also have more SECURE Act updates. The Act upped the penalties for anyone filing a Form 5500, and it has also expanded (again, following the 2017 tax reform law) the possible uses for 529 pans, making them an even more valuable planning tool.

NAIC Committee Votes to Pass Best Interest Standard for Annuity Sales

The Life Insurance and Annuities Committee of the National Association of Insurance Commissioners (NAIC) voted to pass a “best interest” standard that would apply to annuity sales. The NAIC standard would be contained in a model that could be passed by states to create a more uniform approach nationwide. The model law would focus on four key concepts: (1) duty of care, (2) disclosure obligations, (3) conflicts of interest and (4) documentation requirements. For more information on the factors that are important to determining whether an annuity is in a client’s best interest, visit Tax Facts Online. Read More

SECURE Act Increases Cost of Failing to File Form 5500

Form 5500 is a form that must be filed by most employers that offer an employee benefit plan subject to ERISA (exceptions do apply). The SECURE Act has significantly increased the penalties that the IRS may assess for failure to file (note that the DOL may also assess penalties. For more information on when a Form 5500 may be required, visit Tax Facts Online. Read More

SECURE Act Increases 529 Plan Value

The SECURE Act, which primarily impacts retirement-related provisions, also expands upon the permissible uses of Section 529 plan dollars to include apprenticeships and student loan payments. For more information on the use of 529 plan funds, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (Jan 29, 2020)

Posted by William Byrnes on January 29, 2020


Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin late May  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/

Editor’s Note:

Several interesting updates this week, including New Jersey’s unique approach to SALT taxes, which allows optional entity-level taxation for pass-throughs in exchange for individual tax credits to be distributed to the members. We also see a new IRS Gig Economy Tax Center and the elimination of the “one bad apple” rule for MEPs with the SECURE Act.

Did we see you at the Heckerling estate planning conference last week? It was a week of warm sunshine and hot (well, OK, at least interesting) tax and estate planning developments. Happy planning!

Latest in the SALT Cap Saga: New Jersey Passes Pass-through Entity Tax Workaround

In the latest in the ongoing SALT cap debate, New Jersey has passed a new law creating an optional entity-level tax for pass-through entities. The New Jersey law allows pass-through entities to elect taxation at the entity level. In exchange, the members are given a refundable gross income tax credit. For more information on the SALT cap, visit Tax Facts Online. Read More

IRS Announces New “Gig Economy” Tax Center

More workers than ever are working in the gig, or freelance, economy–whether full-time or simply to supplement regular income. To keep up with the growing gig industry, the IRS has developed a new tool to help gig workers better understand and comply with their tax obligations. Taxpayers can access the site through irs.gov. For more information on the self-employment tax, visit Tax Facts Online. Read More

SECURE Act Eliminates the “One Bad Apple” Rule for MEPs—With Conditions

The one bad apple rule presented one of the primary roadblocks for small business owners interested in the multiple employer plan (MEP) structure. The SECURE Act provides that if one employer’s actions would disqualify the plan, only that employer’s portion of the MEP will be disqualified. For more information, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (Jan 28, 2020)

Posted by William Byrnes on January 28, 2020


Texas A&M University School of Law has launched its International Tax online graduate curriculum for tax professionals. Apply now for Jan 13 – April 19 transfer pricing courses.  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for the inaugural cohort opportunity, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax

 

TAXFACTS

TaxFacts Intelligence Weekly

William H. Byrnes, J.D., LL.M. and Robert Bloink, J.D., LL.M.
Jan 09, 2020

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Editor’s Note: Mileage rates, UBTI for VEBAs, and 401(K)s for part-time employees under the SECURE Act

Vehicle-related reimbursement and deductions can be a big deal. Anyone who tracks mileage for work, medical, or charitable purposes is impacted by the changes in the IRS mileage rates, which have just been updated for 2020. We also have new UBTI rules for VEBAs, which were adopted in light of recent litigation. Finally, the SECURE Act mandates access to employer-sponsored 401(k)s to many part-time workers who could previously be excluded from participation. Learn what the new rules are, including how they impact nondiscrimination testing, with Tax Facts Online.

2020 IRS Business Standard Mileage Rates

In 2020, the optional standard mileage rate for using a car for business purposes will be 57.5 cents per mile driven for business purposes (the 2019 rate was 58 cents per mile). For more information on deducting business-related travel expenses, including medical and charitable mileage rates visit Tax Facts Online. Read More

IRS Regs Clarify UBTI Calculation for VEBAs and SUBs

The IRS has released regulations clarifying how voluntary employees’ beneficiary associations (VEBAs) and supplemental unemployment benefit trusts (SUBs) calculate unrelated business taxable income (UBTI) in light of recent litigation. For more information on the new rules and the related litigation, visit Tax Facts Online. Read More

SECURE Act Expands 401(k) Access for Long-Term, Part-Time Employees

Under the SECURE Act, employees who perform at least 500 hours of service for at least three consecutive years (and are at least 21 years old) must be allowed to participate in the employer-sponsored 401(k). These long-term, part-time employees may, however, be excluded from coverage and nondiscrimination testing requirements. For more information on 401(k) requirements, including detailed descriptions of the nondiscrimination testing requirements, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (Jan 2d, 2020)

Posted by William Byrnes on January 3, 2020


Texas A&M University School of Law has launched its International Tax online graduate curriculum for tax professionals. Apply now for Jan 13 – April 19 transfer pricing courses.  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for the inaugural cohort opportunity, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax

Editor’s Note: Ending the Transportation and Parking Tax for Nonprofits, Wrangling the New Form W-4P, and Some SECURE Act Caveats for Inherited IRAs.

We continue to see odds and ends for the new year related to the passage of the SECURE Act. The Act eliminated the Transportation and Parking tax for nonprofits, and we also have an analysis of the caveats for the newly-limited stretch for inherited IRAs.

With the SECURE Act finally passed, the editorial team here at Tax Facts is working hard update all of the relevant content with the new changes. Tax Facts Online content is continually updated, and we will be compiling a white paper for our print customers outlining the changes with the new laws and how they track to the existing Tax Facts Q&As. As always, we strive to make accurate and insightful changes to Tax Facts that reflect the most current tax information available.

Tax-Exempt Entities Wave Goodbye to Tax Reform’s Transportation and Parking Tax
The Taxpayer Certainty and Disaster Relief Act of 2020, which contained the SECURE Act and addressed tax “extender” provisions, also repealed a controversial portion of IRC Section 512(a). Generally, tax-exempt entities were subject to a 21 percent tax on certain benefits, including use of parking facilities, provided to employees beginning in 2018. The new law repeals this expanded definition retroactively to the date of its enactment, to it is essentially as though the UBTI expansion was never enacted. For more information on the issue, visit Tax Facts Online. Read More
IRS Clears Up Questions on Tax Withholding from Retirement Accounts and Annuity Distributions in 2020
Tax withholding from retirement accounts and annuities is handled differently than ordinary employer income tax withholding. However, unless a taxpayer has opted out, payors of amounts from pensions, annuities and other sources are required to withhold for income taxes under Section 3405(a). The IRS guidance discusses how the new Form W-4P can be used for this, and notes that additional changes in later years may be considered. For more information on retirement plan withholding, visit Tax Facts Online. Read More
SECURE Act Limits the Stretch IRA After 2019—with Caveats
In previous years, as retirement accounts have grown in value, the idea of using the account to provide a tax-preferred legacy to future generations had grown in popularity. To offset some of the cost of the SECURE Act, Congress limited the value of the stretch for most taxpayers. Under the new law, most non-spouse account beneficiaries will be required to take distributions over a ten-year period. The new rule has some caveats, and applies for tax years beginning after December 31, 2019. For more information, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Online & Hybrid Learning Pedagogy Best Practices and Standards Development at AALS on Thursday, January 2

Posted by William Byrnes on December 30, 2019


If you are attending the first afternoon of AALS Thursday, please join our discussion Online & Hybrid Learning Pedagogy Best Practices and Standards Development at Marriot Wardman Park Hotel’s Roosevelt Room 4, from 3:30-5:15 p.m. on Thursday, January 2 in a Q&A format.  Discussants include Dean April Barton (Duquesne), Dean James Hackney (Northeastern), Dean Megan Carpenter (New Hampshire), Prof. Rebecca Purdom (Emory), John Mayer (CALI), David Thomson (Denver), and Prof. William Byrnes (Texas A&M).

The discussants will help lead an audience conversation: “Since the publication of the first set of best practices and model rules, what have we learned? What should the community be considering now?

Our goal for this discussion is to test whether there is an appetite for an updated set of best practice standards and model rules. The five-year project sponsored by the Harvard Project on the Legal Profession to draft a set of best practices and model standards for online learning in legal education, Distance Learning in Legal Education: Delivery and Recommended Practices, is published by CALI: download here.  This conversation will continue next summer at SEALS and at the 2021 AALS meeting.

Specific discussion points may include:

  • Do we need to modernize best practices? Were we wrong about anything five years ago?
  • Do we need to update model rules? Who/what organization is the target for model rules? How should the ABA and regional accreditors review online law classes?
  • Some states still restrict how many online classes students may count toward taking the bar. Does this affect the growth of online law programs? Should it? Should this community engage those states? How?
  • Many online offerings by law schools are in their non-JD degree programs. How should the accreditation discussion for these programs consider online offerings? How will their regulation affect online JD classes?
  • Some law schools report status differences between faculty who teach online, and faculty who teach residential classes. Is this status difference a problem? If so, how should the problem be approached?
  • Some law schools heavily use adjuncts to teach online law classes. Is this a problem? If so, what steps should be taken?
Hope that you can join our discussion this Thursday at AALS!

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U.S. IRS Data for Country-by-Country Reports, Tax Year 2017 and 2016

Posted by William Byrnes on December 20, 2019


Six new tables presenting data from Form 8975, Country-by-Country Report, and Form 8975 Schedule A, Tax Jurisdiction and Constituent Entity Information, are now available on SOI’s Tax Stats Web page. The tables present data from the estimated population of corporate and partnership returns filed for Tax Year 2017. Five tables display the number of filers, revenues, profit, income taxes, earnings, number of employees, and tangible assets. The first three tables are classified by major geographic region and selected tax jurisdiction. The fourth table is classified by major industry group, geographic region, and select tax jurisdiction. The fifth table is classified by effective tax rate of multinational enterprise subgroups. A sixth table displays number of constituent entities classified by major geographic region, selected tax jurisdiction, and main business activities.

Country-by-Country Report: Tax Jurisdiction Information

Data Presented: Number of Filers, Revenues, Profit, Income Taxes, Earnings, Number of Employees, Tangible Assets

Classified by: Major Geographic Region and Selected Tax Jurisdiction
Tax Years: 2017 | 2016
Classified by: Major Geographic Region and Selected Tax Jurisdiction with Positive Profit Before Income Tax
Tax Years:  2017 | 2016
Classified by: Major Geographic Region and Selected Tax Jurisdiction with Negative or Zero Profit Before Income Tax
Tax Years: 2017 | 2016
Classified by: Major Industry Group, Geographic Region, and Selected Tax Jurisdiction
Tax Years: 2017 | 2016
Classified by: Effective Tax Rate of Multinational Enterprise Sub-groups
Tax Years: 2017 | 2016

Country-by-Country Report: Constituent Entities

Data Presented: Number of Constituent Entities

Classified by: Major Geographic Region, Selected Tax Jurisdiction, and Main Business Activities
Tax Years: 2017 | 2016

William Byrnes’ 4th Edition of his industry-leading Practical Guide to U.S. Transfer Pricing treatise was published on December 19, 2019 by Matthew Bender LexisNexis.  William Byrnes is the author or co-author of nine Lexis titles and an advisory board member of Law360’s International Tax journal.

William Byrnes’ completely revised 4th Edition Practical Guide to U.S. Transfer Pricing (2020) has been expanded to 2,000 pages of analyses and practice notes, 47 chapters divided over six parts: Part I: U.S. regulatory analysis, application of transfer pricing methods, and jurisprudence; Part II: OECD; Part III: United Nations; Part IV: European Union; Part V: Industry topics; and Part VI: Country practice and tax risk management. Professor Byrnes brings together 50 of the industry’s eminent transfer pricing counsel, economists, and financial accountants to provide a comprehensive two-volume “go-to” resource for tax risk management.

William Byrnes explained, “I am fortunate to be able to call upon and work with the industry’s leading transfer pricing professionals from firms such as Alston, Covington, Pillsbury, Jones Day, McDermott, Duff & Phelps, Miller Chevalier, PwC, KPMG, and multinational companies like Vertex and Veritas.” Sixty contributors add subject matter expertise on technical issues faced by tax and risk management counsel.

Last chance to join one of the case study teams for TRANSFER PRICING taught live online, using Zoom, by Dr. Lorraine Eden, Prof. William Byrnes, and many industry experts… The courses are for tax attorneys, accountants, or economists and count toward the Texas A&M’s INTERNATIONAL TAX Master degree (taught online).

The class of a maximum of 18 students will be grouped into teams of 3 students each. The 6 teams meet using Zoom to prepare a weekly TP Aggiespresentation to respond to a real-world post-BEPS client study. Then all teams meet together online via Zoom twice each week at 8:00am Dallas time Wednesdays and Sundays to discuss and present the case study solutions. Students are provided without charge textbook materials, videos with PPT, and podcasts, and granted access to a large online law & business database library including Lexis, Bloomberg, IBFD, Kluwer/CCH, Thomson, among many other tax resources.

To apply for the transfer pricing courses and international tax courses, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax  (applications and previous university transcripts must be received by Admissions before Wednesday, January 8th at 5pm Texas time). Note that the university is closed for the holidays from Dec. 20 until Jan. 2, 2020.

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What’s New in the 4th Edition Practical Guide to U.S. Transfer Pricing?

Posted by William Byrnes on December 20, 2019


Highlights

In this release, Professor William Byrnes launches a new 4th Edition of Practical Guide to U.S. Transfer Pricing, in which chapters have been reorganized, substantially revised and expanded to align the publication to the Tax Cuts and Jobs Act, the 2017 OECD Transfer Guidelines and BEPS, and the 2017 UN Practical Manual.

His new edition has 47 chapters, 1,800 pages of technical, jurisprudence, and regulatory analysis to advise clients from a tax risk management perspective and to mitigate controversy. Order a copy here: https://store.lexisnexis.com/products/practical-guide-to-us-transfer-pricing-skuusSku60720

There are 29 U.S. specific chapters (Part I), 7 OECD/BEPS/EU chapters (Part II, IV), 9 industry-specific chapters (Part V), 2 foreign country chapters (Part VI).

New Country Chapters. India (Chapter 121) and Brazil (Chapter 120).

Financial Industry Chapters. Financial Industry Transfer Pricing Issues (Chapter 92), Determining Arm’s Length Interest (Chapter 93), Defending Intercompany Debt (Chapter 94), Performance Guarantees (Chapter 95).

Business Structuring Chapters. Business Restructuring: U.S. Tax and Transfer Pricing Rules (Chapter 27), Mergers and Acquisitions (Chapter 96), International Strategy for Transfer Pricing Compliance: A Checklist for Multinationals (Chapter 90), Transfer Pricing Aspects of Business Restructurings (Chapter 43).

Hybrid Rules and Transfer Pricing. New Chapter 45.

Cost Sharing casesAmazon and Altera, analyzed in depth and contrasted. see Chapter 13 and Chapter 10.

Tax Cuts and Jobs Act. Revision of U.S. Business Restructuring Chapter 27 includes the impact of GILTI, FDII, BEAT, Transition Tax, on U.S. business’s transfer pricing exposure. BEAT and Service Cost Method are discussed in Chapter 14.

Digital Taxation and Transfer PricingSee new Chapter 44.

Transfer Pricing Review Panel and Transfer Pricing Examination Process Updates. See Chapter 20, Examination and Appeals.

Value Chain Analysis. See Chapter 42, Porter’s Value Chain Analysis Case Study of Amazon; Chapter 97, Value Chain Study of Coffee Industry; Chapter 98, Value Chain Study of the Tobacco Industry.

Taxpayer First Act of 2019. Impact on LB&I Discussed in Chapter 20.

Impact of 2015 APA and Competent Authority Revenue Procedures. Analysis of trends and risks in Chapter 21, APAs and in Chapter 22, Competent Authority.

* * * * * * * * * * * * * * * * * * *

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Advisors will discover a rich selection of Lexis titles examining hot, cutting-edge issues like: Practical Guide to U.S. Transfer PricingLexis Guide to FATCA Compliance; a country-by-country examination of anti-money laundering laws; Taxation of Intellectual Property and TechnologyFederal Taxation of Oil and Gas Transactions; and Foreign Tax & Trade Briefs, which provides summaries of the tax laws and systems of over 120 countries. Nine treatises are authored or co-authored by Professor William H. Byrnes (Texas A&M University Law School) who leads teams of contributing subject experts in analyzing the management of operational and transactional risk confronting tax officers and their advisors, and providing compliance and planning insights.

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William Byrnes’ 4th Edition Practical Guide to U.S. Transfer Pricing Treatise Published December 19, 2019

Posted by William Byrnes on December 19, 2019


William Byrnes’ 4th Edition of his industry-leading Practical Guide to U.S. Transfer Pricing treatise was published December 19, 2019 by Matthew Bender LexisNexis.  William Byrnes is the author or co-author of nine Lexis titles and an advisory board member of Law360’s International Tax journal.

William Byrnes’ completely revised 4th Edition Practical Guide to U.S. Transfer Pricing (2020) has been expanded to 2,000 pages of analyses and practice notes, 47 chapters divided over six parts: Part I: U.S. regulatory analysis, application of transfer pricing methods, and jurisprudence; Part II: OECD; Part III: United Nations; Part IV: European Union; Part V: Industry topics; and Part VI: Country practice and tax risk management. Professor Byrnes brings together 50 of the industry’s eminent transfer pricing counsel, economists, and financial accountants to provide a comprehensive two-volume “go-to” resource for tax risk management.

William Byrnes explained, “I am fortunate to be able to call upon and work with the industry’s leading transfer pricing professionals from firms such as Alston, Covington, Pillsbury, Jones Day, McDermott, Duff & Phelps, Miller Chevalier, PwC, KPMG, and multinational companies like Vertex and Veritas.” Sixty contributors add subject matter expertise on technical issues faced by tax and risk management counsel.

“Transfer Pricing is one of the most complex and changing areas of tax risk in the United States and globally,” continued Byrnes. “The big-ticket cases, ones with over a half-billion-dollar adjustment, are almost always transfer pricing.  And with the renewed government focus on this topic around the world, transfer pricing audits will both increase in number and in actions taken, not just for the IRS, but most countries’ revenue authorities. U.S. companies are often the target.”

Byrnes shared, “Dr. Lorraine Eden (Texas A&M) and I will be using the treatise to teach transfer pricing online from January 13 through April 20 as part of the Texas A&M international tax curriculum”.

 

 

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Transfer Pricing case studies online course Jan 13 – Apr 19, 2020

Posted by William Byrnes on December 18, 2019


Last chance to join one of the case study teams for TRANSFER PRICING taught live online, using Zoom, by Dr. Lorraine Eden, Prof. William Byrnes, and many industry experts… The courses are for tax attorneys, accountants, or economists and count toward the Texas A&M’s INTERNATIONAL TAX Master degree (taught online).

The class of a maximum of 18 students will be grouped into teams of 3 students each. The 6 teams meet using Zoom to prepare a weekly TP Aggiespresentation to respond to a real-world post-BEPS client study. Then all teams meet together online via Zoom twice each week at 8:00am Dallas time Wednesdays and Sundays to discuss and present the case study solutions. Students are provided without charge textbook materials, videos with PPT, and podcasts, and granted access to a large online law & business database library including Lexis, Bloomberg, IBFD, Kluwer/CCH, Thomson, among many other tax resources.

To apply for the transfer pricing courses and international tax courses, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax  (applications and previous university transcripts must be received by Admissions before Wednesday, January 8th at 5pm Texas time). Note that the university is closed for the holidays from Dec. 20 until Jan. 2, 2020.

 

 

 

 

Course I: Tangibles, Methods

  • Week 1 January 13 Arm’s Length Standard (v Formulary Approach) case study
  • Week 2 Jan 20 CUP & Comparables case study
  • Week 3 Jan 27 Cost Plus & Resale Minus case study
  • Week 4 Feb 3: Comparable Profits Method & TNMM case study
  • Week 5 Feb 10 Profit Split case study
  • Week 6 Feb 17 Best Method case study

Course II: Intangibles, Services

  • Week 1 March 2 Intangibles Royalty Rates CUT and CPM case study
  • Week 2 March 16: CSA Intangibles Buy In/Out case study
  • Week 3 March 23: Digital Business Unitary Apportionment case study
  • Week 4 March 30 Digital Value Chain, Internet of Things case study
  • Week 5 April 6 U.S. v OECD v UN Manual case study Extractive Industries, Financing
  • Week 6 April 13 Restructuring the Business, Services case study

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Transfer Pricing case studies online course Jan 13 – Apr 19 (live Zoom based classes, small team groups)

Posted by William Byrnes on December 13, 2019


Interested to join one of the case study teams for TRANSFER PRICING taught live online, using Zoom, by Dr. Lorraine Eden, Prof. William Byrnes, and many industry experts January 13 – April 19. The courses are for tax attorneys, accountants, or economists and count toward the Texas A&M INTERNATIONAL TAX online Master curriculum.

The class is divided into teams of 3 or 4 students, each team meets internally using Zoom to prepare a team response and presentation for a real-world post-BEPS client study. Then the entire class meets twice each week: (A) on Wednesdays to discuss the case study with the Subject Matter Expert and Prof. William Byrnes, and (B) on Sundays each team presents interactively their positions and solutions in a friendly rivalry against the other teams, facilitated by William Byrnes and the Subject Matter Expert professor.  Students are provided textbook materials, videos with PPT, and podcasts, while learning to use a robust online law & business database library. The weekly lead Subject Matter Experts listed below and several more will be joining to explain specific tools and issues.

To apply for the transfer pricing courses and international tax courses, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax  (applications with all previous degree academic transcripts must be received by Admissions before Wednesday January 8th at 5pm Texas time)

Texas A&M Law offers the premier online program in international tax with a multidisciplinary, risk-management-focused approach. Our TP Aggiesunique, industry-based online curriculum is vetted by and focuses on the needs of multinational corporations, large firms, and governments. Though one of the largest U.S. public universities of 70,000 students and an annual budget exceeding $6 billion (FY2020), Texas A&M’s international tax curriculum offers small class sizes (maximum 30) to ensure personal faculty and in-class engagement. Smaller class sizes also allow stronger engagement and connections to develop among classmates who learn from each other’s corporate experiences.

  • Class meeting time is 60  – 120 minutes each Wednesday and Sunday at Central (Texas) time 08:00 (am) (i.e. 15:00 Paris; 18:00 Dubai; 22:00 Shanghai). The sessions are normally recorded if students are unable to attend because of client commitments or must sign off early.
            Capstone Week April 20 – 26: students teams build case studies that winning teams can present next year in the courses

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (December 12 edition)

Posted by William Byrnes on December 12, 2019


Texas A&M University School of Law has launched its International Tax online graduate curriculum for tax professionals. Apply now for Jan 13 – April 19 transfer pricing courses.  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for the inaugural cohort opportunity, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax

IRS Provides New ACA Transition Relief for Employer Reporting

As usual, the IRS has released transition relief to extend the deadline for providing Form 1095-C to individuals from January 31, 2020 to March 2, 2020. However, unlike other years, the March 2 deadline is now a firm deadline and the IRS has indicated that it will no longer respond to requests for extension beyond that deadline. Form 1094-C and Form 1095-C that must be provided to the IRS are not subject to the extension. The employer must furnish these filings to the IRS by February 28, 2020 if the filing is on paper and March 31, 2020 if the employer is filing electronically. For 2019 forms, the IRS has extended the relief that may allow employers to escape liability if they make a good faith effort to comply with all filing requirements. Because the individual mandate has been reduced to $0, the IRS will also not impose a penalty under IRC Section 6722 upon employers who fail to provide Form 1095-B if certain requirements are satisfied. For more information, visit Tax Facts Online. Read More

December 31 Deadline to Take Full Advantage of Opportunity Zone Deferral is Fast Approaching

The Tax Cuts and Jobs Act introduced opportunity zones into the tax code, which allow taxpayers to defer certain gains if certain deadlines and requirements are satisfied. However, the law only gives taxpayers a limited amount of time to take full advantage of the deferral provisions. Specifically, December 31, 2019, is the deadline for taxpayers who wish to make opportunity zone investments and take full advantage of the 15% step-up in the deferred gains. Taxpayers who invest after this deadline (but before December 31, 2020) and hold the opportunity zone investment through 2026 will be entitled to take 10% step-up in basis (10% of the amount deferred) on the deferred tax. For more information on the opportunity zone rules, including the gain deferral provision, visit Tax Facts Online. Read More

Unpacking the New Section 6050Y Reporting Requirements for Life Insurance Reportable Policy Sales

The new 6050Y regulations create new reporting obligations for many who issue, acquire or sell life insurance policies in a reportable policy sale post-tax reform. An “issuer” under the new regulations is anyone that bears any part of the risk associated with the life insurance contract, including those collecting premiums and paying death benefits. However, where there are multiple issuers, the reporting obligations are satisfied if only one issuer or designee reports on a timely basis. New forms released by the IRS to complete the reporting obligations include Form 1099-LS, Reportable Life Insurance Sale and Form 1099-SB, Seller’s Investment in Life Insurance Contract. While some reporting requirements have been delayed, it’s important to understand the basics of these forms now. Form 1099-LS must be filed by anyone who acquires a life insurance policy (or interest therein) in a reportable policy sale. Basic information about the sale, policy, acquirer and seller must be included. Form 1099-SB must be filed by the issuer of the life insurance policy to report both the seller’s investment in the contract and the surrender amount if the sale is a reportable policy sale (or transferred to a foreign person). For more information on the new 6050Y reporting requirements, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s TaxFacts Intelligence Weekly for Financial Advisors (December 5 edition)

Posted by William Byrnes on December 6, 2019


Texas A&M University School of Law has launched its International Tax online graduate curriculum for tax professionals. Apply now for Jan 13 – April 19 transfer pricing courses.  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for the inaugural cohort opportunity, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax

Final Regulations Confirm: No “Clawback” for Gifts Made Under Expanded Transfer Tax Exemption

The 2017 tax reform legislation significantly expanded the transfer tax exemption, which applies to exempt both lifetime and postmortem gifts from transfer taxes. However, the new provision is set to sunset after 2025, leading many taxpayers to question whether large gifts made while the provision is effective would be exempt once the exemption reverts to the much lower $5 million (as adjusted for inflation) limit. In general, the exemption applies first to gifts made during life and then to the individual’s remaining estate. Under the final regulations, estates are allowed to compute the available estate tax credit using the higher of the basic exclusion amount that applied to gifts made during life or the basic exclusion amount applicable on the date of death. Essentially, this rule provides certainty that taxpayers can make large gifts now (i.e., gifts that exceed the $5 million exemption) without generating transfer tax liability if the exemption amount is reduced in the future. For more information on the estate tax, visit Tax Facts Online. Read More

Court Finds Prudent Process Sufficient to Overcome DOL Fiduciary Liability

Many retirement plan sponsors and advisors have been left in uncertainty since the DOL fiduciary rule was vacated. A September 2019 case involving a DOL fiduciary enforcement action may shed light on resolution of fiduciary issues in the retirement plan context. In this case, the court found that retirement committee members were not liable under ERIA for a failure to monitor the committee’s investment manager more closely. The committee here had implemented processes and procedures, including regular meetings and reports, and acted in accordance with those procedures. After the DOL initiated action, the court agreed that the committee was entitled to rely upon those procedures. Once an error or problem arose and the committee became aware—or reasonably should have become aware—of the issue, the committee correctly increased its oversight until the issue was resolved. Here, that issue was that the committee’s instructions with respect to investments were not being followed. Once the committee noticed, they stepped up oversight. Importantly, this ruling shows that a prudent process is often sufficient to avoid fiduciary liability even if a decision results in investment losses. For more information on the fiduciary standard, visit Tax Facts Online. Read More

IRS Cracking Down on Syndicated Conservation Easements

In recently released IR-2019-182, the IRS announced that it has substantially increased resources to crack down on syndicated conservation easements. Under the IRC, a special rule allows taxpayers to take a deduction for donations of qualified conservation easements (an exception to the general rule prohibiting deductions for donations of less than an entire interest in property). A qualified conservation easement is a contribution of real property including a restriction (granted in perpetuity) for the use of the property, which must be used for conservation purposes. Syndications are often set up to purchase real property for conservation easements. Most syndications involve tiers of pass-through entities so that investors in the entities can more fully use the charitable deduction (which is subject to an adjusted gross income cap like any other charitable deduction). Often, the actual deduction will far exceed the amounts invested—sometimes because inflated property values are used. These and substantially similar arrangements are now classified as listed transactions, which must be disclosed to the IRS. Clients should be made aware of this increased potential for enforcement across several IRS divisions. For more information on the requirements for claiming a conservation easement deduction, visit Tax Facts Online. Read More

 

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s Thanksgiving TaxFacts Intelligence for Wealth Advisors

Posted by William Byrnes on December 3, 2019


Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Jan 13 – April 19 transfer pricing courses.  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for the inaugural cohort opportunity, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax

Often-Overlooked Section 1202 Tax Break for Small Business Adds New Value Post-Reform

Section 1202, while often overlooked by small business owners and investors alike, can provide a valuable tax benefit post-reform because many small businesses have transitioned to C corporation status to take advantage of the simpler 21 percent corporate tax rate. Section 1202 allows for an exclusion of up to 100 percent of gain realized when qualified small business stock is sold. To qualify, the stock must be acquired by the taxpayer when the stock was originally issued and held for at least five years. Further, the Section 1202 stock exclusion only applies to stock in C corporations with active businesses and assets of $50 million or less (measured when the stock is issued). Excluded gains are limited to the greater of: $10 million or 10 times the basis of the qualified small business stock. For more information on the exclusion, visit Tax Facts Online. Read More

IRS Expands Nondiscrimination Relief for Closed Defined Benefit Plans

Although the IRS has previously extended the nondiscrimination relief for closed DB plans in Notice 2014-5, newly released Notice 2019-60 also expands the relief to include relief from benefits, rights and features testing for closed plans. To qualify, the plan must have closed via amendments adopted before December 13, 2013. Notice 2019-60 does not change prior relief, but adds additional relief. Closed plans’ benefits, rights and features are treated as satisfying testing if the benefits, rights and features were provided at the time of the amendment closing the plan and one of two conditions are satisfied: (1) no amendments were adopted after January 29, 2016 that expanded or restricted eligibility for the benefits, rights and features or (2) if there was such an amendment, the benefit, right or feature does not benefit a relatively larger proportion of highly compensated employees (measured using the plan’s ratio percentage) than before the amendment. This relief is available for plan years ending after November 13, 2019 and before January 1, 2021. For more information on defined benefit plan nondiscrimination testing, visit Tax Facts Online. Read More

Advisory Fees Withdrawn From Annuity Not Treated as Distributions to the Owner

A recent IRS letter ruling found that investment advisory fees paid periodically from an annuity contract case value should not be treated as amounts received by the contract owner. The annuities in this case were nonqualified deferred annuities. As part of the annuity, the product owner would receive investment advice from a licensed advisor on how to allocate the case value of the contract. The fees were to be negotiated in an arm’s length transaction, but were not to exceed 1.5 percent of the annuity cash value. The fees were paid directly to the advisor (in other words, the owner would never receive the amounts deducted from the annuity value). The IRS found the fees “integral” to operation of the annuity contract based on the fact that the owner would receive ongoing investment advice. Further, the fees did not compensate the advisor for services related to any other asset (other than the annuity). The IRS concluded that the fees were an expense of the contract, not distributions to the owner. For more information on the tax treatment of nonqualified annuities, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Transfer Pricing case studies online course Jan 13 – Apr 19 (live Zoom based classes, small team groups)

Posted by William Byrnes on November 26, 2019


Interested to join one of the case study teams for TRANSFER PRICING taught live online, using Zoom, by Dr. Lorraine Eden, Prof. William Byrnes, and industry experts January 13 – April 19. The courses are for tax attorneys, accountants, or economists and count toward the Texas A&M INTERNATIONAL TAX online Master curriculum. The class meets each week to discuss the real-world post-BEPS client studies and then again weekly the teams present their positions and solutions.  During the week the teams meet internally via Zoom and study provided materials, videos and audio casts based on provided PPTs, while using a robust online law & business database library.  For more information about how to apply, contact Texas A&M Admissions https://info.law.tamu.edu/international-tax

Texas A&M Law offers the premier online program in international tax with a multidisciplinary, risk-management-focused approach. Our TP Aggiesunique, industry-based online curriculum is vetted by and focuses on the needs of multinational corporations, large firms, and governments. Though one of the largest U.S. public universities of 70,000 students and an annual budget exceeding $6 billion (FY2020), Texas A&M’s international tax curriculum offers small class sizes (maximum 30) to ensure personal faculty and in-class engagement. Smaller class sizes also allow stronger engagement and connections to develop among classmates who learn from each other’s corporate experiences.

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Byrnes & Bloink’s November 21 TaxFacts Intelligence for Wealth Advisors

Posted by William Byrnes on November 22, 2019


Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Jan 13 – April 19 transfer pricing courses.  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for the inaugural cohort opportunity, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax

IRS Proposes New Life Expectancy Tables for Calculation IRA & 401(k) RMDs

The IRS has released new proposed life expectancy tables that would be used in calculating required minimum distributions from both IRAs and employer-sponsored retirement plans. The new tables generally assume longer life expectancies and provide information needed to calculate RMDs for participants living to 120 (the current tables stop at 115). For most clients, the primary impact will be seen in lower required distributions beginning in 2021 Individuals taking RMDs from inherited accounts will also be entitled to switch to the new life expectancy tables under a proposed transition rule, as will those clients currently receiving substantially equal periodic payments. For more information on the RMD rules, visit Tax Facts Online. Read More

IRS Releases Proposed Regulations Implementing Tax Reform Changes to Eligible Terminated S Corporations

The IRS has released proposed regulations that would implement some of the tax reform changes that apply to S corporations that convert to C corporation status. Under tax reform, certain adjustments under IRC Section 481(a) that are required because of the revocation of the S corporation election of an “eligible terminated S corporation” (ETSC) are taken into account ratably during the six tax years beginning with the year of the change (under previous law, most changes had to be accounted for within a one-year period). The proposed regulations’ “no newcomers rule” clarifies that an ETSC is defined as one that (1) was an S corporation on December 21, 2017, (2) during the two-year period beginning on December 22, 2017, revokes its S corporation election, and (3) all of the owners of the corporation on December 22, 2017 are the same as on the day the election is revoked (in identical proportions). The proposed regulations also implement a “snapshot approach” to determining the ratio needed to make allocations under the rules. For more information, visit Tax Facts Online. Read More

Participating in Two Retirement Plans? Need-to-Know Information on Contribution Limits

In today’s day and age, many clients may participate in more than one employer-sponsored retirement plan. This means that clients must understand the deferral limits that limit the amount that can be contributed on a tax-preferred basis each year. The elective deferral limit is a per-person limit, meaning that each client gets one amount per year (for most clients, the 2019 deferral limit is $19,000, or $25,000 for clients who have reached age 50). This means that clients participating in two 401(k) plans can make $19,000 in pre-tax contributions, spread between the two plans (457(b) plans and 403(b) plans are not subject to this aggregation rule). A second limit, known as an “annual additions limit”, governs the total employer and employee contributions that can be made in a single year. For 2020, that limit is $576,000 and $632,000 for clients 50 and up. The annual additions limit applies to plans offered by a single company, or by companies that are related. Clients participating in two plans sponsored by unrelated companies should be aware that a separate annual additions limit applies to each plan. For more information on the rules governing elective deferrals, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

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Byrnes & Bloink’s Actionable TaxFacts Intelligence Weekly for Financial Advisors

Posted by William Byrnes on November 20, 2019


Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Jan 13 – April 19 transfer pricing courses.  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for the inaugural cohort opportunity, contact Jeff Green, Graduate Programs Coordinator, T: +1 (817) 212-3866, E: jeffgreen@law.tamu.edu or contact David Dye, Assistant Dean of Graduate Programs, T (817) 212-3954, E: ddye@law.tamu.edu. Texas A&M Admissions website: https://law.tamu.edu/distance-education/international-tax

Final 401(k) Hardship Distribution Rules Take Effect January 1, 2020

Plan participants and sponsors should note that the final regulations governing 401(k) hardship distributions take effect in 2020. As of 2020, participants who take a hardship distribution must now be permitted to continue to make deferrals within the six months following the hardship distribution. While some aspects of the new rules are optional, this new requirement is mandatory with respect to qualified plans. For more information on hardship distributions, visit Tax Facts Online. Read More

IRS Releases Proposed Regs on Accounting for Advance Payments

The IRS has released proposed regulations implementing changes made by the 2017 tax reform legislation that impact the tax treatment of advance payments. The regulations generally adopt the rules contained in Revenue Procedure 2004-34— the approach in place prior to tax reform. For more information on the tax treatment of advance payments, visit Tax Facts Online. Read More

IRS FAQ Provides for Specific Identification in Transactions Involving Virtual Currency

The recently released FAQ on the tax treatment of virtual currency confirms that transactions in bitcoin and other forms of virtual currency will be taxed as transactions in property. The guidance goes further and answers the question of whether taxpayers should identify particular virtual currency that is part of a transaction. For more information on the tax treatment of bitcoin, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Retirement Planning, Taxation | Tagged: , , | Leave a Comment »

Byrnes & Bloink’s TaxFacts Intelligence Weekly – Actionable Analysis for Financial Advisors

Posted by William Byrnes on November 18, 2019


Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Spring (January) semester for the transfer pricing courses.  Texas A&M University is a public university of the state of Texas and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). 

Final 401(k) Hardship Distribution Rules Take Effect January 1, 2020

Plan participants and sponsors should note that the final regulations governing 401(k) hardship distributions take effect in 2020. As of 2020, participants who take a hardship distribution must now be permitted to continue to make deferrals within the six months following the hardship distribution. While some aspects of the new rules are optional, this new requirement is mandatory with respect to qualified plans. For more information on hardship distributions, visit Tax Facts Online. Read More

IRS Releases Proposed Regs on Accounting for Advance Payments

The IRS has released proposed regulations implementing changes made by the 2017 tax reform legislation that impact the tax treatment of advance payments. The regulations generally adopt the rules contained in Revenue Procedure 2004-34— the approach in place prior to tax reform. For more information on the tax treatment of advance payments, visit Tax Facts Online. Read More

IRS FAQ Provides for Specific Identification in Transactions Involving Virtual Currency

The recently released FAQ on the tax treatment of virtual currency confirms that transactions in bitcoin and other forms of virtual currency will be taxed as transactions in property. The guidance goes further and answers the question of whether taxpayers should identify particular virtual currency that is part of a transaction. For more information on the tax treatment of bitcoin, visit Tax Facts Online. Read More

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Posted in Taxation | Tagged: , , , | Leave a Comment »

Comments and Recommendations to the OECD Proposal for a “Unified Approach” under Pillar One

Posted by William Byrnes on November 15, 2019


Excerpt from SSRN here: A withholding based system will not be trapped in the tar pit of formation and implementation in the development of a new international tax regime, thereafter mired in the lack of institutional knowledge and capacity of resources for audit and MAP. A withholding based system offers a contrasted simplicity in relation to its implementation, including: (a) better procedural certainty for taxpayer and tax authority based upon current withholding regimes for services, (b) better revenue estimation for tax authorities, (c) less complex and expensive audits by tax authorities of taxpayers, (d) better tax risk management for taxpayers, (e) an established procedural system for relief of double taxation, and finally, (f) less cause for requiring MAP. Among proposals most likely to congeal into a uniform approach by March 2020, a withholding based system already has numerous adherents representing various economic strata.  Read the complete Excerpt from SSRN here

Thus, rather than running away from a withholding based system into a ‘brave new world’, the OECD should embrace it and shape its current contours of definitional income and source issues and range of rates. Thereafter, the respective OECD and UN committees may leverage economic theory and regulatory impact analyses, as was done in 1923, to modulate the withholding based system via the inclusive process of the OECD and UN MTCs while working within the context of the ALP bedrock of the OECD and UN TPGs to address Article 7 and Article 9 allocation issues resulting from intangible-based residual. Read the complete Excerpt from SSRN here

Posted in international taxation, OECD, Transfer Pricing | Tagged: , , , , , | Leave a Comment »

Brand Rights: What type of taxable income? Royalties or Business Income?

Posted by William Byrnes on November 13, 2019


The Tax Court recently decided a case, Slaughter v. Comm’r (find all the citations in 1 Taxation of Intellectual Property § 1.06 (2019), involving annual royalty payments to an author wherein the IRS argued that instead of treating the payments as royalties that are not subject to self-employment and Medicare tax, the payments should be treated as net earnings from self-employment. The dispute that the Tax Court faced was whether there is a distinction, for self-employment tax purposes, between an author’s royalty income derived from her writing and any royalty income derived from her name and likeness. The author contends that one portion of her royalty payments is derived from her writing, which is a trade or business, and that another portion is derived, not from her writing, but rather solely from her name and likeness which are personal attributes which are not part of any trade or business. The IRS argued that the entire payments the author received from her publishing contracts were derived from her trade or business as an author, thus subject to self-employment tax.

To provide context to the dispute, Karin Slaughter is a bestselling crime author: over 35 million books sold in 37 languages. The Tax Court stated the following details of her publishing contract are standard in the publishing industry. Her contracting publishers receive more than just the right to print, publish, distribute, sell, and license the works and manuscripts written, or to be written. The publisher also secures the right to use the author’s name and likeness in advertising, promotion, and publicity for the contracted works. The author is required to provide photos and be available for promotional activities. The contracts include noncompete clauses that vary in scope, from requiring that the specified manuscript be completed before others, to prohibiting the author from entry into another contract until her writing obligations are met. Publishers also secure the right to advertise other works in the author’s books, qualified by the requirement that the author’s consent to the specific advertisements. Several of the contracts allow for, but do not require, a share of advertising proceeds to be paid to the author as a condition of her consent. Finally, the contracts include an exclusive option for the respective publisher to negotiate the contract for the author’s next works.

The author also receives more than just her advances and royalties. For instance, some contracts include a marketing guaranty requiring the publisher to spend a minimum amount on marketing for the author’s books. Although the publishers fund the marketing plan, the author’s agent retains the authority over its development. Another example is the author’s option to purchase the publisher’s plates at a reduced cost for any book that goes out of print and that the publisher refuses to reissue or license. In that instance, the rights in the work also revert to the author.

On her Federal income tax returns, the author deducted as a business expense the cost of leasing a vehicle to attend media interviews and promotional events. She also deducted the cost of hosting her own promotional events. For marketing purposes, many of her meetings were scheduled in New York City. While there, the author often attended meetings, conducted media interviews, and participated in publishing industry events such as trade shows. During the years in the issue she also met with a fellow writer to collaborate on a script for a possible television series. To facilitate her various activities, the petitioner rented an apartment in New York City and deducted the rent. Petitioner also deducted the cost of business gifts to agents, editors, publishers, and others.

The authors income grew eightfold due to her brand as an author. That brand is monetized by the author’s ability to attract and engage readers, speak in front of a crowd, and recommend other authors within her publishing house. Petitioner’s promotional activities and writing have created a very successful brand and body of work. In petitioner’s case, her brand includes her name and likeness as well as her reputation, goodwill, and existing readership. She maintains contact with her readership through social media, websites, and a newsletter.

The author’s advisors concluded that any amount paid to the author for the use of her name and likeness was “investment income,” i.e., payment for an intangible asset beyond that of her trade or business as an author. The author’s name is a brand.  The author’s expert concluded that the actual writing of a manuscript is but a small percentage of the value a publisher seeks from an author. An author’s work may sell on the basis of the author’s name and readers’ expectations for a particular kind of story, rather than for the quality of the writing. Thus, the author contended that the amount paid for her writing is what a publisher would pay a nonbrand author, and the residual amount is a separate and distinct payment for her brand.

The Tax Court held that the author’s brand became part of her trade or business. The Tax Court focused on the following elements of her behavior. The author was engaged in developing her brand with continuity and regularity. The author set out in a businesslike fashion to obtain stationery, a reputable agent, and a publishing contract. The author worked with a media coach and publishers to develop a successful brand. She has spent time meeting with publishers, agents, media contacts, and others to protect and further her status as a brand author. She attended interviews and promotional events and works to develop and maintain good relationships with booksellers and librarians. The author uses social media, websites, and a newsletter to maintain her brand with her readership. The Tax Court noted that royalties earned from her brand are not solely a result of her publishers’ actions.

The Tax Court then turned the fact that the author deducted advertising costs, the cost of a car used, in part, to attend promotional activities around Atlanta, and gifts sent to her contacts in the publishing world. Such expenses, stated the Tax Court, demonstrate that petitioner’s trade or business extends beyond writing to its promotion. If the author takes such promotion and brand-related expenditures on her Schedule C trade or business expenses, then the income derived from the brand to which those expenses relate must also be trade or business income. The Tax Court found on behalf of the IRS.

The Tax Court stated that there was not a particular case on point regarding an author’s income from the business of writing and that attaching to royalties for the sales of an author’s books. The Tax Court distinguished other cases decided in favor of the taxpayer regarding athletes and image rights, albeit these cases arguably are applicable to Karen Slaughter’s situation. For example, in Garcia v. Comm’r, the issues were to what extent to which payments made to the taxpayer under the endorsement agreement were compensation for the performance of the taxpayer’s personal services and the extent to which the payments were royalties for the use of the taxpayer’s image rights. The Tax Court stated that

Courts have repeatedly characterized payments for the right to use a person’s name and likeness as royalties because the person has an ownership interest in the right.”

The Court therein cited Goosen v. Comm’r that the characterization of a taxpayer’s endorsement fees and bonuses depends on whether the sponsors primarily paid for the taxpayer’s services, for the use of the taxpayer’s name and likeness, or for both. The court held that the payments made by the company were allocated 65 percent to royalties and 35 percent to personal services.

In Kramer v. Comm’r, the Tax Court found that royalties paid primarily for the grant of the exclusive right to use the taxpayer’s name to sell sports equipment, and only secondarily for the personal services rendered by taxpayer under the royalty contract. Herein the Tax Court concluded that commercial success for sales upon which the royalty income derives depended upon accompanying aggressive promotional activities. For Mr. Kramer, the Tax Court concluded that only the portion of the royalties that reflected compensation for the personal services constituted “earned income.” In Boulez v. Comm’r, the Tax Court said if a taxpayer has an ownership interest in the property whose licensing or sale gives rise to the income, then that income should be characterized as a royalty as opposed to personal service income. Therein the Tax Court cited the Fifth Circuit decision of Patterson v. Texas Co, wherein the Court of Appeals adopted the definition of a “royalty” as

“a share of the product or profit reserved by the owner for permitting another to use the property.”

The Slaughter case is ripe for appeal. The weight of jurisprudence perhaps rests on the author’s side regarding whether the royalties should be apportioned and that a portion derives from her brand rights that are not personal service income. Like for the tennis star Mr. Kramer, aggressive promotional activities are necessary to grow the sales of the product. There can be no brand, such as a trademark, without promotion of it. But the promotional activities are not the business of the author but rather those of the publishing company to sell books.

Yet, the weight of the facts perhaps rest on the side of the IRS. If the author’s accountants claimed the full amount of the expenses, such as for the New York apartment, on the author’s Schedule C as a trade or business expense, then correspondingly, as the Tax Court presents, income associated with those expenses is also Schedule C. It does not appear that the accountants undertook any diligence, by example not reading the contracts and not seeking any support records for the guestimate by the author of her time apportionment. It does not appear the accountants undertook any research and analysis other than to dismiss that any cases applied. It does not appear that the accountants undertook any planning research, or at least, the author rejected paying for such advice because it is common practice for authors, artists, and athletes of this income level to operate via a Sub S corporation or LLC. The pass-through business is a well-understood mechanism for mitigating Medicare tax, though with its own host of issues regarding compensation versus distributions.

For more analysis and coverage on this and other related issues, see William Byrnes’ treatise Taxation of Intellectual Property and Technology (2020 edition), a 1,000-page analytical treatise to the federal tax consequences of the development, purchase, sale and licensing of intellectual properties and intangibles.  Primary author William Byrnes leads a team of America’s leading tax senior counsel to analyze tax risk challenges for business and investment decisions concerning intellectual property, technology, intangibles, and the digital economy.

Nine seats remain for the Spring (4 teams of 3 students each) to join the current 4 teams January 13 – April 20 semester for the TRANSFER PRICING course taught by Dr. Lorraine Eden, Prof. William Byrnes, TP Aggiesand several industry experts. The courses count toward the INTERNATIONAL TAX online Master curriculum of Texas A&M for tax attorneys, accountants, and economists. Taught live twice weekly using Zoom involving teams working to design positions and solutions for real-world post-BEPS client studies each week, supported by originally authored materials, videos and audio casts, PPTs, and a robust online law & business database library.  For more information, contact Texas A&M Admissions https://info.law.tamu.edu/international-tax

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Release of Taxation of IP & Technology Update for 2020

Posted by William Byrnes on November 11, 2019


Taxation of Intellectual Property and Technology 2020 edition is a 1,000 page analytical treatise to the federal tax consequences of the development, purchase, sale and licensing of intellectual properties and intangibles.  Primary author William Byrnes leads a team of America’s leading tax senior counsel to analyze tax risk challenges for business and investment decisions concerning intellectual property, technology, intangibles, and the digital economy. This 2020 update published in November (next update published in June 2020) contains:

  • Expands this treatise beyond 1,000 pages of analysis and planning research.
  • Provides in-depth analysis of the 2019 final and proposed regulations that impact intellectual property and intangibles, including GILTI and FDII.
  • Analyzes the new Cloud Computing Regulations.
  • Expanded analysis of the 2018 Supreme Court Wayfarer decision and its impact on interstate digital business models and trademark holding companies.
  • Analysis of several 2019 decisions cases including AmazonAlteraSlaughterhouse.

Major revisions this update, by chapter, include:

  • GILTI regulations. The final and newly proposed GILTI regs are analyzed in depth in § 2.04[8].
  • FDII regulations. The proposed regulations are explained in depth in § 2.04[9].
  • Cloud Computing Regulations. The proposed regulations are explained in depth in § 2.05[3] and § 10.02[2][c][iii][G].
  • International Transactions. Chapter 12 has been substantially revised and additional analysis of the Service Regulations as well as the Cost Sharing Regulations in light of Amazon and Altera.
  • Economic presence tax nexus and digital services tax. See analysis within Chapters § 11.09, § 14.07[6] and § 15.05[1].
  • Wayfarer’s Impact. On taxation of holding companies, see § 4.06. On tax nexus and sales tax, see Chapter § 11.04.
  • Taxation of Emerging Technologies for Cloud Computing, Blockchain, and Artificial Intelligence. See Chapter § 10.02[2][c].
  • Slaughter v Comm’r. IRS argued that the author’s promotion for the publisher which builds her brand is her trade or business and thus her royalties are net earnings from self-employment. Analyzed and critiqued in Chapter § 1.06[4].

New domestic and internationally focused chapters are in development by treatise author Prof. William Byrnes (Texas A&M Law) for 2020, including on the valuation of intangibles, tax considerations for entrepreneurs, and country analysis chapters. His team of internationally recognized expert practitioners provide strategic and tax risk analysis: Carlos Perez Gautrin, Yair Holtzman, Iselle Coronado-Torres, Jeffrey Trey, Arinjay Kumar Jain, Leonardo Macedo, Venetia Argyropoulou, Pamela Ann Fuller, William Seeger, Lucia Valenzuela, and Charles Lincoln. Please contact William Byrnes with chapter proposals. Taxation of Intellectual Property Publication Update (2019)

Nine seats remain for the Spring (4 teams of 3 students each) to join the current 4 teams January 13 – April 20 semester for TRANSFER PRICING course taught by Dr. Lorraine Eden, Prof. William Byrnes, TP Aggiesand several industry experts. The courses count toward the INTERNATIONAL TAX online Master curriculum of Texas A&M for tax attorneys, accountants, and economists. Taught live twice weekly using Zoom involving teams working to design positions and solutions for real-world post-BEPS client studies each week, supported by originally authored materials, videos and audio casts, PPTs, and a robust online law & business database library.  For more information, contact Texas A&M Admissions https://info.law.tamu.edu/international-tax

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Byrnes & Bloink’s TaxFacts Intelligence Weekly – Actionable Analysis for Financial Advisors

Posted by William Byrnes on November 9, 2019


2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

Texas A&M University School of Law has launched its International Tax online curriculum for graduate degree candidates. Admissions is open for Spring (January) semester for the transfer pricing courses.  Texas A&M University is a public university of the state of Texas and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). 

199A Rental Real Estate Safe Harbor Excludes Certain Businesses

Not all taxpayers will be able to take advantage of the Section 199A safe harbor for rental real estate. While the safe harbor does apply to residential rental real estate, taxpayers are not entitled to rely upon the safe harbor if the taxpayer uses the property as a residence during the tax year. Notably, if the real estate is rented or leased under a triple net lease, the safe harbor remains unavailable under the final rule. When satisfying the “hours of rental real estate services” criteria, only certain activities are counted toward the 250-hour threshold. Activities such as rent collection, advertising the rental, property maintenance, negotiating leases and managing the real property generally count toward the threshold. However, the taxpayer’s activities as an “investor” are not counted. Similarly, if any property within the rental real estate enterprise is classified as a specified service trade or business, the safe harbor is unavailable for the entire business. For more information on the final safe harbor rule, visit Tax Facts Online. Read More

DOL Proposes New Electronic Disclosure Rules for Pension Plans

In response to the Trump administration’s executive order, the DOL has proposed a safe harbor rule that would allow pension plans to satisfy disclosure obligations electronically. As currently proposed, the rule only applies to pension plans. It would allow plan sponsors to email required documents to participants, beneficiaries and any other individuals entitled to receive disclosures–so long as the individual has provided an email address (which can be a work email address). Any documents required under Title I of ERISA could be furnished electronically, including notices of material modification or blackout notices, except for documents that must be furnished upon request. While employers are not yet entitled to rely upon this rule until it is finalized, it provides important insight into potential future developments surrounding pension disclosure obligations. For more information on the requirements that apply to pension plans, visit Tax Facts Online. Read More

District Court Rules Small Business Qualified Retirement Plan Not Exempt in Bankruptcy

While 401(k) funds are generally exempt from a bankruptcy debtor’s estate, a recent district court ruling highlights a situation where a small business owner may lose the exemption. In this case, the taxpayer maintained a pension plan pursuant to a prototype plan document offered by his financial institution that had been approved via an IRS opinion letter, as is commonly the case. The court, however, found that amendments to the prototype plan document rendered the opinion invalid. Further, it found that the plan inappropriately benefitted the taxpayer and his spouse, rather than providing benefits to employees, in violation of IRS nondiscrimination rules. Because of this, the plan was deemed to be disqualified despite the fact that the taxpayer relied upon advisors to manage the plan. Because the taxpayer was owner of the small business responsible for the plan, he was deemed to be materially responsible for the qualification failure, therefore causing the plan assets to lose the typically available bankruptcy exemption. The court noted that this probably wouldn’t have been the case if the taxpayer had been an employee participating in a non-qualified plan. For more information on the treatment of 401(k) assets in bankruptcy, visit Tax Facts Online. Read More

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Transfer Pricing case studies based course Jan 13 – Apr 20 (Zoom based, small team groups)

Posted by William Byrnes on November 7, 2019


Nine seats remain for the Spring (4 teams of 3 students each) to join the current 4 teams January 13 – April 20 semester for TRANSFER PRICING taught by Dr. Lorraine Eden, Prof. William Byrnes, TP Aggiesand several industry experts. The courses count toward the INTERNATIONAL TAX online Master curriculum of Texas A&M for tax attorneys, accountants, and economists. Taught live twice weekly using Zoom involving teams working to design positions and solutions for real-world post-BEPS client studies each week, supported by originally authored materials, videos and audio casts, PPTs, and a robust online law & business database library.  For more information, contact Texas A&M Admissions https://info.law.tamu.edu/international-tax

Texas A&M Law offers the premier online program in international tax with a multidisciplinary, risk-management-focused approach. Our unique, industry-based online curriculum is vetted by and focuses on the needs of multinational corporations, large firms and governments. A degree from Texas A&M University, a Tier-1 research institution and one of the largest U.S. public universities, is recognized worldwide. Texas A&M’s online International Tax Program is specifically designed for tax professionals, both lawyers and non-lawyers, whose careers demand an understanding of international taxation and related issues.  For more information, contact Texas A&M Admissions https://info.law.tamu.edu/international-tax

The International Tax graduate program is an online, 24 or 30 credit hour graduate degree that can be completed in less than two years. The degree program offers a competitive advantage to any tax professional, including lawyers, accountants, finance executives and economists, that advises multinational clients on business and investment, or that works within a tax (risk management) department.

    • Industry-Responsive Curriculum:  A tax-risk management approach with a focus on tax data management and risk analysis based on the results of in-depth industry research.
      • Hanover Research, on behalf of Texas A&M, interviewed one-on-one and then validated by anonymous survey over 100 tax executives from multinational corporations, large firms and government. As a result, the program is designed with faculty and degree candidates that are multidisciplinary, including both tax lawyers and non-lawyer tax professionals, engaged together in teams.
    • Incredible Student Experience:  Texas A&M law offers small class sizes to ensure each student gets personal attention. These small class sizes allow ​you to forge strong connections with your classmates and to learn from each other’s experiences.
    • Faculty Expertise & Leadership:  The curriculum has been developed and is led by Professor William Byrnes, an international tax authority and globally recognized online education pioneer focused on student outcomes. The program’s faculty are multidisciplinary (e.g. lawyers, economists, accountants, data scientists) and include renowned authors, academics, tax executives of multinational corporations, and tax advisors from large firms.

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The Battle to Legalize Marijuana Comes Down to Tax Deductions and the 16th Amendment

Posted by William Byrnes on November 6, 2019


Every day I comb through my Law360 Tax Authority list of articles in order to update one of my tax treatises.  I found a really interesting one though today for my Money Laundering treatise.  It’s about fitting an elephant through a keyhole.  With enough pressure, it can be done, but by breaking down the entire door.  The case is Northern California Small Business Assistants Inc. v. Commissioner, 153 T.C. No. 4 (Oct. 23, 2019).  The Law360 Tax Authority analysis is here: https://www.law360.com/articles/1215134/tax-court-decision-may-open-up-new-challenges-to-280e

My commentary this week… (well, it will be for a debate in my Spring Fed Income Tax course actually)

Of course, it’s not a violation of 8th because not a penalty, albeit I appreciate the (losing) argument.  Yet, at this stage, cross-aisle agree both federal Cannabis-leaf-hempand state, marijuana, at least at defined dosages, it is more like Valium on Schedule IV then Vicodin Schedule II.  The Schedules allow for dosage amounts. Only ardent prohibitionists I think (I am no expert) want the Schedule I classification to remain.  I am sure state leaders, the financial industry (because of the AML provisions of the BSA), the IRS, and the AG industry want it reduced to at least Schedule II but preferably Schedule IV where it belongs.  Or break it up by THC levels into Sch II, III, and IV.

But I think that the DEA is the real problem. I do not understand why the DEA will not remove marijuana from the blacklist (Schedule I) unless the DEA needs it on Schedule I to maintain its significant funding for global marijuana crop eradication programs because govt agencies never shrink themselves by giving up jurisdiction or budget. But I do not believe that the FDA, HHS, et al who inform the DEA want to keep it at Schedule I.  Read the DEA’s current policy regarding CBD and THC-Cannabis.  The medical pharmacological evidence is building of the benefits for various ailments, see the 2017 National Institutes of Health meta analysis (Medicinal Cannabis: History, Pharmacology, And Implications for the Acute Care Setting).  All pharma has side effects so the fact that some participants who ingested the THC Cannabis (“got high”) reported being dizzy is very mild (‘don’t operate heavy machinery or drive’ warning labels mandatory). Prolonged and heavy use of any pharma, any drug like caffeine (of which I have much experience, but not willing to kick the habit yet) and alcohol, is probably going to be harmful to very harmful to just out-right early death.  I am not saying something new – everyone in the debate already knows all the arguments for and against.  So it’s either the teetotaler lobby, the DEA not wanting to give up ‘the war against marijuana”, or a combination, keeping marijuana on Schedule I.

So lots of pressure on Treasury to fix two insurmountable issues to marijuana state-licensed businesses from being federally legit and compliant. The BSA problem for AML compliance (keeps this a cash business) and the IRC 280E problem (makes marijuana industry a federal tax evader or unprofitable because effective rates of taxation of state and federal are in many cases greater than 100% of net income).  And Treasury wants to fix it.  But its hands are technically tied because the DEA will not delist marijuana from Schedule I.  That forces 280E and AML rules to kick in.  I’d be happy for Treasury to ignore the law but it’s too dangerous for Treasury or any agency to pick and choose what laws to adhere to. Of course, the discretion of enforcement is a totally different issue.

The AML issue Treasury issued, albeit the former prohibitionist AG basically said DOJ is not playing ball, a soft guidance explaining to banks how to distinguish good and bad marijuana dollars (the Marijuana SAR guidance). (See marijuana SAR results for 2018) For 280E though, Treasury would need to tell the IRS to ignore 280E marijuana stated licensed businesses fraudulent filed returns to circumvent the prohibition of deductions.  It would be really hard to administer the audits.

If Treasury cannot do it, but wants to do it, that leaves the Tax Court.  The Tax Court judges have over the past two years have concluded that marijuana should be removed from Schedule I so that 280E is not an issue.  In this case, once again the conclusion is:

“Congress, rather than this Court, is the proper body to redress petitioner’s grievances. We are constrained by the law, and Congress has not carved out an exception in section 280E for businesses that operate lawfully under State law.”

It’s only doing so because the IRS Counsel (must I think) express this in arguments to the Court, begging the Court for a way out of this mess. So the Tax Court has written that Congress or an agency needs to fix the problem.  It hasn’t been fixed.   And then this case where a powerful voice on the Tax Court said to the DEA and Congress: ‘do not force us to rectify the problem because you are not going to like the theoretical hoop we must jump through to do it.’

So, the theoretical argument that could gain some traction about the denial of all deductions by 280E is that it imposes the tax rate (say 37%) on revenue which may violate the intention of the 16th Amendment.  This is what Gustafon is musing about at page 23. I agree.

At page 26 the point is driven home (pun coming..):

Very different would be an attempt by Congress to tax gross proceeds from the sale of a capital asset, without allowing a taxpayer to account for his “basis” in the property in calculating his taxable gain.”

So imagine Congress imposes the ordinary tax rate on the sale price of an individual taxpayer’s sale of the home.  Say 37% on $500,000.  Taxpayer not allowed the basis reduction of the acquisition cost of $450,000 three years ago.  TP owes $185,000 tax (and also the additional 3.8% Net Investment Income Tax), on the $50,000 – expenses of the transaction gain.  Of course, this is absurd because property requires financing and the remaining would be less than any mortgage secured loan.  Same scenario but now shares in Apple bought at $220 last year by our home owing taxpayer and 13 months later sold for $250.  Economic collapse.  TP rebellion.  Not a pretty civil scenario.

Well, 280E does not deny deductions for the cost of goods (of the narcotics like marijuana or heroin – I do not think marijuana should be a black-listed scheduled narcotic).  But why not?  Because, simply put, an ‘income’ tax on business ‘income’ should be imposed on the ‘income’ and not on the revenue which is not a business’ income.  A tax imposed on a business revenue is something other than an ‘income tax’.  Excise tax maybe, but not an income tax.  See Judge Gustafson explain this at page 26-27.

Likewise, a congressional attempt to tax the gross receipts of a business engaged in sales should fail. A taxpayer who purchased 100 widgets at a cost of $10 each and sold them at a price of $9 each would have gross receipts or sales of $900, which after being reduced by the “cost of goods sold” (“COGS”) of $1,000 (analogous to basis in the Blackacre example) would yield a loss of $100. Given that obvious loss, Congress could not tax the gross receipts of $900 as if it were “income”. Rather, as the Court of Appeals for the Tenth Circuit has explained: “To ensure taxation of income rather than sales, the ‘cost of goods sold’ is a mandatory exclusion from the calculation of a taxpayer’s gross income.””

Can Congress levy a tax on revenue under the 16th?  We know the answer is no because that is why COG is allowed to be above the line to derive an income, and then 280E applies.  Well settled.  See page 27.

The taxation of “income” must take account of the “basis” in a capital asset and of the COGS of inventory–not merely as an exercise of “legislative grace” but as mandatory under the Sixteenth Amendment of the Constitution.”

So some expenses are allowed being COG, and other, operating expenses, not allowed.  Already 280E is in a quagmire of discriminating between good and bad expenses to fit into the 16th.  Thus, the Tax Court could force a bushel of marijuana through a 280E keyhole using the pressure of the 16th Amend if it must to deal with this situation.  Gustafson’s push through the keyhole is the second part of his sentence highlighted below at page 29.

“Congress taxes something other than a taxpayer’s “income” when it taxes gross receipts without accounting for basis or COGS--and, I would hold, when it taxes gross receipts without accounting for the ordinary and necessary expenses that are incurred in the course of business and must be paid before one can be said to have gain.”

The argument requires stretching the keyhole with a lot of 16th Amend pressure (though I personally quite like the 16th argument) and Appellate Circuits may want to keep the keyhole rather small and deflate that pressure.  But I think that the 1st, 9th, and 10th judges have to live in states where education or other government funding is significantly helped by the state-legal licensed marijuana industry.  Judges look at neighbor farmers who cannot sell to China about to go belly up with their grains and soybean – where marijuana can save the farm.  I have no litigation or controversy experience but I imagine some Appellate judges know these situations from reading or table talk.

So if the stretch of the 280E keyhole is not totally implausible by using the 16th Amend, a panel may just agree to send a message like the Tax Court to the DEA and failing that, Congress.  Anyway, the Supremes can sort out the ramifications of using the 16th to stretch the 280E keyhole.  And by that time, maybe the DEA did what the public pressure wants it to do, and is the right thing to do based on medical evidence being generated, move marijuana, based on amount of THC, to the relevant schedules of II through IV.

Anyway, my take on this case.  Look forward to our Spring debate.

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William Byrnes joins SDG project for taxation supported by the UN’s International Tax Committee

Posted by William Byrnes on October 29, 2019


William Byrnes of Texas A&M University’s Law School was invited to participate in the October 2019 4-day session of the United Nations’ International Tax Committee of Experts at its Geneva HQ2 followed by the day-long session of the international tax committee of the International Chamber of Commerce (the “ICC”), as well as the April 2019 UN international tax committee meeting in New York.

“150 plus countries, led by China, India, and Brazil, that are not members of the Organization of Economic Cooperation and Development (the “OECD”) which is led by the G7, have found their voice and are shaking up the international system for taxing business income,” said William Byrnes.

William Byrnes UN credentials

“At the United Nations Committee meetings, the future sharing of corporate profits among trading nations is being decided, from old industries such as Oil & Gas, to new ones such as digital advertising, big data, and cloud storage,” continued Byrnes. “Texas A&M Law, through my work with Dr. Lorraine Eden, is one of a very few public research institutions with a seat at the proverbial table, which I think is a testament to the impact of our research and mutual reputation.”

“Last October Dr. Lorraine Eden and I were invited to present our research on government tax agreements to the UN’s UNCTAD World Investment Forum, attended by over 4,000 national and industry leaders.  That event started a conversation that led to an invitation to the sustainable development goals for taxation conference sponsored by the University of Barcelona in collaboration with the UN, the OECD, the Spain and Netherlands Tax Authority, the Inter-American Center of Tax Administrations, and the Conféderation Fiscale Européenne.”

“I learned at this meeting that I have been appointed as a research scholar to the project of the 2030 Addis Ababa Sustainable Development Goals for the area of taxation, which is supported by the UN International Tax Committee and led by Prof. Eva Andrés Aucejo of the University of Barcelona,” shared William Byrnes.  “The team members will begin our research for an international tax cooperation convention that may be discussed among countries seeking a sustainable balance among capital exporter and importer countries, natural resource rich countries, entrepreneur countries, and market countries.”

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