Larry's Tax Law

President Trump signed the Families First Coronavirus Response Act (the “Act”) on March 18, 2020.  The Act becomes effective April 2, 2020, and contains a number of tax provisions that fund the Act’s mandatory paid leave provisions. 

This blog post summarizes the Act’s paid leave and associated employer tax-related benefits.  The Act is broad in application, creating complexity.  In general, it applies to employers with fewer than 500 employees.  We have attempted to dissect the Act in bite-sized, easily understandable chunks, removing the complexities whenever possible.

Yesterday, I reported that the U.S. Department of the Treasury (“Treasury”) issued Notice 2020-17, extending the due date for payment of federal income taxes from April 15, 2020 to July 15, 2020, because of the impact of the COVID-19 pandemic.  After some feedback from the tax community, Treasury has now restated and expanded the relief provided by Notice 2020-17.  

In accordance with Notice 2020-18, not only is the due date for payment of federal income taxes extended to July 15, 2020, but the date for filing federal income tax returns originally due on April 15 is now extended to July 15, 2020.

Notice 2020-18 supersedes and expands Notice 2020-17 in many helpful ways:

On March 13, 2020, President Trump issued an emergency declaration, which in part instructed the U.S. Department of the Treasury (“Treasury”) to provide taxpayers with “relief from tax deadlines” due to the impact of the Coronavirus.  In response, Treasury issued Notice 2020-17 (which will be published in IRB 2020-15, dated April 6, 2020).

Code Section 7508A gives Treasury authority to postpone the time to perform certain acts required under the Code for taxpayers affected by a federally declared disaster (as defined in Code Section 165(i)(5)(A)).  

I hope our readers, their families and co-workers are safe and remain healthy during these trying times.  As a distraction for tax geeks like us from the news about the Coronavirus that is permeating our lives these days, Peter and I decided to present more coverage on the Oregon Corporate Activity Tax (“CAT”).

On March 6, 2020, the Oregon Department of Revenue (the “Department”) published two new temporary rules that it had previously presented in draft form.  While the rules are substantively the same as they were in draft form, there are several nuances worthy of discussion.

Temporary Rules Keep Rolling in

The Oregon Department of Revenue (the “Department”) recently issued four new temporary rules relative to the Oregon Corporate Activity Tax (the “CAT”).  The new rules went into effect on February 1, 2020.    

The new temporary rules provide much needed guidance with respect to three notable exclusions from the fangs of the CAT, namely the Grocery Exclusion, the Wholesale Exclusion and the Vehicle Exclusion.

The CAT Tour

As previously discussed, late last year, the Oregon Department of Revenue (the “Department”) conducted several town hall meetings with taxpayers and tax practitioners across the state to discuss the Corporate Activity Tax (the “CAT”), answer questions and solicit feedback about administration of the new tax regime.  I am happy to report that the Department is hitting the road again! 

The Department announced on February 6 that it will be hosting another series of meetings across the state next month.  The meetings are aimed at providing information to and answering the questions of taxpayers and tax professionals about the CAT and the newly issued administrative rules.

I apologize in advance for focusing my blog these past several weeks on the new Oregon Corporate Activity Tax (“CAT”), but my mind keeps finding new facets to this tax regime that I suspect most tax practitioners and even the lawmakers who passed the legislation may not have envisioned or anticipated.  So, please indulge me as I explore another one of these numerous issues in this installment of the blog.

After the passage of the Tax Reform Act of 1986 and the introduction of Code Section 469, we started seeing tax practitioners focusing attention on trying to figure out how their clients could be characterized as active participants in a trade or business activity.  Their goal is simple – they want to avoid the deduction limitations imposed by the passive activity loss rules contained in Code Section 469. 

A dog will immediately respond to you when you call out.  On the other hand, when you call out to a cat, the cat will take a message and promise to get back to you later.  This is not the case with the Corporate Activity Tax (“CAT”).  The Oregon Department of Revenue (“DOR”) is doing everything possible to provide taxpayers and tax practitioners with prompt and helpful guidance and support relative to the CAT, the new state tax regime that became effective on January 1, 2020.

As previously discussed, late last year, the DOR conducted several town hall meetings with taxpayers and tax practitioners across the state to discuss the CAT, answer questions and solicit feedback about administration of the tax regime.  In addition, as promised, the DOR started issuing draft temporary rules this past December to provide clarity and address many uncertainties in the new law.  It quickly removed the “draft” stamp from the rules.  The rules keep rolling in!  To date, the DOR has issued a total of 12 temporary rules.  We have already provided a discussion of eight of those temporary rules.  In this post, we discuss the remaining four temporary rules.

On January 6, I presented a new White Paper, The Oregon Corporate Activity Tax – You Can Run and You Can Hide, but This New Tax Is Effective January 1, 2020, at the Oregon Society of Certified Public Accountants Annual State and Local Tax Conference.  We had a large number of attendees, including representatives of the Oregon Department of Revenue (the “DOR”).  Based upon the numerous questions I received (during and after the presentation), it is clear that tax practitioners are busy thinking about this new tax regime and how it applies to their clients.  Unfortunately, in this particular case, I do not believe the curiosity will kill the CAT.  It looks like it is here to stay.

It is hard to believe it, but 2019 is coming to an end. We have had a truly interesting year in the world of tax law, the primary impetus of which was the aftermath of the Tax Cuts and Jobs Act (“TCJA”).  During the past 12 months, we have explored several aspects of the TCJA as well as other interesting developments in tax law, including:

• • Opportunity Zone Funds – Part I—Overview of the Law
  • Opportunity Zone Funds – Part II—Due Diligence Required
  • Opportunity Zone Funds – Part III—Lots of Questions But Few Answers
  • Opportunity Zone Funds – Part IV—The Second Round of Proposed Regulations
  • Oregon’s New Corporate Activity Tax
  • Now You See It – Now You Don’t. Like Magic, the City of Portland Disallows Depreciation Deductions Otherwise Allowable as a Result of Code Section 754
  • Referendum to Repeal Oregon Corporate Activity Tax Has Wind Taken Out of Its Sails – The New Tax May Be Here to Stay
  • The Oregon Department of Revenue Plans to Publish Much Needed Guidance on the Newly Enacted Corporate Activity Tax
  • IRS Cleaning House at the Office of Professional Responsibility
  • Be Aware – The CAT Is on the Prowl – the Oregon Department of Revenue’s Town Hall Meetings Begin Tonight
  • School is Back in Session and the CAT is Among the Most Popular Courses
  • The CAT Continues to Be on the Prowl – the Oregon Department of Revenue’s Town Hall Meetings Roadshow Made It to Portland
  • The CAT Has Gone Telephonic
  • Hold the Phone, but Not Your Questions – Recent Oregon CAT Updates
  • The IRS Continues Taking Measures to Enhance Security – the EIN Application Process Changed Earlier This Year
  • Continue to Keep Your Eyes Peeled and Your Ears Tuned-In for CAT Developments—They Are Rolling In