- Posts by Larry Brant
PrincipalLarry is Chair of the Foster Garvey Tax & Benefits practice group. He is licensed to practice in Oregon and Washington. Larry's practice focuses on assisting public and private companies, partnerships, and high-net-worth ...
As discussed in recent blog posts, the Oregon Legislative Assembly recently enacted a Corporate Activity Tax (“CAT”). Governor Kate Brown signed the legislation into law, effective January 1, 2020. Put in simplest terms, the CAT is a gross receipts tax on businesses with greater than $1 million of “commercial activity sourced to this state.”
Given the broadness of the new law and the many anticipated difficulties that taxpayers, tax advisors and the government will likely encounter determining what constitutes “commercial activity sourced to this state,” the need for the Oregon Department of Revenue (the “Department”) to adopt administrative rules on the new law is evident.
As we reported in our June 4 blog post, Oregon lawmakers had recently enacted a “corporate activity tax” (“CAT”) that applies to certain Oregon businesses. The new law, absent challenge, becomes effective January 1, 2020.
We also recently reported that a prominent group of Oregon businesses planned to challenge the CAT. It appears, however, that the momentum for a challenge has recently died.
In this blog post, we discuss the reasons causing the death of the challenge. In addition, we cover some technical changes in the new law that are currently awaiting Governor Kate Brown’s signature.
Please join me later this month in New York City for NYU’s Tax Conferences in July. I will be speaking at the program’s Advanced Subchapter S Conference on July 25-26, 2019.
I will be presenting my new White Paper entitled “The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, but It Isn’t Free of Potholes and Obstacles.” We will explore the complexities that may impede travel on this two-way road, including the built-in-gains tax, LIFO recapture, excessive passive income, unreasonable compensation, personal holding company status, excessive accumulated earnings, and re-election hindrances and restrictions.
Earlier this week, a local tax practitioner asked us whether it was true that the City of Portland no longer allows depreciation deductions resulting from an election under Section 754 of the Internal Revenue Code of 1986, as amended (the “Code”), for purposes of computing tax under the City of Portland Business License Tax (“BLT”) and the Multnomah County Business Income Tax (“BIT”). The answer we gave was “yes.” Of course, the response we received from the practitioner was “why.” That question is more difficult to answer than the original question. Nevertheless, we present this blog post to remind tax practitioners of the City’s position on this issue and to discuss the implications of the City’s new position.
I want to share some exciting news with you.
Our firm, over the years, has explored mergers with other law firms, both medium and large. We never completed a merger, however, due in most part to cultural differences. Our firm is not and probably never will be “big law.” Instead, as you know, we partner/collaborate with our clients in a manner to bring about the best results for clients, give back to our community in a big and meaningful way, and create an environment for our attorneys and staff that is as nonhierarchical as possible. “Big law” is generally not consistent with that approach to practicing law and, as a consequence, we have stayed the course alone for over 50 years.
Things are changing! For the past eight months, I have been on a GSB committee exploring a merger with another Pacific Northwest law firm. This time, we found a great firm to partner with, a law firm with consistent values and culture, and great attorneys and staff. The firm is Foster Pepper, PLLC.
We are taking a break from our multi-post coverage of Opportunity Zones to address a recent, significant piece of Oregon tax legislation.
On May 16, 2019, Governor Kate Brown signed into law legislation imposing a new “corporate activity tax” (“CAT”) on certain Oregon businesses. The new law expressly provides that the tax revenue generated from the legislation will be used to fund public school education.
Although the new tax is called a “corporate” activity tax, it is imposed on individuals, corporations, and numerous other business entities. The CAT applies for tax years beginning on or after January 1, 2020.
To help defray the expected increased costs of goods and services purchased from taxpayers subject to the CAT that will assuredly be passed along to consumers, the Oregon Legislative Assembly modestly reduced personal income tax rates at the lower income brackets.
On April 17, 2019, Treasury issued its second installment of proposed regulations relating to Qualified Opportunity Zones (“QOZs”). The regulations are 169 pages in length, and (as suspected) are fairly complex. Nevertheless, Treasury addresses a significant number of important QOZ issues.
We will dive into the proposed regulations in some detail in subsequent blog posts. In this post, however, we provide a high-level overview of some of the more significant provisions in the proposed regulations.
There has been a lot of “buzz” in the media about Qualified Opportunity Zones (“QOZs”). Some of the media accounts have been accurate and helpful to taxpayers. Other accounts, however, have been less than fully accurate, and in some cases have served to misinform or mislead taxpayers. Let’s face it, the new law is quite complex. Guidance to date from Treasury is insufficient to answer many of the real life questions facing taxpayers considering embarking upon a QOZ investment.
In this installment of our series on QOZs, we will try to address some of the questions that are plaguing taxpayers relative to investing in or forming Qualified Opportunity Funds (“QOFs”). Please keep in mind before you attempt to read this blog post that we readily admit that we do not have all of the answers. We do, however, recognize the many questions being posed by taxpayers.
As with any investment, due diligence is required. Investing in an Opportunity Zone Fund (“OZF”) is not any different.
Historically, we have seen taxpayers go to great lengths to attain tax deferral. In some instances, the efforts have resulted in significant losses. With proper due diligence, many of these losses could have been prevented.
A TALE OF IRC § 1031 EXCHANGES GONE WRONG
Tax deferral efforts under IRC § 1031 have often resulted in significant losses for unwary taxpayers. The best examples of these losses resulted from the mass Qualified Intermediary failures we saw over the last two decades.
BACKGROUND
Sections 1400Z-1 and 1400Z-2 were added to the Internal Revenue Code of 1986, as amended (the “Code”) by the Tax Cuts and Jobs Act. These new provisions to the Code introduce a multitude of new terms, complexities and traps for the unwary.
The first new term we need to add to our already robust tax vocabulary is the phrase “Qualified Opportunity Zones” (“QOZs”). The Code generally defines QOZs as real property located in low-income communities within the US and possessions of the US. Additionally, to qualify as a QOZ, the property must be nominated by the states or possessions where the property is located and be approved by the Secretary of Treasury.
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Larry J. Brant
Editor
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; Tulsa, Oklahoma; and Beijing, China. Mr. Brant is licensed to practice in Oregon and Washington. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
