Berdon Blogs

SALT TALK: Written in Reverse – Federal Tax Overhaul and Impact on the States

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jan 2, 2018 9:17:00 AM

I'm writing this to you in reverse . . . No nothin' was planned . . . I've seen you blankly stare . . . I can see it all from here . . . From just a few glimpses . . . Now that lightbulb's gone off . . .

I apologize for the reference so soon again, to the band Spoon, but with just a little rearranging of the lyrics to their song “Written in Reverse, “ it becomes apparent to me that back in 2009 they must have been anticipating what state tax practitioners would be thinking upon the next major overhaul of the Internal Revenue Code.

While all of the questions and issues raised by the new federal tax law’s impact are a long way from being answered, I wanted to provide my readers with a preliminary and far from all-inclusive list of potential state and local issues we all need to start thinking about now.

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SALT TALK: State Tax Debts - Don't Believe Everything You Read

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Dec 18, 2017 11:40:00 AM

This week’s post is unusual in that it takes us to two very disparate points in time: The first being sometime last week, and the second being the third grade. This week, one of my clients received a “Notice of Intended Federal/NJ State Offset.” It’s a good thing I paid careful attention to my third grade teacher, Mrs. Maupin, who reminded us at least once a week not to believe everything we read.

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SALT TALK: Every Day I Hear Knock, Knock, Knock - Oh and it's You

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Dec 11, 2017 11:43:00 AM

The year 2017 is accelerating to its end and, as usual, I’ve spent a good part of the year looking at everything through the thought-bending prism known as state and local taxes. Hence the reason for my thoughts to turn paranoiac while hearing one of my favorite songs from the band Spoon. I can guarantee that upon hearing “Knock, Knock, Knock” most others would not have the image in their mind of the state taxing authorities knocking on the front door of your home or business with their hand out.

Fortunately, I’ve been assured everything is ok, since paranoia is characterized by delusions of persecution. And based on what has been happening in the world of state and local taxes, there have been no delusions.

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SALT TALK: Nexus Gone Crazy - Feds Need to Tell States to Put Down the Cookie (Ducky) [1]

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Dec 4, 2017 1:39:38 PM

Being a state and local tax practitioner has always been a stressful job. Stress eating is certainly understandable, especially around the holidays. But lately, it appears, some states have been trying to force cookies down our throats. Not the baked kind, but the electronic variety. 

As avid readers of my blog know, the states have been very creative in attributing the more than de minimus physical presence required by the U.S. Supreme Court in Quill [2] to internet retailers, so as to create sales tax nexus and require the retailers to collect sales tax.  Some of these approaches, especially those attributing the presence of a representative or agent to an otherwise out of state retailer, certainly seem to make sense, and if the Supreme Court were ever to decide to review agency-type nexus in the context of internet sales, my bet is the state taxing authorities would prevail.

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SALT TALK: Year End Planning Tips – Taxing Reasons Not To Visit Your Relatives for the Holidays

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Nov 27, 2017 11:40:00 AM

The drive is too far and the traffic is horrendous.  Did you see those outrageous airfares?  I have a major deadline at work.  Didn’t we come to you last year; this year I have to go to the in-laws?  While all members of the Berdon SALT team are anxiously looking forward to traveling both to spend the upcoming holidays with our respective families, we know that some of our clients may not be as enthusiastic.  Our holiday gift to our readers is two-fold: firstly an excuse (at least a new one) not to attend that family function, and secondly, potential tax savings for using our excuse.

The excuse:  I can’t spend another day in (fill in the appropriate tax jurisdiction) because I will be taxed as a resident and owe an additional (please fill in the appropriate dollar amount) in personal income tax. Even worse, the House and Senate are currently weighing changes to state and local tax law so I’m not even sure where I stand!

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SALT TALK: Republicans Insist SALT is Detrimental to our Health

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Nov 20, 2017 10:21:43 AM

Even though a 2017 study of Russian cosmonauts concluded that everything we thought we knew about salt might be completely wrong, the House and Senate are poised to pass tax legislation taking away our daily dose of SALT.  While salt (NACL or Sodium Chloride) is completely different from SALT (state and local taxes), I love them both and don’t want anyone other than my internist to limit my intake.  Neither the cosmonauts nor my internist have denounced science as of yet, so both opinions are still highly valued.

Now that the House of Representatives has passed their version of “tax reform” the extinction of the state and local tax deduction seems closer to reality.  As passed, the House Bill completely eliminates any deduction for state and local income taxes, but still allows property tax deductions up to $10,000.  The Senate version, still working its way to a vote, goes even further by eliminating the $10,000 window for property tax deductions.

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SALT TALK: Where You Rest Your Weary Bones May Have No Impact on Tax Residency

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Nov 13, 2017 9:16:00 AM

As avid readers of my blog already know (see last week’s installment), most states have a two-pronged approach to pulling you in as a resident and consequently taxing you on worldwide income. The first way is domicile, the test that generally looks to your intentions. The second and the focus of this post is statutory residence.

If you have a permanent place of abode and are in the jurisdiction for more than 183 days, with limited exceptions, you will be held in the same regard as a domiciliary of the jurisdiction. You will be taxed as a resident. What many taxpayers fail to appreciate is that you don’t ever need to sleep, visit, drive by, look at or be within 500 miles of the so called living quarters that may constitute a permanent place of abode.

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SALT TALK: Golf and a Little Bit of Residency Planning, Anyone?

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Nov 6, 2017 9:17:00 AM

At Berdon, we do our best to educate our clients about the tax ramifications of their decisions.  They know that in most states there are two ways to be considered a resident (and thereby taxed on worldwide income) for income tax purposes. First, the domicile test. It’s the “touchy-feely” test of what your intentions are and where you intend your home to be. Then there is the arguably more objective statutory resident test. If you have a “permanent place of abode” (a term of art to be discussed some other time) and are “present” (also a term of art to be further explored) in the jurisdiction for more than 183 days, you are a resident.

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SALT TALK: Traps in Transactions - Tax Free for Fed Doesn’t Mean Tax Free for State and Local

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Oct 30, 2017 11:41:00 AM

Another common misconception is the belief that because a transaction is tax free (really, tax deferred) for federal tax purposes the states will tag along and not subject the transaction to tax.  While this certainly isn't true when we are addressing the possibility of transfer taxes or even sales tax for that matter (stay tuned), it may not even be true for state income tax purposes.

Put yourself in the shoes of the state taxing authorities.  While a properly structured like-kind (1031) exchange can defer income taxes for years, it's technically only a deferral.  The newly acquired property will inherit the lower basis of the old property.  In theory, the federal government will eventually collect the tax on the ultimate sale in a straight transaction.  State tax collectors may not be so lucky.  What if the property being sold is in New York City and the replacement property is in Florida?  As the law now stands, both New York State and New York City are out of luck and not entitled to any tax resulting from the appreciation on the New York property. 

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SALT TALK: Traps in Transactions - Don’t Stumble Over a Good Deal

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Oct 23, 2017 12:07:29 PM

At Berdon, we promote a culture within the Firm and with clients to be up-to-date regarding what our clients are planning for themselves and their businesses. This ensures that we assist in maximizing the efficiency of a given transaction, and safeguards against some common mistakes that can be prevented if addressed upfront, can be prevented.

These common foot faults span the gamut of all types of taxes. What might be a mistake in one state could be the optimum result in another.

Let’s consider real property transfer taxes.

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