Berdon Blogs

SALT TALK: "I'm Just a Bill" - Mobile Workforce Legislation (Re)Introduced

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Apr 3, 2017 11:57:00 AM

There is a joke that starts with three mothers sitting around discussing the professions of their respective sons. The first mother bragged about her son the doctor and all were impressed. The second mother chimed in that her son was a lawyer and everyone smiled. The third mother sheepishly stated her son was an accountant. All shrugged and one of the mothers interjected, that's ok, he always was a little slow.

Well, I'm no doctor, but I am a lawyer and an accountant and I still can't explain where or what happened to the mobile workforce legislation we have been promised for so long1. Yet to my surprise, just last month the "Mobile Workforce State Income Tax Simplification Act of 2017" comes barreling down the tracks 2.

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SALT TALK: Pennsylvania Tax Amnesty - The I Forgot to Pay Taxes Strategy Works if Timing is Right

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

Who knew the comedian, actor, and musician Steve Martin was also prophetic?  Back in the seventies (sorry again, millennials) Mr. Martin had a plan to be a millionaire and never pay taxes[1].  When the tax man issued a friendly reminder regarding your newly found million, Mr. Martin simply suggested two simple words, “I forgot,” as the remedy to get back on good footing with the government.            

Mr. Martin must have fans at the Pennsylvania Department of Revenue (“Department”).  Their newly issued amnesty program, beginning April 21, 2017 and ending June 19, 2017 (the “Amnesty Period”) is quite generous in scope.  Not only does the program waive penalties on past due taxes, but 50% of the interest as well.  All taxes administered by the Department, whether applicable to individuals or businesses, are eligible.

Eligible taxes include known and unknown delinquencies existing as of December 31, 2015.  Let’s assume a nonresident individual has a PA tax liability unknown to him (or the Department), as long as it is for the tax year ended 2014 or prior (a 2015 delinquency won’t exist until April 2016), amnesty may apply. 

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SALT TALK: Inferences, Conclusions, Relationships, and Residency Audit Traps

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Mar 20, 2017 12:50:00 PM

There are two very disparate pursuits in which I have partaken for almost 30 years; marriage and residency audits.  While the burden of proof in relationships and audits may be different, inferences drawn and conclusions reached hastily can be a disaster for both.  While no one knows the rules for lasting relationships, readers of my blog know that many jurisdictions use a two-pronged approach to determining whether an individual taxpayer is a resident for state tax purposes. 

First and foremost is domicile.  With certain exceptions, if an individual is domiciled in a state, they will be a tax resident of a state.  The so-called statutory residency test looks to whether one has a permanent place of abode in the jurisdiction and whether more than 183 days have been spent in the jurisdiction.  I have blogged extensively about the intricacies of these tests and browsing through the previous blogs at is highly recommended.

While I would love to list some of the inferences to be drawn, conclusions (false or otherwise) reached and relationship consequences thereof, my spouse has strongly advised me to stick to what I know best.  Here are some of the inferences, hasty conclusions, and traps I have heard over the years.

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SALT TALK: NYC Taxpayer Gets Favorable REIT Transfer Tax Rate - ALJ Rules Everything is Less Than Zero

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Mar 13, 2017 11:00:00 AM

A recent taxpayer victory[1] related to one of the most onerous taxing schemes, the New York City Real Property Transfer Tax and the New York State Real Estate Transfer Tax (Transfer Tax) provides a light at the end of the tunnel for those of us facing the continued administrative assaults on relatively clear and legitimately enacted tax incentives. 

To encourage additional liquidity in the market, both New York State and City have provisions in place that effectively cut the tax rate in half for transfers to real estate investment trusts (REITs).  Without the incentive, combined tax rates can reach as high as 3.025% of the “consideration paid” for the property.  In addition to the rate reduction, the NYC tax has the added bonus of using the estimated market value (EMV), an amount determined by reference to the NYC real property tax assessment.  This amount is usually significantly less than the actual fair market value of the property.

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SALT TALK: California Minimum Franchise Tax Refund Opportunity – May the Swart [1] Be With You

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Mar 6, 2017 11:00:00 AM

Here is how the conversation usually goes at Berdon: 

Berdon Person Other Than Me (“BPOTM”): Wayne, I have a client whose only connection to California is a 0.001% non-managing membership interest in manager-managed LLC.  The LLC is doing business in California.  Do I have to pay the $800 minimum franchise tax?

Me:  Well, there is a case with a limited partnership and similar facts that says you don’t have to.  But the Franchise Tax Board (“FTB”) has been interpreting it very narrowly and only applies the case to LPs and not LLCs.

BPOTM:  Wayne, that’s crazy.  The facts and circumstances are exactly the same.  Why should my client have to pay $800 and why should we go to the expense of filing the return?

Me:  Well, I agree with you, but you should explain to your client that the FTB is likely to send a notice indicating that tax is due and ultimately issue an assessment.  In order to clear this up, the cost is likely to exceed $800.  I sympathize, and if it was my own return I would seriously consider not filing, but we need to make a practical business decision here.

BPOTM:  I hear you.  I’ll speak to my client and help them make a decision on how to deal with this nuisance.

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SALT TALK: Refund Claims – Be Careful What You Wish For

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

Fame, fortune, and now tax refunds? According to some commentators, the Pennsylvania Department of Revenue is proposing to make the sales tax refund process akin to the regrets many throughout history have claimed to experience upon reaching a long sought after goal.

While the draft Sales and Use Tax Bulletin[1] certainly serves as a reminder of the perils associated with chasing goals not carefully thought through, isn’t the Bulletin nothing more than a reminder to taxpayers to carefully consider both the pros and cons, as well as the timing, of filing any type of refund claim, Sales Tax or otherwise.

The Bulletin states that “large and complex sales and use tax refund petitions” may be addressed through the field audit process. While I can’t speak for others, regardless of the type of tax involved, virtually every large and complex refund claim I have filed on behalf of a taxpayer, has involved some type of field audit associated with it. Did you really think the taxing jurisdiction was just going to hand over a check?

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SALT TALK: NYS Proposal Would Have a Major Impact on Real Estate Transactions

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Feb 21, 2017 12:50:00 PM

Housed in the New York State Fiscal Year 2018 Executive Budget is proposed legislation that would significantly impact real estate transactions in the State by expanding the scope of the real estate transfer tax.

Currently, real estate transfers in New York State are subject to a 0.4% tax on the consideration paid for an interest in real property (the “Tax”). The Tax applies to deed transfers as well as transfers of controlling interests in entities that own real property. Generally, a 50% or more shift in ownership in an entity that owns an interest in property located in the State constitutes the transfer of a controlling interest. There is also an aggregation concept that consolidates multiple transfers that are “part of a plan” to determine whether a 50% or more shift has occurred.

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SALT TALK: Change of NY Domicile Successful by Dumping Old Girlfriend; Keeping Old Dog

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Feb 13, 2017 7:00:00 AM

A recent New York State Tax Appeals Tribunal Decision[1] held that a taxpayer successfully demonstrated, by clear and convincing evidence, a change in domicile from New York City to Dallas, Texas.  The extremely well-reasoned Opinion is notable in recognizing the domicile change occurred through a complex series of events and not simply by one overt act.  Rather than simply reiterating the Tax Department’s own Nonresident Audit Guidelines, (which, despite what an auditor may tell you, are not the law) the Tribunal looked to the precedential jurisprudence and reminded all that a change of domicile is a question of fact, not a question of law.  The circumstances surrounding the changes can vary widely depending on the individual.

The details of the Opinion are way too complex to cover in this short space, but the series of events which evidenced the intent to abandon the old domicile and establish a new one included the termination of a relationship with his long-term girlfriend, changing career goals and circumstances, listing of his $2.4 million New York City apartment, renting a small apartment in Dallas, and culminated with moving his “large, senior dog[2]” to Dallas.

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SALT TALK: As Amazon Goes, So Goes the Nation

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Feb 6, 2017 11:00:00 AM

In the days before Twitter, November 4, 1936 to be exact, James Farley, Franklin Roosevelt’s campaign manager gave us a preview of things to come.  His sound bite to the press, “As goes Maine, so goes Vermont,” was his witty remark commenting on the landslide victory where FDR won every state but Maine and Vermont.  Well under the 140 character Twitter limit, and based on the even earlier Twitter appropriate comment addressing Maine as the first state to enact prohibition (As goes Maine, So goes the Nation), it should be obvious to us all, that 140 character politics is nothing new.  If we could only find a way to legislate and issue all new regulations through Twitter, we might really have something.

While this past November Maine did go as Vermont, prohibition is long gone (Maine allows alcohol in movie theaters, while New York is still working on it) I thought this would be an opportune time to revitalize and put Twitter to good use for some long needed federal action as applied to state tax reform.

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SALT TALK: Governor Cuomo Unveils Executive Budget Proposal

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

It’s official.  Governor Cuomo has released his proposed 2017 – 2018 Executive Budget.  And yes, the extension of the “millionaire’s tax” through 2020, is front and center.  The Division of the Budget press release in the “Highlights” section refers to it as “Extends tax rate on millionaires – 45,000 taxpayers impacted, 50% non-residents.”  Should the term “non-residents” be replaced with “non-voters?”

The proposal also takes aim at continuing to limit the charitable contribution deduction for those with adjusted gross income (AGI) over $10 million.  Charitable contributions for those with adjusted gross income over $1 million are limited to 50% of the federal deduction.  Those with AGI over $10 million are presently limited to 25%.  The 25% limit, set to expire at the end of 2017, would be permanently extended.

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