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Wayne K. Berkowitz CPA, J.D., LL.M.

Wayne K. Berkowitz CPA, J.D., LL.M.
Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.
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SALT TALK: Having a Pied-À-Terre in New York City May Result in Higher Real Property Taxes

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Dec 22, 2020 2:58:47 PM

My colleague Richard Goldstein and I worked on an alert for clients on identical bills currently in committee in the NYS Assembly and Senate that, if passed, would raise the real property tax in NYC on residential properties that are not the owner’s primary residence. To learn more click here.

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Topics: SALT TALK

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 Dec 14, 2020 11:40:00 AM

A common tax 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, 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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Topics: SALT TALK

SALT TALK: Golf, COVID-19, and Residency Planning

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Dec 7, 2020 12:59:29 PM

For some, the pandemic has triggered the urge to move to greener (or safer) pastures. 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 at a later date) 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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Topics: SALT TALK

SALT TALK: Beyond COVID-19, There are Taxing Reasons Not to Visit Your Relatives for the Holidays

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Nov 30, 2020 11:40:00 AM

At the very least, COVID-19 has provided an excuse for not making that unwanted trip to visit relatives for the holidays. For those of you who might still get some negative feedback, our holiday gift to you is two-fold: firstly another 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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Topics: SALT TALK

SALT TALK: DC Eliminates the Terminating Business Gain Exclusion for the UBT Effective January 1, 2021

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Nov 23, 2020 11:40:00 AM

My colleagues Sarah Kim and Ken Maeng report on the District of Columbia Budget Support Emergency Act which eliminates the Terminating Business Gain Exclusion for Unincorporated Business Franchise Tax effective January 1, 2021. To learn more, click here.

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Topics: SALT TALK

SALT TALK: Should State Apportionment of Income Change with Your Mood(y’s)?

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Nov 16, 2020 11:40:00 AM

When I was in law school, Constitutional Law and Tax Policy were my least favorite subjects. Little did I know I would grow up to be a SALT expert and these subjects would be the foundations of my chosen practice area. Not on a day-to-day basis, but as the essential foundation to everything we do.

While my eyes may have occasionally glazed over in class, I did manage to learn that tax policy is what makes the law and it isn’t the law that should be making tax policy. This distinction might seem subtle or nonexistent, but I think is illustrated in all its grandeur in a New York State ALJ Decision, In the Matter of Moody’s Corporation & Subsidiaries, (DTA Nos. 828094 and 828203, October 24, 2019.)

There were four separate issues in this case, but the focus will be on the apportionment of receipts to New York State by the taxpayer, Moody’s Investors Services (MIS). MIS is hired by issuers of corporate debt to perform what we all know as bond rating services used by the investment public in making decisions regarding the appropriateness and the risk of investing in specific debt issues. Both the Tax Department and the taxpayer agreed that MIS performs these services for debt issuers with commercial domiciles throughout the world, the services are “used” by investors throughout the world, but most of the activities (roughly fifty seven percent) in formulating the ratings are performed in New York State.

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Topics: SALT TALK

SALT TALK: Life Coaching, GPS or Tax Planning

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Oct 26, 2020 11:40:41 AM

What do these three items have in common? Depending on whom you ask, they can all help you find your way. Not knowing much about life coaching, and as a male being devoid of the gene to ask directions (even from an inanimate object), I tend to be most helpful providing direction in the form of tax planning.

In an earlier blog, I discussed the trend towards single factor apportionment formulas. Today, we will address its first cousin, market-based or customer-based sourcing. In the old-world manufacturing economy, it was easy to “find your way.” You sent thingamajigs[1] to your customer in Ohio and (very) generally speaking, receipts would be sourced to the thingamajigs’ destination, Ohio. So a New York- based manufacturer would get the benefit of apportioning a percentage of his or her tax base outside of New York and either to Ohio (if there was nexus in Ohio, a topic for at least another 100 posts) or possibly to nowhere.

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Topics: SALT TALK

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 Oct 19, 2020 11:40:00 AM

In light of the current COVID-19-inspired flight from New York, it is worth revisiting the issue of change of domicile. A 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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Topics: SALT TALK

SALT TALK: New Jersey Enacts Millionaires Tax — Immediate Action Required

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Oct 12, 2020 11:40:00 AM

My colleagues Sarah Kim J.D., LL.M. and Ken Maeng, J.D. examine New Jersey’s recently signed fiscal 2021 budget which includes a so-called “millionaires tax” and will require immediate action by employers and high net worth taxpayers.

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Topics: SALT TALK

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

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Oct 5, 2020 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.

Just imagine that you are in a legitimate tax controversy with one of many tax jurisdictions. You are able to rest easily as you know it is being handled by your expert advisor at Berdon. The audit process was difficult but you decided, along with your advisor, that the auditor was simply inexperienced and clearly came up with the wrong result. So a timely protest is filed with the appropriate office. You even receive correspondence indicating your timely protest has been received and will be scheduled for review sometime in the future.

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Topics: SALT TALK

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