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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: Back to School Means Back to Taxes

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 13, 2018 11:30:00 AM

By now, taxpayers with high state tax burdens are all too well aware of the impact the federal Tax Cuts and Jobs Act of 2017 has had in limiting state and local tax deductions to $10,000.  We also know states have been proactive in fighting back.  For example, New York State has gone as far as enacting legislation enabling local governments and school districts to establish charitable funds so that residents can make “contributions” and receive a tax credit towards the local tax obligation.  In other words, through the alchemic magic of the tax law, converting now-capped SALT deductions to much less restricted charitable contributions.

New York State has demonstrated their commitment to make this work and has even established a web link to provide local governments with guidance in setting up the charitable funds[1].  Yet the IRS has been warning of their intention to issue regulations that are likely to undermine the plan.

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Topics: SALT TALK

SALT TALK: Sales Tax Slip-Ups; Back to Basics in the Age of Wayfair

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 6, 2018 11:30:00 AM

Rightfully so, we have all been occupied with the U.S. Supreme Court decision in Wayfair, but that doesn’t mean we should forget about the basics of sales tax planning.  As has always been the case, a simple change in a transaction’s structure or the check of a box (or not) can either be a big money saver or a huge unexpected cost.

Case in point is a recent New York State Advisory Opinion[1]. The Petitioner asks the Department of Taxation and Finance whether the rental of a truck to a customer, where the customer is using the truck for a project performed for an organization that is exempt from sales tax, will require the Petitioner to collect the tax from its customer.  The customer provided the Petitioner with a Contractors Exempt Purchase Certificate and checked box “A” indicating tangible personal property (“TPP”) is purchased for use as part of a project for an organization exempt from tax.

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Topics: SALT TALK

SALT TALK: Color TV, State Lawsuits, and the Demise of the State and Local Tax Deduction

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jul 30, 2018 11:30:00 AM

Way before the advent of streaming video, 4k, 1080p, 720p, and basic color TV, unbelievably readers, existed the black and white TV set.  Weighing in at least fifty pounds, these behemoths of information were our only means of receiving our prime-time entertainment.  Selecting channels meant getting off the couch and turning a knob, usually by the youngest member of the family present at the time.  Occasionally, someone, usually the senior family member, had to adjust the horizontal or vertical hold and if that didn’t help stabilize the picture, a good rap on the side of the TV usually did the trick.

The stone age of TV watching wasn’t all-bad.  As the screen had no color, we had no red and blue states.  A quick scan of the internet tells me that color-coded state maps weren’t used during TV news coverage of elections until 1976.  To eliminate inconsistency and confusion, the story goes that ABC was the first in 1990 to assign red to the GOP and blue to the Dems. 

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Topics: SALT TALK

SALT Talk:  New York Fires Its Latest Warning Shot at the TCJA

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jul 16, 2018 11:30:00 AM

Warning shots are sent as a way to persuade a potential enemy to withdraw from its position and cease further threatening actions.  Since the passage of the Federal Tax Cuts and Jobs Act (TCJA) it is getting difficult to follow who fired last.  The virtual elimination of the itemized deduction for state and local income and property taxes clearly has created the biggest display of fireworks between the federal government and high tax states.

How appropriate that on July 3, while most of us were leaving early for the Independence Day holiday, New York State released guidance on the implementation of the Employer Compensation Expense Tax (ECET).  The ECET was created as a workaround to the limited SALT deduction by allowing employers to elect to pay a payroll tax expense for employees. 

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Topics: SALT TALK

SALT TALK:  Need a Break from SCOTUS and Wayfair?  New York – Why Make a Federal Case about It?

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jul 9, 2018 11:30:00 AM

Yes, I know the Supreme Court decision in Wayfair certainly may turn out to be the most important case related to state and local taxes the court has addressed in the last 25 years and maybe for the next 100 years.  Nevertheless, I need a break and likely so do you.  Therefore, I digress to another taxing topic my readers should find interesting.

We all have heard, and The Wall Street Journal has reported, that audits by the Internal Revenue Service have been on a downward trend and continue to plummet to extremely low levels.  Since virtually every state and local jurisdiction somehow ties the computation of tax due to a federal reference or starting point, the drop in federal audits and the corresponding mandate to report federal changes to state and local authorities has added another source of lost revenue to the coffers. 

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Topics: SALT TALK

SALT TALK:  New Jersey Parks and Beaches Stay Open – (Multi) Millionaires Go Elsewhere

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jul 2, 2018 11:30:00 AM

On the hottest weekend of the year, New Jersey avoided a shutdown of its parks, beaches, and everything else, by raising the price of admission for millionaires. Who can forget the photos of former Governor Christie sitting on the closed State Beach with family in tow? Hoping to avoid another such photo opportunity, just hours before the deadline, with a government shutdown looming, Governor Phil Murphy and legislative leaders struck a budget deal.

The key point of contention, a so-called millionaire’s tax, was agreed to. Beginning for tax years on or after January 1, 2018, those earning $5 million or more will see a top tax rate increase to 10.75% from the current 8.97%. The Governor was pushing for a $1 million rate differential. Just so corporations won’t feel left out, a four-year surcharge will be imposed on companies earning in excess of $1 million per year. The current rate of 9% will be increased by 2.5% for the first two years. The rate increase will be phased out over the subsequent two years until returning back to 9%.

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Topics: SALT TALK

SALT TALK:  Sales Tax Collection No Longer Requires Physical Presence (AKA “The Day Stare Decisis Died”)

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jun 25, 2018 10:58:15 AM

A long long time ago, I can still remember how[1] the concept of stare decisis “promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process.[2]

Let’s get to what you need to know first.  On Thursday, June 22, the Supreme Court of the United States handed down the long awaited decision in South Dakota v. Wayfair, Inc. effectively eliminating the requirement that a seller of goods needs to have a physical presence in a jurisdiction in order to be compelled to collect sales tax.  As long as certain thresholds, yet to be determined, are met, any internet merchant, regardless of whether they ever set foot in a jurisdiction can (and likely will) be required to collect the sales tax.

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Topics: SALT TALK

SALT TALK: Connecticut Fires Back at the TCJA

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jun 18, 2018 1:39:45 PM

As my readers know, I’ve been anticipating strong state responses to some of the more onerous aspects of the Tax Cuts and Jobs Act (TCJA). Well, Connecticut Governor Dannel Malloys “An Act Concerning Connecticut’s Response to Federal Tax Reform” (The Act) is a major shot in what I expect will be a long war.  One key provision of the Act is the Pass-Through Entity Tax (PET).

PET is designed to be revenue neutral to both the State and taxpayers. The TCJA limited the deductibility of state and local taxes paid by individuals to $10,000 and pass through entities (PTE) with Connecticut source income are now required to pay a tax on that income at a rate of 6.99% -- the highest individual tax rate.  Malloy is trying to work around this.   Under the Act, members of the PTE will receive a credit on their Connecticut personal income tax return equal to their pro-rata share of entity income multiplied by 93.01%.

Here’s how it works:

  • AB partnership is owned equally by A, a Connecticut resident, and B a nonresident.  The partnership earns $1,000,000 before taxes in 2018, all Connecticut source.  AB will pay a PET of $69,900 (1,000,000 * 6.99%).  A and B will each have $465,050 of income from AB (($1,000,000 - $69,900)/2).
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Topics: SALT TALK

SALT TALK: Telecommuting Becomes an Inconvenient Truth in Connecticut

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jun 11, 2018 10:30:00 AM

You’re trying to do your share to stop global warming, so you persuade your employer to let you work from home. Think of the gas you will save and the burden lifted from the environment.  Well, not so fast, if you live in one of the few states with a so-called “Convenience of the Employer” rule.  You are going to be so mad when you realize the consequences that the steam rising from the top of your head is going to create more environmental damage than any reduction in carbon output from working at home. 

Currently only Delaware, Nebraska, New York, and Pennsylvania have a convenience rule.  But effective for tax years beginning on or after January 1, 2019, Connecticut will have one as well, albeit a slightly kinder version. The rule will only apply if the nonresident taxpayer in question lives in a jurisdiction that has its own version of the rule.

The inconvenient part about the convenience rule, simplified for brevity, can be best demonstrated by a simple example. 

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Topics: SALT TALK

SALT TALK:  “I Wanna Be a Lifeguard” – But Not in New York

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Jun 4, 2018 9:35:43 AM

Memorial Day has come and gone. Visions of the beach are swirling through my head and memories from my high school and college summers take over and surmount any state tax concerns I may have at the moment. I had the second best job in the world (SALT Partner at Berdon being number one) back in those days. I was a lifeguard.

Not one of those muscle-bound Jones Beach types, but at a day camp, where I made lots and lots of extra money giving swim lessons after the camp day was done. Since one hundred percent of my income was disposable in those days (thanks Mom and Dad) I had more money to go around than I do now. A typical day consisted of getting to the pool early, commiserating about our previous night out, teaching bright eager minds to swim (to this day, I still bump into doctors, lawyers, accountants, engineers, school teachers and the like, who I taught to do so) and listening to the hit song by the Band Blotto, “I Wanna Be a Lifeguard” over and over.

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Topics: SALT TALK

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