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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: World’s Most Expensive Vacation Destinations

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Sep 24, 2018 11:30:00 AM

Regular readers of SALT TALK know that many states and localities follow a similar model in determining whether one will be a tax resident of the jurisdiction and subject to tax on one’s world-wide income. Two tests, domicile or, in the alternative, statutory residency are out to accept your tax dollars.

Focusing on the statutory residency test, if one has a permanent place of abode (a term of art in itself, but for sake of simplicity let’s simply view it for this blog as a place for you to stay that you have unfettered access to) and is present in the jurisdiction for more than 183 days, the test is met (or failed, depending on your perspective) and a resident of the jurisdiction you will be.

I have had more than one potential resident make the statement to me that because I walked down the street in New York City one afternoon that cost me $5 million. My answer: Well, maybe. That one-day putting taxpayers over the edge of the day count can result in one of the most costly strolls ever down Fifth Avenue. Hence the importance of documenting one’s days through some straightforward and not so straightforward documentation techniques.

If you are the paranoid-government-conspiracy-theory-loving-type, this post is not for you. You will cringe at the very thought of the suggestions and ideas contained herein and will insist that I am an integral part of the treachery. For the more practical-minded reader who thinks they may have a residency issue, read on.

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Topics: SALT TALK

SALT TALK:  Losing Interest or Don’t Always Trust Your State K-1

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Sep 17, 2018 11:30:00 AM

As my marketing department knows, SALT TALK is often written at the very last minute.  The reason being is that I like to capture current events, whether that be the latest news or what I am currently experiencing.  Hence the subject of today’s blog.

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SALT TALK:  Rock and Roll and the Internet Never Forget

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Sep 4, 2018 11:55:38 AM

The year was 1977 and the internet was barely a glimmer in a 29 year-old Al Gore’s eyes. (In all fairness, I would like to note that the internet says that the rumors that Al Gore claims to have invented the internet are not true.) Accordingly, even though more than forty years ago Bob Seger knew rock and roll never forgets, we simply could not have contemplated that the internet would not.

I have always told my family and friends, do not post anything on the internet you do not want coming back to haunt you, because it will. (Hence, the proliferation of “fake” Facebook accounts acquired under bizarre aliases by all juniors in High School, about to apply to college.) Although it is often difficult to follow your own advice, I try to as often as possible. Generally, having done so with my blog, I was ecstatic to see that one of my March 2017 posts was quoted in last week’s New York Post. (https://nypost.com/2018/08/28/vornado-preparing-for-20m-tax-showdown-with-city/)

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Topics: SALT TALK

SALT TALK:  Act Immediately - Once In a Lifetime Tax Opportunity?

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 28, 2018 2:46:41 PM

Is it too good to be true? Can I really get the best of both worlds? Should I bend over backwards to do this? Maybe I shouldn’t look a gift horse in the mouth. Did the Governor of New York hit the nail on the head in his Sunday Press Release[1] entitled “Governor Cuomo Alerts New Yorkers To Tomorrow Deadline To Make Charitable Donations Before Politically Motivated IRS Regulations Take Effect?”

I am going to cut right to the chase and go out on a limb in telling the Governor, once in a lifetime opportunities that look too good to be true, usually are. Moreover, this was the case here.

The IRS released Proposed Regulations addressing the various state attempts to recharacterize the now limited state and local tax deduction to a charitable contribution. As expected, the IRS came down hard on the attempt and effectively eliminated doubt from anyone’s mind as to the ability to make the conversion.

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Topics: SALT TALK

SALT TALK:  New Internet Taxes and Wayfair?  Don’t Forget the Use Tax

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Aug 20, 2018 11:30:00 AM

Many science fiction adventures have posited the idea of a parallel universe, but to my knowledge, we have not found intelligent life out there yet.  Readers don’t fret.  If you had your heart set on discovering a parallel universe, just take the lead of state government.  Go out and create your own.

The parallel universe created by the states is known as the Use Tax.  The Use Tax is a virtual mirror to the Sales Tax.  It is imposed on the user of goods and services that would be subject to the Sales Tax, but for the fact that the seller or service provider didn’t charge and collect the Sales Tax.

For that new 90-inch TV you just purchased from www.wedon’tchargesalestax.com, your State is looking for you to voluntarily compute the amount that would have been charged as Sales Tax and submit it as Use Tax.  Despite the mistaken belief that internet sales aren’t subject to tax, your State expects you to be a good citizen and hand over what you believed to be your savings.

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Topics: SALT TALK

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

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