SALT TALK: Counting Days - The Sun May Actually Rise in the West

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Apr 15, 2019 11:30:00 AM

While most of us think of a day as the interval of light between two successive nights, taxing jurisdictions that look to the statutory residency test certainly had something much shorter in mind. While the New York statutes don’t bother to define what constitutes a day for purposes of the count, the regulations clearly state that “presence within New York State for any part of a calendar day constitutes a day spent within New York. . .”

Despite the broad reach of the regulations, two very limited exceptions are carved out. The first of these pertains to travel days within New York. If in New York solely to board a plane, ship train, bus, etc. to travel to a point outside of New York, this will not count as a day.

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SALT TALK: 2019 - When is a Day Not a Day

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Apr 8, 2019 12:02:01 PM

For those of you who have been following my blog, you know that one way to be taxed as a resident in New York State and/or NYC (collectively referred to as NY) is to be a statutory resident. One must have a permanent place of abode (PPA) and be present in NY for more than 183 days.

While understanding what constitutes a day in NY would seem to be a simple task, for the purpose of the statutory residency test this is simply not the case. Before we even explain how to count days and the various exceptions, the most important point to understand is that the burden of proof rests with you.

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SALT TALK: NYS Budget Battle Settles on (Surprise!) Higher Transfer Tax and an Increased Mansion Tax

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Apr 1, 2019 11:30:00 AM

In the ongoing NYS war over taxes, the additional surcharge on certain high-value non-primary residences in New York City, discussed in last week’s blog, proved to be a Mission Impossible. Intense lobbying by the NYC real estate industry and questions about enforceability sealed its fate. But never fear!

The Governor, New York State Assembly and New York State Senate finally agreed on the 2019 – 2020 State Budget late yesterday. The most significant provisions include an increase in the New York State Transfer Tax and the New York State “Mansion Tax” for certain properties located in New York City. The increases are effective for conveyances occurring on or after July 1, 2019. Binding written contracts entered into on or before April 1, 2019 will not be subject to the increases.

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SALT TALK: Keeping Your Feet on the Ground in New York City May Become More Taxing

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Mar 26, 2019 9:40:42 AM

Former Governor and now Senator from Florida, Rick Scott, wrote a scorching editorial in last week’s Wall Street Journal directing New Yorkers to stop whining about high taxes and fix the problem ourselves. Whether or not you agree with Senator Scott’s political views, one point he made is simply undisputable. “America is a marketplace where states are competing with each other, and New York is losing.” Senator Scott even points out that “[t]here’s a reason Rep. Alexandria Ocasio-Cortez’s mom left New York for Florida.”

This all stems from New Yorker’s continuing to blame the sag in the luxury real estate market on the limit set of $10,000 for the deduction of state and local taxes. While the Senator did not say as much, I can almost hear the utterance that if New York and its high tax state brethren spent as much time trying to cut state taxes as they have to find ways around the cap, the problem would almost take care of itself.

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SALT TALK: Helen Shapiro Claims She’s Not Responsible–Why Are You?

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Mar 18, 2019 9:53:38 AM

Steadfast readers of my blog have likely realized at least one thing about me by now: I am a dedicated music fan and will listen to anything once.1 Sometimes I’ll love something the first time I hear it (rarely); sometimes I’ll hate something the first time I hear it (fairly common); and other times, a second listen is all it takes.

So I was really stumped by Helen Shapiro. I had no idea who she was before I decided what this week’s blog would cover. But apparently Helen had some big hits in the early sixties and in 1963 the Beatles toured as her supporting act. The reason Helen is important to this week’s post is the fact that she has been crooning (not to the state tax authorities) since 1963, that she is “Not Responsible.”

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SALT TALK: State Tax Auditors are People Too?

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Mar 11, 2019 11:54:45 AM

Those responsible for posting my blog into the outreaches of cyberspace are well aware that rarely do I know what the topic will be till I sit down to write. Whether it be a current news item (I am somewhat restrained and need to keep the Firm politically neutral) or something I am working on at that moment in time, I just never seem to run out of material.

My office phone rings. Glancing over at the caller id, I can see it is one of the many state tax departments calling me. As I’m not trying to avoid any auditors at the moment, I decide to answer the call.

Mr. Berkowitz, I’m Mr. X from the State of Y Department of Revenue. I see you are going to be representing ABC LLC in their upcoming audit. There is a problem with the Power of Attorney authorizing you to represent ABC. The period you indicated on the Power doesn’t coincide with the audit period.

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

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Mar 4, 2019 11:40:00 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?

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SALT TALK: Head in the Clouds? You Might be Subject to Sales Tax

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Feb 25, 2019 11:30:00 AM

I may want you to get off my cloud, but that just might not be possible like it was back in 1965 when Mick Jagger and Keith Richards urgently begged their listeners to do so[1]. You see, those of you not old enough to remember the days when you had to buy software on tangible media (floppy disk, compact disc, or flash drive) and install it yourself may actually have your head in the clouds and not be aware that many jurisdictions are seeking to tax the cloud equivalent, often referred to as “software as a service (SAAS).

A quick scan of the rules indicates that at least 17 states currently subject cloud computing to sales tax. It wasn’t a surprise when a New York State Advisory Opinion[2] took some leaps into the stratosphere answering in the affirmative, that the “Cloud Collaboration Service” offered by the Opinion’s requestor, is subject to the sales tax. 

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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 Feb 19, 2019 9:30:00 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.

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SALT TALK: Author Jules Verne was Architect of New York Tax Policy

Posted by Wayne K. Berkowitz CPA, J.D., LL.M. on Feb 11, 2019 11:40:00 AM

Journey to the Center of the Earth, the 1864 science fiction novel by Jules Verne apparently is a favorite of a preponderance of New York lawmakers. The novel revolves around the premise that volcanic tubes permit travelling adventures to the center of the Earth. It seems as though our state and city leaders believe the notion that volcanic tubes or otherwise compel our presence here. If they have not read the book, I would imagine there are prints of those tacky maps of the world with New York at the center, hanging on the walls of their offices.

It has been a long time since I read Journey to the Center of the Earth, but it came to the forefront of my mind when reading this weekend’s New York Times. The headline, “The $238 Million Penthouse Provokes a Fierce Response: Tax It” quickly caused me to murmur to Java, my trusty American Cocker Spaniel, here they go again. While Java did not ask me what I was referring to, you may be curious.

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