Corporate Partners: Beware of New York’s Changes to its Draft Regulations!

One of the least discussed but critical aspects of New York’s corporate tax reform is the impact on corporate partners who do not engage in business in New York other than by virtue of its ownership interest in a partnership doing business in New York. The combination of the laws governing corporate partners, and recent proposed interpretations of those laws in the newest revisions to New York’s draft regulations should give a corporate partner pause as to its New York tax exposure.

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Economic Nexus in New York

https://www.hodgsonruss.com/practices-sales-use-tax-attorneys.htmlWe’ve discussed New York’s economic nexus rules for sales tax purposes several times in this blog.  You can review these previous articles here, here and here. But, after a flurry of initial activity and confusion, now that these rules have seemingly settled, we thought it would be a good time to provide a more comprehensive recap of the state of economic nexus in New York.

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NY Tax Minutes: Trump Tax Updates, End To SALT Cap Suit

This article originally appeared in Law360 and is reprinted with permission.

It seems that President Donald J. Trump often finds himself at the center of New York state tax news, and therefore at the center of our monthly "NY Tax Minutes" column. This month is no different. First, the president continues two separate lawsuits seeking to prevent disclosures of his personal income tax returns, and second, Trump, whose name has graced New York buildings and tabloid headlines for decades, recently declared that he plans to abandon his New York tax residency for the warm weather (and low taxes) of Florida.

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New York Residency in the Spotlight: A Presidential Declaration of Florida Domicile

As the kids were out trick-or-treating last night, The New York Times dropped yet another bombshell concerning ongoing potential tax issues for President Trump. But this one did not concern requests for copies of his tax returns; this one was generated by the President himself. 

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SALT Cap Lawsuit Brought by Four States against Federal Government Is Dismissed

More than three months after oral arguments were heard in the SALT cap lawsuit (State of New York, State of Connecticut, State of Maryland, and State of New Jersey v. United States Department of Treasury, The Internal Revenue Service and The United States of America, 18-cv-6427), Judge J. Paul Oetken of the U.S. District Court dismissed the suit on September 30, 2019. Judge Oetken ruled that the $10,000 SALT deduction cap under the Tax Cuts and Jobs Act was not unconstitutionally coercive, finding that the states had not plausibly alleged that the cap meaningfully constrains the states’ decision-making processes. Further, Judge Oetken rejected the federal government’s argument that the court did not have jurisdiction to hear the case, holding that the states’ allegation that they would suffer diminished real estate transfer tax revenues was sufficient to give them standing to challenge the cap. He also held that the Anti-Injunction Act did not bar the suit because the states had no alternate mechanism to challenge the cap's legality.

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New York City Finally Releases Guidance on Impact of TCJA Business Interest Deduction Limitations on City Business Income Tax Returns

New York City corporate tax returns have already been filed for the 2018 tax year and NYC unincorporated business tax (UBT) returns are due October 15th. But barely a week before the UBT filing due date, on October 8, 2019, NYC released its long-awaited guidance (https://www1.nyc.gov/assets/finance/downloads/pdf/fm/2018/fm-18-11.pdf) on the attribution of interest deductions for taxpayers whose interest expense deduction was limited under Section 163(j) of the Internal Revenue Code, enacted as part of the Tax Cuts & Jobs Act (TCJA). Under that provision, a taxpayer’s deduction for business interest expense is limited to 30% of adjusted taxable income except in certain circumstances. Any unused interest expense may be carried forward to the following tax year. Note that the NYC Finance Memorandum is numbered 18-11, suggesting that it was originally intended for release in late 2018.

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Supreme Court Denies Cert in Wynne Cases

It appears we’ve reached the end of the line on our “Wynne” cases. On October 7, 2019, the Supreme Court of the United States declined to hear our appeals in Edelman v. Department of Taxation and Finance and Chamberlain v. Department of Taxation and Finance. In both cases, we argued that New York’s statutory residency taxing scheme, which subjected taxpayers who qualified as dual residents of New York and Connecticut to double taxation, was unconstitutional and in violation of the Commerce Clause. As we reported earlier this year, the New York State Court of Appeals previously declined to hear the taxpayers’ appeals in April 2019.

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Boring but Important: Tax Department Releases Memos Summarizing Tax Law Changes

The New York State Department of Taxation and Finance (the Department) issued three technical memoranda on September 3, 2019, summarizing the corporation tax, personal income tax and tax credit changes that were part of the 2019-2020 New York state budget we covered here. Two of the three are recapped below, with links to both memos. The third, TSB-M-19(4)C, (5)I, covered new tax credit provisions.    

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Pass-through Entity Level Taxes - Where are They and How do they Work?

The SALT cap has been in the news since the Tax Cuts & Jobs Act (TCJA - P.L. 115-97) was passed in late 2017, with federal legislation capping the individual state and local tax deduction at $10,000 per year beginning January 1, 2018. SALT cap issues have abounded and we have written about SALT lawsuits here, proposed workarounds here, and new IRS regulations regarding SALT credits here. Of course, the biggest hurdle facing taxpayers still remains finding a viable workaround to the SALT cap.

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NY Tax Minutes: City Finances, Transparency, Tribunal Rulings

This article originally appeared in Law360 and is reprinted with permission.

August is often a slow month in the state and local tax world, with attorneys, accountants and auditors looking to squeeze the last bit out of summer. But not everyone at the New York State Tax Department took a break this month. And our most seasonally appropriate update comes from the Tax Department’s August appearance at The Great New York State Fair in Syracuse, New York. [1]

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