Greenberg Traurig’s Jim Lang Speaks at NAIOP Tampa Bay – Oppportunity Zone Extended Lunch Event

Posted in Event, Opportunity Zones

Greenberg Traurig Shareholder Jim Lang was a speaker at NAIOP Tampa Bay’s Opportunity Zone Lunch. The presentation highlighted how businesses can identify and structure benefits under the Qualified Opportunity Zone incentive.

Click here for information on Greenberg Traurig’s Opportunity Zone Funds Practice.

IRS Says Special Program Bonds Including Tribal Development Bonds May Be Current Refunded

Posted in GT Alert, Internal Revenue Code, IRS, Tax Planning

While the advance refunding of tax-advantaged bonds remains a thing of the past, the Internal Revenue Service (IRS) issued guidance on May 22, Notice 2019-39, expanding the realm of current refundings to permit the current refunding of all existing and future tax-exempt bond programs that impose bond volume cap, issuance time deadlines, or both, for which the statute under which such programs operate does not address the permissibility of current refunding bonds.

Background

Over the years, Congress has enacted several targeted tax-exempt bond programs, often to provide disaster relief or promote economic development in underserved areas. Such bonds include “GO Zone Bonds” under former Section 1400N of the Internal Revenue Code of 1986, as amended (the Code), Midwest Disaster and Hurricane Ike Disaster Bonds under Code Sections 702(d)(1) and 704(a) of the Heartland Disaster Relief Act, Recovery Zone Facility Bonds under former Code Section 1400U-3, and Tribal Economic Development Bonds issued under Code Section 7871(f).

Unlike other tax-advantaged bonds, these targeted programs were authorized under statutory provisions that did not address whether an issuer could current refund such bonds. The Treasury and IRS have addressed on a piecemeal basis the ability to current refund certain of these programs. See, e.g., Notice 2012-3, 2012-3 I.R.B. 289 (GO Zone, Midwest, and Hurricane Ike Disaster Bonds); Notice 2014-39, 2014-5 I.R.B. 455 (Recovery Zone Facility Bonds); and Notice 2003-40, 2003-2 C.B. 20 (New York Liberty Bonds).

Click here to read the full GT Alert.

IRS and Treasury Issue Final IRC Section 956 Regulations that Reduce Deemed Income Inclusion for Certain Corporate U.S. Shareholders

Posted in Code Section 956, controlled foreign corporation, GT Alert, Internal Revenue Code, IRS

On May 23, 2019, the Internal Revenue Service (IRS) and the Treasury Department issued final regulations (the Final Section 956 Regulations) intended to mitigate the impact of Section 956 of the Internal Revenue Code (the Code) for certain domestic corporations. Consistent with the proposed regulations issued in November 2018 (see previous GT Alert here), the Final Section 956 Regulations align the application of the deemed income received under Section 956 with the participation exemption created under Section 245A of the Code, enacted by the 2017 Tax Cuts and Jobs Act (P.L. 115-97).

Prior to enactment of Section 245A, both actual and Section 956-deemed dividends that arose due to certain investments in U.S. property were included in the income of a domestic corporation and taxed symmetrically. The enactment of Section 245A provides for a participation exemption regime pursuant to which a 100 percent dividends-received deduction (DRD) is available to a corporate U.S. shareholder with respect to dividends received from the untaxed earnings of a “specified 10-percent owned foreign corporation” that are actually distributed to the shareholder. A specified 10-percent owned foreign corporation is any foreign corporation (other than certain passive foreign investment companies) with respect to which a domestic corporation owns at least 10 percent of voting power or value. Thus, a specified 10-percent owned foreign corporation includes a controlled foreign corporation (CFC) with respect to its corporate U.S. 10 percent shareholders. Contrary to the provisions of Section 245A, a Section 956 inclusion of a corporate U.S. shareholder of a CFC was not eligible for the DRD, thus creating unequal treatment between actual and deemed repatriations.

Click here to read the full GT Alert.

Applicable Federal Rates and Code Section 7520 Rate for June 2019 – Downward Trend Slowing Down

Posted in Applicable Federal Rates (AFRs), Internal Revenue Code

The Internal Revenue Service (IRS) publishes the applicable federal rates (AFRs) under Internal Revenue Code (Code) Section 1274(d) and the Code Section 7520 rate (7520 rate) for a particular month in a Revenue Ruling that is released around the 18th day of the immediately preceding month. Advance knowledge of the AFRs and 7520 rate for the following month provides a window of opportunity for the quick or delayed implementation of income, gift, and estate-tax planning techniques in response to upward or downward trends. Effective implementation and management of interest-sensitive estate planning techniques involves numerous other factors in addition to the relevant AFR or 7520 rate, including a client’s particular personal and financial circumstances and should be undertaken only with the advice of competent tax counsel and financial advisers.

The IRS has issued Revenue Ruling 2019-14, which provides the AFRs and 7520 rate for June 2019. Revenue Ruling 2019-14 will appear in Internal Revenue Bulletin 2019-23 dated June 3, 2019. While the downward trend that began in January 2019 continues, with all AFRs and 7520 rate below 3% in June 2019, it is slowing down.

What is the Applicable AFR? The applicable AFR is the minimum safe-harbor interest rate that must apply to loans between related parties (intra-family loans) to avoid adverse income or gift-tax consequences – based on the month in which the loan is made, how frequently interest is compounded, and the length (term) of the loan.

AFRs Trending Down. AFRs have decreased since January 2019, making intra-family loans and installment sales to grantor trusts generally more attractive. While the June 2019 short-term AFRs have decreased vis-à-vis the AFRs for May 2019, the June 2019 mid- and long-term AFRs have inched up slightly since May 2019.

June 2019 AFRs Summary. The AFRs for June 2019 are as follows:

AFR ANNUAL SEMI-ANNUAL QUARTERLY MONTHLY
Short-Term 2.37% 2.36% 2.35% 2.35%
Mid-Term 2.38% 2.37% 2.36% 2.36%
Long-Term 2.76% 2.74% 2.73% 2.72%

Historical AFRs. The AFRs for June 2018 through June 2019 are as follows, in reverse chronological order:

AFR ANNUAL SEMI-ANNUAL QUARTERLY MONTHLY
Short-Term AFRs – For demand notes and notes with a term of three years or less.
June 2019 2.37% 2.36% 2.35% 2.35%
May 2019 2.39% 2.38% 2.37% 2.37%
April 2019 2.52% 2.50% 2.49% 2.49%
March 2019 2.55% 2.53% 2.52% 2.52%
February 2019 2.57% 2.55% 2.54% 2.54%
January 2019 2.72% 2.70% 2.69% 2.68%
December 2018 2.76% 2.74% 2.73% 2.72%
November 2018 2.70% 2.68% 2.67% 2.67%
October 2018 2.55% 2.53% 2.52% 2.52%
September 2018 2.51% 2.49% 2.48% 2.48%
August 2018 2.42% 2.41% 2.40% 2.40%
July 2018 2.38% 2.37% 2.36% 2.36%
June 2018 2.34% 2.33% 2.32% 2.32%
Mid-Term AFRs – For notes with a term in excess of three years but no greater than nine years.
June 2019 2.38% 2.37% 2.36% 2.36%
May 2019 2.37% 2.36% 2.35% 2.35%
April 2019 2.55% 2.53% 2.52% 2.52%
March 2019 2.59% 2.57% 2.56% 2.56%
February 2019 2.63% 2.61% 2.60% 2.60%
January 2019 2.89% 2.87% 2.86% 2.85%
December 2018 3.07% 3.05% 3.04% 3.03%
November 2018 3.04% 3.02% 3.01% 3.00%
October 2018 2.83% 2.81% 2.80% 2.79%
September 2018 2.86% 2.84% 2.83% 2.82%
August 2018 2.80% 2.78% 2.77% 2.76%
July 2018 2.87% 2.85% 2.84% 2.83%
June 2018 2.86% 2.84% 2.83% 2.82%
Long-Term AFRs – For notes with a term in excess of nine years.
June 2019 2.76% 2.74% 2.73% 2.72%
May 2019 2.74% 2.72% 2.71% 2.70%
April 2019 2.89% 2.87% 2.86% 2.85%
March 2019 2.91% 2.89% 2.88% 2.87%
February 2019 2.91% 2.89% 2.88% 2.87%
January 2019 3.15% 3.13% 3.12% 3.11%
December 2018 3.31% 3.28% 3.27% 3.26%
November 2018 3.22% 3.19% 3.18% 3.17%
October 2018 2.99% 2.97% 2.96% 2.95%
September 2018 3.02% 3.00% 2.99% 2.98%
August 2018 2.95% 2.93% 2.92% 2.91%
July 2018 3.06% 3.04% 3.03% 3.02%
June 2018 3.05% 3.03% 3.02% 3.01%

Note that the “blended annual rate” under Code Section 7872(e)(2)(A) may be used to determine the interest on a demand loan (i.e., a loan which can be called in at any time) with a fixed principal amount outstanding for an entire year.

What is the 7520 Rate? The 7520 rate for the month in which a lifetime gift or testamentary transfer occurs is used to determine the gift- or estate-tax value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest. In the case of a charitable life estate or remainder, however, the 7520 rate for the month in which the lifetime gift or testamentary transfer occurs or a rate for either of the two preceding months may be used to determine its income-, gift-, or estate-tax value. The 7520 rate is equal to 120% of the applicable mid-term rate using semi-annual compounding, adjusting the resulting rate to produce an equivalent yield for annual compounding, and then rounding it to the nearest two-tenths of a percent.

7520 Rate Trending Down. The 7520 rate also has continued its downward trend, making planning techniques like grantor retained annuity trusts (GRATs) and charitable lead annuity trusts (CLATs) more attractive. Conversely, qualified personal residence trusts (QPRTs) and charitable remainder annuity trusts (CRATs) have become less attractive.

7520 Rate for June 2019. The 7520 rate for June 2019 remain the same as for May 2019, 2.8%.

Historical 7520 Rates. The 7520 rates for June 2018 through June 2019 are as follows, in reverse chronological order:

7520 RATE
June 2019 2.80%
May 2019 2.80%
April 2019 3.00%
March 2019 3.20%
February 2019 3.20%
January 2019 3.40%
December 2018 3.60%
November 2018 3.60%
October 2018 3.40%
September 2018 3.40%
August 2018 3.40%
July 2018 3.40%
June 2018 3.40%

For more on AFRs, click here.

Greenberg Traurig’s Cris O’Neall Recognized as ‘Tax Advocate of the Year’

Posted in awards

ORANGE COUNTY – May 21, 2019 – Cris K. O’Neall of global law firm Greenberg Traurig, LLP’s Orange County office has been recognized as “Tax Advocate of the Year” by the California Alliance of Taxpayer Advocates (CATA).

The recognition was based in part on O’Neall’s role in getting amendments to California’s Property Tax Rules approved by the California State Board of Equalization (SBE) in 2018. The process took many months and included written submissions to the SBE, meetings with SBE staff members, and hearings before elected SBE Members. The Property Tax Rule changes will assist taxpayers in responding to information requests from tax authorities and in making presentations before county Assessment Appeals Boards.

Click here to read the full press release.

In the Zone: GT Qualified Opportunity Zone News – May 2019

Posted in Opportunity Zones, qualified opportunity funds, qualified opportunity zones

Welcome to the May 2019 issue of In the Zone: GT Qualified Opportunity Zone News. Our monthly digest of the latest federal and state developments in Qualified Opportunity Zones and Qualified Opportunity Funds and related Greenberg Traurig news and events will keep stakeholders apprised of the most pressing issues in this burgeoning space.

In the Administration:

Today, President Trump spoke before the National Association of Realtors’ legislative meeting and highlighted Opportunity Zones in his address.

The president stated it was “amazing the way [Opportunity Zones] worked out.” He complimented Sen. Tim Scott (R-SC) on his advocacy for the program and noted that interest is growing and “jobs that are being created in neighborhoods where people wouldn’t go before, the Opportunity Zones. And it’s starting to be seen and it’s starting to be written about.”

At Treasury:

 HOT DOCS Investing in Qualified Opportunity Funds posted May 1 in the Federal Register

May 1 Treasury regulations explained by Greenberg Traurig’s Jim Lang, Sandy Presant, and Larry Brenman:

Executive Summary: IRS Issues Second Installment of Qualified Opportunity Zone Fund (QOF) Proposed Regulations
Detailed Analysis: IRS Issues Second Installment of Qualified Opportunity Zone Fund (QOF) Proposed Regulations  

 In Congress:

Booker, Scott, Hassan, Young Introduce Bipartisan Bill to Strengthen Reporting Requirements for Opportunity Zone Tax Incentive

S.1344 — 116th Congress (2019-2020): A bill to require the Secretary of the Treasury to collect data and issue a report on the opportunity zone tax incentives enacted by the 2017 tax reform legislation, and for other purposes.

Sponsor: Sen. Booker, Cory A. [D-NJ] (Introduced 05/07/2019) Cosponsors: (3) Committees: Senate – Finance Latest Action: Senate – 05/07/2019

Read twice and referred to the Committee on Finance.

Upcoming Events:

Speaking Engagements 

For additional information, please contact Sharon Mangione.

Refundable State Tax Credits: Maybe Don’t Take the Money and Run

Posted in GT Alert, State Tax

On April 25, 2019, the United States Court of Appeals for the Federal Circuit decided that refundable state tax brownfield credits are taxable income for federal purposes. The court held in Ginsburg v. United States, “The excess amount of the brownfield redevelopment tax credit received by the Ginsburgs in 2013 is taxable gross income because it is an undeniable accession to wealth over which the Ginsburgs have complete dominion and control.”

The case dealt with New York’s brownfield credits that may be used to reduce a taxpayer’s state tax obligations and, if there are excess credits beyond the state tax liabilities, can be refunded to the taxpayer. The court’s decision makes that refunded credit subject to federal tax. The taxpayers argued that the brownfield redevelopment tax credit “is a reimbursement of a portion of the capital costs,” i.e., costs relating to investments made by them for the cleanup and redevelopment of the property. Accordingly, the Ginsburgs claimed they “neither realized an undeniable accession to wealth nor an economic gain” because the payment was a reimbursement of expenses. They also argued they do not have complete dominion and control over the tax credits because there were many strings attached. The court was not persuaded and found that the Ginsburgs neither alleged a payment was made to New York nor explained why the payment of the excess amount of the brownfield redevelopment tax credit was a return of their basis to restore impaired capital.

To read the full GT Alert, click here.

For more on SALT, click here.

GT Executive Summary & Detailed Analysis: IRS Issues Second Installment of Qualified Opportunity Zone Fund (QOF) Proposed Regulations

Posted in GT Alert, Internal Revenue Code, IRS, Opportunity Zones, qualified opportunity funds, qualified opportunity zones, real estate tax, Tax Cuts and Jobs Act

Greenberg Traurig is pleased to provide our guidance on the Second Installment of Qualified Opportunity Zone Fund (QOF) Proposed Regulations issued by the U.S. Treasury on April 17, 2019.    

Here are the links to our two-part guidance:

Part  I –  Executive Summary: IRS Issues Second Installment of Qualified Opportunity Zone Fund (QOF) Proposed Regulations

This Executive Summary is a quick reference guide to the key changes made by the New Proposed Regulations (discussed more fully in the Detailed GT Analysis below).

 Part II –  Detailed Analysis: IRS Issues Second Installment of Qualified Opportunity Zone Fund (QOF) Proposed Regulations

This detailed analysis contains a deep dive into the technical aspects of the New Proposed Regulations and a description of the planning considerations thereunder for both QOZ fund sponsors and operators.

For more on Opportunity Zones and Funds, click here.

IRS Expands Retirement Plan Self-Correction Program

Posted in GT Alert, Internal Revenue Code, IRS, Self-Correction Program

Our January 2019 GT Benefits and Compensation Alert addressed the unprecedented level of potential liability for compliance failures in 401(k) and other retirement plans and the importance of performing a plan compliance review and correcting plan document or operational failures before an IRS auditor knocks on the door. Doing nothing and playing the audit lottery is no longer an acceptable risk, with one out of three employers (and half of large employers with at least 25,000 employees) likely to have their retirement plan audited by the IRS or DOL (See 2016 WillisTowersWatson Retirement Plan Governance Survey).

Fortunately, the IRS and DOL have programs allowing employer plan sponsors to perform compliance reviews and self-correct plan document and operational failures rather than requiring them to file a correction submission with the IRS or DOL for approval and paying fees or negotiating sanctions on audit.

The IRS has just released new self-correction procedures with the issuance of Revenue Procedure 2019-19, effective as of April 19, 2019, which increases the number and type of errors that can be self-corrected without filing and paying a fee.

Click here to read the full GT Alert.

Applicable Federal Rates and Code Section 7520 Rate for May 2019 – Downward Trend Continues

Posted in Applicable Federal Rates (AFRs), Internal Revenue Code, IRS

The Internal Revenue Service (IRS) publishes the applicable federal rates (AFRs) under Internal Revenue Code (Code) Section 1274(d) and the Code Section 7520 rate (7520 rate) for a particular month in a Revenue Ruling that is released around the 18th day of the immediately preceding month. Advance knowledge of the AFRs and 7520 rate for the following month provides a window of opportunity for the quick or delayed implementation of income, gift, and estate-tax planning techniques in response to upward or downward trends. Effective implementation and management of interest-sensitive estate planning techniques involves numerous other factors in addition to the relevant AFR or 7520 rate, including a client’s particular personal and financial circumstances and should be undertaken only with the advice of competent tax counsel and financial advisors.

The IRS has issued Revenue Ruling 2019-12, which provides the AFRs and 7520 rate for May 2019. Revenue Ruling 2019-12 appears in Internal Revenue Bulletin 2019-19, dated April 16, 2019. The downward trend that began in January 2019 continues, with all AFRs and 7520 rate below 3% in May 2019.

What is the Applicable AFR? The applicable AFR is the minimum safe-harbor interest rate that must apply to loans between related parties (intra-family loans) to avoid adverse income or gift-tax consequences – based on the month in which the loan is made, how frequently interest is compounded, and the length or term of the loan.

AFRs Trending Down. AFRs have been decreasing steadily since January 2019, making intra-family loans and installment sales to grantor trusts generally more attractive.

May 2019 AFRs Summary. The AFRs for May 2019 are as follows:

AFR ANNUAL SEMI-ANNUAL QUARTERLY MONTHLY
Short-Term 2.39% 2.38% 2.37% 2.37%
Mid-Term 2.37% 2.36% 2.35% 2.35%
Long-Term 2.74% 2.72% 2.71% 2.70%

Historical AFRs. The AFRs for May 2018 through May 2019 are as follows, in reverse chronological order:

AFR ANNUAL SEMI-ANNUAL QUARTERLY MONTHLY
Short-Term AFRs – For demand notes and notes with a term of three years or less.
May 2019 2.39% 2.38% 2.37% 2.37%
April 2019 2.52% 2.50% 2.49% 2.49%
March 2019 2.55% 2.53% 2.52% 2.52%
February 2019 2.57% 2.55% 2.54% 2.54%
January 2019 2.72% 2.70% 2.69% 2.68%
December 2018 2.76% 2.74% 2.73% 2.72%
November 2018 2.70% 2.68% 2.67% 2.67%
October 2018 2.55% 2.53% 2.52% 2.52%
September 2018 2.51% 2.49% 2.48% 2.48%
August 2018 2.42% 2.41% 2.40% 2.40%
July 2018 2.38% 2.37% 2.36% 2.36%
June 2018 2.34% 2.33% 2.32% 2.32%
May 2018 2.18% 2.17% 2.16% 2.16%
Mid-Term AFRs – For notes with a term in excess of three years but no greater than nine years.
May 2019 2.37% 2.36% 2.35% 2.35%
April 2019 2.55% 2.53% 2.52% 2.52%
March 2019 2.59% 2.57% 2.56% 2.56%
February 2019 2.63% 2.61% 2.60% 2.60%
January 2019 2.89% 2.87% 2.86% 2.85%
December 2018 3.07% 3.05% 3.04% 3.03%
November 2018 3.04% 3.02% 3.01% 3.00%
October 2018 2.83% 2.81% 2.80% 2.79%
September 2018 2.86% 2.84% 2.83% 2.82%
August 2018 2.80% 2.78% 2.77% 2.76%
July 2018 2.87% 2.85% 2.84% 2.83%
June 2018 2.86% 2.84% 2.83% 2.82%
May 2018 2.69% 2.67% 2.66% 2.66%
Long-Term AFRs – For notes with a term in excess of nine years.
May 2019 2.74% 2.72% 2.71% 2.70%
April 2019 2.89% 2.87% 2.86% 2.85%
March 2019 2.91% 2.89% 2.88% 2.87%
February 2019 2.91% 2.89% 2.88% 2.87%
January 2019 3.15% 3.13% 3.12% 3.11%
December 2018 3.31% 3.28% 3.27% 3.26%
November 2018 3.22% 3.19% 3.18% 3.17%
October 2018 2.99% 2.97% 2.96% 2.95%
September 2018 3.02% 3.00% 2.99% 2.98%
August 2018 2.95% 2.93% 2.92% 2.91%
July 2018 3.06% 3.04% 3.03% 3.02%
June 2018 3.05% 3.03% 3.02% 3.01%
May 2018 2.94% 2.92% 2.91% 2.90%

Note that the “blended annual rate” under Code Section 7872(e)(2)(A) may be used to determine the interest on a demand loan (i.e., a loan which can be called in at any time) with a fixed principal amount outstanding for an entire year.

What is the 7520 Rate? The 7520 rate for the month in which a lifetime gift or testamentary transfer occurs is used to determine the gift- or estate-tax value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest. In the case of a charitable life estate or remainder, however, the 7520 rate for the month in which the lifetime gift or testamentary transfer occurs or a rate for either of the two preceding months may be used to determine its income-, gift-, or estate-tax value. The 7520 rate is equal to 120% of the applicable mid-term rate using semi-annual compounding, adjusting the resulting rate to produce an equivalent yield for annual compounding, and then rounding it to the nearest two-tenths of a percent.

7520 Rate Trending Down. The 7520 rate also has continued its downward trend, making planning techniques like grantor retained annuity trusts (“GRATs”) and charitable lead annuity trusts (“CLATs”) more attractive. Conversely, qualified personal residence trusts (“QPRTs”) and charitable remainder annuity trusts (“CRATs”) have become less attractive.

7520 Rate for May 2019. The 7520 rate for May 2019 is 2.8%.

Historical 7520 Rates. The 7520 rates for May 2018 through May 2019 are as follows, in reverse chronological order:

7520 RATE
May 2019 2.80%
April 2019 3.00%
March 2019 3.20%
February 2019 3.20%
January 2019 3.40%
December 2018 3.60%
November 2018 3.60%
October 2018 3.40%
September 2018 3.40%
August 2018 3.40%
July 2018 3.40%
June 2018 3.40%
May 2018 3.20%
April 2018 3.20%
March 2018 3.00%
February 2018 2.80%
January 2018 2.60%

For more on Applicable Federal Rates, click here.

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