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.

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

Posted in Opportunity Zones, qualified opportunity funds, qualified opportunity zones, real estate tax, Tax Cuts and Jobs Act

Welcome to 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.

At the White House

 HOT DOCSTreasury issues second round of regulations and wants public comment measuring the economic impact of QOZs.

GT Alert > Highly Anticipated Qualified Opportunity Zone Proposed Treasury Regulations Released <

In early April, President Trump named Scott Turner as the new Executive Director of the White House Opportunity and Revitalization Council.

The Administration strongly supports QOZ.

REVITALIZING AMERICAN COMMUNITIES: Opportunity Zones are a critical part of President Trump’s efforts to bring economic opportunity to communities that have been left behind.

  • The Tax Cuts and Jobs Act (TCJA) included a new Opportunity Zones incentive designed to bring investment to struggling communities across the country.
  • Under the TCJA, investors can get tax benefits by investing in communities designated as Opportunity Zones.
    • Investors receive tax benefits on capital gains that they reinvest into Opportunity Zones through investment vehicles called Qualified Opportunity Funds.
    • These benefits are structured to promote long-term investment that will help these communities recover and thrive.
  • All states, territories, and the District of Columbia nominated low-income communities to be designated as Opportunity Zones.
  • 8,762 communities home to nearly 35 million Americans have now been designated.
  • Opportunity Zones will help encourage investors to fund new businesses, develop properties, and finance construction in these struggling communities.

https://www.whitehouse.gov/briefings-statements/tax-cuts-jobs-act-generating-economic-resurgence-communities-across-country/

On April 17, the President participated in another community group outreach event on QOZs at the White House.

In the Agencies

Treasury announced the highly anticipated second round of regulations at the White House event April 17. Read about it here as well. Treasury also wants public comment on how to measure the economic impact of QOZs

HUD is asking for public comment on its existing policies, practices, planned actions, regulations, and guidance regarding HUD-administered programs and laws to identify actions HUD can take to encourage beneficial investment, both public and private, in urban and economically distressed communities, including qualified Opportunity Zones. HUD seeks input and recommendations from the public regarding potential agency actions.

In Congress 

Legislation introduced to apply Opportunity Zones to areas struggling with disaster recovery.

Upcoming Events 

Speaking Engagements

  • May 21: Opportunity Zone Summit at Dr. Phillips, Inc. Foundation with SunTrust Bank, 12:00 – 1:00 ET – James Lang
  • May 21: KBKG Opportunity Zone Deals, Separating Facts From Fiction: An Interactive Discussion with Thought Leaders in the OZ World, James Lang, Sandy Present, and Ryan Bailine, Online Webinar, 1:00 – 2:00 PT.
  • May 22: “Hold For” GT In-house Webinar on OZ – James Lang
  • June 2 to June 4: 41st Annual NYU International Hospitality Industry Investment Conference, New York Marriott Marquis – James Lang
  • June 20: Strafford CLE Webinar:  Qualified Opportunity Zones: New Tax Incentives, 1:00 – 2:30 EDT – James Lang

QOZ Conferences

  • April 25 to April 26: Novogradac OZ, Denver
  • May 9 and May 10: Opportunity Zone Expo, Las Vegas, Mandalay Bay

 For additional information, please contact Sharon Mangione.

Highly Anticipated Qualified Opportunity Zone Proposed Treasury Regulations Released

Posted in Opportunity Zones, qualified opportunity funds, qualified opportunity zones, Real Estate, real estate tax

On Wednesday, April 17, the United States Department of the Treasury released proposed regulations related to investment in Qualified Opportunity Zones and Qualified Opportunity Funds. The issuance of these highly anticipated regulations and related guidance will provide critical information to investors, Qualified Opportunity Funds, and project sponsors/operators involved in real estate, venture capital, operating business, and project finance in Qualified Opportunity Zones. Of particular importance in this release is guidance relating to the qualification criteria for operating businesses and venture capital. The release also provides further clarity in the qualification criteria for real estate development projects. Greenberg Traurig has broad experience working with clients in fund formation and investor utilization, along with sponsor, developer, and operator project qualification under this new tax incentive program.

Click here for the full GT Alert, which includes a link to and highlights of the proposed regulations.

Veterans Housing Preference Permitted Under IRC Section 42 Now Permitted Under 142

Posted in GT Alert, Internal Revenue Code, tax-exempt bonds

On April 3, 2019, the IRS released Revenue Procedure 2019-17, providing that the general public use requirement of section 142(d) of the Internal Revenue Code (relating to residential rental projects) permits the use of housing preferences and occupancy restrictions consistent with the provisions of the low-income housing tax credit requirements under section 42(g)(9) of the Code. This issue has become a point of interest for housing developers given a recent focus on the needs of veterans and other groups that have particular trouble locating affordable housing.

To read the full GT Alert, click here.

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

Posted in Opportunity Zones, qualified opportunity funds, qualified opportunity zones, real estate tax

Welcome to 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.

Legislative Updates

On Capitol Hill, Opportunity Zones continue to get a lot of attention and discussion before Tax Committees. On March 14 Treasury Secretary Mnuchin appeared before the House Ways and Means and Senate Finance Committees. There was good discussion and interest level in House Ways and Means on Opportunity Zones as the new Democrat majority assesses this component of the Tax Cuts and Jobs Act, looking to determine effectiveness in achieving new majority goals.

OMB still has the most recent Opportunity Zones rule under consideration:

AGENCY: TREAS-IRS RIN: 1545-BP04 Status: Pending Review
TITLE: Qualified Opportunity Funds [TCJA]
STAGE: Proposed Rule ECONOMICALLY SIGNIFICANT: No
RECEIVED DATE: 03/12/2019 LEGAL DEADLINE: Statutory

Past Events

Thanks to our partners for a successful event in Northern Virginia: Life Cycle of a Serial Entrepreneur – Just in Time: Qualified Opportunity Zone. 

Our panelists discussed the most recent tax legislation regarding robust tax benefits when investing in Qualified Opportunity Zones. If you’ve recently sold your company or investment for a sizable capital gain, investing in a Qualified Opportunity Fund can be an effective strategy to reduce the upcoming tax bill by deferring the gain. But timing is crucial as the tax benefits are tied to a 180-day window to invest in an Opportunity Zone Fund.

 

 

 

 

 

 

 

 

 

 

 

 

 

Upcoming Events

  • April 8: Miami-Dade County Opportunity Zones Conference & Marketplace presented by Madison Street Strategies, with James O. Lang
  • May 2: Ozone Breakfast sponsored by SunTrust and the Dr. Phillips Foundation for Orlando Not-for-Profit Entities, with James O. Lang
  • May 9 & 10: Opportunity Zone Expo, Las Vegas, Mandalay Bay, with James O. Lang
  • May 21:  Opportunity Zone Online Presentation with  Ryan D. Bailine  and James O. Lang
  • June 2-4: 41st Annual NYU International Hospitality Investment Conference, New York Marriott Marquis with James O. Lang.

For additional information, please contact Sharon Mangione.

GT Supports NYU Winthrop Hospital’s 22nd Annual A Cause to Celebrate…Child Life

Posted in Firm News

Greenberg Traurig was a proud sponsor of NYU Winthrop Hospital’s 22nd Annual “A Cause to Celebrate” on March 21, 2019, in New York. The gala honored the Founder/CEO of Fareportal, Sam Jain, and his wife, Vera Jain, for their contributions. The firm’s participation benefitted the hospital’s Child Life Program and celebrated the Jain family. Lucy S. Lee (Shareholder, Northern Virginia and Washington, D.C., Tax) attended on behalf of GT.

Pictured Immediately Below: Sam Jain (honoree and Founder/CEO of Fareportal), David Orleans (Managing Director of Citi Private Bank), Lucy S. Lee, Harvey Tanton (Managing Partner of Tanton Grubman LP), and Rob Grubman (Partner of Tanton Grubman LP).

Pictured at Bottom: Matt Blance-Stephany (Voyager HQ), Rob Grubman (Partner of Tanton Grubman LP, Harvey Tanton (Managing Partner of Tanton Grubman LP), Lucy S.Lee, David Orleans, Jim Givens (Partner of Ernst & Young LLP), Mike Persinski (Managing Director of Citi Private Bank), Anta Cisse-Green (Associate General Counsel of NYU Langone), and Amanda Miller (Associate General Counsel of NYU Langone).

Lucy Lee Receives 2 Korean Tax Authority Awards

Posted in awards

Lucy S. Lee (Shareholder, Northern Virginia and Washington, D.C., Tax) was recently recognized by the Korean Tax Authority. The Commissioner of the National Tax Service of Korea, Han Sung Hee, presented Lucy with an Award of Distinguished Service and Contribution to the advancement of international tax policies and administration, and a Plaque of Appreciation in recognition of distinguished support and devotion to the development of friendship and mutual cooperation between Korea and the United States.

The awards, pictured below, were presented to Lucy by Ambassador Hyo-Sung Park and Consul Insup Lee in an awards ceremony attended by other dignitaries and press.

Greenberg Traurig Attorney Lucy Lee Quoted in the Wall Street Journal

Posted in Estate Planning, International Tax, Legacy Planning

Lucy S. Lee, shareholder of Greenberg Traurig’s Tax Practice, was recently quoted in the Wall Street Journal article, “Meghan Markle Is About to Have a Little Bundle of Tax Headaches.” The article discusses what tax concerns Meghan and her baby will have being a U.S. citizen with a British royal husband/father.   

To read the full article, please click here. (subscription required)

 

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