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The Pandora Papers, The Biggest Leak in History at Our Doorstep

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Latest legal news and recent law changes.

The Pandora Papers, The Biggest Leak in History at Our Doorstep

In October of 2021, as a result of the largest leak of documents in history, 11.9 million files from over 2.94 terabytes of data were publicly released by the International Consortium of Investigative Journalists [ICIJ].

Concerning assets and individuals across the globe, this leak identified the financial affairs of more than 100 billionaires, 30 world leaders and 300 public officials. This leak is reminiscent of the Panama Papers released back in 2016 [ICIJ].

The Pandora Papers were published under the script of providing transparency on the use of “offshore” tax havens, which are utilized in order to mitigate taxes and secure privacy around one’s financial affairs. Included in the data were several high-profile individuals mired by controversy [Reuters].

Though the scope of this leak concerned “offshore” locations, the United States was likewise implicated in several tax-friendly jurisdictions. The most prominent of these was South Dakota, but they also included Florida, Delaware, Texas, and Nevada. The Pandora Papers identified 206 U.S. trusts linked to 41 countries holding assets worth more than $1 billion [ICIJ].

As the ICIJ notes, being named in the Pandora Papers is in no way synonymous with alleging the individuals identified conducted illegal activity. The use of offshore or domestic tax-friendly jurisdictions is both legal and accepted, if done correctly. Even so, being named in the Pandora Papers is bound to create controversy, and invites public and government speculation. Of the trusts named in the Pandora Papers, nearly 30 of the ones based in the U.S. have been identified as connected to individuals or companies accused of fraud, bribery or human rights abuses.

As specialists in Estate Planning and Trusts, The Burton Law Firm is actively monitoring the Pandora Papers and staying abreast of any changes in the law that may come from this leak. Please note that The Burton Law Firm represents individuals of all backgrounds and walks of life, having a firm foothold in both domestic and international communities. In short, none of The Burton Law Firm’s clients were affected by the data leak, and we continue to maintain the highest grade of professional responsibility and upholding attorney-client confidentiality.

For more information, visit the source of the leak at: https://www.icij.org/investigations/pandora-papers/ or email the Burton Law Firm at info@lawburton.com.

 

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Potential Tax Impacts of the Proposed Reconciliation Bill to Individual Taxpayers

News & Analysis
Latest legal news and recent law changes.

Potential Tax Impacts of the Proposed Reconciliation Bill to Individual Taxpayers

On September 13, 2021, the House Ways & Means Committee of the U.S. House of Representatives released the draft text of its proposed budget reconciliation bill (the “Build Back Better Act”), and on September 15, 2021 it approved various sections of the proposal. It is important for clients to note that as of the date of this article, these proposals are not the law, and are subject to ongoing negotiations. The proposed provisions could change considerably and there is no guarantee that any of the provisions will become law. Nevertheless, this article is to alert clients of the potential changes to individual taxpayers and the resulting consequences of such changes if they are approved. We encourage our clients to be proactive and plan in advance of possible impending changes.  

Effective Date: The Effective Date is the date the drafted provision would become operative and enforceable law. It’s important to note that the effective date is not the same for each proposed change. Each proposed change would take effect one of three dates: (1) the Introduction Date (September 13, 2021); (2) the start of the next tax year (January 1, 2022); or (3) the Enactment Date of the legislation (to be determined). The following topics have a planned effective date of either the Introduction Date, or January 1, 2022. All references refer to the Build Back Better Act.  

(1) Potential Tax Impact to Individual Taxpayer: Effective – Introduction Date (September 13, 2021)

  • Capital Gains Tax Rate Increase (§138202): Currently, the top long-term capital gains tax is 20%. The new legislation proposes to increase the top long-term capital gains tax to 25% and would affect gains from any transactions completed after September 13, 2021. However, gains recognized after September 13, 2021, so long as they arise from transactions entered into before the Introduction Date further evidenced by a written binding contract, will be treated as occurring prior to the Introduction Date and will still be subjected to the 20% rate.  

(2) Potential Tax Impact to Individual Taxpayer: Effective – January 1, 2022

  • Income Tax Rate Increase (§138201): Currently, the top ordinary income tax rate is 37% for individuals with a taxable income exceeding $518,401 ($622,051 for married individuals filing jointly). Under the proposed legislation, the top marginal individual income tax rate would increase to 39% for individuals with a taxable income exceeding $400,000 ($450,000 for married individuals filing jointly; $425,000 for heads of households; and $255,000 for married individuals filing separately) and for estates and trusts with a taxable income over $12,500.
  • High Income Surcharge Tax (§138206): This proposal would impose a surtax equal to 3% of a taxpayer’s modified adjusted gross income in excess of $5,000,000 ($2,500,000 if married, filing separately). For this purpose, the modified adjusted gross income would be defined as the adjusted gross income reduced by any allowed deductions.
  • Limitation of Deduction of Qualified Business Income -Section 199A (§138204): Under current law, subject to exceptions and limitations, certain taxpayers other than corporations (owners of pass-through entities such as S Corporations and partnerships) are entitled to deduct 20% of qualified business income earned in a qualified trade or business (199A Deduction). The proposal limits the amount of the 20% deduction to $500,000 for joint filers, $400,000 for individual filers, $259,000 for married filers filing separately, and $10,000 for trusts and estates.
  • Net Investment Income Tax Expanded (§138203): Under current law, a 3.8% tax is imposed on Net Investment Income (NII) on certain individuals, estates, or trusts if a trade or business is a passive activity for the taxpayer (i.e., the taxpayer does not materially participate in the trade or business). In other words, the 3.8% tax does not apply to income from a trade or business conducted as a sole proprietor, partnership, or S Corporation, if the taxpayer materially participates in the trade or business. Under the proposal, the 3.8% tax would be imposed on the NII of high-income individuals (taxpayers with greater than $400,000 in modified adjusted gross income (single filer) or $500,000 (joint filer)) regardless of whether the trade or business is a passive activity for the taxpayer so long as the income isn’t already subject to the Federal Insurance Contribution Act (FICA) or Self-Employment Tax.

    Additionally, the current tax is 3.8% of the lesser of NII or the excess of modified Adjusted Gross Income (AGI) over a set dollar amount. For trusts and estates, the current tax is 3.8% of the less of undistributed net income, or the excess of AGI over a set dollar amount. The drafted legislation also proposes to expand the definition of the NII subject to the tax by stating the 3.8% tax would apply to the greater of specified net income or NII. For trusts and estates, the 3.8% would apply to the lesser of (1) the greater the undistributed specified net income or undistributed NII; or (2) the excess AGI over the set dollar amount.

  • Contribution Cap on Individual Retirement Plans of High-Income Taxpayers (§138301): The proposed legislation would prohibit new contributions to a Roth or traditional Individual Retirement Accounts (IRAs) if the total value of all of the taxpayer’s IRAs exceeds $10 million at the end of the prior tax year. However, rollover contributions shall not be treated as new contributions. This provision would only apply to individuals whose adjusted taxable income exceeds $400,000 (single filer) or $450,000 (joint filer).
  • Increased Required Minimum Distributions for Excess Balances (§138302): This legislation would impose new required minimum distributions for taxpayers whose adjusted taxable income exceeds $400,000 (single filer) or $450,000 (joint filer) and whose combined IRAs (Roth, traditional, and defined contribution plan) exceed $10 million at the end of year. These individuals, regardless of their age, would be required to take a minimum distribution in the following year of an amount equal to 50% of the amount by which the aggregate accounts exceed $10 million. For taxpayers whose aggregate account balances exceed $20 million, the taxpayer will be required to draw the lesser of: (1) the amount needed to bring the aggregate balance down to $20 million; or (2) the aggregate balances in all Roth IRAs and designated Roth accounts.
  • Rollover and Conversion Limits; Eliminate Back Door Roth IRAs (§138311): This proposed legislation would eliminate the “backdoor” conversions of traditional IRAs or employer plan accounts to Roth IRAs for a taxpayer whose adjusted taxable income exceeds $400,000. Additionally, this proposal would prohibit after-tax IRA or employer plan contributions from being converted to Roth accounts for all taxpayers irrespective of income level.
  • Prohibitions of IRA Investments Conditioned on Account Holder Status (§138312): The proposal would prohibit any IRA from holding any securities if the issuer of such security requires the IRA owner to have a specified minimum amount of income or assets, has completed a specified minimum level of education, or holds a specific license or credential (Accredited Investors). IRAs holding such investments would lose their IRA status. If the IRA account holds such an investment (existing investment) on the date of enactment, the proposal shall apply to such investment for taxable years beginning January 1, 2024.
  • IRA Non-Compliance Statute of Limitations Extended (§138313): This legislation would extend the statute of limitations for IRA noncompliance related to valuation related misreporting and prohibited transactions from 3 years to 6 years. This would apply to taxes to which the current 3-year period ends after December 31, 2021.
  • Prohibition on Self-Interest Investment of IRA Assets (§138314): Under the current law, an IRA owner cannot invest his or her IRA assets in a corporation, partnership, trust, or estate in which he or she has a 50% or greater interest. The proposal adjusts the 50% threshold to 10% for investments that are not tradable on an established securities market, regardless of whether the IRA owner has a direct or indirect interest. The legislation would also prevent an IRA owner from investing in an entity in which the IRA owner is an officer. Lastly, this rule would be an IRA requirement and not a prohibited transaction (meaning an IRA would lose its IRA status if it does not meet this requirement). If on the date of enactment, the IRA account holds such an investment (existing investment) the proposal shall apply to such investment for taxable years beginning January 1, 2024.
  • IRA Owners Treated as Disqualified Persons (§138315): The legislation proposes to further clarify that IRA owners (including individuals who inherit an IRA as beneficiary aft the IRAs owner’s death) are always disqualified persons for the purpose of applying the prohibited transaction rules.
  • Holding DISC or FSC In IRA (§138503): An IRA holding an interest in a Domestic International Sales Corporation (DISC) or Foreign Sales Corporation (FSC) that receives commission or payment from any entity, stock, or interest owned by the individual for whose benefit the IRA is established, is a prohibited transaction

NOTE: This article does not list all of the legislation being proposed in the Build Back Better Act. It is merely a list of the provisions we believe to be most relevant to a majority of our clients. Please contact your tax attorney to discuss the potential legislation and how it may or may not affect your planning needs. Although it is impossible to know which provisions will pass, possible tax-planning strategies may still be available to those who would like to act in advance of the impending change. 

Please contact The Burton Law Firm at 916.822.8700 or info@burtonlawfirm.com for more info.

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News

Potential Estate Planning Tax Impacts of the Proposed Reconciliation Bill

News & Analysis
Latest legal news and recent law changes.

Potential Estate Planning Tax Impacts of the Proposed Reconciliation Bill

On September 13, 2021, the House Ways & Means Committee of the U.S. House of Representatives released the draft text of its proposed budget reconciliation bill (the “Build Back Better Act”), and on September 15, 2021 it approved various sections of the proposal. It is important for clients to note that as of the date of this article, these proposals are not the law, and are subject to ongoing negotiations. The proposed provisions could change considerably and there is no guarantee that any of the provisions will become law. Nevertheless, this article is to alert clients of the potential changes to estate planning and the resulting consequences of such changes if they are approved. We encourage our clients to be proactive and plan in advance of possible impending changes.  

Effective Date: The Effective Date is the date the drafted provision would become operative and enforceable law. It’s important to note that the effective date is not the same for each proposed change. Each proposed change would take effect one of three dates: (1) the Introduction Date (September 13, 2021); (2) the start of the next tax year (January 1, 2022); or (3) the Enactment Date of the legislation (to be determined). The following topics have a planned effective date of either January 1, 2022, or the Enactment Date. All references refer to the Build Back Better Act.  

(1) Potential Tax Impact on Estate Planning: Effective – January 1, 2022

  • Income Tax Rate Increase (§138201): Currently estates and trusts with taxable income in excess of $12,500 are subject to a 37% tax rate. The proposed legislation would increase the tax rate to 39.6%.
  • Net Investment Income Tax Expanded (§138203): Under current law, a 3.8% tax is imposed on Net Investment Income (NII) on certain individuals, estates, or trusts if a trade or business is a passive activity for the taxpayer (i.e., the taxpayer does not materially participate in the trade or business). In other words, the 3.8% tax does not apply to income from a trade or business conducted as a sole proprietor, partnership, or S Corporation, if the taxpayer materially participates in the trade or business. Under the proposal, the 3.8% tax would be imposed on the NII of high-income individuals (taxpayers with greater than $400,000 in modified adjusted gross income (single filer) or $500,000 (joint filer)) regardless of whether the trade or business is a passive activity for the taxpayer so long as the income isn’t already subject to the Federal Insurance Contribution Act (FICA) or Self-Employment Tax.

    Additionally, the current tax is 3.8% of the lesser of NII or the excess of modified Adjusted Gross Income (AGI) over a set dollar amount. For trusts and estates, the current tax is 3.8% of the lesser of undistributed net income, or the excess of AGI over a set dollar amount. The drafted legislation also proposes to expand the definition of the NII subject to the tax by stating the 3.8% tax would apply to the greater of specified net income or NII. For trusts and estates, the 3.8% would apply to the lesser of (1) the greater the undistributed specified net income or undistributed NII; or (2) the excess AGI over the set dollar amount.

  • Surcharge on High Income Estates and Trusts (§138206): Any modified AGI of an estate or trust in excess of $100,000 would now be subject to a tax equal to 3%.

  • Gift, Estate, and Generation-Skipping Transfer Exemptions Decreased (§138207): Currently the gift, estate, and generation skipping transfer (GST) tax exemptions are $11.7 million per person ($23.4 for married couples). The proposed legislation would decrease the exemption to $5 million per person, plus a cost-of-living adjustment (estimated to equal around $6 million for individuals, $12 million for married couples).
  • Limitation of Deduction of Qualified Business Income -Section 199A (§138204): Under current law, subject to exceptions and limitations, certain taxpayers other than corporations (owners of pass-through entities such as S Corporations and partnerships) are entitled to deduct 20% of qualified business income earned in a qualified trade or business (199A Deduction). The proposal limits the amount of the 20% deduction to $500,000 for joint filers, $400,000 for individual filers, $259,000 for married filers filing separately, and $10,000 for trusts and estates.
  • Estate Tax Valuation Reduction for Certain Real Property Used in Farming or Other Trades or Businesses (§138208): Generally, assets within an estate are valued at their highest and best use for estate tax calculation purposes. However, §2032A of the IRC allows property used for farming or in a trade or business to be valued based on that use (e.g., farm production value) and not on the true fair market value of the property. Currently, the maximum reduction in the value of such property is $750,000 adjusted for inflation ($1.2 million). For example, if the estate owns a farm with a fair market value of $10 million but the farm production value is only $1 million, then the estate can reduce the value from $10 million to $8.8 million for the purposes of estate tax calculation. This proposed legislation would increase the maximum reduction in the value of such property to $11.7 million. This means the estate with that same farm having a fair market value of $10 million and farm production value of $1 million would be able to reduce the value to $1 million for the purposes of estate tax calculation.

(2) Potential Tax Impact on Estate Planning: Effective – Enactment Date (To Be Determined)

  • Estate Taxation of Grantor Trusts (§138209): Grantor trusts are a common estate planning technique used to allow a grantor to make a gift to a trust (for which he/she retains certain powers) so that the trust is treated for income tax purposes as the same person as the grantor, while being excluded from the grantor’s estate for estate tax purposes.

    Under the proposed legislation, when the owner of an Irrevocable Grantor Trust (IGT) dies, the assets of the IGT would be part of the owner’s gross estate, opposed to that of the beneficiaries. Also, any distribution from a IGT to someone other than the grantor, the grantor’s spouse, or to discharge a debt of the grantor would be treated as a taxable gift from the grantor to the recipient. Lastly, if the trust ceases to be IGT during the grantor’s lifetime, it would be treated as a gift by the grantor of all trust assets.

    When this proposal is applied to existing estate planning techniques, the impacts are devastating to both existing and future estate plans. For example:

    • Grantor Retained Annuity Trusts (GRAT): If at end of annuity term if the GRAT transfers assets to a continuing grantor trust, those assets would be subject to estate tax under the new legislation. Also, if any asset passes to a non-grantor trust or to the grantor’s children it would be treated as a taxable gift.
    • Intentionally Defective Grantor Trusts (IDGT); The proposed legislation would subject a grantor trust to estate taxes (when the trust’s deemed owner dies) or gift taxes (when grantor trust status is terminated while the deemed owner is still living).
    • Spousal Lifetime Access Trust (SLAT): Under the proposed legislation, the appreciation of the assets in the trust would be subject to gift or estate tax upon the termination of grantor trust status, negating the benefit of having made an earlier taxable gift.
    • Insurance Trusts: Under the proposed legislation, some or all of the proceeds of a life insurance policy that are owned inside an irrevocable life insurance trust (that’s considered a grantor trust) would be subject to estate taxation if either the trust is established after the date of enactment, or the insured makes payments of insurance premiums after the date of enactment.

This legislation would apply to all IGTs created on or after the enactment date, however if a contribution is made to an IGT that was created before the enactment date, such contribution would be subject to the new legislation.

  • Taxation of Sales to Grantor Trusts (§138209): Currently, if a grantor sells an appreciated asset to an IGT, no capital gain is triggered (because the trust is treated, for income tax purposes, as the same person as the grantor). Under the proposal, a sale between an IGT and its deemed owner (grantor) would be treated as equivalent to a sale between the grantor and a third party. Therefore, gain would be recognized on such sale and would deny the recognition of a loss. The proposal also removes a grantor’s ability to swap assets of equal value with an IGT. It’s important to note that even if the IGT was created before the Enactment Date, a gain will still be recognized if a contribution is made to an IGT after the Enactment Date.
  • Valuation of Nonbusiness Assets (§138210): Taxpayers currently have the ability to claim a valuation discount for estate and gift tax purposes on transfers of non-publicly traded entities holding nonbusiness assets (any passive asset held for the production or collection of income and is not used in the active conduct of a trade or business). Under the proposed legislation, those valuation discounts on transfers of non-publicly traded non-business assets are eliminated in determining the assets value for estate and gift tax purposes.

NOTE: This article does not list all of the legislation being proposed in the Build Back Better Act. It is merely a list of the provisions we believe to be most relevant to a majority of our clients. Please contact your estate planning attorney to discuss the potential legislation and how it may or may not affect your planning needs. Although it is impossible to know which provisions will pass, possible tax-planning strategies may still be available to those who would like to act in advance of the impending change. 

Please contact The Burton Law Firm at 916.822.8700 or info@burtonlawfirm.com

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Potential Corporate Tax Impacts of the Proposed Reconciliation Bill

News & Analysis
Latest legal news and recent law changes.

Potential Corporate Tax Impacts of the Proposed Reconciliation Bill

On September 13, 2021, the House Ways & Means Committee of the U.S. House of Representatives released the draft text of its proposed budget reconciliation bill (the “Build Back Better Act”), and on September 15, 2021 it approved various sections of the proposal. It is important for clients to note that as of the date of this article, these proposals are not the law, and are subject to ongoing negotiations. The proposed provisions could change considerably and there is no guarantee that any of the provisions will become law. Nevertheless, this article is to alert clients of the potential changes to business law and the resulting consequences of such changes if they are approved. We encourage our clients to be proactive and plan in advance of possible impending changes.  

Effective Date: The Effective Date is the date each drafted provision would become operative and enforceable law. It’s important to note that the effective date is not the same for each proposed change. Each proposed change would take effect one of three dates: (1) the Introduction Date (September 13, 2021); (2) the start of the next tax year (January 1, 2022); or (3) the Enactment Date of the legislation (to be determined). All references refer to the Build Back Better Act.  

(1) Potential Corporate Tax Impact: Effective – Introduction Date (September 13, 2021)

  • Modification to Rules Governing the Sale or Exchange of Qualified Small Business Stock (§138150). Currently, a taxpayer (other than a corporation) who acquired (or acquires) Qualified Small Business Stock (“QSBS”) during certain periods in 2010, and thereafter, and has held the stock for more than 5 years, is able to exclude 100% of any gain from the sale or exchange of QSBS from his or her gross income. Under the proposal, if the taxpayer’s Adjusted Gross Income (“AGI”) equals or exceeds $400,000, or if the taxpayer is a trust or estate, then the 100% exclusion of any gain from the sale of a QSBS is reduced to 50%.
  • Limitation on Syndicated Conservation Easement Deductions (§138403): This provision would limit the partner’s deduction for a qualified conservation contribution made by the pass-through entity (i.e., the partnership) if the amount of the contribution exceeds 2.5 times the sum of each partner’s adjusted bases in the partnership that relates to the donated property. The proposed legislation would also allow for an exception if the donations of property meet the requirements of the 3-year holding rule. Lastly, it would not apply to contributions by family partnerships. The provision would apply retroactively to contributions made after December 23, 2016.

(2) Potential Corporate Tax Impact: Effective – January 1, 2022

  • Increase in Corporate Tax Rate (§ 138101). The current corporate flat tax rate of 21% on all taxable income (i.e. the adjusted gross income minus either the standard deduction or allowable itemized deductions) would be replaced with graduated rates based on the corporation’s taxable income (outlined below). Corporations that have a taxable income in excess of $10,000,000 for any taxable year will have an additional tax of 3%, up to $287,000.
    1. 18% of taxable income up to $400,000
    2. 21% of taxable income from $400,000 to $5,000,000
    3. 5% of taxable income over $5,000,000

Certain personal services corporations may be ineligible for the graduated tax rates and will be taxed at 26.5%.

  • Carried Interest (§138149): Carried interest is a contractual right to profit interests granted to a taxpayer as compensation for taxpayer’s services. Under current law, certain long-term capital gain attributable to carried interests in certain partnerships such as hedge funds, private equity funds, and real estate funds are subject to ordinary income tax rates (current top federal rate is 37%), instead of long-term capital gains tax rates (current top federal rate is 20%) unless the asset was held for more than 3 years. Also, currently, Section 1231 gain (gain from the sale of property used in a trade or business) is not subject to this 3-year holding period.

    Under the proposal, the 3-year holding period required for an applicable carried interest to be taxed at long-term capital gains rates would increase to 5 years. Also, Section 1231 gain would now be subject to a 3-year holding period. Lastly, the 3-year holding period would be retained for taxpayers (other than a trust or estate) with an AGI of $400,000 or less.

  • Limitation on Excess Business Losses of Noncorporate Taxpayers (§138205): The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided relief for taxpayers by eliminating the excess business loss limitation (which disallows excess business loss for noncorporate taxpayers for losses in excess of $500,000 for joint filers and $250,000 for individuals) for the 2018, 2019, and 2020 tax years. This proposal would permanently disallow excess business losses for non-corporate taxpayers and would allow taxpayers whose losses are disallowed to carry those losses forward to the next succeeding tax year as a deduction.
  • Modification to Treatment of Certain Losses (§138142): Under the proposed legislation, losses realized on certain securities will be treated as being realized on the day that the event establishing worthlessness occurred, rather than on the last day of the taxable year. This potentially limits the instances when such a loss would be treated as a capital loss as opposed to a short-term loss (ordinary loss). Also, under the proposed legislation, partnership indebtedness would be treated the same as corporate indebtedness for the purpose of Section 165 of the Internal Revenue Code (IRC) and worthless partnership interests would be treated as a loss from the sale or exchange of a partnership interest at the time of the identifiable event establishing worthlessness.
  • Wash Sale Rules Apply to Related Parties and Digital Assets (§138153): Currently, the Wash Sale Rule provides that a tax loss resulting from the sale of a security is not deductible to the extent the taxpayer acquires a substantially identical security at either 30 days before or 30 days after the loss. The proposed legislation would include digital currencies such as cryptocurrency in the Wash Sale Rule. Also, under the new legislation, related parties whose acquisition of a substantially identical security within 30 days would also implicate the wash sale rules.
  • Tax Free Conversion of S-Corp to Partnership (§138509): This provision would temporarily allow eligible S corporations to reorganize as partnerships without such reorganizations triggering tax on the built-in gain in assets that would normally apply when assets are distributed out of a corporation. The S corporation must completely liquidate and transfer substantially all of its assets and liabilities to a domestic partnership during a two-year period beginning December 31, 3021.

(3) Potential Corporate Tax Impact: Effective – Enactment Date (To Be Determined)

  • Constructive Sale Rules Apply to Digital Assets (§138151): The Constructive Sale Rule under IRC §1259 provides that when there is a constructive sale of an appreciated financial position the taxpayer shall recognize gain as if such position were transferred at fair market value on the date of the constructive sale. A constructive sale occurs when a taxpayer holds an appreciated financial position and enters into certain designated transactions that substantially reduce taxpayer’s downside risk (such as a short sale). This tax proposal expands the definition of an “appreciated financial position” to include digital assets such as cryptocurrency.

NOTE: This article does not list all of the legislation being proposed in the Build Back Better Act. It is merely a list of the provisions we believe to be most relevant to a majority of our clients. Please contact your business or corporate attorney to discuss the potential legislation and how it may or may not affect your planning needs. Although it is impossible to know which provisions will pass, possible tax-planning strategies may still be available to those who would like to act in advance of the impending change. 

Please contact The Burton Law Firm at 916.822.8700 or info@burtonlawfirm.com for more info.

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COVID News

Governor Newsom Survives Recall Election

News & Analysis
Latest legal news and recent law changes.

Governor Newsom Survives Recall Election

With 70% of the California counties reporting, not enough outstanding votes remain to recall the sitting Governor, therefor solidifying that Gavin Newson has survived the 2021 Recall Election.

The currently tally of votes shows 5,840,283 votes against Governor Newson’s recall and 3,297,145 in favor. Republican challenger Larry Elder received 2,373,551 votes, or 46.9% votes over all to be the next governor.

This is California’s 179th attempted political recall since 1913 (source).

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COVID News

Workplace Vaccination Requirements: All Employers With 100 Workers or More Must Require Covid-19 Vaccinations or a Weekly Negative Test Result

News & Analysis
Latest legal news and recent law changes.

Workplace Vaccination Requirements: All Employers With 100 Workers or More Must Require Covid-19 Vaccinations or a Weekly Negative Test Result

On September 9th, 2021, President Biden announced incoming restrictions on non-vaccinated individuals in the workplace. Private employers with 100 or more employees must require their workers to be either be: (i) fully vaccinated or (ii) have them obtain weekly COVID-19 tests confirming they are not live carriers of the virus. Employers must take note: Businesses will also be required to provide paid leave for employees to become vaccinated.

Referred to as the “Covid-19 Mandate,” this requirement has yet to be officially implemented and officials are awaiting the Executive Order as well as the new Emergency Temporary Standard by the Occupational Safety and Health Administration, which will develop mechanisms for implementation. It is anticipated that there will be various lawsuits challenging the Executive Order, the fate of which is unknown. In theory, legal precedent advises that the Covid-19 Mandate will be held constitutional [i.e., Jacobson v. Massachusetts 197 U.S. 11 (1905)]. However, as has been seen with the Supreme Court’s decision ending the CDC’s eviction moratorium, and the Court’s refusal to block the recent controversial Texas law, the current Supreme Court is anything but predictable; and it could potentially strike down the Covid-19 Mandate based on the Tenth Amendment to the Constitution (State Sovereign Immunity). This blog will be updated as details emerge.

 


For more details, contact Burton Law Firm at: 916.822.8700 or info@lawburton.com or, see details at: https://www.whitehouse.gov/covidplan/.

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COVID News

Supreme Court Ends CDC Pandemic Residential Eviction Moratorium

News & Analysis
Latest legal news and recent law changes.

Supreme Court Ends CDC Pandemic Residential Eviction Moratorium

In a 6-3 decision on party lines, Alabama Assn. of Realtors v. Department of Health and Human Servs., the Supreme Court struck down President Biden’s COVID-19 eviction ban. This decision was unexpected as the Court’s upheld the ban placed by the prior administration which expired last July. The Order was unsigned (“Per Curiam”). Although the lack of a signature does not affect the enforceability of the Order, it is an unusual circumstance seemingly acknowledging the controversial nature of the ruling.

Historically, the Court is relatively flexible toward responses to public emergencies. However, the conservative majority rued such flexibility was no longer warranted. Specifically, that “[v]accine and rental-assistance distribution had improved since the stay was entered, while the harm to landlords had continued to increase.” [Alabama Assn. of Realtors, 584 U.S. at 4-5)].  The dissent countered with statistics, warning that this ruling risks the reemergence of COVID-19 mutations as 92% of U.S. counties have “substantial” and “high” levels of coronavirus transmission with national “average new daily hospital admissions at 12,209.” [Id at 14].

The majority opinion ultimately voided the moratorium under the doctrine of separation of powers, arguing that the 1944 law that delegated power to the CDC is far narrower than what the current administration maintains. Simply put, the Court ruled that the Executive branch did not have legal authority to ban evictions, and that Congress, and Congress alone, could authorize this ban.

As such, please be advised that the ban on evictions is unconstitutional due to its origin not its substance. Should Congress pass a law identical to the CDC’s moratorium, a ban on evictions would most likely be held constitutional.

The full ruling can be read HERE.

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COVID News

U.S. Senate Passes $1 Trillion Infrastructure Bill

News & Analysis
Latest legal news and recent law changes.

U.S. Senate Passes $1 Trillion Infrastructure Bill

On August 10th, 2021, with 68 yes votes vs. 29 no votes, the United States Senate passed the INVEST in America Act (H.R. 3684), a $1 trillion infrastructure revamp that has been a signature component of President Biden’s economic agenda. The bill constitutes a significant victory for the Biden Administration and received bipartisan support in its passing by the Senate.

More than half of the funds will go specifically to improvements in transportation, broadband telecommunications infrastructure, and public utilities. The bill also includes funding designated to combat climate change in the form of “publicly accessible electric vehicle charging infrastructure, hydrogen fueling infrastructure, propane fueling infrastructure, and natural gas fueling infrastructure[.]” Specifically, the bill approves spending on the following:

  • $11 billion for road safety;
  • $15 billion on alternative fuel based vehicle infrastructure;
  • $17 billion toward port improvements;
  • $17 billion toward airports;
  • $21 billion on environmental reclamation;
  • $39 billion for public transit revitalization;
  • $66 billion to expand passenger rail lines;
  • $50 billion for flood and other natural disaster protection;
  • $55 billion in clean water distribution;
  • $65 billion in broadband infrastructure;
  • $73 in clean energy conversion; and
  • $110 billion for roads and bridges.

Despite already having passed the House, the bill must return to the House to be reconciled with the Senate’s version before it can be sent for President Biden’s signature. This is not expected to occur until September 20th, but it is expected to pass the House again and then proceed to the President’s desk to be signed into law.

The full bill can be read here. For more information, please contact the Burton Law Firm or your local congressperson.

Categories
COVID News

Public Mask Mandate Reinstatement

News & Analysis
Latest legal news and recent law changes.

Public Mask Mandate Reinstatement

On July 29, the Sacramento County Health Office issued  a Health Order, effective July 30, requiring masks to be worn indoors in public settings. This order comes because of an almost 300% rise in the number of hospitalizations for COVID-19 in the last month since the statewide restrictions were lifted. According to the order, 64.8% of positive COVID-19 tests in Sacramento County were found to be the Delta variant that is currently causing surges in COVID-19 cases all over the world. This order also references the recent CDC and California Department of Public Health recommendations to wear face coverings in indoor public settings, elevating the recommendations to a mandate.

The order requires:

  • Masks to be worn in all indoor public venues, regardless of one’s vaccination status.
  • Businesses to require face coverings indoors, and to post visible signage at all entry points to indoor settings stating the mask requirements.
  • All attendees of “Indoor Mega-Events” (gatherings of 5,000 or more attendees) to wear face coverings.
  • All attendees of “Outdoor Mega-Events” (gatherings of 10,000 or more attendees) to wear face coverings.

The entire order can be read on the Sacramento County Website linked here. Sacramento County Order of the Health Officer – 07-29-2021.pdf (saccounty.net)

Categories
COVID News

The American Families Plan: President Biden’s Next Step

News & Analysis
Latest legal news and recent law changes.

The American Families Plan: President Biden’s Next Step

On April 28, 2021, President Biden unveiled the American Families Plan. This plan, if adopted in its entirety, would make significant changes to childcare, education, family and medical leave, and tax credits for low-income households. Many of the programs that it would expand would be funded via higher taxes on high income households[1], as well as increased enforcement of current tax policies via additional funding to the IRS. The White House says additional IRS funding would “go toward enforcement against those with the highest incomes. . . . Additional resources would focus on large corporations, businesses, and estates, and higher-income individuals.”[2] This plan will also limit 1031 like-kind exchanges above $500,000 in deferred capital gains, end the preferred treatment of carried interest, and make the 2017 tax law’s limitation on excess losses that applies to non-corporate income permanent.

The American Families Plan will focus on providing the following benefits:

  • Childcare, in the form of universal prekindergarten for children 3 and 4 years old.
  • Strengthening education by providing better training for teachers, and by providing 2 years of free community college following high school.
  • Decreasing food insecurity of children, by providing free meals for children in high-poverty school districts, and by expanding access to summer EBT (Electronic Benefits Transfer) programs—programs that provide increased access to SNAP (Supplemental Nutrition Assistance Program) benefits.
  • Reforming unemployment insurance, by putting money towards “unemployment insurance system modernization, equitable access, and fraud prevention”[3]
  • Creating a national paid family and medical leave program.
  • Granting a variety of tax credits to low-income households with children.

This legislation comes as the third installment of Biden’s “Build Back Better” plan. Build Back Better consists of a series of legislation started with the American Rescue Plan that he has claimed is intended to help many Americans who have been impacted negatively by the pandemic as well as assist people who were struggling even before COVID-19 was a factor. It is still early to say if it will pass or not but the American Families Plan indicates what Biden hopes to accomplish during his time as President.


[1] Raise of the top marginal income tax from 37% to 39.5% (applies to incomes over $425,700 for single filers and $509,300 for joint filers). Taxing long term capital gains and qualified dividends as ordinary income for taxpayers with taxable income over $1 million. Taxing unrealized gains at death for unrealized gains above $1 million for single filers and 42 million for joint filers. Apply a 3.8% net investment income tax (NIIT) to active pass-through business income above $400,000. Pass-through businesses include partnerships, sole proprietorships, and S corporations.

[2] The White House Briefing Room Statements: “Fact Sheet: The American Families Plan” 4/28/2021

[3] The White House Briefing Room Statements: “Fact Sheet: The American Families Plan” 4/28/2021