On September 13, 2024, California’s Franchise Tax Board (“FTB”) released updated proposed regulations (“Draft Regulations”), which would amend the rules regarding market-based sourcing for sales other than sales of tangible personal property. These proposed rules would have a significant effect on professional service providers, including asset managers. The Draft Regulations
The IRS and Senator Warren Raise Concerns about Lodging and Health Care REITs
The IRS and Senator Warren Raise Concerns about Lodging and Health Care REITs
I. Introduction
On September 3, 2024, Senator Elizabeth Warren (D-MA) sent a letter to the Internal Revenue Service (the “IRS”) urging it to “increase enforcement scrutiny of REITs, especially large health and hospitality REITs that may be
California Franchise Tax Board (FTB) to Apply Market-Based Sourcing Rules to Nonresident Directors of California Based Corporations
On Monday, September 9, 2024, the California FTB approved proposed amendments to California’s personal income tax code.
This proposed rule would impose California income tax on non-resident/non-employee corporate directors receiving fees for services performed outside of California if the corporation has a commercial domicile in California (presumably because the corporation
Proposed Regulations Issued on Reporting Obligations for Basket Contract Transactions
1. Introduction.
On July 12, 2024, the U.S. Department of the Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) issued proposed regulations that would classify “basket contract transactions”, which are derivatives (i) with a term of more than a year (or that spans two taxable years), (ii) that reference a
Proposed Regulations Issued on the Excise Tax on Repurchases of Corporate Stock
Introduction
On April 9, 2024, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (the “IRS”) issued two sets of proposed Treasury Regulations related to section 4501, REG-115710-22, which provides guidance on the application of section 4501, and REG-118499-23 (together with REG-115710-22, the
Final Regulations on Domestically Controlled REITs
- Introduction
On April 24, 2024, the U.S. Department of the Treasury (“Treasury”) and the Internal Revenue Service (the “IRS”) issued final regulations[1] on the definition of “domestically controlled” real estate investment trusts (“REITs”) (the “Final Regulations”). The Final Regulations retain
Recent Updates from the IRS and Treasury on the Superfund Chemical Tax
I. Executive Summary
On February 15, 2024, the IRS and Treasury issued a supplemental notice to a prior notice from December 2022, to correct a petition requesting that the Superfund Chemical Tax apply to polyphenylene sulfide. While the supplemental notice is narrow in scope, the IRS and Treasury have requested
Tax Court Provides Helpful Guidance on Requirements for Tax-Free Profits Interests
Introduction
On May 3, 2023, the United States Tax Court held in ES NPA Holding, LLC v. Commissioner, T.C. Memo. 2023-55, that the taxpayer’s receipt of interests in a partnership in exchange for services rendered to the sole owner of the business before it became a partnership was for the benefit of the future partnership and, therefore, was a profits interest (rather than a capital interest). The taxpayer did not provide ongoing services to the partnership.
IRS and Treasury Provide Guidance on the Excise Tax on Repurchases of Corporate Stock under Section 4501
On December 27, 2022, the Internal Revenue Service (“IRS”) and the U.S. Department of the Treasury (the “Treasury”) released Notice 2023-2 (the “Notice”), which provides guidance regarding the application of the 1% excise tax on corporate stock buybacks under recently enacted section 4501 (the “Tax”).[1] Taxpayers may rely on the Notice until proposed regulations are published. The Notice also contains a request for comments on the rules included in the Notice and rules not included in the Notice.
The Treasury and the IRS took a literal interpretation of the statute; thus, the Tax applies broadly to stock repurchases and other transactions that are not traditionally viewed as stock buybacks, including a repurchase of mandatorily redeemable preferred stock (even if such stock was issued before January 1, 2023). Special purpose acquisition companies (“SPACs”) will need to analyze whether a transaction is subject to the Tax under the general rules as the Notice does not include any special guidance for SPACs. However, SPACs did receive comfort that redemptions that take place in the same year as a “complete liquidation” under section 331 are not subject to the Tax.
Summary of the Biden Administration’s Fiscal Year 2023 Green Book Tax Proposals
On March 28, 2022, the Biden Administration released the Fiscal Year 2023 Budget, and the “General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals,” which is commonly referred to as the “Green Book.” The Green Book summarizes the Administration’s tax proposals contained in the Budget. The Green Book is