Thursday, October 31, 2013

New York Offers Tax Exemptions to New Businesses in Designated Tax-Free Areas

In June 2013, New York State enacted the START-UP NY program to encourage new businesses to move to New York, especially upstate New York, by offering a full tax exemption from New York state taxes for businesses locating in tax-free areas on or near certain institutions of higher education. The START-UP NY program may provide significant benefits and should be considered by out-of-state businesses operating in high tax states or foreign businesses seeking to establish or expand their U.S. presence.

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Monday, July 29, 2013

FBARs Must Be Filed Electronically

The Treasury Department will no longer accept FBARs in paper form.  Beginning August 1, 2013, all FBARs must be filed electronically.  U.S. persons with a financial interest in, or signature authority over, foreign financial accounts with an aggregate value exceeding $10,000 during any year are required to file a an FBAR – “Report of Foreign Bank and Financial Account” on Form TD F 90-22.1 -- by June 30 of the following year.  FBARs must now be filed online through the BSA E-Filing System of the Financial Crimes Enforcement Network (“FinCEN”).  Noncompliance may result in civil penalties.  


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Monday, July 22, 2013

Amendments to Immigration Reform Bill to Prevent “Taxpatriation”

Certain members of Congress are upset that more than 670 people expatriated from the United States in the first quarter of 2013, the largest quarterly number since the IRS started publishing the names of expatriates in 1998. While the press has actively reported on the immigration reform bill before Congress (the “Immigration Bill”), little notice has been taken of the two significant amendments proposed by Senators Reed (D-RI), Schumer (D-NY), and Casey (D-PA) on June 12, 2013,1 which would “punish” both past and future expatriates. While the Immigration Bill passed the Senate on June 27, 2013, without the two expatriation amendments, it is impossible to predict when and where these amendments may reappear.

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Friday, May 24, 2013

IRS Releases New FATCA Forms


On May 17, 2013, the U.S. Internal Revenue Service ("IRS")  released a new draft Form W-8BEN, "Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)" and a new draft Form W-9, "Request for Taxpayer Identification Number and Certification."  The new draft forms incorporate changes necessitated by the implementation of the Foreign Account Tax Compliance Act ("FATCA"). The new draft Form W-8BEN will be used by individuals to certify foreign status for U.S. withholding tax, U.S. tax treaty benefit and FATCA withholding purposes.  The new draft Form W-9, "Request for Taxpayer Identification Number and Certification" will be used by U.S. individuals and entities to certify U.S. status and provide a tax identification number in order to avoid U.S. backup withholding and FATCA withholding.

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Wednesday, April 24, 2013

Fiscal Cliff Update - Estate, Gift and GST Tax

On January 1, 2013 Congress passed the American Taxpayer Relief Act (the “Act”), which President Obama signed into law on January 2nd in order to avoid the so-called “fiscal cliff.”  The Act permanently extended a number of temporary and expiring tax cuts and has significant impact on estate, gift, and generation-skipping transfer (“GST”) tax laws.  On April 10, 2013 President Obama released his most recent budget proposal, which potentially may impact some of the “permanent” provisions of the Act.  Where applicable, the budget’s impact on the Act is noted below.

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Friday, January 18, 2013

The Treasury Department issued final regulations on the Foreign Account Tax Compliance Act (FATCA)

On January 17, 2013, the Treasury issued final regulations on the Foreign Account Tax Compliance Act (FATCA), and announced that Norway has joined the United Kingdom, Mexico, Denmark, Ireland, Switzerland, and Spain as countries that have signed or initialed model agreements relating to FATCA compliance. The voluminous final regulations, expanding over hundreds of pages, will be published in the federal register on January 28, and the pre-publication version is available here: https://www.federalregister.gov/articles/2013/01/28/2013-01025/information-reporting-by-foreign-financial-institutions-and-withholding-on-certain-payments-to.

FATCA was enacted in 2010 to require foreign financial institutions ("FFIs") to report to the IRS information about financial accounts held by U.S. taxpayers (or by foreign entities in which U.S. taxpayers hold a substantial ownership interest). In order to avoid withholding under FATCA, an FFI will have to enter into an agreement with the IRS to identify U.S. accounts, report certain information to the IRS regarding U.S. accounts, and withhold a 30 percent tax on certain U.S.-connected payments to account holders who are unwilling to provide the required information. 

 The regulations finalize the step-by-step process for U.S. account identification, information reporting, and withholding requirements, build on intergovernmental agreements that foster international cooperation, phase in the timelines for due diligence, reporting and withholding and align them with the intergovernmental agreements, expand and clarify the scope of payments not subject to withholding, refine and clarify the treatment of investment entities, and clarify the compliance and verification obligations of FFIs.

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Thursday, January 3, 2013

Congress passes the "American Taxpayer Relief Act of 2012"

On January 1, 2013, Congress passed legislation, the "American Taxpayer Relief Act of 2012", to avert some of the January 1, 2013 tax increases resulting in the so-called fiscal cliff. The text of the legislation is available at http://www.gpo.gov/fdsys/pkg/BILLS-112hr8enr/pdf/BILLS-112hr8enr.pdf.

Highlights include:

  • The maximum income tax rate remains at 35% for taxpayers whose taxable income is under $400,000 (or $450,000 for married couples filed jointly). The maximum income tax rate for taxpayers whose taxable income exceeds these thresholds is 39.6%. 

  • Marginal income tax rates on long-term capital gains and dividends, currently 15%, continue for taxpayers whose taxable income is under $400,000 (or $450,000 for married couples filed jointly). The maximum marginal rate is 20% for taxpayers whose taxable income exceeds these thresholds. 

    •  Note that a new 3.8% surtax enacted by the 2010 healthcare reforms also took effect January 1, 2013 on investment income of taxpayers with modified gross income over $200,000 for individuals (or $250,000 for joint filers). 

  • The overall limitation on itemized deduction and the personal exemption phaseout apply only to taxpayers whose adjusted gross income exceeds $250,000 (or $300,000 for joint filers). 

  • The $5 million unified exemption amount (indexed after 2011) with portability for estate and gift tax is permanently extended, but with a new top rate at 40%. 

  • The alternative minimum tax exemption amount is increased permanently, to $50,600 (or $78,750 for joint filers) in 2012 and indexed thereafter. 
In addition, certain business tax relieves are also permanently extended including, for example, the reduction in recognition period for S corporation built-in gains tax, the look-through treatment of payments between related controlled foreign corporations, and the extension of certain bonus depreciations.

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