Articles Posted in Tax

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On August 14, two U.S. Court of Appeals released decisions regarding the interplay between environmental law and the federal tax code.

In the case of Green Gas Delaware Statutory Trust, et al. v. Commissioner of IRS. The Court of Appeals for the District of Columbia Circuit affirmed the ruling of the Tax Court that the appellants could not claim federal tax credits connected with the generation and sale of “landfill gas” that is produced from decomposing landfill waste. Chief Judge Garland’s opinion begins with

Rumpelstiltskin could spin straw into gold. Rumpelstiltskin, Inc. thought it could do the same for garbage, spinning it into tax credits. The Commissioner of the Internal Revenue Service disagreed. So did the Tax Court. So do we.

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This morning, our colleagues on the State & Local Tax team published their Client Alert titled The U.S. Supreme Court Changes Sales and Use Tax Collection Nexus. In South Dakota v. Wayfair, Inc., the Court overrules the “physical presence” requirement as “unsound and incorrect.” Takeaways from the Court’s decision include:

  • South Dakota law satisfies the Commerce Clause “substantial nexus” requirement based on the “economic and virtual contacts” with the State.
  • The Wayfair decision does not prohibit the retroactive application of this new standard for Commerce Clause “substantial nexus.”
  • The decision strikes a blow to the Court’s stare decisis jurisprudence.

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iStock-482487681-maijuana-tax-300x200As noted in a prior post, the affordable housing industry is struggling to make ends meet after equity pricing took a dive in response to the decreased corporate tax rate under President Trump’s tax reform plan. While some reprieve was granted by the increases in tax credit allocations and appropriations for affordable housing programs under the 2018 federal spending plan, developers are still struggling to fill funding gaps. One city is proposing a creative way to funnel more money toward affordable housing: On April 16, Denver Mayor Michael Hancock proposed a 2% increase in the special tax on recreational marijuana, with the additional revenue generated to be earmarked for the City’s affordable housing fund.

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Over the last few decades, there have been more than a few proposals seeking to limit or remove the protections Proposition 13 affords to some types of real estate. In their recent client alert, colleagues Craig A. Becker and Breann E. Robowski examine Initiative 17-0055, which would make two significant changes to California’s property tax system, including the elimination of Prop 13 protection for commercial and industrial real estate.

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When it comes to real estate, every large U.S. city is in some ways its own unique ecosystem. Still, a local measure can set a standard that other municipalities take note of and potentially emulate. In their recent client alert on dueling proposals for commercial rent tax measures, colleagues Richard E. Nielsen, Craig A. Becker and Robert C. Herr examine just such a local ballot measure, as the San Francisco electorate will decide between a 1.7% or 3.5% tax on commercial rentals in June.

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In general, the Tax Cuts and Jobs Act bill allows pass-through owners making less than $157,500 ($315,000 for married couples) to take a flat 20 percent deduction on certain business income, before computing the ordinary income tax they would owe on the remainder. Under complex rules, the deduction phases out when taxpayers make over that amount but under $207,500 ($415,000 for married couples). Continue reading

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On July 11, the Texas Court of Appeals, Third District, at Austin, TX, decided the case of Freestone Power Generation, LLC, v. Texas Commission on Environmental Quality, et al., reversing the trial court’s ruling that eight Texas power companies were not entitled to certain property tax exemptions administered by the Texas Commission on Environmental Quality (TCEQ). Continue reading

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The California Supreme Court’s recent Ardmore decision expanding the applicability of California’s Documentary Transfer Tax Act will no doubt be the source of future litigation. In their recent client alert, colleagues Craig A. Becker, Richard E. Nielsen, Breann E. Robowski and Dianne L. Sweeney examine the issue.

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In California Supreme Court Decision Changes the Transfer Tax World, Pillsbury attorneys Craig Becker, Richard Nielsen, Breann Robowski and Dianne Sweeney discuss the California Supreme Court’s decision in 926 North Armore Avenue, LLC v. County of Los Angeles:

  • Court concludes counties and cities are permitted to impose a documentary transfer tax on entity transfers that result in a Proposition 13 “change in ownership” under California Revenue & Taxation Code § 64(c) or 64(d).

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iStock-520129622-umbrella-300x247There are two reasons why borrowing has become the tax-preferred method of financing a sophisticated real estate investment portfolio.

First is the ability to finance improvements with debt, which offers depreciation deductions. Second is the ability to make leveraged distributions through refinancing without paying immediate tax on the proceeds. The tax basis of assets steps up to fair market value at the time of the holder’s death, eliminating the deferred gain, so the income tax deferral upon a refinancing is even more attractive for heirs.

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