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Noonan’s Notes Blog

About This Blog

Noonan’s Notes Blog is written by a team of Hodgson Russ tax attorneys led by the blog’s namesake, Tim Noonan. Noonan’s Notes Blog regularly provides analysis of and commentary on developments in the world of New York and multistate tax law. Noonan's Notes Blog is a winner of CreditDonkey's Best Tax Blogs Award 2017.

Contributors

Timothy Noonan 
Ariele Doolittle
Joseph Endres
Daniel Kelly
Elizabeth Pascal 
Craig Reilly
Andrew Wright 

SALT Cap Lawsuit Brought by Four States against Federal Government Is Dismissed

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More than three months after oral arguments were heard in the SALT cap lawsuit (State of New York, State of Connecticut, State of Maryland, and State of New Jersey v. United States Department of Treasury, The Internal Revenue Service and The United States of America, 18-cv-6427), Judge J. Paul Oetken of the U.S. District Court dismissed the suit on September 30, 2019. Judge Oetken ruled that the $10,000 SALT deduction cap under the Tax Cuts and Jobs Act was not unconstitutionally coercive, finding that the states had not plausibly alleged that the cap meaningfully constrains the states’ decision-making processes. Further, Judge Oetken rejected the federal government’s argument that the court did not have jurisdiction to hear the case, holding that the states’ allegation that they would suffer diminished real estate transfer tax revenues was sufficient to give them standing to challenge the cap. He also held that the Anti-Injunction Act did not bar the suit because the states had no alternate mechanism to challenge the cap's legality.

New York City Finally Releases Guidance on Impact of TCJA Business Interest Deduction Limitations on City Business Income Tax Returns

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New York City corporate tax returns have already been filed for the 2018 tax year and NYC unincorporated business tax (UBT) returns are due October 15th. But barely a week before the UBT filing due date, on October 8, 2019, NYC released its long-awaited guidance (https://www1.nyc.gov/assets/finance/downloads/pdf/fm/2018/fm-18-11.pdf) on the attribution of interest deductions for taxpayers whose interest expense deduction was limited under Section 163(j) of the Internal Revenue Code, enacted as part of the Tax Cuts & Jobs Act (TCJA). Under that provision, a taxpayer’s deduction for business interest expense is limited to 30% of adjusted taxable income except in certain circumstances. Any unused interest expense may be carried forward to the following tax year. Note that the NYC Finance Memorandum is numbered 18-11, suggesting that it was originally intended for release in late 2018.

Supreme Court Denies Cert in Wynne Cases

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It appears we’ve reached the end of the line on our “Wynne” cases. On October 7, 2019, the Supreme Court of the United States declined to hear our appeals in Edelman v. Department of Taxation and Finance and Chamberlain v. Department of Taxation and Finance. In both cases, we argued that New York’s statutory residency taxing scheme, which subjected taxpayers who qualified as dual residents of New York and Connecticut to double taxation, was unconstitutional and in violation of the Commerce Clause. As we reported earlier this year, the New York State Court of Appeals previously declined to hear the taxpayers’ appeals in April 2019.

Can a New York Resident Claim a Resident Tax Credit for the Connecticut Pass-through Entity Tax?

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Last week the Massachusetts Department of Revenue released a Directive (Directive 19-1) announcing its position that its residents can claim a credit for the taxes paid by pass-through entities under Connecticut’s PET, the Connecticut workaround to the federal cap on state and local tax deductions. Practitioners with New York clients have been asking the same question, but the New York Tax Department has not, up to this point, provided any similar guidance.

Boring but Important: Tax Department Releases Memos Summarizing Tax Law Changes

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The New York State Department of Taxation and Finance (the Department) issued three technical memoranda on September 3, 2019, summarizing the corporation tax, personal income tax and tax credit changes that were part of the 2019-2020 New York state budget we covered here. Two of the three are recapped below, with links to both memos. The third, TSB-M-19(4)C, (5)I, covered new tax credit provisions.    

Pass-through Entity Level Taxes - Where are They and How do they Work?

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The SALT cap has been in the news since the Tax Cuts & Jobs Act (TCJA - P.L. 115-97) was passed in late 2017, with federal legislation capping the individual state and local tax deduction at $10,000 per year beginning January 1, 2018. SALT cap issues have abounded and we have written about SALT lawsuits here, proposed workarounds here, and new IRS regulations regarding SALT credits here. Of course, the biggest hurdle facing taxpayers still remains finding a viable workaround to the SALT cap.

NY Tax Minutes: City Finances, Transparency, Tribunal Rulings

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This article originally appeared in Law360 and is reprinted with permission.

August is often a slow month in the state and local tax world, with attorneys, accountants and auditors looking to squeeze the last bit out of summer. But not everyone at the New York State Tax Department took a break this month. And our most seasonally appropriate update comes from the Tax Department’s August appearance at The Great New York State Fair in Syracuse, New York. [1]

New York State v. Obus : Clearing the Air on a New N.Y. Tax Case

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There has been a lot of buzz in recent days about a recent New York Division of Tax Appeals case addressing the New York residency status of a taxpayer who maintained a vacation home in New York state. The case, titled Matter of Obus (click here to read it), dealt with a New Jersey resident who worked in New York City and also maintained a vacation home in Northville, New York, a vacation community in Upstate New York. The case was also covered in a Wall Street Journal article that has sparked a lot of confusion about New York’s residency tests.

NY Tax Minutes: Trump Tax Returns, New Corporate Tax Regs

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This article originally appeared in Law360 and is reprinted with permission.

Every year, magazines and newspapers across the country release summer’s best beach reads — lists of what books and articles to pick up and read your way through vacation. But, if you’re like us, don’t you wish there was a list tailored just for tax professionals? Those of us looking for something relaxing to read on our summer vacations but that’s also tailored just for you? Well for that, there’s only one recommendation you need: this month’s edition of NY Tax Minutes.

Are Tax Rates Going Up In New York?

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All the talk around the SALT Cap over the past year or so has put New York’s high personal income tax rates into focus. Just last month, President Trump locked into a Twitter debate with Governor Andrew Cuomo, arguing that "it is very hard and expensive to live in New York" because of the state's "ridiculously high taxes.”  Governor Cuomo countered that he had in fact lowered taxes. Whatever the case, with the SALT Cap hurting high-income New Yorkers, one obvious way to alleviate that burden would be to reduce state income tax rates. Even a little bit would help!

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