NY Tax Minutes: Marketplace Sales Tax, Corp. Franchise Regs

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

As we finalize this month’s column, it appears that budget season here in New York state has finally come to a close, with the Governor and Legislature agreeing, on March 31, 2019, to a new $175 billion budget. The agreement came one day before the deadline for an on-time budget in order to meet the state’s next fiscal year, which begins April 1 In a March 31, 2019 press release,[1] Gov. Andrew Cuomo, Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie announced a plan that includes:

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Decoupling for Trusts and Estates and Other Disallowances Included in Last Minute Revisions to Budget Bill

On March 31^st  an agreement was announced on the FY 2020 Budget. We wrote about the tax related highlights of the budget proposal when it was released back in January. We also recently commented here about the mismatch between the treatment of itemized deductions for individuals versus trusts. Recent guidance from the Tax Department clarified that individuals could itemize deductions at the state level even if they took the standard deduction on their federal return and could take deductions for items disallowed at the federal level. Initially, this seemed to only apply to only individuals, and not trusts and estates.

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New York’s SALT “Workarounds” Not Really Working

Now in the heart of tax season, we are reminded about many of New York’s tax credits and deductions still available to taxpayers despite federal deductions being eliminated with the passage of the Tax Cuts and Jobs Act (TCJA) in December 2017. Over the past year, there has been a flurry of activity as New York legislative bodies and federal regulations drafters have offered up various SALT “workarounds,” to deal with the $10,000 SALT cap.  But recent reporting out of the New York budget office (from New York State Comptroller Thomas P. DiNapoli’s February 27 report on the proposed executive fiscal budget for 2020 (the “Report”) (see page 25-26)) suggests that these workarounds aren’t really working.  

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Mismatch for Decoupling in New York: Trusts and Estates Not Covered!

A few months ago, we wrote about the recent guidance that the Tax Department issued about itemized deduction decoupling (TSB-M-18(6)). The guidance addresses New York State’s decoupling from the federal treatment of deductions for individuals, but it was not initially clear whether these changes also apply to trusts and estates.

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New York’s Potential New Pied-a-terre Tax and Expanded Real Estate Transfer Tax: Nuts and Bolts of the Proposed Law

As reported here last month, a recent purchase of a $238 million apartment in New York City has re-sparked a debate among New York officials about taxing second homes owned by nonresidents.  As New York’s lawmakers look to finalize a budget by April 1^st, and to find new ways to fund New York City’s subway system, the pied-a-terre tax is viewed as a new quill in the arsenal. (The Assembly Budget Proposal is A. 2009-B). 

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Online Marketplaces Must Now Collect Sales Tax in New York State

Public relations firms often advise clients to release controversial or negative news late in the day on Friday. People are less likely to pay attention to such news over the weekend and by the time Monday rolls around, the news cycle has typically moved on. That might have been what the New York State Department of Taxation and Finance had in mind when, at 4:39 PM on Friday, March 9^th, it released its first sales tax advisory opinion of the year. In TSB-A-19(1)S, the Tax Department announced for the first time that an online marketplace can be held liable for the sales tax due on transactions that the marketplace facilitated. In other words, the Tax Department can hold both the individual vendor using the marketplace infrastructure and the marketplace itself liable for tax due on sales made through the marketplace. This is a dramatic, and we anticipate controversial, change in Tax Department policy.

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NY Tax Minutes: Amazon, Congestion Pricing, GILTI Guidance

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

The past month was a busy one for New York tax updates, but don't worry, we have the highlights, and, as always, we're delivering the month's news in a way that's made for New Yorkers. Fast.

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Can New York Continue to Ignore the Wynne Case?

Is New York’s taxation of statutory residents unconstitutional? Those who follow state and local tax developments (and readers of this blog) may know that Hodgson Russ has been litigating that question in two parallel cases, Chamberlain and Edelman (past coverage here and here). Both cases hone in on whether the U.S. Supreme Court’s 2015 decision in Comptroller v. Wynne upends New York’s prior precedent on this issue in Tamagni v. Tax Appeals Tribunal, requiring a new constitutional analysis. We think so, and that under an analysis consistent with Wynne, the double taxation faced by people domiciled outside of New York but taxed as statutory residents unconstitutionally burdens and discriminates against interstate commerce.

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A Pied-à-terre Tax in New York City?

According to a recent New York Times article, hedge-fund billionaire Kenneth C. Griffin purchased a $238 million apartment in January 2019 located at 220 Central Park South, making it the most expensive residential sale in United States history. Even in Manhattan, where huge real estate sales are downright routine, Griffin, founder and chief executive of the global investment firm Citadel, has managed to set a new record on an unfinished piece of property,  a purchase that surpassed the cost of the next most expensive purchase by more than $100 million.

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Sports Team Owners Strike-Out with Pass-Through Deduction

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

Much of the fanfare around last year’s federal tax reform was around the special 20% deduction applicable to income from flow-through entities like partnerships, S corporations and LLCs under IRC § 199A. But the new law generated more questions than answers, requiring the IRS to issue new regulations to help taxpayers and practitioners sort through all the details. Just recently, the IRS issued final regulations, and they came with some bad news for owners of your favorite sports team. Specifically, the new regulations confirm that sports team ownership falls within the definition of “athletics” and, therefore, is a disqualified activity, meaning team owners generally will be unable to qualify for the 20% deduction with respect to income generated from the team. In this post, we’ll explain what all the fuss is about.

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