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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 

Photo of Noonan’s Notes Blog Elizabeth Pascal
Partner, Accountant Professional Practice Leader
epascal@hodgsonruss.com
716.848.1622
View Bio »
Liz concentrates her practice in tax law with a focus on New York State, New York City, and multistate tax issues. She assists individual and business clients with New York …

Showing 11 posts by Elizabeth Pascal.

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.

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

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On March 31st  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.

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

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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.

Regarding Hurricanes Harvey and Irma and their Impact on New York Residency

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Clients who are domiciled in Texas, Florida, and US Virgin Islands may end up spending additional time in New York this year, due to Hurricanes Harvey or Irma. Those affected might be concerned about the impact of that additional New York time on their New York residency situation. Clients should be aware that the New York State Department of Taxation of Finance has not put out any information to taxpayers affected, or potentially affected, by these storms. To our knowledge, the Department has never issued an official policy regarding the treatment of days spent in New York due to a mandatory evacuation from a primary residence in another state, or damage to that residence.

Give your feedback on draft of new Corporation Franchise Tax Regulations

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The New York State Department of Taxation and Finance has been drafting new Corporation Franchise Tax Regulations to incorporate the changes made by the corporate tax reform legislation that went into effect in 2015. 

The newest draft regulations address net operating losses carried forward from pre-2015 tax years. In order to preserve the value of unused NOLs that arose prior to 2015, New York has created a prior net operating loss conversion (PNOLC) subtraction pool that can be applied against apportioned income in post-2015 tax years.

Corporate Tax Reform FAQs

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Since the new corporate tax reform went into effect on January 1, 2015, the New York State Department of Taxation and Finance has been providing “general guidance” -- answers to frequently asked questions (FAQs) -- on topics of interest to taxpayers. Recently, the Tax Department clarified two administrative issues with combined filing under the new regime and issued an FAQ with respect to the proper completion of the apportionment schedule on the return.

Attention Hedge Fund Investment Advisors: Connecticut Court Permits Credit for Taxes Paid on Carried Interest

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On March 7th, a Superior Court in Connecticut issued a decision that could have a significant impact on some investment fund managers who live in Connecticut but manage funds in other states. In Jonathan A. Sobel v. Commissioner of Revenue Services, the Judge held that investment (and therefore intangible) income received by Mr. Sobel, a partner in a partnership that served as the general partner and advisor of certain investment funds, was New York source income and therefore Mr. Sobel could claim a credit on his 1997 and 1998 Connecticut resident tax return for taxes paid to New York (yes, the case has been going on that long!).

Report from the First Annual New York State Tax Summit

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Last week we had the opportunity to attend the first annual New York State Tax Summit, a daylong seminar put on by the New York State Department of Taxation and Finance at their offices in Brooklyn.  It was a fantastic event, with senior Department officials presenting a wide variety of topics and issues for discussion.  There were close to 200 attendees present. And the Agenda was impressive. Here are some of the highlights of the day:   

Did the Tribunal Expand the Jurisdiction of the Division of Tax Appeals?

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In Matter of Grand Central JT VT (March 10, 2016), the Tax Appeals Tribunal decided a fairly routine tax case as to whether the taxpayer maintained adequate books and records in a sales tax audit and whether the Audit Division’s indirect methodology to estimate sales was reasonable.

What’s So Interesting About Interest Rates?

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A pile of money representing compounded interestFor those of us who regularly handle state audits, the focus is usually on the legal or factual arguments as to why no additional taxes are due. And it’s great when our clients can walk away with no additional taxes to pay. But in many cases, a “win” means negotiating a reasonable settlement of a difficult issue. In those cases, the final bill can come as a shock to taxpayers, once interest is included. Particularly with interest rates at historical lows, we expect those low rates to carry over to our tax bills. For the IRS and states that base their interest rate on the federal short-term rate or a similar metric, that’s true. The current IRS interest rate on individual underpayments and overpayments is 3%—not so bad.

But states are by no means required to follow the IRS on interest rates, although quite a few do. Some states may start with the IRS underpayment rate but then tack on a few percentage points (e.g. Virginia adds 2%). Other states, such as North Carolina (5%), Kansas (4%), Michigan (4.25%), and Oregon (4%), also keep their rates in line with overall interest rates.

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