By Kevin M. Flynn
The CPA Journal
September 2019 Edition
The itemized deduction for state and local taxes (SALT) under Internal Revenue Code (IRC) section 164 had long provided relief to taxpayers residing in high income and property tax states such as New York, New Jersey, and Connecticut. It assured these taxpayers that their federal tax obligation would only be computed after a reduction for the state and local taxes that they paid, subject to the application of the alternative minimum tax and the itemized deduction limitation. The SALT deduction meant that the IRS could not impose a double tax on that portion of a taxpayer’s income that had been paid in taxes to state and local taxing authorities.
On December 22, 2017, President Donald J. Trump signed the Tax Cuts and Jobs Act (TCJA), which represents the most significant overhaul of the country’s tax laws since the Tax Reform Act of 1986. A major component of the TCJA was a $10,000 per calendar year cap on an individual’s aggregate deduction for state and local income, property, and sales taxes [IRC section 164(b)(6)]. This limitation applies to tax years beginning after December 31, 2017, and ending before January 1, 2026.
By: Kevin M. Flynn
The CPA Journal
On November 2, 2015, Congress enacted the Bipartisan Budget Act of 2015 (BBA), which contained sweeping changes to the Internal Revenue Code’s (IRC) partnership audit, litigation, assessment, and collection procedures. The BBA repealed the partnership audit and litigation rules enacted as part of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), which had governed the practice of tax advisors and the IRS for more than three decades. The BBA also replaced TEFRA’s partnership “tax matters partner” with a new “partnership representative,” in whom it vested vast powers, including the sole authority to act on behalf of a partnership and to bind all partners on partnership matters covered by the BBA. In light of these expanded powers, partners must carefully consider the person that they select to be the partnership representative. The failure to do so could be financially calamitous.
Robert S. Fink, Author
Kevin M. Flynn, Contributing Author
Sharon L. McCarthy, Contributing Author
Amy Walsh, Contributing Author
Tax Controversies: Audits, Investigations, Trials, 2 Vols. (Lexis/Nexis, 30th Rev. 2011)