One of the sensual and ineffable pleasures of life is a satisfying meal, whether prepared at home or partaken of at a restaurant. The Consolidated Appropriations Act, 2021 (CAA) temporarily expanded the pathway to this pleasure by providing for the full deductibility of business expenses paid or incurred from January 1, 2021 to December 31, 2022 for food or beverages provided by restaurants. Full deductibility is set forth in Section 274(n)(2)(D) of the Internal Revenue Code of 1986, as amended (the “Code”). Prior to the CAA, the deductibility of restaurant meals, like all other food and beverage business expenses, was subject to a 50 percent limitation. Since the CAA did not define “restaurant,” the precise scope of full deductibility remained uncertain. In Notice 2021-25, the IRS defined “restaurant,” and its definition removes a significant degree of this uncertainty. A restaurant means a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises. A restaurant does not include a business that primarily sells pre-packaged food or beverages not for immediate consumption, such as a beer, wine, or liquor store; convenience store; drug store; grocery store; kiosk; newsstand; specialty food store; or vending machine. The 50 percent deduction continues to...
IRS Allows Use of Pass-Through Business Alternative Taxes to Bypass 2017 Tax Act’s Limitation on SALT Deductions – Effectively Blessing New Jersey Statutory Work-Around
On Monday, November 9th, the IRS issued Notice 2020-75 stating that it intended to issue proposed regulations to clarify that state and local income taxes imposed on and paid by a partnership or an S corporation would be deductible by such entity regardless of whether the liability for such taxes is the result of an election by the entity or whether the partners or S shareholders receive a partial or full state or local deduction, exclusion, credit, or other tax benefit that is based on their share of the amount of such taxes paid by the entity. Taxpayers will not need to take such tax payments into account in applying the 2017 Tax Act’s $10,000 cap on state and local taxes. Notice 2020-75, effective immediately, appears to directly support the efficacy of New Jersey’s work-around (S-3246/A-4807) adopted early in 2020 to address the federal 2017 Tax Act’s $10,000 cap on state and local taxes (SALT). Because that cap applies predominantly to real property taxes and sales taxes in addition to income taxes, business taxpayers who can use the work-around and remove business income taxes from the $10,000 cap will effectively be allowed to deduct an additional amount of other SALT taxes under the cap. The New Jersey law, commonly called the Pass-Through Business Alternative Income Tax,...
Incentivizing Global Monetization of U.S. Based IP Rights – The Carrot and the Stick of the 2017 Tax Act
The 2017 Tax Act, signed into law on December 22, 2017, encompasses the most significant and wide-ranging changes to the U.S. Internal Revenue Code (“IRC”) since 1986. This article addresses both the new taxation of global intangible low-taxed income (“GILTI”) and a new deduction for foreign-derived intangible income (“FDII”), as they relate to patent rights. GILTI and FDII will significantly affect the tax strategies of multinational corporations, particularly those with valuable intellectual property rights held abroad. The new tax laws do not define intangible property through a list of specific types of assets, including intellectual property like patents. Rather, intangible property under the new laws encompasses anything not strictly considered a tangible asset. This expanded definition applies when determining the GILTI and FDII amounts. GILTI New IRC Section 951A effectively imposes a minimum tax on U.S. shareholders who own at least 10% of controlled foreign corporations (“CFCs”) to the extent the CFCs have “global intangible low-taxed income.” The Tax Act provides a formula for calculating GILTI, which exempts the deemed returns on tangible assets. The GILTI amount is calculated by subtracting the “net deemed tangible income return” from the “net CFC tested income.” The remainder is deemed intangible income subject to income tax. Practically, the GILTI base is determined by subtracting a normal return for the...
The new Tax Act was signed into law on December 22, 2017. Holders and developers of commercial real estate will be impacted by certain provisions of the new Tax Act, such as its treatment of real property depreciation deductions, 1031 like-kind exchanges, and pass-through rates. We direct you to our recent Legislative Tax Alert for a more detailed overview of certain relevant provisions of the new Tax Act. If you have questions or concerns about how the new Tax Act will impact you or your business, please contact Russell B. Bershad, a Director in the Gibbons Real Property Department, or Peter J. Ulrich, a Director in the Gibbons Corporate Department.
The deadline to file real estate tax appeals in New Jersey to challenge the assessment of real property is April 1 (or 45 days from the bulk mailing of assessment notices, whichever is later). Given widespread declines in market values in recent years, there may be an opportunity for property owners — particularly owners of multifamily, commercial and industrial property — to reduce their assessments, and hence their property taxes, by filing a tax appeal.
Crucial to New Jersey’s Five-Year Exemption and Abatement Law is the time within which an application for the tax exemption or abatement must be filed with the municipal tax assessor. A recent Tax Court of New Jersey decision provides the first published opinion interpreting a crucial provision of the statute used to calculate such period of time. Under N.J.S.A. 40A:21-16, written application for a tax exemption or abatement must be made to the municipal tax assessor within 30 days (including Saturdays and Sundays) following the completion of an improvement, conversion alteration, or construction on the property for which tax abatement or exemption is sought. The statute defines “completion” of a project as the date on which same is “substantially ready for the intended use”.
Expansion of Philadelphia Minimum Wage and Benefit Standards Could Impact Retail and Restaurant Tenants
Under a newly enacted City of Philadelphia Ordinance, some tenants in properties developed with financial assistance by the City of Philadelphia may now be required to comply with a minimum wage requirement that is 150% of the federal minimum wage. Benefits provided to full-time employees of tenants may also be impacted.
Currently, no one knows whether Congress and the President will take action this year to retain the historically low long-term capital gains rates, which are scheduled to increase to 20% effective January 1, 2011. This uncertainty has motivated some real estate sellers to contemplate closing in 2010 in order to avoid potentially increased capital gains taxes next year.
A bill that would add the Port District of the Port Authority of New York and New Jersey to the definition of “wind energy zones” in the newly adopted Offshore Wind Economic Development Act, was reported out of the Senate Budge and Appropriations Committee on September 13, 2010. The amendment would allow tax credits for qualified wind energy facilities in the Port District.
Green or Not to Green, That is the Question? Whether it is Nobler to Build a Green Building or Suffer the Ignominy of an Ungreen One
With energy costs high and the focus on combating global warming, there is an impetus toward encouraging the development of Green Buildings. Buildings account for 39% of the total energy usage in the U.S., two thirds of the electricity consumption and 1/8 of the water usage. Building codes, setting minimum standards for construction, now include standards for energy efficiency. Green Codes are creeping in.