There is a change in the federal partnership audit rules that take effect for tax years on or after January 1, 2018, that may impact you.

Who is Affected?

All entities classified as partnerships for federal tax purposes. This includes, for example, multi-member LLC’s that have not elected to be taxed as corporations (C or S). If the entity files IRS Form 1065, it is a partnership. Certain partnerships may opt out of the new audit rules, but they must meet the eligibility requirements, including identity and number of partners (no more than 100 partners, all must be individuals, estates, C corporations and S corporations).

The Changes

The new law and regulations proposed by the IRS will replace the current audit regime. The details of the changes to the audit regime are beyond the scope of this letter, but in general, under the new partnership audit rules, any adjustments to tax items for a partnership are generally determined, and the tax attributable to such adjustments is assessed and collected, at the partnership level, with the tax assessed at the highest tax rate then in effect. The adjustments relate to a prior year (the “reviewed year”), but the assessment and collection of the tax will affect the partners in the year of the assessment (the “adjustment year”). The partnership may be able to elect to “push out” the adjustments to the partners who were partners in the reviewed year, rather than assessing it at the partnership level.

In addition, the partnership is now required to designate a “partnership representative” on an annual basis. This designation replaces the appointment of a “tax matters partner” under the prior regime. Comparing the two, the requirements for who may serve as a partnership representative are broader (e.g., not required to be a partner) and the partnership representative has significantly more authority in dealing with the IRS on behalf of the partnership (i.e., sole authority to act and the other partners have no right to receive notice from the IRS or participate in the audit).

What Does This Mean For You?

All partnership agreements (or operating agreements, in the case of an LLC taxed as a partnership) should be reviewed and amended to adopt appropriate changes to reflect the application of the new IRS rules effective January 1, 2018. The nature of these amendments will differ among partnerships/companies depending on the specific situation. Changes may include:

  • appointing the partnership representative, with a mechanism for appointing replacements and any contractual limitations on his authority;
  • ensuring the partnership is eligible to opt out of the rules by restricting who can be a partner;
  • providing for a method of allocating the adjustments in the event of changes in partners between the reviewed year and the adjustment year; and/or
  • providing for an election to “push out” the adjustments to the reviewed year partners.

Please feel free to reach out to any of our tax attorneys to update your partnership’s and/or company’s agreements to remian compliant with these federal tax law changes:

 

Guest post by Beth T. Vogelsang, Esquire, Florida Bar Board Certified Divorce, Marital and Family Law Attorney

On November 2, 2017, House Republicans released an income tax reform bill known as the “Tax Cuts and Jobs Act.” There has been much publicity about the bill’s proposed corporate tax cuts and the purported reduction and simplification of individual income tax rates. One provision of the 492-page bill, which has gone largely unnoticed, is the proposed repeal of the deductibility of alimony payments.

Current IRS Regulations on Alimony

Continue Reading Will Tax Reform Eradicate the Alimony Tax Deduction?

As the year-end approaches, you may want to consider steps to reduce your federal income tax bill, especially as Congress weighs tax reform. The current proposals would reduce income tax rates for most businesses and individuals, and increase the available business deductions. Whether or not the proposed tax reforms become law, the following tax tips should help you save on federal income taxes.

Tips for Business Owners: Expensing and Depreciation

Continue Reading Tax Planning and Proposed Tax Reform

In order to help the Southwest Florida community recover from Hurricane Irma, the following is a non-exhaustive list of resources:

Tax

FEMA

Interest Free Loans

Payroll

Construction

United Way

  • United Way 2-1-1 is a United Way program that provides free information and referral to human/social service agencies within Lee, Hendry, Glades and Okeechobee Counties. Clients can call and receive information and referrals appropriate to their needs, https://www.unitedwaylee.org/what-is-united-way-211/.

We will continue to update the list as they become available.

As our area recovers in the aftermath of Hurricane Irma, one less thing we need to worry about in the immediate future are certain tax matters. The IRS has issued relief to taxpayers in Presidential Disaster Areas, which includes Lee, Charlotte, and Collier Counties. Among the relief granted, for affected individuals and businesses there is an extension to January 31, 2018 to file returns and pay taxes originally due during the period starting September 4, 2017.  So, if you were on extension to file your income tax return for your business (generally due September 15, 2017) or individually (due October 15, 2017), you now have until January 31, 2018 to file that return.

Keep in mind, this relief does not extend the time to pay income taxes for 2016, which were due on April 15, 2017 (even if your return was on extension).

The IRS continues to provide updates on areas covered and the relief granted. More information can be found at https://www.irs.gov/newsroom/help-for-victims-of-hurricane-irma.

Tax photo courtesy of 401(K) 2012 under Flickr Creative Commons License

It is almost that time of year — football season is approaching and with the anticipation of tailgating and touchdowns comes, of course, talk of trademarks. For years, the Washington Redskins have been fighting battles regarding their REDSKINS trademark. The issues have created much controversy due to the purported negative connotation the REDSKINS term gives to Native American groups.

Section 2(a) of the Lanham Act prohibits registration of “disparaging” marks. A number of REDSKINS trademark registrations were challenged on this basis and the Trademark Trial and Appeal Board has agreed, cancelling several such registrations. In fact, for a while it looked like the Washington Redskins might be forced to lose all trademark rights to REDSKINS and even possibly change the team name.

However, the REDSKINS case raised the question of whether Section 2(a) of the Lanham Act violated the Constitution because it constituted a government restraint of free speech. That is, to what extent can the government pass substantive review on terms that are meant for use in the private sector for commercial purposes?

THE SLANTS, SCOTUS and Disparagement

Simon Tam is a musician and formed a band. About eight years ago he sought trademark registration for the band name, which is not uncommon. Here though, the trademark at issue was THE SLANTS. The mark was refused registration because SLANT was viewed as a disparaging term directed toward Asians. Mr. Tam challenged that refusal and it ultimately found its way to the Supreme Court.

On June 19, 2017, the Supreme Court ruled in favor of Mr. Tam finding that Section 2(a) the disparagement clause of Section 2(a) of the Lanham Act was unconstitutional because it constituted viewpoint discrimination. Accordingly, the refusal to register THE SLANTS based on the government’s conclusion that the term was disparaging was improper.

The fate of the REDSKINS mark has been somewhat contingent on the outcome reached in Tam because the argument supporting cancellation of the REDSKINS trademarks was based on Section 2(a) in that REDSKINS was disparaging. With that section of the Lanham Act declared unconstitutional, the Washington Redskins have the opportunity to regain protection for the REDSKINS mark.

Thank you to our Summer Associate Madison Allen for her contributions to this post!

Photo courtesy of Keith Allison Under Flickr Creative Commons License

CAK big wheelYeah, that’s me on a Big Wheel at age 6 or 7. Check out that air! Good thing there was grass for soft landing….

Recently, my law partner and I tried a temporary injunction in a complicated business dispute. When I cross-examined the opposing expert, he answered “Yes” to most of my leading questions, as I expected he would. When the opposing expert strayed from deposition testimony, I impeached him to get him back on the straight and narrow.

Near the end, I elicited a pretty good answer. I could have stopped right there. It would have been a good cross-examination. But I thought I could ask one more question on this topic, and really nail him. There was some risk in asking the next question, as he could have tried to put a spin on his previous answers. But if he did, he’d have an awful lot of previous testimony to explain away.

It turned out the next answer was better than I could have hoped for when I was putting my cross-exam together beforehand.

Take-Away

Risk is a constant in business. Don’t avoid it—embrace it, measure it, and use it to guide your next action.

If your business ventures may require you to use the court system, whether as a plaintiff to enforce your contractual rights, or as a defendant to protect against attempts to attack your business, identify the risks and discuss them with your lawyer. He or she should be listening so that you can identify a strategy to come up with a soft landing. Just in case.

pro-basketball-team-1594634_1920(1)While we have written on this topic in the past, because the NCAA Basketball Tournament is an annual event and the NCAA gets more aggressive each year, this information bears repeating. Because businesses sometimes tie promotions to the Tournament and use it as a marketing activity, they should be careful how they do so.

The Problem

Continue Reading Don’t Foul Out with MARCH MADNESS Marketing

Eagles_in_concert_September_2014(To the tune of Hotel California)

Once in Northern Virginia, a trademark was filed
A Mexican company a long list compiled
Cosmetics and phone cases, purses, hair gel and shoes
The list went on for six classes, just what did they have to lose?

During examination, a disclaimer was sought
The applicant gladly complied, any fear of refusal was for naught.

Then the mark was published, but the Eagles they did see
Their lawyers got involved
Said you can’t use this for free

Registering HOTEL CALIFORNIA
Such a lovely try (such a lovely try) Such a lovely cry
Don’t even try to use HOTEL CALIFORNIA
For any goods (for any goods) in our neighborhoods….

What Can That “Song” Possibly Mean?

Continue Reading Litigating it up at the HOTEL CALIFORNIA

Hands Holding Digital Tablet Database Hacked

Guest post by John Miller, Esquire, Stockholder in Henderson Franklin’s Tort & Insurance Litigation Group

Regardless of the economic or political climate, there never seems to be a decline in tort lawsuits. Be it personal injury claims, employment suits, or professional liability cases, 2017 promises to be another busy year for insurance defense litigators.

Data Security – Data Breaches

Continue Reading Tort Trends for 2017: Protect Yourself in the New Year