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Congress Enacts the Corporate Transparency Act Requiring Certain Entities to Disclose their Owners

On January 1, 2021, Congress enacted the National Defense Authorization Act (the NDAA”). One portion of the NDAA includes the Corporate Transparency Act (the “CTA”), which is described as the most comprehensive anti-money laundering legislation passed in the United States and which regulates the use of anonymous entities for money laundering, tax evasion, and financing terrorism.  The CTA requires certain entities, including limited liability companies, corporations, and “similar entities,” to disclose their individual owners and their “beneficial owners”, meaning those who own or control at least 25% of the entity.  The legislation is aimed at preventing these “shell companies” from hiding illegal activity.

The statute states that the CTA only applies to entities that are created by filing a document with a secretary of state or a similar office, or are formed under the laws of a foreign country, but are registered to do business in the United States through

IRS Publishes Guidance on COVID-19 Relief for Estate and Gift Taxes

The IRS has published a series of questions and answers that provide guidance with respect to COVID-19 relief for estate and gift taxes, which can be found here.

IRS Expands Medical Condition Exception to Substantial Presence Test to Include Travel Disruption as a Result of COVID-19

In Rev. Proc. 2020-20, the IRS provides relief to nonresident taxpayers who have been in the United States long enough to be considered resident aliens under the substantial presence test of IRC 7701(b)(3) as a result of the COVID-19 pandemic. This Revenue Procedure also provides relief to taxpayers who would otherwise be ineligible for treaty benefits on services income. While this expansion is welcome, it is limited to excluding days falling after January 31 and through May 31.

Typically, under IRC 7701(b), persons who are otherwise not permanent US residents but who spend a sufficient amount of time in the country will be treated as US residents for income tax purposes under the substantial presence test. This test counts the number of days that an individual spent in the country in a given tax year or over a three year “look back” period to determine whether such person spent a

IRS extends more tax deadlines; EO operations affected during COVID-19 and more

Last month, the IRS announced that certain taxpayers generally have until July 15, 2020, to file and pay federal income taxes originally due on April 15. The IRS has extended this relief to additional returns, tax payments and other actions. As a result, the extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. The extensions apply to many forms and tax payments made by tax-exempt organizations, including:

  • Form 990-series annual information returns or notices (Forms 990, 990-EZ, 990-PF, 990-BL, 990-N (e-postcard))
  • Forms 8871 and 8872
  • Form 5227
  • Form 990-T
  • Form 1120-POL
  • Form 4720
  • Form 8976

See Notice 2020-23 and Rev. Proc. 2018-58 for more information, including a complete list of affected forms, tax payments and other time-sensitive actions.

IRS operations during COVID-19: mission-critical functions continue

In response to the coronavirus (COVID-19) crisis, the

U.S. Congressional CARES Act & Nonprofit Organizations

Loan Programs

Small Business Loan Program Expansion – “Paycheck Protection Program”: Provides 100% guarantee for bank loans made to qualifying business/organizations during the period of February 15, 2020 to June 30, 2020.  To qualify, nonprofits must not have more than 500 total full-time and part-time employees.  Nonprofit organizations with more than 500 employees are not eligible for this program. Detailed guidance from the firm on this program can be found here.

Emergency Economic Injury Grants – “Disaster Loans”: Nonprofits with fewer than 500 employees who apply for an economic injury disaster loan with the SBA may receive up to $10,000 as an advance against the loan within 3 days of application if SBA certifies that the entity is eligible.  This is to enable nonprofits to quickly access financial assistance while their loan application is being processed.  Eligibility is based solely on applicant’s credit score.  Funds can be used for payroll

COVID-19 Update – How the CARES Act Effects Tax Benefits Related to Charitable Giving

On Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”). The Act was one of several Congressional responses to the COVID-19 emergency and it covered many areas, including the tax benefits related to charitable giving.

Generally, there are limitations on deductions for charitable contributions for both individual and corporate taxpayers based on the taxpayer’s adjusted gross income (“AGI”), in the case of individuals, and taxable income, in the case of corporations. The CARES Act increases the limit on individual taxpayers’ deductions for cash contributions to public charities from 60% of the individual’s AGI to 100% of the individual’s AGI. This increase effectively suspends the limit for individuals in 2020.  For corporate taxpayers, the CARES Act increased the income limits on the deduction for charitable cash contributions from 10% of the corporation’s taxable income to 25% of the corporation’s

Update: Tax Filing Date Also Extended to July 15th

As an update to our earlier blog posted, U.S. Treasury Secretary Steven Mnuchin announced this morning that the U.S.is extending the April 15th tax-filing deadline to July 15th.  This extension is in addition to the earlier announced tax payment extension.

Tax payers now will have until July 15th to not only file their federal income tax forms but also make tax payments.  While it is still suggested to file and make payments as early as possible, individuals can defer up to $1 Million.  This encompasses self-employed individuals, and all entities (other than C corporations), such as trust or estates. C corporations get an extension up to $10 million.  While states are encouraged to follow suit, it is important to remember that this tax filing/payment period extension only applies to federal income tax returns.

Another important note is that this relief also applies to estimated tax payments for 2020 that are

Income Tax Payment Period Extended, Tax Filing Deadline Is Still April 15th

https://www.google.com/search?q=covid-19&rlz=1C1GGRV_enUS762US762&sxsrf=ALeKk02_wIZU5Hcu5kBjZ3TWH-MXOo4S-g:1584709840151&source=lnms&tbm=isch&sa=X&ved=2ahUKEwiWnOCYkKnoAhWWW80KHX1tDVgQ_AUoAnoECA8QBA&biw=1435&bih=650#imgrc=t2x444RPeS4z7M

As a strategy to help combat the economic effects of COVID-19, the U.S. Secretary of the Treasury Steven Mnuchin announced on Monday, March 16th, that taxpayers are getting a 90-day extension for paying their 2019 income taxes.  The goal is to free up $300 billion in liquidity and to lessen the cash-flow burdens facing the country as businesses are temporarily forced to close or slash their workforce.

What does this mean?

While the deadline to file your taxes is still April 15th, 2020, tax payments that are made by July 15th will have no interest or penalty.  As of today, individuals can defer up to $1 Million, while C corporations get an extension up to $10 million.  The $1 million deferral for individuals is to help

IRS Issues Final Regulations Quashing Taxpayer Fears of Clawback on Gifts

https://www.google.com/url?sa=i&source=images&cd=&ved=2ahUKEwjXhI6W9oDnAhUIVs0KHUSsAyoQjRx6BAgBEAQ&url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FUnited_States_Department_of_the_Treasury&psig=AOvVaw3-KJts_b0uQwIYTZ0cp-4l&ust=1579016816822422The Treasury Department issued final regulations on  November 26, 2019 (Treasury Decision 9884) confirming that taxpayers will not be subject to “clawback” of the value of their pre-2026 gifts of the temporarily increased gift and estate tax exemption.

Pursuant to the final regulations, taxpayers will be able to use (prior to 2026) the full increased gift and estate tax exclusion that became available beginning in 2018 under the citing the Tax Cuts and Jobs Act (TCJA) without concern that the IRS may attempt to include gifts that exceed the post-2025 exclusion amount in the taxpayer’s taxable estate at death.  This concern that lifetime gifts in excess of the exclusion amount at death might be included in the taxable estate of the decedent has come to be known as “clawback.”  The TCJA itself directed the IRS to publish regulations clarifying the clawback question and

BCLP Senior Counsel Lawrence Brody in December 2019/ January 2020 STEP Journal

Lawrence Brody authored an article in the December 2019/ January 2020 STEP Journal titled US Taxation of Death Benefits.  This article discusses the US income taxation of life insurance death benefits, particularly the exceptions to the general rule that proceeds paid by reason of the death of insured are not included as a part of the beneficiary’s taxable income. The complete article can be accessed by STEP members here.

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