Wow, there is sure a lot of discussion about the limit placed on the deductibility of state and local taxes by the Tax Cuts and Jobs Act, and the related regulations recently issued by the IRS. I wrote about those regulations on August 30, pointing out that the regulations will limit or disallow federal deductions for payments for which the taxpayer receives a state or local tax credit. The effect will be to undo measures put in place by certain states that would treat otherwise non-deductible state and local tax payments as charitable contributions.
If you want to read some scholarly analyses about how all this works or doesn’t work, and how it should or should not be changed, here are some links:
And here’s a link to a report on what I would call a decidedly non-scholarly, political attack on the proposed regulations:
As you can see, the links are all from the TaxProf Blog. Of course, you can go and read the source papers, if you’re so inclined.
It seems that many more enlightened countries have a national consumption tax. Such taxes are also known as value added taxes or “VAT” and are more colloquially described as national sales taxes.
In a discussion about why there is no national consumption tax in the United States, I learned something I hadn’t heard about before. According to the scholar who researched the question, in the 1970s and 1980s, American lawmakers supported such taxes, but those lawmakers either abandoned the idea or were ”ousted from political office.” That wording suggests that those lawmakers’ support of a national consumption tax resulted in electoral defeat for those lawmakers. That shouldn’t come as a huge surprise, should it?
BAR APPLICANT SEZ: I HAVE A DISABILITY THAT PREVENTS ME FROM BEING TRUTHFUL, BUT THAT SHOULDN’T PREVENT ME FROM BEING ADMITTED TO THE PRACTICE OF LAW
The parodies write themselves, don’t they?
Actually, I can’t say it any better than the Supreme Court of Georgia did (their decision is linked in the ABA Journal article linked above):
“[The applicant] essentially asks for a waiver of certification, or an accommodation from being subjected to an examination of his character and fitness, based on an alleged inability to be truthful, accurate, and forthcoming in his bar application disclosures and his professional dealings.”
Via TaxProf Blog.
PROPOSED IRS REGULATIONS WOULD DENY FULL FEDERAL INCOME TAX DEDUCTION FOR STATE TAX CREDIT DONATIONS
This is an outgrowth of the uproar over the limit placed on the deductibility of state and local taxes by the Tax Cuts and Jobs Act. I wrote about it here and here.
As a result of the limit on deductibility of state and local taxes, some states adopted changes to their tax codes to treat state and local tax payments as charitable contributions, in order to preserve the deductibility of those payments on taxpayers’ federal income tax returns.
The IRS has now responded by proposing regulations that will limit or disallow entirely deductions for payments for which the taxpayer receives a state or local tax credit.
The IRS news release is here.
Of course, this change isn’t going to affect just the deductibility of stat and local tax payments. It’s also going to affect state tax credit donations to actual charities. In other words, it will mean that my tax credit donation to the food bank won’t be a deductible donation on my federal tax return anymore.
Thanks a lot, high tax states (they’re the ones who were so insistent on preserving federal deductibility for the high taxes their residents pay).
One of the most commonly used vehicles for non-testamentary estate planning (that’s a term I just made up) is the revocable (“living”) trust. Non-testamentary estate planning refers to any estate planning method that doesn’t rely on a will. Perhaps a better term (one that I didn’t make up) is non-probate estate planning. That includes any method of transferring assets owned by a deceased individual outside of an estate administration (that’s what’s commonly referred to as “probate”).
The revocable trust is widely used as a vehicle for non-probate estate planning, but it doesn’t actually allow you to avoid probate unless it’s “funded.” What is “funding” a trust? And what are some other ways to leave things to people without using a will, or in other words, what are some other methods of non-testamentary estate planning? Find out by reading my Estate Planning Law Report for August, 2018, now available for your enjoyment, and hopefully edification, in the publications section of deconcinimcdonald.com. It’s also linked on the home page.
If you are interested in how businesses work, then you should be interested in how corporations work (no, that's not redundant).
On the subject of how corporations work, I have read several articles about Senator Warren’s proposed Accountable Capitalism Act. I think the best commentary I have read is the series by Professor Bainbridge, in which he explains several measures by which this proposed legislation would (1) radically change, and (2) profoundly harm, large American corporations. Highly recommended.
Q (by some Congresscritters, apparently): “Can fake news be regulated?”
A (me): No. Next question?
A superficial treatment is better than none at all, but an article I read on Fox Business really didn’t tell me much of any substance, even though it was loaded with quotes from authoritative-sounding lawyers.
Oh, the subject was valuation discounts for family limited partnership interests. Apparently, the IRS has proposed new regulations that would narrow the circumstances in which the IRS will allow those discounts to be applied.
Those valuation discounts are, as the Fox Business article indicates, a method to reduce the value of, and hence the estate tax on the transfer of, family limited partnership interests when an owner dies. It’s not a new idea.
If you’re not a baseball fan, then skip this. If you are a baseball fan, read the blog post at this link and realize that the day is coming when the rules of baseball will be just as contrived as the rules for every other sport. A team gets to have a runner on second base to start an inning, just because the game is in extra innings? Why not just have a shootout if the game is tied at the end of regulation play, like in soccer?
My Dad used to say that the rules of football have gotten to the point that you have to be a Philadelphia lawyer to be a football referee. That's what I'm talking about.
The contents of this blog, this web site, and any writings by me that are linked here, are all my personal commentary. None of it is intended to be legal advice for your situation.