Reform California Unveils Plan To Repeal New “Flat Fee” Utility Surcharge

California politicians are imposing a new “flat fee” on your utility bill that you have to pay regardless of whether you use any energy that month and the rate will now be based on your income! Reform California opposes the charge and calls it an illegal tax and a violation of privacy.

Californians are still suffering under the highest utility rates in the country, and many can barely afford to pay their bills.

Now California Democrat politicians want to impose a new “flat fee” surcharge on all utility bills based on each household’s income for the year.

That means many households will pay an additional flat charge of $24.15 per month to subsidize “lower income households” who would pay a lesser fee of between $6 and $12 a month.

Politicians claim these fees would pay for installing and maintaining the equipment necessary to transmit electricity to homes, but Reform California Chairman Carl DeMaio notes that those charges are already part of the electricity rates — and that the proposal is an excuse for a new tax.

“By imposing a flat fee that varies based on household income, California politicians are turning utility bills into tax bills,” said DeMaio.

The fixed rates are required under Assembly Bill 205 (AB 205), which was signed by Governor Gavin Newsom (D) in 2022. The bill states that “the commission may authorize fixed charges [for utilities] … The fixed charge shall be established on an income-graduated basis.”

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Progressive Tax Could Cost Nearly $1800 A Year In Home Equity To Illinois Homeowners If Voters Approve The Increase

According to the Illinois Policy Organization…

Gov. J.B. Pritzker promises his $3.7 billion “fair tax” would only hit those making over $250,000, but it also threatens to cost more than 3.2 million Illinois homeowners an average of $1,800 a year in home equity.

If voters approve the state income tax increase, it could eventually cause Illinois’ home price appreciation rate to fall by 34.8% (see Appendix), if the state has the same experience as the last state to enact a progressive income tax: Connecticut in 1996. If the median homeowner, with a home value of $203,400, were planning on selling their house in 10 years, a progressive income tax would cost them $17,937 in foregone equity. The average annual cost of the progressive tax for these homeowners would be nearly $1,800 in home equity.

Because lower home prices are a hidden cost that will impact homeowners at all income levels, it is disingenuous for proponents of the progressive tax to claim it will only affect the rich. Less housing wealth will be a concern even if state lawmakers could be trusted not to abuse their new taxing powers to spread tax hikes to the middle class or retirees, as Connecticut also did.

INTRODUCTION

Lawmakers are asking voters to approve a $3.7 billion income tax increase on Nov. 3, promising the tax increase will only harm those making more than $250,000. However, the financial damage would also spread to Illinois’ 3.2 million homeowners. The 2011 state income tax hike previously reduced housing prices in Illinois, according to the Harvard Joint Center for Housing Studies, which added a caveat because housing prices were already declining prior to the tax hike. The same study found the 2007 Washington, D.C., income tax cuts led to a significant increase in housing prices.

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Thinking About Selling Or Merging Your Tax Advisory Practice?

We have been approached many times over the years for a solution for small firm business owners who want to sell their practice and need a succession plan. We now have a solution for you and your clients who have been loyal to you over many years of professional services advisory.

Are you working on a succession plan so you can retire comfortably from your tax practice? Have big brokers told you that your practice is too small for them? TaxConnections search services provides a solution for you to transition your practice and your clients to qualified  buyers. TaxConnections has a team of advisors to help you in setting up a succession plan to sell and transition your practice to qualified industry professionals so you can retire.

Small professional services business owners are faced with many challenges today that they have never experienced before in running a tax and accounting practice. Operating a practice is more expensive today with increased costs for website development, cloud services, secured document management software, time and expense software, tax return software, practice management software, payroll software,  human resources software, monthly office rent, numerous insurances, IT support, computers and laptops, phones, remote software, sales and marketing team, employee salaries, 401K Plan Administration Fees, and much more.

Are you also feeling the pressure of increasing costs of the technology you now need to operate your practice efficiently today? The truth is many small firm owners are being financially squeezed with these increased costs and time-consuming activities of learning multiple new software implementations. Do you realize the software you now purchase will have an impact on your sale? The firm that acquires a practice may be able to adopt it or must start from scratch and use their own. This takes more time for the acquisition of your business.  Would you like to know what software implementations are best for the future sale of your firm? We are conducting due diligence for you well in advance of your firm being acquired, which greatly increases your value. TaxConnections will position you and your small practice for sale within the next 12-24 months.

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What Is Streamlined Sales Tax And How Can it Help My Business?

Streamlined Sales Tax (SST) is an initiative that aims to simplify and standardize the collection and remittance of sales tax across different states. It was first implemented in 2005 and has since been adopted by 24 states. The initiative aims to make it easier for businesses to comply with sales tax laws, reduce administrative costs, and create a level playing field for retailers across different states.

What Are the Benefits of Streamlined Sales Tax?

One of the main benefits of SST is uniform definition of products and services across the states. Additionally, SST provides businesses access to free tax administration software, which can help automate tax calculations, filings, and remittances.

Current List of Full Member Participating States

 

Arkansas Kansas Nebraska North Dakota South Dakota West Virginia
Georgia Kentucky Nevada Ohio Utah Wisconsin
Indiana Michigan New Jersey Oklahoma Vermont Wyoming
Iowa Minnesota North Carolina Rhode Island Washington Tennessee*

*Associate Member State 

For more information about registering for the SST program, contact us today. We are your Trusted Tax Advisor.

Have a question? Contact Dan Thompson, Thompson Tax Team.

ALERT: Register Today For Tax Partnership Webinar On Thursday May 16th (Free Webinar By Partnership Experts)

This coming Thursday, on May 16th at Noon CDT, please join Tax Forum for a Complimentary Webinar:

Avoiding Costly Mistakes: Four Essential Tax Concepts

 For the Business Attorney or CPA And EAs

Even smaller matters might have big traps and significant tax implications – leading to unexpected tax liabilities for your clients and potential malpractice claims for the professionals.

During this one-hour webinar, the Tax Forum team of Chuck LevunMichael Cohen and Scott Miller will provide a top-level look at …

  • Converting an existing S corporation to an LLC on a tax-free basis to obtain “charging order” protection
  • Simple business structuring to circumvent the $10k deduction limitation for the portion of state and local income taxes attributable to partnership/LLC and S corporation income
  • How not to cause your client to be one of the estimated 500k+ LLCs that incorrectly thought it was going to be taxed as an S corporation but, because of certain language contained in its operating agreement, is not an S corporation
  • Personal goodwill and the C corporation business sale – identifying situations in which double tax can be avoided

Any one of these could make the difference between you being a hero or creating a significant problem for your clients.

This webinar is geared for business attorneys and CPAs who handle matters (even on a limited basis) involving closely held businesses and smaller mid-market companies.

Please bring your questions, as the presentation will include a live Q&A session.

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Tax Court Decision Shows Potential Pitfalls When Claiming Settlements Qualify For Federal Income Tax Exclusion

A recent Tax Court case illustrates the importance under current case law of thinking about the tax consequences of a potential verdict or settlement early on and attempting (if the facts allow) to establish a basis for exclusion from federal income tax throughout the course of litigation.

In Estate of Finnegan v. Comm’r, T.C. Memo. 2024-42, the question before the Tax Court was whether payments under a settlement of certain constitutional and civil rights claims were excluded from income under section 104 of the Internal Revenue Code.

The Indiana State Police (“ISP”) had investigated husband and wife taxpayers in Estate of Finnegan for medical neglect resulting in the death of their daughter at the age of fourteen. Criminal charges were filed against husband and wife taxpayers but later were dismissed.

Nevertheless, the Indiana Department of Child Services (“DCS”) removed the remaining children from husband and wife taxpayers’ home. While the children were eventually returned home, DCS continued its investigation.

Husband and wife taxpayers filed suit in state court against DCS to invalidate certain determinations that DCS had made against them, including  (1) that there was medical neglect in connection with their deceased daughter based on the postponement of a cardiology checkup; (2 that their daughter’s death was caused by physical abuse; and (3) that their remaining children were in a life/health endangering environment. The state court found in husband and wife taxpayers’ favor.

Husband and wife taxpayers along with their children sued various employees of the State of Indiana in federal court for their actions after their daughter’s and sister’s death. The suit was brought under 42 U.S.C. § 1983 for violation of their civil rights under state law, federal law, and the FirstFourthSixth, and Fourteenth Amendments to the U.S. Constitution. A jury awarded the taxpayers compensatory damages totaling $31.5 million, with amounts specifically awarded for violations of each taxpayer’s constitutional rights. Ultimately, the case was settled for $25 million.

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Nebraska Ends Income Taxes On Gold & Silver, Declares CBDC’s Are Not Lawful Money

Nebraska joins Utah, Wisconsin, and Kentucky as states to have enacted pro-sound money legislation into law so far in 2024.

With Gov. Jim Pillen’s recent signature, Nebraska has become the 12th state to end capital gains taxes on sales of gold and silver.

LB 1317 is the fourth major sound money bill to become law this year, as state lawmakers across the nation scramble to protect the public from the ravages of inflation and runaway federal debt.

Under the new Nebraska law, any “gains” or “losses” on precious metal sales reported on federal income tax returns are backed out, thereby removing them from the calculation of a Nebraska taxpayer’s adjusted gross income (AGI).

Supported by the Sound Money Defense LeagueMoney Metals Exchange, and in-state advocates, Nebraska’s sound money measure passed out of the unicameral legislature’s Revenue committee unanimously before being amended into a larger bill.

Sponsor Sen. Ben Hansen said upon news of the formal enactment of his legislation:

Gold and silver are the only forms of currency mentioned in our Constitution and with that comes the people’s ability to use it as such without penalty from the government. Saving, and using, gold and silver is our right and one of the only checks and balances to our federal government’s unending devaluation of our paper currency.

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Treasury, IRS Issue Frequently Asked Questions Regarding Disaster Relief Related To Retirement Plans And IRAs

The Internal Revenue Service today issued frequently asked questions (FAQs) in Fact Sheet 2024-19, relating to rules for distributions from retirement plans and IRAs and for retirement plan loans, for certain individuals impacted by federally declared major disasters.

The FAQs relate to the SECURE 2.0 Act of 2022 (SECURE 2.0) provision that provides for ongoing disaster relief for certain distributions and loans in the case of federally declared major disasters. Prior to the changes made by SECURE 2.0, there was no disaster relief allowing these distributions and loans that applied generally for all major disasters.

The FAQs are intended to assist individuals, employers, and retirement plan and IRA service providers, and they are divided into four categories:

  • General information
  • Taxation and reporting of qualified disaster recovery distributions
  • Repayment of qualified distributions taken for the purpose of purchasing or constructing a principal residence in a qualified disaster area
  • Loans from certain qualified plans

IRS-FAQ

IR-2024-132

Cost Segregation For Short Term Rentals

As a short-term rental property owner, maximizing your tax savings is essential for the success of your investment. One effective strategy to achieve this is through cost segregation.

Cost Segregation for Short Term Rental Owners

Cost segregation is a tax-saving technique that allows you to accelerate the depreciation of certain assets in your property. Traditionally, real estate is depreciated over 27.5 or 39 years, while personal property is depreciated over 5 to 7 years and land improvements receiving a 15-year treatment. Cost segregation allows you to reclassify certain components of your property, such as appliances, fixtures, and special use electrical & plumbing as personal property, enabling you to depreciate them over a shorter timeframe. This results in larger tax deductions in the early years of ownership, reducing your taxable income and ultimately lowering your tax burden.

The beauty of cost segregation is its versatility, it can unlock tax savings for a diverse range of short-term rental properties, including:

Urban Apartments:

Studio apartments, lofts, and trendy condos catering to business travelers or weekend getaways can benefit from cost segregation on appliances, furniture, smart home systems, and even rooftop amenities like grills and hot tubs.

Shared Accommodations:

Hostels, co-living spaces, and even shared vacation homes can leverage cost segregation for common areas like kitchens, bathrooms, laundry facilities, and entertainment zones.

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Biden's Proposal On Largest Capital Gains Tax In Over A Century

We want to repost this article since it is receiving a lot of attention. Time for tax professionals to make your commentary below to gain higher visibility! Please share this post with anyone you know interested in capital gains taxes, we believe this post will eventually surpass 10,000 views. With your help it could surpass 100,000 views by the end of the year!

Bidens 2025 budget proposal raises the top marginal rate on long term capital gains and qualified dividends to 44.6 percent.

The Biden administration has proposed the highest top capital gains tax in over a century.

According to Biden’s 2025 budget proposal the top marginal rate on long-term capital gains and qualified dividends would rise to 44.6%.

The proposal, which marks the highest tax increase since the creation of the capital gains tax in 1922, could significantly curtail the financial returns of investors in stocks and crypto.

“For example, a taxpayer with $1,100,000 in taxable income of which $200,000 is preferential capital income would have $100,000 of capital income taxed at the preferential rate and $100,000 taxed at ordinary rates,” the proposal states.

Additionally, the proposal when combined with state capital gains tax would exceed 50% in many (mostly blue) states and would not account for inflation’s erosion of purchasing power.

From Americans for Tax Reform:

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Certificates Of Discharge From IRS Liens

I previously posted about the process for requesting the subordination of an IRS lien – that post can be found here.  However, as noted in that post, subordination is primarily useful in cases where a taxpayer intends to keep property (and thus any liens on that property would stay in place).  But what if a taxpayer wants to sell the property and use the proceeds to pay off all or part of an IRS liability?  The IRS requires these taxpayers to apply for a “certificate of discharge,” discussed further below.

Publication 783

 IRS Publication 783 lays out the process for applying for, and obtaining, a certificate of discharge. [1] Generally, Publication 783 states that taxpayers must complete and submit IRS Form 14135 and provide certain supporting documents.  The IRS will review the submission and make a determination, within its discretion, regarding whether to grant the certificate.

Form 14135

Like its counterpart for subordinating liens, Form 14135 is somewhat lengthy, and requires the taxpayer to attach a variety of documents related to the property at issue (including title, appraisal value, and lien information) as well as the proposed sale transaction (including purchaser information, escrow information, and the proposed sale terms). [2]

Additionally, the taxpayer must identify the statutory basis for requesting the certificate of discharge. [3] In this regard, Form 14135 presents the following options:

  1. 6325(b)(1)
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What Is A TPR (Tangible Property Regulation) Study?

A Tangible Property Regulation (TPR) study is an analysis that examines a company’s compliance with the Tangible Property Regulations. In this context, tangible property refers to real property such as land and improvements to land (e.g., site improvements and buildings), as well as personal property that can be felt or touched, and be physically relocated, such as furniture and equipment.

The main objective of a TPR study is to ensure that a company is in compliance with the final TPR regulations to accurately classify its costs, distinguishing between capital expenditures (which are typically depreciated over time), deductible expenses, and dispositions by a thorough review of taxpayers’ documentation. This strategic approach can result in significant tax savings, mitigate audit risk, and bolster overall tax planning strategies for businesses.

What Do TPR Studies Involve?

A TPR study is typically conducted by seasoned tax professionals or consultants who deeply understand the regulations. They meticulously examine a company’s financial and tax records, identify misclassifications, and recommend necessary adjustments to ensure compliance with the rules.

Such studies may involve:

Legal Analysis: Reviewing statutes, regulations, case law, and other legal materials related to tangible property.

Compliance Assessment: Assessing whether businesses or individuals comply with relevant Tangible Property Regulations.

Policy Evaluation: This involves evaluating taxpayer’s capitalization policy on treatment of expenditures and proposing potential revisions or improvements.

Impact Analysis: A TPR study aims to provide insight into tangible property’s legal framework and its implications for taxpayers to accelerate deductions or reduce tax compliance burdens.

When Should Businesses Consider Conducting a TPR Study?

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