Mike is devoted to helping businesses build value and improve working capital, and helping individuals preserve and protect their family wealth. Foundational to this mission is his concentration in the area of taxation, which impacts so much of business and personal financial planning. In representing businesses, this includes counseling clients on the tax aspects of business formation, financing, reorganization, and acquisition transactions, as well as business succession planning. With individual clients, this includes assistance with income tax planning, and planning for estate, inheritance, and other death taxes.
On December 22nd, President Trump signed into law the Tax Cuts and Jobs Act, which will take effect on January 1st. This legislation will have far reaching implications for both individual and corporate taxpayers. The attached analysis and charts provide an overview of some of the key changes made by the new Act, along with some planning considerations between now and year-end.
Last week Congress passed the “Tax Increase Prevention Act of 2014,” which President Obama signed into law on Friday December 19, 2014. Referred to as the “extenders package,” it extends certain tax provisions that had expired on December 31, 2013. The extension of almost all provisions is through December 31, 2014, which is of course a very welcome development for those who will see benefits relating to their 2014 activity. However, for those who have been waiting to take action until the passage of extender legislation, it leaves very little time to get things done.
The more universally applicable provisions which have been extended are summarized below.
The U.S. Supreme Court finally rendered its decision in U.S. v. Quality Stores, Inc., 572 U.S. ____ (2014), on March 25, 2014, in a closely watched tax case. The Supreme Court reversed the Sixth Circuit Court of Appeals, and found that severance pay is to be considered wages, and therefore subject to Federal Insurance Contribution Act (“FICA”) taxes.
This holding dashed the expectations created by the Sixth Circuit’s holding that severance pay was not subject to FICA taxes. Many businesses had already filed refund claims based on the Sixth Circuit decision, and many more were in the process. Those refund claims are now most likely going to be denied.
The taxpayer, Quality Stores, Inc., paid severance to hundreds of employees while undergoing Chapter 11 bankruptcy reorganization. In its originally filed payroll tax returns, the taxpayer paid roughly $1 million of FICA tax on those severance payments. It later sought a refund of those payments while in bankruptcy, which then placed jurisdiction with the U.S Bankruptcy Court, rather than the U.S. Tax Court. That jurisdictional position seemed to work in the taxpayer’s favor, as the Bankruptcy Court found in favor of the taxpayer, as did the Michigan District Court on review of the decision.