Photo of John Crisp

John Crisp is an associate in the Tax Practice Group in the firm's Orange County office.

Businesses, employees, and other taxpayers are incurring new and often significant expenses as they adapt and respond to the changes brought on by the COVID-19 pandemic.  Several tax provisions may help to mitigate the impact of those costs, including new provisions enacted as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act as well as certain previously existing provisions of the Internal Revenue Code (“Code”).
Continue Reading COVID-19 Related Expenses

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act” to provide nearly 2 trillion dollars in aid and relief to individuals, businesses, and other entities in the wake of the spread of COVID-19.  Included in the CARES Act are tax and loan provisions intended to provide financial relief to people and businesses suffering as a result of the disease.

The following summarizes certain key tax-related provisions in the CARES Act.
Continue Reading The CARES ACT – Tax Relief

Qualified Opportunity Funds

The Opportunity Zone tax incentive program allows taxpayers that invest in a Qualified Opportunity Fund to (i) defer paying taxes on the capital gain from the sale or exchange of appreciated assets; (ii) receive a permanent exclusion from taxation of up to 15% on that deferred gain, and (iii) for taxpayers that hold their investment for at least 10 years, a permanent exclusion from taxation for any appreciation in excess of the deferred gain.
Continue Reading Opportunity Zones Update NEW PROPOSED TREASURY REGULATIONS (Part III)

Qualified Opportunity Zone Businesses

BACKGROUND

In December 2017, as part of the Tax Cuts and Jobs Act (“TCJA”), Congress established a new tax incentive program to promote investment in certain low-income communities designated by the IRS as qualified opportunity zones. The tax incentives obtained by investing in a qualified opportunity fund (“QOF”) allow taxpayers to (i) defer paying taxes on capital gain from the sale or exchange of appreciated assets; (ii) receive a permanent exclusion from taxation of up to 15 percent of the originally deferred gain; and (iii) for taxpayers that hold their investment in the QOF for at least 10 years, a permanent exclusion from taxation for any appreciation in excess of the deferred gain.

On April 17, the Treasury Department released its second round of guidance on Opportunity Zone investments in the form of proposed regulations (the “New Proposed Regulations”). These newly proposed regulations supplement and in some cases revise the proposed regulations issued in October of 2018 (the “October Proposed Regulations”). [1]

The New Proposed Regulations provide further clarity, but leave many questions unanswered. This is Part II of our series of blog posts on the New Proposed Regulations. This post addresses key issues relating to the requirements for qualified opportunity zone businesses and qualified opportunity zone business property. For Part I of our explanation, which addresses qualified investments in qualified opportunity funds, please click on the link here.
Continue Reading Opportunity Zones Update: NEW PROPOSED TREASURY REGULATIONS (PART II)

Background

In December 2017, as part of the Tax Cuts and Jobs Act (“TCJA”), Congress established a new tax incentive program to promote investment in certain low-income communities designated by the IRS as qualified opportunity zones. Section 1400Z-2 of the Internal Revenue Code provides three compelling tax incentives to encourage investment in qualified opportunity funds (“QOFs”).

  • Taxpayers can defer paying taxes on capital gain from the sale or exchange of appreciated assets by investing such gain in a QOF within 180 days following such sale or exchange. Such gain may be deferred until the earlier of (i) when the investment is sold or exchanged or (ii) December 31, 2026.
  • Investors receive a step-up in the basis equal to 10% of the original deferred gain if the investment in the QOF is held for at least five years, with an additional 5% basis step-up if the investment is held for seven years. These basis step-ups can result in permanent exclusion from taxation of up to 15% of the originally deferred gain.
  • If the investor holds the investment in the QOF for at least 10 years, an elective basis adjustment made upon sale of the interest in the QOF provides a permanent exclusion from taxation for any appreciation in excess of the deferred gain.

On April 17, 2019, the Treasury Department released its second round of guidance on opportunity zone investment in the form of proposed regulations (the “New Proposed Regulations”). These newly proposed regulations supplement and in some cases revise the proposed regulations issued in October 2018 (The “October Proposed Regulations”).
Continue Reading Opportunity Zones Update: NEW PROPOSED TREASURY REGULATIONS (PART I)

The Tax Cuts and Jobs Act created a new tax incentive program through investment in “qualified opportunity funds”. Qualified opportunity funds are intended to encourage investment in low-income communities by providing three tax incentives to investors:

  • Investors can defer taxes on eligible capital gain arising from a sale or exchange of assets by investing in qualified opportunity funds.
  •  10% of the deferred gain may be permanently excluded from federal income tax by way of a step-up in basis if an investor holds its interest in the qualified opportunity fund for at least five years, with an additional 5% basis step up if the investment is held for seven years.
  • If the investor holds the investment in the qualified opportunity fund for at least 10 years, an elective basis adjustment made upon sale of the interest in the fund provides a permanent exclusion from taxation for any appreciation in excess of the originally deferred gain.


Continue Reading Opportunity Zones Update

On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (TCJA), the most extensive overhaul of the United States tax regime in over thirty years. The new tax law will have a significant impact upon individual taxpayers in all income tax brackets, all businesses and every sector of the economy, including private equity. This alert provides a brief summary of some of the provisions that are likely to impact private equity, both at a fund level and the portfolio company level, and provides some insight in terms of what private equity professionals should consider in their tax structuring going forward.
Continue Reading The Effects of Tax Reform on Private Equity

With the affirmative vote in the House today, both Houses of Congress have now passed a final version of the Tax Cuts and Jobs Act, clearing the legislation for President Trump’s signature. President Trump is widely expected to sign the legislation into law, although White House officials have now raised the prospect that the Act may not be signed until January. This significant legislation will impact nearly every sector of the U.S. economy and U.S. individual taxpayers in all income brackets.
Continue Reading Congress Passes Final Tax Reform Bill

On December 2, the Senate passed its version of the Tax Cuts and Jobs Act. The House of Representatives earlier approved a competing version of the Act on November 16. The Senate and House entered into conference this week to resolve differences between the two versions of the Act. The attached chart summarizes and compares key components of the two versions.
Continue Reading Tax Reform – The Current State of Play

This post  was updated on November 20, 2017 to reflect the most recent state of the legislation.

On November 16, 2017, the House of Representatives voted on and passed the Tax Cuts and Jobs Act. If passed by the Senate, the Act would significantly change the current federal income tax regime in the United States. The legislation would impact all levels of the U.S. economy. The final version of the Tax Cuts and Jobs Act passed by the House is the culmination of a series of negotiations and amendments to the original version of the Act that was released by the House on November 2, 2017. The attached chart summarizes key aspects of the Tax Cuts and Jobs Act passed by the House today.
Continue Reading U.S. Tax Reform: The Current State of Play