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New Treasury and IRS Regulations Bless SALT Deductions for Pass-through Entities

November 10, 2020

By: Amanda Wilson and Andrew Kelly

Yesterday, the U.S. Department of the Treasury and Internal Revenue Service (IRS) issued a press release and related notice regarding proposed regulations which clarify that the $10,000 cap on state and local tax (SALT) deductions imposed by the Tax Cuts and Jobs Act of 2017 does not apply to pass-through entities (PTEs).

While the primary purpose of a PTE is to allow income to “flow through” the entity to its respective owners (thus being taxed only at the individual level), several states have now passed laws which allow PTEs to pay state income taxes at the entity level. These state laws, which have now essentially been blessed by the Treasury and IRS, provide a way for PTE owners to avoid the $10,000 cap on SALT deductions as the Tax Cuts and Jobs Act of 2017 only applies this cap to individuals. 

In addition to stating that “State and local income taxes imposed on and paid by a pass-through entity are allowed as a deduction by [pass-through entities] in computing [their] non-separately stated taxable income or loss for the taxable year of payment,” the press release explains that the proposed regulations will be effective as of November 9, 2020, and will also allow taxpayers to elect to apply the rules described in the notice to specified income taxes paid in a taxable year of a [PTE] ending after December 31, 2017, and before the date the forthcoming proposed regulations are published in the Federal Register.

Originally published on Lowndes Taxing Times.


This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.
Amanda

A member of the firm’s tax practice, Amanda Wilson concentrates on federal tax planning and structuring. She represents clients in a wide variety of complex federal tax matters with a particular emphasis on pass-through entities such as partnerships, S corporations and real estate investment trusts.


Specifically, Amanda focuses on advising clients on the formation, operation, acquisition and restructuring of such pass-through entities. In addition, she regularly advises clients on the structuring and operation of private equity funds, real estate funds and timber funds. Amanda is the author of the Bloomberg Tax Management Portfolio 718-3rd Edition, Partnerships- Disposition of Partnership Interests or Partnership Business; Partnership Termination.

Amanda regularly works in structuring deals to benefit from tax advantaged structures, including like-kind exchanges, new market tax credits, low income housing tax credits, and qualified opportunity zones. Amanda also has extensive experience in corporate planning and international tax matters, as well as federal tax controversy. Her practice before the Internal Revenue Service (IRS) includes providing advice on audits and appeals, drafting protests and ruling requests, and negotiating settlements.

Prior to joining the firm, Amanda worked for Sutherland Asbill & Brennan LLP (now Eversheds Sutherland), an Am Law 100 firm in the Atlanta office, where she was part of Sutherland’s Tax Practice Group. Amanda has also served as an adjunct professor at Emory University School of Law where she taught Partnership Taxation.

Amanda regularly contributes to the firm’s Taxing Times blog and is a regular panelist on tax webinars hosted by Strafford Publications.

Andrew

Andrew Kelly is an attorney in the firm’s Corporate & Securities Group. He focuses his practice in the areas of mergers and acquisitions, corporate governance, financing and other general corporate and securities matters.

Andrew also regularly works alongside the firm’s Real Estate Group, and he has experience working with clients on a wide range of real estate matters including real estate development, finance and transactions, condominiums, property owners’ associations, commercial leasing, commercial lending and title insurance.

Prior to attending law school, Andrew worked as an alternative investment wholesaler for CNL Securities Corp., providing counsel and support regarding various alternative investments to financial professionals.

Andrew is an active member of the Orange County Bar Association, and for the past two years , he has served as co-chair of the annual “Gator Bus Trip” event hosted by the Young Lawyers Section.

Andrew earned his law degree from the University of Florida Levin College of Law, where he competed as a member of the Environmental Moot Court Team and served as senior articles editor of the Florida Journal of International Law. He received his undergraduate degree in applied economics from The Florida State University. While there, he served as an intern for both the Florida Senate in Tallahassee and the U.S. House of Representatives in Washington, D.C.

When not practicing law, Andrew enjoys fishing and playing saxophone and keyboard in an Orlando-based band.

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