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State and Local Tax Credit Programs – Businesses May Get What Individuals Cannot

State and Local Tax Credit Programs – Businesses May Get What Individuals Cannot

Since recent Federal tax law changes have capped the state and local tax deduction for individuals to $10,000, many states have been trying to implement solutions to help alleviate the effects of the change.  New York State has introduced two programs to get around the $10,000 limitation:  New Yorkers can make payments to state charitable programs and receive a credit against N.Y. income tax or, alternatively, use an Employer Compensation Expense Program. Nina Krauthamer and Rusudan Shervashidze look at the back and forth between N.Y. and Federal regulators.

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It’s Time for Cayman Shell Entities to Come Out of Their Shells and Show Economic Substance

It’s Time for Cayman Shell Entities to Come Out of Their Shells and Show Economic Substance

·       It is said that beauty is in the eye of the beholder.  The same can be said about economic substance.  In a step to adopt a standardized definition in the context of business arrangements that are typical for Cayman Islands companies, the country enacted the International Tax Cooperation (Economic Substance) Law, 2018 (“E.S. Law”) on December 27, 2018, and issued supplemental guidance on February 22, 2019.  Neha Rastogi and Galia Antebi address relevant aspects of the new rules, including (i) entities that fall within the ambit of the E.S. Law, (ii) entities that are exempt, (iii) identified business activities under the E.S. Law, and (iv) steps that may be taken to meet the economic substance test.

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New Jersey Provides G.I.L.T.I Guidance

New Jersey Provides G.I.L.T.I Guidance

Federal tax law has introduced a new type of gross income: Global Intangible Low Tax Income (“G.I.L.T.I.”).  The provisions are designed to stop U.S. companies from shifting their profits to offshore jurisdictions, and states are given a choice to incorporate parts of Federal law in one of three ways.  New Jersey has chosen “selective conformity.”  Nina Krauthamer and Rusudan Shervashidze explain what this means for the state and for taxpayers.

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More Permanent Establishments: The Dwindling Preparatory and Auxiliary Activities Exception

More Permanent Establishments: The Dwindling Preparatory and Auxiliary Activities Exception

Nothing is certain in this world, except death and taxes – and even taxes are subject to change.  The ever-expanding definition of a permanent establishment (“P.E.”) and ever diminishing exceptions to a P.E. under the O.E.C.D.’s B.E.P.S. Project has made one thing clear – the restrictions local jurisdictions put on activities by foreign taxpayers to trigger taxation are tightening.  The dwindling preparatory and auxiliary activities exception is a prime example.  Neha Rastogi and Beate Erwin explain.

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The I.R.S. Approach to the Dependent Agent Concept

The I.R.S. Approach to the Dependent Agent Concept

When foreign corporations have certain limited activities in the U.S., a question that arises is whether a taxable presence exists in the U.S. for Federal income tax purposes.  A foreign corporate taxpayer with direct activities or operations in the U.S. is subject to U.S. corporate income tax and branch profits tax if it conducts a U.S. trade or business generating effectively connected income. Recently, the I.R.S. Large Business and International division published an international practice unit (“I.P.U.”) addressing the creation of a P.E. through the activities of a “dependent agent.” Fanny Karaman and Beate Erwin lead the reader through the I.P.U. and explain the four-step process that is used by the I.R.S. to evaluate whether a permanent establishment exists.

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