Tim focuses his practice in the state and local tax area. His work primarily involves New York State and New York City tax litigation and controversy. Over the past 25 years, he has handled more than 3,000 personal income tax, sales tax, corporate tax, or other New York State and City tax audits, and over 100 cases in New York’s Division of Tax Appeals. Tim is also a member of the Board of Directors of Hodgson Russ.
Tim leads the firm’s Tax Residency Practice and he is one of the leading practitioners in this area of the law. He has handled some of the most high-profile residency cases in New York, including a significant win in the Gaied case, one of the first New York residency cases to ever reach New York’s highest court. He is often quoted by media outlets, including The Wall Street Journal, The New York Times, Bloomberg, and Forbes, on residency and other state tax issues. Under his direction, the Tax Residency Practice authored What to Expect in a Residency Audit, a detailed guide to residency rules and audits in New York and other states. And over the past 25 years, he has guided literally thousands of taxpayers moving from high-tax states to low-tax states and successfully defended them in state residency audits.
As the “Noonan” in “Noonan's Notes,” a monthly column in Tax Notes State, Tim is a nationally recognized author and speaker on state tax issues. He co-authored the CCH Residency and Allocation Audit Handbook and Contesting New York State Tax Assessment- Fourth Edition, published by the New York State Bar Association. In addition, Tim has served as a contributing author or editor for several other tax publications and treatises, including the American Bar Association's Sales and Use Tax Deskbook, the "New York Sales Tax Guide" published by practicallaw.com, the corporate apportionment chapter in Thomson Reuters’ Checkpoint Analyst, the New York chapter of LexisNexis’s Practice Insights, and the New York Tax Litigation chapter in Thomson Reuters’ Commercial Litigation in New York State Courts treatise. He has also written more than 400 articles in state and local tax publications around the country over the past two decades, and he runs the award-winning Noonan's Notes Blog, where he and his colleagues offer regular commentary on developments in the world of New York and multistate tax law.
Tim also has extensive experience on New York City corporate and entity tax matters, and handled a significant number of residency and sales tax issues in other states, including work with many national and international clients on multistate compliance or voluntary disclosures. He has also appeared before the Connecticut Supreme Court and the Michigan Court of Appeals in litigated matters and is admitted to practice law in Connecticut.
Education
University at Buffalo, B.A., magna cum laude
University at Buffalo School of Law, J.D., magna cum laude
Admissions
- Connecticut
- New York
- U.S. Supreme Court
Audits and Litigation
Tim has handled thousands of state tax audits, litigated cases, and appeals. His track record in reported cases within New York’s Division of Tax Appeals is exceptional, and his experience extends into the state courts as well, highlighted by a win in a watershed 2014 residency case in New York’s highest court. In that case, Hodgson Russ attorneys represented the victorious taxpayer in a highly anticipated decision in a tax residency case before the New York Court of Appeals in February 2014. In John Gaied v. New York State Tax Appeals Tribunal, the court agreed with the position advocated by Hodgson Russ on behalf of Mr. Gaied and established a new rule for determining when individuals domiciled outside of New York may still be taxed in New York as "statutory residents." This was the first case in several decades to prompt New York's highest court to examine the scope and extent of New York's residency rules. The case has been widely cited in the press, including the Wall Street Journal and Law360. Other reported cases in the income tax and sales tax areas include:
Matter of CDECRE Artwork DTA No. 828952 (N.Y. Div. Tax App. Sept 1, 2022)
Matter of Obus (as amicus) DTA No. 827736 (N.Y. Tax App. Trib. Jan. 25, 2021); rev’d 206 A.D.3d 1511 (2022)
Matter of Christopher Sheehan DTA 827290 (N.Y. Div. Tax App. April 19, 2017)
Matter of Sobotka, DTA No. 826286 (N.Y. Div. Tax App. Aug. 20, 2015)
Matter of Luizza, DTA No. 824932 (N.Y. Div. Tax App. Aug. 21, 2014)
Gaied v. New York State Tax App. Trib., 22 N.Y.3d 592 (Feb. 18, 2014)
Matter of Michaels, DTA No. 823370 (N.Y. Div. Tax App. Apr. 12, 2012)
Matter of Primo Coffee DTA No 823096 (N.Y. Div. Tax App. 823096)
Matter of L&L Painting DTA 822227 (N.Y. Tax. App. Trib. June 2, 2011)
Matter of Barker, DTA No. 822324 (N.Y. Tax App. Trib. June 23, 2011)
Matter of Marriott International DTA No. 821078 et al (N.Y. Tax. App. Trib. Jan. 14, 2010)
Matter of Xerox Corporation DTA No. 821914 (N.Y. Div. Tax App. Apr. 23, 2009)
Matter of John Smythe DTA No. 822160 (N.Y. Div. Tax App. Mar. 16, 2009)
Matter of Hoffman Car Wash, Inc. DTA 820681 (N.Y. Tax. App. Trib. Dec. 11, 2008)
Matter of Premier National Bancorp DTA No. 819746 (N.Y. Div. Tax App. April 27, 2006)
Matter of Reiner, DTA No. 820266 (N.Y. Div. Tax App. July 13, 2006)
Matter of Falberg, DTA No. 818960 (N.Y. Div. Tax App. Oct. 9, 2003)
Matter of General Electric DTA No. 818425 (N.Y. Div. Tax App. May 15, 2003)
Matter of Kaltenbacher-Ross, DTA No. 818499 (N.Y. Div. Tax App. May 29, 2003)
Residency and Tax Planning
Over the past two decades, Tim and his colleagues in the residency practice have assisted thousands of clients in effectuating changes of residency from New York and other states and helping with state tax planning on major income events. They have also assisted hundreds of clients with planning associated with New York State's 548-day rule. This planning involves detailed work with the client and advisors on interpretation and application of New York's residency provisions. And very often these residency-planning matters lead to residency tax audits. Tim and the residency team at Hodgson Russ handle more of these audits than any other law firm in the country, and their track record of success is exceptional, in particular in those cases where they’ve worked with the clients on the planning process.
Other Representative Highlights
- Counsel in Multistate Residency Litigation
- Lead Tax Counsel in Flow-Through Income Case
- Litigation Proves Bridge Painting Project Satisfies New York's Capital Improvement Rules
- NYS Sales Tax Audit on Investment Research Provider
- Represented Major Hotel Chains in Litigation
- Served as Tax Counsel on Behalf of a Banking Client
- Tax Counsel in Significant State Residency Case John Gaied v. New York State Tax Appeals Tribunal
- Tim is a member of the Advisory Board of Tax Analysts' Tax Notes State, and was profiled in that publication in an August 2022 article.
- Listed, Best Lawyers in America Lawyer of the Year (Tax Law) 2024
- Listed, Best Lawyers in America (Tax Law) 2022 - 2025
- Listed, Chambers USA: America’s Leading Lawyers for Business, (Tax: State & Local (NY)) 2023-2024
- Listed, Upstate New York Super Lawyers (Tax) 2017 - 2024
- Listed, Upstate New York Super Lawyers Rising Stars 2013 - 2014
- Noonan's Notes Blog listed among "Best Tax Blogs 2017" on Credit Donkey.com
- As special legal advisor to Topia, Tim assisted in the creation of MONAEO, a GPS-powered smartphone application and software service to help taxpayers track their time for tax purposes.
- 2004 Burton Award for Excellence in Legal Writing for his co-authorship of "Executive Compensation and Employer Withholding," Journal of Multistate Taxation, August 2003.
- QuotedBloomberg Law
Timothy Noonan's insights are featured in the article "Massachusetts Ruling Upends Norms for Taxing Nonresident Income" by Perry Cooper.
- ArticleTax Notes State
Timothy Noonan and Brandon Bourg an article written for Tax Notes State titled, “A Bad Call? New York's BBA Partnership Audit Rules Miss the Mark.”
- SeminarJanuary 30, 2025 & January 31, 2025Palm Beach & Boca Raton
- QuotedTax Notes State
- Media MentionTax Notes State
- Blog Post
From TiNY: We interrupt our not-so-regularly-scheduled … umm … schedule for a special report by our court-watch correspondents: Open Weaver Banks and Tim Noonan. I’m sure all our readers are familiar with Open as a result of her recent article “Do cross border incursions by extraterrestrial drones implicate New Jersey Use Tax?” But you may not be so familiar with Tim since he tends to keep a low profile.
All kidding aside, Happy Holidays from TiNY! As a special holiday treat, here is Open and Tim’s take on the November oral argument before the Tax Appeals Tribunal in Matter of Zelinsky (with some parenthetical commentary by TiNY). Zelinsky may end up being one of the most important SALT cases addressing the unique SALT circumstances resulting from the COVID-19 pandemic, and Judge DiFiore’s determination against Petitioner may be found here. Professor Zelinsky knew of our firm’s interest in convenience rule disputes and was kind enough to share a copy of the transcript of the Tribunal argument.
- ArticleTax Notes State
- ArticleTax Notes State
- Webinar
- QuotedTax Notes State
- Blog Post
There is a lot of residency guidance out there harping on the importance of taking various administrative steps to change your domicile, like changing your driver’s license, voter registration, vehicle registration, etc. And while those steps are certainly indicative of a move, they are typically less relevant to the final determination, and often can cause taxpayers to lose focus on what we think can be the most important factor in changing your domicile: where you spend your time. Indeed, a poor “time factor” can hamstring an otherwise legitimate change in domicile.
- SeminarBST & Co. CPAs, LLP, 10 British American Blvd., Latham, NY 12110
- ArticleTax Notes State
- Speaking EngagementPLI, 1177 Avenue of the Americas, New York, NY
- Blog Post
The Third Department of the New York Supreme Court, Appellate Division recently issued a somewhat surprising ruling that should expand taxpayers’ access to protest rights within the state’s Division of Tax Appeals (“DTA”).
In the case, Matter of Dumpling Cove, LLC, the Petitioner was audited and subsequently signed a Statement of Proposed Audit Change in January 2018, agreeing that it owed over $500,000 in sales tax, interest, and penalties. Shortly thereafter, the Petitioner made a partial $100,00 payment, and the Department responded with a letter confirming receipt of the $100,000 check and, importantly, referring Petitioner to the Department’s website “to view your balance due.”
- Press ReleaseHodgson Russ Press Release
- Press ReleaseHodgson Russ Press Release
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In July, the Massachusetts Appellate Tax Board (ATB) issued a decision upholding the state’s 2020 emergency regulation that required nonresident employees who worked in Massachusetts prior to the pandemic, but worked remotely due to the pandemic, to continue to apportion their income to Massachusetts.
But just because we’re posting about it—don’t confuse the Massachusetts’ emergency regulation with New York’s convenience rule. There are several key differences.
- Blog Post
Earlier this year we reported on a Massachusetts case where a court, (wrongly, we think), determined that a nonresident taxpayer could be taxed on the sale of stock in a business that he founded and ran in the state. Turns out this issue might be contagious……a few months ago, Ohio successfully made a similar argument. In a Final Determination issued on March 28, 2024, the Ohio Tax Commissioner denied Claimants Dr. Garry Rayant and Dr. Kathy Fields’s $719,492 refund application filed with their amended 2018 Ohio tax return. The Claimants sold 25% of their interest in Rodan & Fields, a skincare products company, and originally apportioned their resulting capital gain income to Ohio in calculating their Ohio nonresident credit. On their amended return, however, they allocated this capital gain income to California, increased their nonresident credit, and claimed a refund.
- SeminarTuesday, June 25 and Thursday, July 18605 3rd Ave., New York, New York
- Blog Post
Over the past few years, we’ve seen a major expansion of enforcement efforts by the New York City Department of Finance, particularly with respect to the City’s unique Unincorporated Business Tax (the “UBT”). In these audits, DOF has been taking increasingly aggressive positions around the application of various statutory provisions.
- Blog Post
Over the past decade, New York and other states have employed some version of a “False Claims Act” (FCA) to enforce violations of the tax law, and occasionally these cases wade into residency and personal income tax waters. One of the tax jurisdictions is the District of Columbia, and recently they scored a big win in a FCA case.
- ArticleTax Notes State
- Press ReleaseHodgson Russ Press Release
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- QuotedTax Notes State
- QuotedBloomberg Tax
- ArticleTax Notes State
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Over the past few years, we’ve seen a mass exodus of taxpayers leaving New York. Why? Well, first there was the COVID-19 pandemic; that didn’t help. But in the middle of the pandemic, the State raised the personal income tax rates to some of the highest in the nation. That didn’t help either! And then we had issues around a declining standard of living in New York City, empty office buildings, remote work, and safety issues, all leading more New Yorkers to seek out more friendlier climates.
- QuotedBloomberg Tax
- ArticleTax Notes State
- SeminarJanuary 25, 2024 - February 16, 2024Palm Beach, Boca Raton, Sarasota, Naples, Florida
- ArticleTax Notes State
- Blog Post
A couple weeks ago, the Third Department of the New York Supreme Court, Appellate Division issued its decision in Matter of Schreiber, reversing a prior decision of the Tax Appeals Tribunal, finding that its interpretation of Tax Law § 16(f)(2)(C) and Matter of Purcell, both related to the calculation of qualified empire zone enterprise (QEZE) tax reduction credits, was irrational. We’ve been following this issue for almost a decade, dating back to our review and analysis of the Purcell case, which you can read about here. The Schreiber case presents an interesting new twist in the story, and the Court’s analysis could impact cases beyond the realm of QEZE credits.
- Blog Post
As states continue to seek increased revenues, especially those high-tax states dealing with a dwindling tax base, we’re starting to see some states take unusual and fairly aggressive positions in tax cases. One recent example we covered involved New York and the enforcement of its “convenience rule” in the Zelinsky case. In November 2023, the Massachusetts Appellate Tax Board issued another doozy, holding in Welch v. Commissioner of Revenue that a nonresident could be taxed on the gain from the sale of stock. (Docket No. C339531 (November 29, 2023)).
- NewsBloomberg Tax
- Blog Post
Last month, we wrote about a recent ALJ Order dealing with New York’s application of the convenience rule to a situation where a taxpayer’s New York office was closed during COVID. In that piece, we noted that we expected a decision in February 2024 in the Zelinsky case, in which the petitioner was making similar arguments about the application of the convenience rule during COVID.
- Webinar
- Webinar
- SeminarDecember 6, 2023 - December 7, 2023Novotel Miami Brickell, 1500 SW 1st Avenue, Miami, FL 33129
- Speaking EngagementMiami, Florida
- ArticleTax Notes State
- Blog Post
As our regular readers know (all 7 of them), one of the bigger SALT issues to come out of COVID, especially in New York, relates to New York’s “Convenience of the Employer” rule. Under that rule, wages that a nonresident employee earns while working outside of New York State are treated as New York-sourced income if the employee is working from home for their New York employer for their own convenience. As we reported back in October 2020, several months into the pandemic the New York Tax Department announced its position that COVID-related telecommuting would have no impact on its application of the convenience rule. And as we experienced in a number of personal income tax audits after that, the Tax Department extended this position even to situations where an employer had closed its office in New York.
- Seminar
- ArticleTaxStringer
- Webinar
- ArticleTax Notes State
- SeminarSeptember 11 - 12, 2023Practising Law Institute, 1177 Avenue of the Americas, New York, NY 10036
- ArticleCFO Tech Outlook
- Press Release
- NewsTaxNotes
- NewsLaw360
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We’re seeing some progress in New York! It’s been nine long years since the Legislature adopted sweeping corporate tax reform, and today the New York Department officially released its proposed rulemaking (as opposed to the draft version of the rules that were kicking around for the last few years). Under New York rulemaking procedures, a mandatory 60-day comment period has commenced. During this time the public may submit comments to the Department on the proposal. After the comment period, the Department is permitted to adopt the proposed rules.
- SeminarJune 21 - August 2, 2023605 Third Avenue, New York, New York
- Blog Post
A few weeks ago, the Tax Appeals Tribunal issued a decision in a residency case, Matter of Glynn, holding that the Administrative Law Judge’s grant of summary determination was properly granted to the Division of Taxation. This is somewhat unusual for a residency case, as more extensive fact finding is usually necessary to resolve these disputes. And our fellow blogger at Taxes in New York (“TiNY”) had a lot to say about this opinion. A few other thoughts from this corner………
- AlertHodgson Russ LLP State & Local Tax Alert
- Webinar
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Last month, New York State passed its 2023-24 Budget, better late than never. We highlighted a lot of the new provisions in a recent Tax Alert, but there are a couple of changes involving the Metropolitan Commuter Transportation Mobility Tax (the “MCTMT”) worthy of special note. The MCTMT functions somewhat like a payroll tax on employers in the Metropolitan Commuter Transportation District (which includes the counties of New York, Bronx, Kings, Queens, Richmond, Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess, and Westchester). And it also applies to self-employed individuals, including partners in partnerships.
- ArticleTax Notes State
- SeminarWestin New York at Time Square
- Press Release
- ArticleTax Notes State
- Blog Post
Edward Zelinsky, a Connecticut resident and professor at the Benjamin N. Cardozo School of Law in New York City, recently added another chapter to his New York tax chronicles, once again challenging New York’s convenience of the employer rule. Professor Zelinsky lost his previous battle with New York, Zelinsky v. Tax Appeals Tribunal, 1 N.Y.3d 85 (2003), cert. denied, 541 U.S. 1009 (2004), but this one has a bit of a different twist, as outlined in his 2019 and 2020 petitions for a hearing with the Division.
- AlertHodgson Russ State and Local Tax Alert
- SeminarMay 1 - May 2, 2023Harvard Club, New York, New York
- NewsLaw360
- Blog Post
In an unfortunate blow to Taxpayers, the Washington State Supreme Court ruled 7-2 on Friday, March 24, 2023, to uphold the constitutionality of the state’s capital gains tax. The ruling comes as a sharp reversal of a lower court decision striking down the tax as unconstitutional, which we reported on here.
- Webinar
- NewsTax Notes
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Last month, New York’s highest court denied leave to appeal in Matter of Obus v. New York State Tax Appeals Trib., 206 A.D.3d 1511 (3d Dep’t. 2022), closing the book on litigation that will have lasting implications on New York’s ability to tax vacation-home owners, and perhaps others with tenuous connections to a New York dwelling, as tax “residents” of New York. The New York Court of Appeals’ refusal to hear the appeal leaves the lower court’s decision in Obus intact.
- SeminarMarch 13 - March 17, 2023Royal Sonesta Hotel, New Orleans, LA
- Speaking Engagement
- Press Release
- SeminarJanuary 26, 2023 - February 24, 2023Palm Beach, Boca Raton, Miami, Sarasota, Naples, Florida
- ArticleTax Notes State
- NewsLaw360
- NewsLaw360
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Another win for telecommuters! Yes, you read that right! We recently covered a case involving a Pennsylvania-based employee who won a Covid-related telecommuting case in Ohio. Now remote employees have another win to add to their pile of Covid-related telecommuting cases. In Missouri, a judge just ruled that St. Louis improperly applied its 1% earnings tax on nonresident employees who worked outside the city during the Covid-19 pandemic.
- AlertHodgson Russ SALT Alert
- ArticleTax Notes State
- Blog Post
As residents and SALT practitioners in New York, we see firsthand how high income tax rates drive the personal decision making of taxpayers as well as enforcement efforts by tax departments. On the taxpayer side, we’ve seen tangible (albeit anecdotal) evidence that taxpayers will make decisions on where to work or live based on their taxes. We saw this in 2018 with the explosion of moves following the implementation of the SALT cap, and again in New York in 2021 when, combined with Covid, taxpayers exited New York at a record-breaking pace, coincidentally around the time that the New York legislature raised the highest combined tax rate for New York State and City resident taxpayers to 14.7%. Of course, over the years New York has become somewhat of a leader in personal income tax enforcement, particularly in the residency area, to address the movement of taxpayers both in and out of the state. For example, over the course of 2018 through 2022, the tax department reports performing over four thousand residency audits per year. More recently, the tax department has put in place a massive “desk audit” program specifically to have a process that immediately questions taxpayers who left the state in 2020 or 2021.
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The New York City Pass-Through Entity Tax (“NYC PTET”) online application is now available, allowing individuals eligible to opt in to the NYC PTET on behalf of an eligible city partnership or eligible city resident S corporation.
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An interesting residency case came out last summer on a statutory residency issue, and it may have got lost in all the hubbub around the Obus case (which we covered here). In Matter of Joseph Pilaro, the Tax Appeals Tribunal held that the taxpayer didn’t maintain a permanent place of abode (PPA) for substantially all of 2014, even though he had a place in New York for most of the year. The decision provides several helpful nuggets for future residency battles.
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- ArticleTax Notes States
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Yes, you read that right! The first employee win we have seen on the COVID-related telecommuting cases recently came out of Ohio. During the pandemic, many states came out with guidance on how to treat the income employees earned while working remotely, some of which was contrary to their existing rules. Ohio was one of those states that acted quickly, with HB 197 taking effect March 27, 2020. Backdating to March 9, 2020, and lasting until 30 days after the state of emergency ended, Section 29 of HB 197 stated, for municipal income tax purposes, employees were deemed to be performing services at the employee’s principal place of work, rather than where the employee was physically working. This notably applied to both resident and nonresident employees. The alleged intention of the bill was to lessen the burden on employers by not requiring them to change the municipal withholding of their employees. This rule looks a lot like the “convenience of the employer" rule that a few states, including New York, applied before Covid, and that many states migrated to during the pandemic.
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Over the years, we have written on a variety of topics that involve professional athletes -- from how states handle signing bonuses to an overview of multistate tax issues. This past week, there was an interesting new development to add to the list. On September 21, 2022, the Court of Common Pleas of Allegheny County ruled Pittsburgh’s “jock tax” is unconstitutional in Francoeur v. City of Pittsburgh.
- NewsLaw360
- SeminarSeptember 25 - September 28, 2022Niagara Falls Convention Center
- AlertHodgson Russ TriState Tax Alert
- Blog Post
As we reported here several months ago, this year's New York State budget included a provision for a New York City Pass-Through Entity Tax, effective in 2023, that would allow New York City resident owners of pass-through entities to benefit from a local Pass-Through Entity Tax regime. Shortly after it was passed, many wondered why there was only a prospective effective date. Given that a change like this should be net neutral to the State and City government, why not make it retroactive to January 1, much like the State Pass-Through Entity Tax was made retroactive when it was put in place in 2021?
- Press ReleaseHodgson Russ Press Release
- Press ReleaseHodgson Russ Press Release
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- NewsTax Notes
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- SeminarJune 15 - July 20, 2022NYC and Park Ridge, NJ
- NewsTax Notes
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Big news on the residency front!
For years we’ve been battling the New York tax department on the scope of its statutory-residency test, and yesterday brought a huge victory in that fight. In Matter of Nelson Obus et al., v New York State Tax Appeals Tribunal, the court ruled that a seldom-used vacation home in New York cannot be considered a “permanent place of abode” for statutory residency purposes. Click here for the decision.
- NewsLaw360
- NewsTax Notes
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Last week we reported on the fast-paced legislative efforts to extend New York’s 2022 pass-through entity tax (PTET) election deadline. To read that article, click here. In record time, the bill we reported on was signed into law by Governor Hochul on May 6, 2022.
- ArticleTax Notes State
- NewsTaxNotes Talk Podcast
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Last month we reported on recent legislative amendments to New York’s pass-through entity tax (“PTET”). To read that article, click here. It turns out the New York legislature is not done making amendments to the PTET.
- Webinar
- NewsTax Notes
- NewsHodgson Russ State & Local Tax Alert
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In 2021, many New York residents did not receive the full benefit of New York’s SALT cap workaround, because New York took a unique approach to the computation of its new pass-through entity tax (“PTET”). We are happy to report that on April 8, 2022, the New York Assembly and Senate passed Fiscal Year 2023 budget legislation (the Budget Bill), and part of the new legislation addresses (and fixes) this issue.
- NewsLaw360
- NewsTax Notes
- NewsTax Notes State
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Without even a hint of fanfare, the New York State Department of Taxation and Finance recently released a new version of its audit guidelines for nonresidents. Given that the last update was in 2014, we easily excited tax lawyers cracked them open to find out what had changed. But when we dug into the new guidelines, we were disappointed to see only minor stylistic edits.
- NewsHodgson Russ Tristate Tax Alert
- Blog Post
The drip of Pass-Through Entity Tax (PTET) questions we’ve received has grown into a steady stream… there must be some due dates approaching! Here’s a quick reminder about two important due dates for New York’s PTET. Spoiler: They’re both March 15.
- NewsTax Notes
- Blog Post
On Tuesday, March 1, 2022, Washington State Superior Court Judge Brian Huber released a ruling striking down the state’s new capital gains tax. The law—signed by Governor Jay Inslee last May—imposes a 7% tax on the sale of stocks, bonds, and other assets above $250,000. When signed, Washington became the first state in the country with no income tax to impose a tax on capital gains.
- NewsCNN Business
- NewsTax Notes State
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As promised, we have an update on one of the unanswered questions relating to New York’s Pass-Through Entity Tax (PTET) that went into effect last year. While we are still waiting for an official pronouncement, we have heard from other practitioners that the Department is taking a favorable position on the treatment of guaranteed payments in the context of the PTET.
- NewsHodgson Russ New Jersey Tax Alert
- NewsHodgson Russ Tristate Tax Alert
- NewsTax Notes State
- Blog Post
Recently, the New York State Department of Taxation & Finance released new nonresident audit guidelines, without any announcement or fanfare. Being the first official update to the guidelines since 2014, we were excited to crack them open! But, alas, our hopes were soon dashed; the changes to the guidelines turned out to be mostly minor.
- NewsBloomberg Tax
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- SeminarWestchester Manor, Hastings-On-Hudson, NY
- NewsTax Notes Talk
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Recently, we’ve witnessed a mass exodus from New York State as a result of the COVID-19 pandemic. Some movers yearn for warmer weather, others for more reasonable Covid policies, and others simply seek a home-state that won’t tax their personal income. When we advise these moving individuals on their domicile change, a question we’re receiving with increasing frequency is “after I move, can I continue to make donations to my favorite local charities, or will New York State use that information against me in a determination of my domicile?” We understand why people are concerned at the possibility that their charitable contributions might be weaponized against them. After all, in a domicile audit, New York auditors are instructed to analyze the taxpayer’s lifestyle, using five primary factors: home, time, business activity, near & dear, and family.
- NewsHodgson Russ SALT and Renewable Energy Alert
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Just when you thought you could relax because you met the October 15 deadline for the New York Pass-Through Entity tax (PTET) election, new questions about some of the practical aspects of making tax payments and return filing deadlines have come to light.
- Blog Post
Back in August, the Department confirmed in TSB-M-21(1)C, (1) that, beginning this year, resident partners, members, or shareholders will be allowed a resident tax credit against their New York State personal income tax for any pass-through entity tax imposed by another state, local government, or the District of Columbia, that is substantially similar to the PTET. The question remaining was: “what does substantially similar mean?” Well, we have our answer. On Monday, the Department published a list, which specifically enumerated the states (and corresponding qualifying state taxes) that impose a pass-through entity tax that is substantially similar to New York’s PTET.
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Much to the frustration of the practitioner community, the New York Tax Department’s extension of certain filing deadlines last month due to Hurricane Ida (sorry, we’re not calling it a “Post-Tropical Depression!”) did not cover October 15-related deadlines, unlike the extensions offered by the IRS and New Jersey. But late on October 12, with only a couple days left in the filing season, the Tax Department finally capitulated, issuing Notice N-21-5, extending many (but not all) of the due dates coming up for taxpayers and practitioners impacted by Ida.
- Blog Post
We have been trying to keep up with all of the questions from clients and practitioners regarding New York’s Pass-Through Entity Tax (PTET) with the deadline for making the 2021 annual election looming on October 15. We published a handy list of FAQs in State Tax Notes, covering the nuts and bolts of the PTET, state credits and the federal deduction.
Based on discussions internally, with other SALT practitioners, and with NYS representatives who were actively involved in the PTET legislation and guidance, we wanted to add a few more FAQs to our list.
- Blog Post
On October 5, 2021, the Second Circuit Court of Appeals declared that the federal $10,000 SALT deduction cap is constitutional. The long-awaited ruling affirms a decision by U.S. District Court Judge J. Paul Oetken, which we covered here. The SALT deduction was first capped at $10,000 as part of former President Trump’s Tax Cuts and Jobs Act of 2017 (TCJA).
- NewsHodgson Russ Tristate Tax Alert
- Webinar
- NewsTax Notes State
- NewsBloomberg Tax
- NewsHodgson Russ Tristate Tax Alert
- NewsBloomberg Tax
- Blog Post
For months we’ve all been waiting for the Tax Department to issue guidance on New York’s new Pass-Through Entity Tax (PTET), since the legislation passed in April 2021. And with the deadline to elect into the tax on October 15, 2021, little details—like how to actually make the election—remained up in the air! We did our part, with a recent article in Tax Notes State asking and answering some FAQs, but finally yesterday the Tax Department issued its own guidance, in the form of a technical services memo, entitled TSB-M-21(1)C, (1).
- Press ReleaseHodgson Russ Press Release
- NewsThe Washington Post
- Press ReleaseHodgson Russ Press Release
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- NewsHodgson Russ State & Local Tax Alert
- NewsBloomberg Tax
- NewsHodgson Russ Tristate Tax Alert
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- NewsBuffalo Business First
- NewsTax Notes State
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For the last year, we've been tracking the guidance that states have issued related to how state personal income taxes will be handled during the COVID-19 pandemic, with a specific focus on telecommuting employees. At this point, most states have issued some guidance on this. Connecticut, on the other hand, has stayed silent, until now.
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At the end of last year, we discussed the latest pied-à-terre tax proposal introduced in the New York Legislature, Senate Bill S44B, and how it compared with prior versions reported in this blog over the past six years. (As you may recall, New York State Senator Brad Hoylman sponsored the original proposal to impose a real property tax on nonprimary residences in 2014). This past weekend, the New York Assembly released its Tax and Revenue budget proposals for 2021-22, Assembly Bill 3009-B (the “Assembly Proposal”), which includes a new type of pied-à-terre tax, a surcharge on the owner! (The Senate declined to include such tax in its budget proposal.)
- NewsTax Notes State
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We’re back to our regularly scheduled programming. For the last two weeks, we took a break from tracking legislative developments to provide a summary of the proposed tax changes in Governor Cuomo’s Executive Budget for fiscal year 2022. In addition to our overall summary of the Executive Budget, we also took an in-depth look at some of the more noteworthy changes. (See here, here, and here.)
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Welcome to our second post dedicated to providing a summary of the proposed tax changes in Governor Cuomo’s Executive Budget for fiscal year 2022. The Executive Budget proposes to enact new taxes, credits, and other initiatives, aimed largely at mitigating the revenue shortfalls caused by the COVID-19 pandemic, and are broken down into the following categories:
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We’re back! This week, we have dedicated the post to providing a summary of the proposed tax changes in Governor Cuomo’s Executive Budget for fiscal year 2022. We’ve already covered some of the proposed tax changes in the Executive Budget that came out late last month (see here, here, and here). The Budget Proposal sets forth new taxes, credits, and other initiatives, aimed largely at mitigating the revenue shortfalls caused by the COVID-19 pandemic, and are broken down into the following categories:
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We’re back with another update on recently-introduced tax legislation. As discussed last week, we continue to see bills reintroduced that expired at the end of the last session. Two of the more interesting proposals include repealing New York’s estate tax and another so-called “millionaire’s tax.” We’ve also been following the proposed tax changes in the Governor’s Budget proposal that came out earlier this week (see here, here, and here), and next week we’ll dedicate our update to an overall summary of the Budget proposals.
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In the blog I posted below, more than a year ago, we tried to answer what has been a pressing question about how far New York’s resident credit rules go, and specifically whether NY resident who pays the Connecticut pass-through entity tax (or really any other state’s PTE tax) could claim a resident tax credit in New York for such taxes. Sixteen months later, there still is no direct answer to this question, though I continue to believe there’s some authority under existing law to claim such a credit. But earlier this week, as part of the Governor’s 2021 Budget Proposal and buried in provisions around a new PTS tax for New York (which we will cover in a separate blog post, don’t worry), there’s this amendment to Tax Law § 620:
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The day many expected has finally come: Governor Cuomo has officially proposed his 2021 Budget and, as expected, it includes higher personal income tax rates for high-income taxpayers.
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On January 19, 2021, New York Governor Andrew Cuomo published his Fiscal Year 2022 Executive Budget and related legislation (the “Budget Proposal”). While the Budget Proposal contains a variety of important provisions, this post will cover one of the most notable: the proposed pass-through entity (“PTE”) workaround to the $10,000 limitation on Federal state and local tax deductions (the “SALT cap”).
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We’re back with another update on recently-introduced tax legislation. As discussed last week, we continue to see bills reintroduced that expired at the end of the last session. Two of the more interesting proposals include a bill addressing the taxability of carried interest for investment management services and another proposing a new personal income surcharge on high-income residents of New York City.
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With the start of New York’s new Legislative Session for the 2021-22 term, we are eagerly anticipating the introduction of new tax legislation and we plan to cover those developments here. We’ll be tracking all noteworthy legislative developments on a weekly or bi-weekly basis, and this is our first installment of 2021.
As expected, we are already seeing bills reintroduced that expired at the end of the last session. Given the uptick in working remotely due to COVID-19, one of the more interesting proposals addresses the tax treatment of telecommuting employees. While some of these efforts may fail, New York is experiencing multibillion-dollar revenue shortfalls and will be increasingly looking to businesses and high earners to ease the revenue shortfalls being faced due to the COVID-19 pandemic.
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This blog post will cover several noteworthy, recently-introduced pieces of New York tax legislation. While these bills are set to expire today at the end of the current legislative session, these bills may be reintroduced when the new legislative session begins in January 2021. If ultimately passed, these new pieces of legislation could have a significant impact on New York taxpayers, so we plan to keep these bills on our radar and track their progression through the legislative process when the new session begins.
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On November 9, 2020, the IRS issued Notice 2020-75 (the “Notice”) informing taxpayers that forthcoming proposed regulations would clarify that state and local income taxes imposed on and paid by a partnership or S corporation (a “pass-through entity” or “PTE”) on its income are allowed as a deduction by the PTE in computing its non-separately stated taxable income or loss for the year of the payment, meaning that such payments are not taken into account in applying the State and local tax (“SALT”) cap limitation to any individual who is a partner of shareholder in the PTE.
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Over the past few weeks, several of our clients have received letters from the New York Tax Department’s desk audit unit inquiring about their 2018 tax return. These have all been form letters, all asking the same questions, and looking something like this letter. From what we can tell, all of these letters have been issued to taxpayers who fall generally in the same circumstances: they either changed their residency during 2018 and thus filed a part-year resident return, or they filed as New York residents in 2017 and then as full-year nonresidents in 2018.
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As we have chronicled in blog posts over the past several months, many states have issued guidance related to how state personal income taxes will be handled during the COVID-19 pandemic, with a specific focus on telecommuting employees. Last month we also published an article in Tax Notes State on the issue. The primary question has been whether an employee telecommuting from outside a state due to the pandemic owes personal income tax in their home state or in their employer’s state (or both!).
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UPDATED OCTOBER 25, 2021
Due to the COVID-19 pandemic, millions of people have been telecommuting for over a year, either from their home state or elsewhere. Even as some states open their economies back up, it does not change the fact that companies have been allowing employees to telecommute for a significant amount of time. And many companies are allowing employees to telecommute on a more indefinite basis. Allowing employees to telecommute from states in which they do not normally work can create a host of issues for employers, but the two big tax issues relate to nexus and income tax.
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Last year we published a full-length article in State Tax Notes that discussed the importance of cell phone records in residency audits and did a deeper dive on some of the issues we’ve seen come up in reviewing various cell phone records in these audits. Here is a link to that article: /assets/htmldocuments/2019stn16-4.pdf
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Last week we published an alert regarding the upcoming June 15 New York estimated tax deadline, noting that taxpayers still needed to pay their New York State and City second quarter estimated payments for 2020 because the New York State Tax Department had made no pronouncements extending the due date to July 15, as the IRS had done. The Department’s silence on the issue left many tax practitioners and taxpayers confused about what to pay and when to pay it.
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The current pandemic has changed the working landscape for commuters everywhere and their employers. This is especially true in New York City, which became the epicenter for the crisis and poster child for the telecommuting work force. Now more than ever, individuals who used to travel into the City for work are logging in remotely from home, delivering their services miles away from their Manhattan offices. This has created interesting personal income tax questions, and as we will discuss below, potential saving opportunities for professional service companies subject to the NYC Unincorporated Business Tax (UBT).
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About a month ago we talked about Executor Order 202.15 from New York’s Governor Andrew Cuomo, which authorized the NYS Tax Department to begin accepting digital signatures on various tax documents related to determining and collecting tax liabilities, but deferred to the Department to issue guidance implementing the particulars. Soon after, the NYS Tax Department issued Notice N-20-3, which addressed various aspects of the new digital signature authorization including the expiration date on May 9, 2020 which appeared in both the Notice and in Executor Order 202.15. Last week, however, a newly-issued Executive Order 202.31 extended the Tax Department’s authority to accept digital signatures “for the duration of the disaster emergency.”
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The COVID-19 crisis continues to throw off a variety of tax questions and issues that 60 days ago likely would have been unimaginable. In an article we published this month in Tax Notes State, we talked about different types of New York residency and income allocation issues that could arise as a result of shutdown or travel-related restrictions put in place by state governments. A couple of those issues involved some of the strict day counting requirements that arise under New York’s residency rules. For example, the statutory residency test limit certain taxpayers to spending 183 days in New York. Also, the 548-day rule, which is a special safe harbor available to protect certain taxpayers from New York residency taxation, requires that a taxpayer spend 450 days in a foreign country over the course of a 548-day period and also limits the taxpayer’s presence in New York to 90 days. In both cases, we know of taxpayers who will fail these tests in 2020 because of travel-related restrictions.
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As taxpayers begin adjusting to these strange times, it seems the NYS Tax Department is trying to do the same. The Department just issued guidance in Notice N-20-3 which temporarily allows taxpayers and their appointed representatives to use digital signatures on various tax forms. This comes on the heels of last week’s Executor Order 202.15 from New York’s Governor Andrew Cuomo, which authorized the Department to “accept digital signatures in lieu of handwritten signatures on documents related to the determination or collection of tax liability” until May 9, 2020, but then punted to the Department to hammer out the logistics and issue appropriate guidance.
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The unprecedented COVID-19 pandemic has triggered a wide variety of relief efforts from the Federal, state, and local governments. This update will provide insight into several of these relief efforts, and discuss the effect they might have on employers coping with the impact of the Coronavirus on their business operations. Hodgson Russ recently published a State and Local Tax Alert reviewing these developments.
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The NYS Division of Tax Appeals updated its website this morning regarding the agency’s operations.
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The “workaround train” keeps rolling! A New Jersey bill to give small businesses and partnerships a way to diminish the impact of the federal cap on state and local tax deductions (the SALT cap) was signed into law on January 13, 2020 by Governor Phil Murphy (D). The bill (S-3246/A-4807) gives S corporations, limited liability corporations and other business partnerships the option of paying state income tax directly at the entity level, as a business tax rather than at the partner level, as personal income tax. The bill is effective for tax years beginning on or after January 1, 2020 and creates a business alternative income tax (BAIT). As we’ve outlined in the past, the play here arises because while the Tax Cuts and Jobs Act (TCJA) capped federal deductions for state and local tax at $10,000 for individuals, it set no limit on deductions for state and local taxes paid by businesses.
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Employees nationwide are working to finish year-end business before the holidays and House Democrats are no exception. The U.S. House of Representatives voted 218 to 206 on December 19 to pass H.R. 5377 (the “bill”) which temporarily repeals the SALT deduction cap for 2020 and 2021.
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A week or so ago, New York Governor Andrew M. Cuomo and New York Attorney General Letitia James announced that New York, Connecticut, Maryland and New Jersey filed a notice of appeal in the United States Court of Appeals for the Second Circuit to continue litigation against the federal government for its unlawful and unprecedented cap on the deduction for state and local taxes, known as SALT. The SALT deduction was capped at $10,000 as part of President Trump’s Tax Cuts and Jobs Act of 2017 (TCJA). This appeal challenges a September 30, 2019 ruling by Judge J. Paul Oetken of the U.S. District Court for the Southern District of New York stating that the $10,000 SALT deduction cap is not unconstitutionally coercive. Judge Oetken held that the states had not plausibly alleged that the cap meaningfully constrains their decision-making processes. We covered the ruling here. He denied the states' motion for summary judgment in their original suit, State of New York et al v. Mnuchin. The four states argued that the SALT cap is a politically motivated bid to effectively raise property taxes in predominately Democratic states.
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Just an observation from the cheap seats about a recent notice issued by the Minnesota Department of Revenue (DOR) (Revenue Notice No. 19-05, referred to as Notice 19-05). This notice clarifies that neither the DOR nor the courts can consider the location of the individual's attorney, CPA, financial adviser, or the place of business of a financial institution where the individual opened or maintained an account for purposes of establishing whether an individual is domiciled in the state.
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Late last week, New York’s Attorney General Letitia James filed a Superseding Complaint against a photo and video equipment retailer, B&H Foto & Electronics Corp., in New York County Supreme Court. The Superseding Complaint alleges various violations by the retailer under New York State’s Tax Law, False Claims Act, and the Executive Law, spanning the past two decades. A whistleblower actually filed the qui tam civil suit under seal in early 2016, after which New York State was given time to investigate the matter. But it wasn’t until just recently that the Attorney General’s office notified the court of its decision to supersede the whistleblower’s complaint and, in doing so, converted the whistleblower’s complaint into a civil enforcement action by the Attorney General.
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They say that history repeats itself. After seven months of explaining that the proposed pied-à-terre tax did not pass April 1, 2019 as part of New York State Governor Andrew Cuomo’s final budget bill covered here, according to a recent Bloomberg article, the idea of charging a pied-à-terre tax is once again being discussed in political and real estate circles in New York City. Although not actually included in the Governor’s original budget proposal last year, there was much buzz around a potential real property pied-à-terre tax on non-primary residences located in New York City with a market value of $5 million or more. The Senate and Assembly budget proposals included such taxes with tax rates ranging from 0.5% to 4% on properties valued at $25 million or more.
- NewsLaw360 Tax Authority
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One of the least discussed but critical aspects of New York’s corporate tax reform is the impact on corporate partners who do not engage in business in New York other than by virtue of its ownership interest in a partnership doing business in New York. The combination of the laws governing corporate partners, and recent proposed interpretations of those laws in the newest revisions to New York’s draft regulations should give a corporate partner pause as to its New York tax exposure.
- NewsCrains New York
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This article originally appeared in Law360 and is reprinted with permission.
It seems that President Donald J. Trump often finds himself at the center of New York state tax news, and therefore at the center of our monthly "NY Tax Minutes" column. This month is no different. First, the president continues two separate lawsuits seeking to prevent disclosures of his personal income tax returns, and second, Trump, whose name has graced New York buildings and tabloid headlines for decades, recently declared that he plans to abandon his New York tax residency for the warm weather (and low taxes) of Florida.
- NewsLaw360 Tax Authority State & Local
- NewsTax Notes State
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As the kids were out trick-or-treating last night, The New York Times dropped yet another bombshell concerning ongoing potential tax issues for President Trump. But this one did not concern requests for copies of his tax returns; this one was generated by the President himself.
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More than three months after oral arguments were heard in the SALT cap lawsuit (State of New York, State of Connecticut, State of Maryland, and State of New Jersey v. United States Department of Treasury, The Internal Revenue Service and The United States of America, 18-cv-6427), Judge J. Paul Oetken of the U.S. District Court dismissed the suit on September 30, 2019. Judge Oetken ruled that the $10,000 SALT deduction cap under the Tax Cuts and Jobs Act was not unconstitutionally coercive, finding that the states had not plausibly alleged that the cap meaningfully constrains the states’ decision-making processes. Further, Judge Oetken rejected the federal government’s argument that the court did not have jurisdiction to hear the case, holding that the states’ allegation that they would suffer diminished real estate transfer tax revenues was sufficient to give them standing to challenge the cap. He also held that the Anti-Injunction Act did not bar the suit because the states had no alternate mechanism to challenge the cap's legality.
- NewsTax Notes State
- NewsLaw360 Tax Authority
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It appears we’ve reached the end of the line on our “Wynne” cases. On October 7, 2019, the Supreme Court of the United States declined to hear our appeals in Edelman v. Department of Taxation and Finance and Chamberlain v. Department of Taxation and Finance. In both cases, we argued that New York’s statutory residency taxing scheme, which subjected taxpayers who qualified as dual residents of New York and Connecticut to double taxation, was unconstitutional and in violation of the Commerce Clause. As we reported earlier this year, the New York State Court of Appeals previously declined to hear the taxpayers’ appeals in April 2019.
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The New York State Department of Taxation and Finance (the Department) issued three technical memoranda on September 3, 2019, summarizing the corporation tax, personal income tax and tax credit changes that were part of the 2019-2020 New York state budget we covered here. Two of the three are recapped below, with links to both memos. The third, TSB-M-19(4)C, (5)I, covered new tax credit provisions.
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The SALT cap has been in the news since the Tax Cuts & Jobs Act (TCJA - P.L. 115-97) was passed in late 2017, with federal legislation capping the individual state and local tax deduction at $10,000 per year beginning January 1, 2018. SALT cap issues have abounded and we have written about SALT lawsuits here, proposed workarounds here, and new IRS regulations regarding SALT credits here. Of course, the biggest hurdle facing taxpayers still remains finding a viable workaround to the SALT cap.
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This article originally appeared in Law360 and is reprinted with permission.
August is often a slow month in the state and local tax world, with attorneys, accountants and auditors looking to squeeze the last bit out of summer. But not everyone at the New York State Tax Department took a break this month. And our most seasonally appropriate update comes from the Tax Department’s August appearance at The Great New York State Fair in Syracuse, New York. [1]
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There has been a lot of buzz in recent days about a recent New York Division of Tax Appeals case addressing the New York residency status of a taxpayer who maintained a vacation home in New York state. The case, titled Matter of Obus (click here to read it), dealt with a New Jersey resident who worked in New York City and also maintained a vacation home in Northville, New York, a vacation community in Upstate New York. The case was also covered in a Wall Street Journal article that has sparked a lot of confusion about New York’s residency tests.
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This article originally appeared in Law360 and is reprinted with permission.
Every year, magazines and newspapers across the country release summer’s best beach reads — lists of what books and articles to pick up and read your way through vacation. But, if you’re like us, don’t you wish there was a list tailored just for tax professionals? Those of us looking for something relaxing to read on our summer vacations but that’s also tailored just for you? Well for that, there’s only one recommendation you need: this month’s edition of NY Tax Minutes.
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All the talk around the SALT Cap over the past year or so has put New York’s high personal income tax rates into focus. Just last month, President Trump locked into a Twitter debate with Governor Andrew Cuomo, arguing that "it is very hard and expensive to live in New York" because of the state's "ridiculously high taxes.” Governor Cuomo countered that he had in fact lowered taxes. Whatever the case, with the SALT Cap hurting high-income New Yorkers, one obvious way to alleviate that burden would be to reduce state income tax rates. Even a little bit would help!
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On June 24, Hodgson Russ LLP filed petitions for certiorari with the Supreme Court of the United States (“the Supreme Court”) in two cases involving the double taxation of taxpayers who lived in another state but were “statutory” residents of New York because they had a place to live in New York and were in New York 183 days or more. The cases are titled: Samuel Edelman and Louise Edelman, Petitioners v. New York State Department of Taxation and Finance, et al. (“Edelman”) and Richard Chamberlain and Martha Crum, Petitioners v. New York State Department of Taxation and Finance, et al. (“Chamberlain”).
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As we reported here a month ago, the IRS never liked the SALT cap workarounds that allowed taxpayers to receive a tax credit for contributions to specified state charities. Last month, it issued final regulations that officially, in the IRS’ mind at least, shut down these programs as workable workarounds.
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This article originally appeared in Law360 and is reprinted with permission.
The Fourth of July fireworks may be over but there’s still plenty to see on the New York tax front. In this month’s edition of NY Tax Minutes, we take a look at the Internal Revenue Service’s final state and local tax, or SALT, regulations addressing potential workarounds to the SALT deduction cap. We also highlight two noteworthy post- budget changes to New York’s tax law and look in on the past month’s important state tax decisions and opinions.
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On June 20, 2019, both the NYS Assembly and Senate passed bills that made significant changes to the state’s treatment of two hot tax issues: the taxation of global intangible low-taxed income (“GILTI”), and the state’s threshold for establishing economic nexus for sales tax purposes. According to the Senate and Assembly websites, the legislation was signed into law by Governor Cuomo on June 24th.
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On June 4, 2019, Gov. Ned Lamont announced that Connecticut’s Democrat-controlled Assembly passed the $43.35 billion FY 2020 Budget (the “Budget Plan”). The Final Bill (H.B. 7424) cleared the Senate on June 4 and the House on June 3. It aims to resolve a $3.7 billion multi-billion dollar deficit largely through tax and revenue hikes, increasing spending by 1.7% in fiscal year 2020 and by 3.4% in 2021. As of June 13, it has not been signed by the Governor. This is just a formality as he stands behind this Budget Plan.
- NewsBloomberg Tax.com
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The New York State Division of Taxation and Finance (the “Department”) issued information entitled “FAQs related to registration requirement for businesses with no physical presence in NYS” (“FAQs”) on May 1, 2019 to address questions concerning sales tax collection by businesses without a physical presence in New York.
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This article originally appeared in Law360 and is reprinted with permission.
We’re back after a brief one month hiatus. One of your authors celebrated the birth of his first child in April, which led to some last- minute calls to duty on the home front. Your other author was at the ready to fill in, but he has 12 kids already (no joke), so we decided to dedicate April to our dependents (new and old), and to our clients. We’ll leave it to readers to guess which author has one mouth to feed and which has 12.
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A significant benefit of using trusts is the ability to minimize state level income taxes. The availability of this strategy depends on the residence of the trust creator (the “settlor”); the residence of the trustee; the residence of the trust beneficiaries; the type of assets owned by the trust; and the type of income earned by the trust. When all of the factors align correctly, the trust settlor can minimize, or even eliminate, state level income tax on the trust assets.
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New York’s Brownfield Cleanup Program (“BCP”) is one of the more effective tax-based incentive programs offered by the state. The BCP allows participants to remediate a contaminated piece of real property in exchange for tax credits that can total up to 50% of the qualified remediation costs incurred to clean the property, and 24% of the qualified construction costs incurred to develop the property after it has been remediated. These tax credits can be the difference between a lucrative development and one that is economically unfeasible.
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Governor Cuomo announced that New York lawmakers passed the $175.5 billion FY 2020 Budget (the “Final Bill”) on April 1, 2019. There’s a lengthy list of spending packages in the budget as described but I’m circling back to two real property tax issues. Although Gov. Cuomo floated the idea of a pied-a terre tax on large mansions and an increased real estate transfer tax on conveyances where the consideration “for the entire conveyance” is $5 million or more, neither of these items made the final cut. Instead, the budget features: a permanent property tax increase cap of 2% and a “mansion tax,” a variation of the proposed pied-a terre tax. The State Assembly and State Senate on March 31 approved the budget’s revenue bill (S. 1509-C/A. 2009-C) soon after legislative leaders and Gov. Andrew Cuomo reached an eleventh-hour agreement on the state budget, one day before the start of the fiscal year.
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On April 1, Governor Cuomo announced that New York lawmakers passed the $175.5 billion FY 2020 Budget (the “Final Bill”). The Final Bill (S. 1509-C / A. 2009-C) is available here. As of this writing, it has not been signed by the Governor. We have been following the evolution of the budget since Governor Cuomo released his proposal on January 15th. The tax and revenue highlights of the Final Bill, along with the omissions or differences from the Governor’s original proposals, are summarized below. Other aspects of the Final Bill, including criminal justice reform, MTA reforms, and changes to the Public Authority Law, are not discussed.
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Last week, New York’s highest court issued a disappointing blow to our New York “Wynne challenges,” the two cases brought to challenge the double taxation scheme that applies to taxpayers who are dual residents in New York and another state. In both cases, Chamberlain and Edelman, we argued that the U.S. Supreme Court’s 2015 decision in Comptroller v. Wynne upended New York’s prior precedent on this issue (Tamagni v. Tax Appeals Tribunal). But the Court declined to hear the taxpayers’ appeals from the lower court decisions, and did so by way of two two-sentence orders with no analysis or explanation.
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This article originally appeared in Law360 and is reprinted with permission.
As we finalize this month’s column, it appears that budget season here in New York state has finally come to a close, with the Governor and Legislature agreeing, on March 31, 2019, to a new $175 billion budget. The agreement came one day before the deadline for an on-time budget in order to meet the state’s next fiscal year, which begins April 1 In a March 31, 2019 press release,[1] Gov. Andrew Cuomo, Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie announced a plan that includes:
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On March 31st an agreement was announced on the FY 2020 Budget. We wrote about the tax related highlights of the budget proposal when it was released back in January. We also recently commented here about the mismatch between the treatment of itemized deductions for individuals versus trusts. Recent guidance from the Tax Department clarified that individuals could itemize deductions at the state level even if they took the standard deduction on their federal return and could take deductions for items disallowed at the federal level. Initially, this seemed to only apply to only individuals, and not trusts and estates.
- NewsLaw360
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- NewsState Tax Notes
- NewsThe New York Times
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Now in the heart of tax season, we are reminded about many of New York’s tax credits and deductions still available to taxpayers despite federal deductions being eliminated with the passage of the Tax Cuts and Jobs Act (TCJA) in December 2017. Over the past year, there has been a flurry of activity as New York legislative bodies and federal regulations drafters have offered up various SALT “workarounds,” to deal with the $10,000 SALT cap. But recent reporting out of the New York budget office (from New York State Comptroller Thomas P. DiNapoli’s February 27 report on the proposed executive fiscal budget for 2020 (the “Report”) (see page 25-26)) suggests that these workarounds aren’t really working.
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A few months ago, we wrote about the recent guidance that the Tax Department issued about itemized deduction decoupling (TSB-M-18(6)). The guidance addresses New York State’s decoupling from the federal treatment of deductions for individuals, but it was not initially clear whether these changes also apply to trusts and estates.
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As reported here last month, a recent purchase of a $238 million apartment in New York City has re-sparked a debate among New York officials about taxing second homes owned by nonresidents. As New York’s lawmakers look to finalize a budget by April 1st, and to find new ways to fund New York City’s subway system, the pied-a-terre tax is viewed as a new quill in the arsenal. (The Assembly Budget Proposal is A. 2009-B).
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Public relations firms often advise clients to release controversial or negative news late in the day on Friday. People are less likely to pay attention to such news over the weekend and by the time Monday rolls around, the news cycle has typically moved on. That might have been what the New York State Department of Taxation and Finance had in mind when, at 4:39 PM on Friday, March 9th, it released its first sales tax advisory opinion of the year. In TSB-A-19(1)S, the Tax Department announced for the first time that an online marketplace can be held liable for the sales tax due on transactions that the marketplace facilitated. In other words, the Tax Department can hold both the individual vendor using the marketplace infrastructure and the marketplace itself liable for tax due on sales made through the marketplace. This is a dramatic, and we anticipate controversial, change in Tax Department policy.
- Blog Post
This article originally appeared in Law360 and is reprinted with permission.
The past month was a busy one for New York tax updates, but don't worry, we have the highlights, and, as always, we're delivering the month's news in a way that's made for New Yorkers. Fast.
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Is New York’s taxation of statutory residents unconstitutional? Those who follow state and local tax developments (and readers of this blog) may know that Hodgson Russ has been litigating that question in two parallel cases, Chamberlain and Edelman (past coverage here and here). Both cases hone in on whether the U.S. Supreme Court’s 2015 decision in Comptroller v. Wynne upends New York’s prior precedent on this issue in Tamagni v. Tax Appeals Tribunal, requiring a new constitutional analysis. We think so, and that under an analysis consistent with Wynne, the double taxation faced by people domiciled outside of New York but taxed as statutory residents unconstitutionally burdens and discriminates against interstate commerce.
- Blog Post
According to a recent New York Times article, hedge-fund billionaire Kenneth C. Griffin purchased a $238 million apartment in January 2019 located at 220 Central Park South, making it the most expensive residential sale in United States history. Even in Manhattan, where huge real estate sales are downright routine, Griffin, founder and chief executive of the global investment firm Citadel, has managed to set a new record on an unfinished piece of property, a purchase that surpassed the cost of the next most expensive purchase by more than $100 million.
- Blog Post
This article originally appeared in Law360 and is reprinted with permission.
Much of the fanfare around last year’s federal tax reform was around the special 20% deduction applicable to income from flow-through entities like partnerships, S corporations and LLCs under IRC § 199A. But the new law generated more questions than answers, requiring the IRS to issue new regulations to help taxpayers and practitioners sort through all the details. Just recently, the IRS issued final regulations, and they came with some bad news for owners of your favorite sports team. Specifically, the new regulations confirm that sports team ownership falls within the definition of “athletics” and, therefore, is a disqualified activity, meaning team owners generally will be unable to qualify for the 20% deduction with respect to income generated from the team. In this post, we’ll explain what all the fuss is about.
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This article originally appeared in Law360 and is reprinted with permission.
The New Year is in full swing here at “NY Tax Minutes,” and we’re sticking with our resolution to deliver all the month’s New York City and state tax news in a way that’s made for New Yorkers. Fast.
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On January 15th, Governor Cuomo released the FY 2020 Executive Budget, which is available here. The highlights of certain proposed revenue provisions are summarized below. Keep an eye out for further updates in mid-February when the “thirty-day amendments” to the Executive Budget will be out.
- NewsLaw360
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New York is one of the most, if not the most, aggressive states when it comes to tax enforcement. That’s why it was a bit confusing when the New York State Department of Taxation and Finance (the “Tax Department”) remained uncharacteristically silent following the landmark Supreme Court decision in South Dakota v. Wayfair. But that’s finally changed! On January 15, 2019, the Tax Department issued a Notice explaining its position on economic nexus for sales tax purposes. In this article, we’ll (1) provide a brief review of how the Wayfair case changed tax administration, (2) discuss New York’s new guidance, and (3) address some of the potential issues that are likely to arise as a result of this new guidance.
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This article originally appeared in Law360 and is reprinted with permission.
It’s a new year here at “NY Tax Minutes,” but don’t worry, we’re still delivering all the month’s New York City and state tax news in a way that’s made for New Yorkers. Fast. But as we close the books on 2018 and look ahead to another year of tax updates, we’re adding a new wrinkle to this month’s column. We’re pulling out our crystal balls and predicting whether the news that brought 2018 to a close will continue into the New Year or whether we can turn the clock on these issues.
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As the calendar flipped to 2019, we’ve seen continued activity in states looking to find some way to combat the loss of SALT deduction to “help” its in-state taxpayers. The Tax Cuts & Jobs Act (“TCJA”) (P.L. 115-97) capped the individual state and local tax deduction at $10,000 per year beginning January 1, 2018, making it even harder for folks in high-tax states to stomach the payment of state and local taxes. To alleviate this burden, various states have offered up a myriad of “workarounds” usually in form of charitable contributions or new taxes designed to shift the tax burden from individuals (whose SALT deductions are capped) to businesses (which face no such cap). As we move into a New Year, let’s examine some of the recent developments.
- Blog Post
This promises to be the most “exciting” tax season ever for your friendly neighborhood accountants! It makes me a little relieved that I declined to follow in the footsteps of my father and grandfather (both CPAs) and turned to the legal world instead! With so many changes in the federal tax law, it’s going to be tough for accountants (and software companies) to keep up. And because most states’ tax laws are based on federal law or use federal tax rules as a starting point, so many of these federal changes will flow-through to state tax returns as well.
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This article originally appeared in Law360 and is reprinted with permission.
We’re back with the fifth installment of “NY Tax Minutes.” And once again, we’re delivering all the month’s New York City and state tax news in a way that’s made for New Yorkers. Fast.
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Earlier this month, those who oppose the SALT cap must have been pleased to see the results in the mid-term elections. With Democrats taking over the house, there’s already talk (here and here) that the next Congress will take aim at the cap. But quietly, on the other side of the battle lines, shots were fired by the federal government, as attorneys for the United States Department of Treasury and IRS filed a Motion to Dismiss the Complaint in State of New York, State of Connecticut, State of Maryland, and State of New Jersey v. United States Department of Treasury, The Internal Revenue Service and The United States of America, 18-cv-6427 on November 2 as noted here in the corresponding Memorandum of Law Supporting the Government’s Motion to Dismiss.
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South Dakota Governor Dennis Daugaard and State Attorney General Marty Jackley announced on October 31, 2018 that the State of South Dakota has entered into a settlement agreement and stipulation of dismissal resolving all issues that had remained in the landmark Wayfair case. The settlement agreement and stipulation of dismissal were made with Wayfair Inc. and its co-litigants, Overstock.com Inc. and Newegg Inc., to resolve all remaining issues in South Dakota v. Wayfair Inc. State circuit court must still give its final approval to the settlement agreement reached by the parties and to the dismissal of both cases.
- NewsTax Analysts
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This originally appeared in Law360 and is reprinted with permission.
We’re back with the fourth installment of "NY Tax Minutes." And once again, we’re delivering all the month’s New York City and state tax news in a way that’s made for New Yorkers. Fast.
This month, we continue to chronicle New York’s response to the federal Tax Cuts and Jobs Act’s $10,000 cap on state and local tax deductions; we highlight important takeaways from the attorney general’s recent $30 million settlement announcement with a hedge fund manager in a tax whistleblower action; and we cover the tax department’s draft amendments to the state business corporation franchise tax regulations dealing with declaring and paying estimated taxes. We also highlight this month’s new and noteworthy decisions from the Tax Appeals Tribunal.
- Blog Post
Fifteen or so years ago, there was a debate brewing between Connecticut and New York about the so-called “convenience rule.” New York had the rule, so Connecticut residents working for New York employers were subject to it. But Connecticut didn’t have the rule, so Connecticut residents couldn’t get credit for taxes paid to New York against their Connecticut income tax liability.
- NewsTax Analysts
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This originally appeared in Law360 and is reprinted with permission.
We’re back with the third installment of "NY Tax Minutes." And once again, we’re delivering all the month’s New York state and city tax news in a way that’s made for New Yorkers. Fast.
This month, we revisit New York’s ongoing battle with the federal government over the recently enacted $10,000 cap on state and local tax deductions; we take a look at the importance of taxpayer testimony in domicile cases; we address the ever-growing list of non-audit related legal challenges facing taxpayers in New York state, including whistleblower lawsuits and class actions; and, lastly, we review New York City’s recent (better late than never) guidance on repatriated income for business taxpayers. - NewsTax Analysts
- Blog Post
The renewal period for Highway Use Tax registrations is just around the corner. The Tax Department, ever mindful of the leverage this affords, just sent out a slew of computer-generated notices that inform taxpayers with outstanding tax liabilities that the Department cannot issue them a renewed Certificate of Registration and decals until the liabilities are resolved.
- Blog Post
This originally appeared in Law360 and is reprinted with permission.
Well, thankfully, Law360 didn’t cancel our column after month one, so we’re back with the second installment of “NY Tax Minutes.” If we can make it here, we’ll make it anywhere!
Once again, we’re delivering all the month’s New York State tax news in a way that’s made for New Yorkers. Fast. This month, we cover the governor’s brash response to the IRS’s proposed end to one of New York’s SALT deduction cap workarounds and highlight the Tax Appeals Tribunal’s recent decision explaining the procedures for claiming sales and use tax refunds after a failure to properly protest an original assessment. We also cover two recent New York State Notices addressing the state’s treatment of IRC § 965 repatriation amounts, along with a recent Advisory Opinion on the proper (or improper) use of sales tax exemption certificates.
- Blog Post
Earlier this summer, the New York City Department of Finance issued a memorandum explaining the recognition and allocation of deferred income from nonqualified deferred compensation plans (“NQPs”), specifically geared towards hedge fund managers. (NYC Department of Finance, Finance Memorandum 18-6, “Recognition and Allocation of Deferred Income from a Non-Qualified Deferred Compensation Plan,” June 29, 2018 (“Memorandum 18-6”). Sorry about the delay in reporting. Tax lawyers need vacations too.
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This originally appeared in Law360 and is reprinted with permission.
Life moves fast in New York. So do taxes. New York state (and City) tax a lot of people, places and things. The state and city’s audit divisions and administrative appeal tribunals are both among the most active in the country. So how, you’re asking yourself, do I possibly keep up with all the headlines, rulings, opinions and law changes happening across the Empire State? Well, you’ve come to the right place.
Once a month, your authors, two practicing tax attorneys (nerds) with ties all over the state (Tim was born and raised in Buffalo; Craig grew up on the shores of the St. Lawrence River, before moving to New York City) will give you a full update on everything New York tax. But we’ll also deliver the news in a way that’s made for life in New York: fast.
So, without further fanfare, we give you the first installment of "New York Tax Minutes." This month, we cover New York state’s deafening silence on the Wayfair ruling and the state’s pending lawsuit against the federal government over the recently enacted state and local tax deduction cap. We also highlight two recent New York state and city publications addressing some complicated apportionment issues surrounding hedge fund manager compensation.
- Blog Post
On June 27, 2018, the New York State Division of Tax Appeals and the Tax Appeals Tribunal (collectively “DTA”) sent its Annual Report for the Fiscal Year 2017--2018 to the Governor and to the heads of the Senate and Assembly. Each year, these reports contain some new and noteworthy figures. This year’s highlights include:
- NewsBloomberg News
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Well, it happened. Back in January, New York’s Governor Andrew Cuomo announced that the State was considering, among other things, a lawsuit against the federal government for taking away the SALT deduction as part of the 2017 tax overhaul. We talked about that issue here, and I've also talked more generally about the pain and suffering (and residency changes) caused by the loss of the SALT deduction. But yesterday, New York followed through in court, and it had some helpers.
- NewsTax Analysts
- NewsLaw 360
- Blog Post
Wow.
This morning the U.S. Supreme Court sent a shockwave through the Internet—and the SALT community—by issuing its long-awaited decision in the South Dakota v. Wayfair case and resoundingly overturning the Quill physical-presence nexus standard that had been the law of the land for sales tax purposes for the past several decades.
- Blog Post
We previously covered the substance of the Governor’s Proposed FY 2019 Budget here and the Final Budget here. On May 25, 2018, the New York State Department of Taxation and Finance (the “Department”) issued a Technical Memorandum—TSB-M-18(4)I—providing its summary of the personal income tax changes enacted in the final 2018-2019 budget. The TSB-M is available here.
- Blog Post
2018 has been an amazing year for tax practitioners. Since the passage of the Tax Cuts and Jobs Act, practitioners have been scrambling to understand the implications of the federal tax overhaul and to begin work on implementing new strategies for clients. And though the legislation obviously occurred at the federal level, many SALT practitioners have been dealing with the dramatic fallout at the state level as well, since aspects of the federal tax reform have had complicating and unexpected ramifications for state tax purposes.
- NewsTax Analysts
- Blog Post
As state tax lawyers, we are often asked for advice on navigating different—and often competing—state tax schemes. The law in this area is subject to a handful of constitutional limitations. For instance, the Commerce Clause requires (among other things) that state taxes be fairly apportioned. So in the case of nonresidents and other out-of-state or multistate taxpayers, many state tax schemes determine the taxability of a transaction or person based on the numbers of days spent in the taxing state. Consequently, our advice to nonresident taxpayers often turns on the number of “days” involved. This concept of counting “days” is actually pretty important in our world! But one thing that can be interesting in these cases is seeing how different states treat seemingly similar situations or transactions.
- NewsTax Analysts
- Blog Post
On May 15, 2018, Amazon Services, which assists third parties selling their products through the online Amazon Marketplace, sent an email notifying third-party sellers that “Amazon has received a valid and binding legal demand from the New York State Department of Revenue (DOR)” (we assume the request came from the New York State Department of Taxation and Finance—the state agency responsible for administering tax laws in New York State). According to Amazon’s email, Amazon plans to release the following information to New York regarding its third-party sellers by June 1, 2018:
- NewsTax Notes
- Blog Post
On March 7, 2018, the NY Tax Department issued its first income tax advisory opinion of the year. The content of the advisory opinion, a review of the rules governing the timing of the tax credits associated with the state’s Brownfield Cleanup Program, isn’t particularly noteworthy. What struck us here at Noonan’s Notes, and made the opinion blog-worthy, is the timing of the opinion. Though the Tax Department has many functions (e.g., return design and processing, enforcement/audit, tax collection, etc.), this opinion may illustrate that additional resources should be allocated to its interpretation and education functions.
- Blog Post
Yesterday we put out an "Alert" the Governor’s final 2019 budget bill. It contains everything you need to know about what tax provisions passed in the budget (and what did not pass).
Here at the Noonan’s Notes Blog, we’ve been following the process closely (see my prior report on the proposed budget here). Here’s my take on how everything shook out:
- Blog Post
For years we’ve been following a ticking income tax time bomb of sorts, dealing with a big 2017 issue for hedge fund managers receiving deferred income. We first started talking about this in 2013 (click here for the article) and followed-up on it a few times later (including here), wondering how states would react to all this. But up until last week, we’ve heard nothing from the New York tax department on the issue.
- Blog Post
New Tribunal Case Offers Up a New Framework for Answering this Question
New York’s two-part test for statutory residency has been heavily litigated over the years, and one of the biggest issues has involved the determination as to whether a taxpayer maintained a “permanent place of abode.” In 2014, the State’s highest court in Gaied v. NYS Tax Appeals Tribunal struck down the Tax Department’s overly-broad interpretation of “permanent place of abode” in favor of a more sensible interpretation. In doing so, the High Court declared that in order for a place to constitute a permanent place of abode (“PPA”), “there must be some basis to conclude that the dwelling was utilized as the taxpayer’s residence.” And later in the decision, the Court opined that to qualify as a PPA, “the taxpayer must, himself, have a residential interest in the property”
- Blog Post
Governor Andrew Cuomo declared a State Disaster Emergency for counties affected by the March 2018 Nor’easters that began early this month. If you hadn’t heard the term before, a nor’easter is a large cyclone usually accompanied by heavy rain or snow that can cause hurricane-force winds, blizzard conditions, and coastal flooding. To us folks in Buffalo, we also call this “Tuesday.”
- NewsTax Analysts
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It’s “budget season!” On January 16th, Governor Cuomo released the FY 2019 Executive Budget, which is available here, and one day later the Department of Taxation and Finance issued a preliminary report on consequences of the Federal Tax reform and possible legislative responses, which can be found here. We blogged about some of this last month. Then, just last week, in his “30-day amendments” to the FY 2019 Executive Budget, we got to see more of the Governor’s proposals take shape. Now the dust has somewhat settled on all these proposals, so let’s take a look. The highlights of the proposed amendments, which include a new optional Employer Compensation Expense Tax system, increasing the options for charitable deductions, and provisions designed to decouple the state tax code from the federal tax code, are summarized below.
- NewsTax Analysts
- News
- Blog Post
We are just a couple days into 2018, and the fallout from the recently passed federal tax reform has already begun.
- NewsState Tax Notes
- NewsState Tax Notes
- Blog Post
On Friday afternoon, we emailed many clients and friends regarding the possibility of a “last chance” to claim a disappearing federal income tax deduction by paying 2018 state income tax estimates at the end of 2017. Apparently some of you didn’t get the email until Sunday. Sad! More on that below.
- Blog Post
Due to the likely elimination of almost the entire SALT deduction in 2018, this could be the last opportunity for taxpayers to pay state and local taxes and still ensure a full federal tax deduction. Keep reading to learn more.
- Blog Post
Here's what you need to know about the likelihood of a disappearing SALT deduction.
- NewsTax Notes
- Blog Post
On October 17, 2017, the New York State Division of Tax Appeals and Tax Appeals Tribunal (collectively “DTA”) submitted its annual report to the Governor and heads of the Senate and Assembly for the 2016-17 fiscal year. Numbers-wise, we don’t see a tremendous change over last year in the outcomes of Administrative Law Judge and Tax Appeals Tribunal cases.
- Blog Post
For years, there have been whispers about a big 2017 tax issue for hedge-fund managers. What’s the deal?
- Blog Post
Just when you thought you knew everything there was to know about multistate corporate income tax apportionment, the states start switching up the rules!
- NewsTax Notes
- Blog Post
Last Friday, members of the NYS Legislature introduced a bill aimed at clarifying the definition of “permanent place of abode” under Tax Law § 605(b)(1)(B) for statutory residency purposes. Under that statute, a person is generally taxable as a resident if they meet a two-pronged test: (1) maintain a “permanent place of abode” in New York and (2) spend more than 183 days in New York.
- Blog Post
For years, practitioners and taxpayers have struggled with the cumbersome, four-page power-of-attorney form that the New York Tax Department has required taxpayers to use when they wanted to appoint a representative to help them with their tax matter.
But this week, the NYS Tax Department rolled out a new web application where POAs can be filed online.
- Blog Post
Last week, another great domicile case was issued by New York’s Division of Tax Appeals. The case, entitled Matter of Patrick, chronicled a movie-esque love affair between long-lost high school sweethearts and—more importantly for our purposes—another win for a taxpayer in a change-of-domicile case.
- NewsTax Notes
- Blog Post
The New York State Department of Taxation and Finance has issued a new sales tax ruling on the taxability of club dues at a social club. In an advisory opinion released May 24, tax department held that fees charged to nonmembers for club-sponsored activities are not subject to tax merely as a result of the club’s relationship to its members and that the nature of each activity should determine its taxability. The ruling was also written up in a recent Tax Notes article, in which yours truly was quoted.
- Blog Post
Last week the Tax Department published another advisory opinion on a “software as a service” issue, continuing the trend of rulings on software sales “in the cloud.” A few years ago, I wrote an article on sales tax issues in the cloud-computing context generally, and we have also covered New York cases where the issue has come up. In this most recent opinion, the taxpayer asked whether charges for its “video generating services” were subject to sales tax. And not surprisingly, the Department concluded that the sales were taxable, continuing its trend of taxing almost everything that moves in the cloud.
- NewsTax Notes
- NewsBuffalo Law Journal & Business First
- Blog Post
During the past several years, we have seen a continuing trend in New York personal income tax audits involving the examination of federal tax issues. The New York State Tax Department, overall, has one of the more sophisticated and aggressive personal income tax audit groups in the country. For years, as I have outlined in numerous blogs and articles, the Tax Department’s residency audit program has been second to none. But as we have seen, the Tax Department focuses more on flow-through entity issues. We also have seen the expansion of an interesting phenomenon: federal tax audits being conducted by New York tax auditors.
- Blog Post
Here’s a note on an interesting development in the ongoing litigation between the Tax Department and Sprint. For background, Sprint has been embroiled in the false claims action brought by New York State as a result of allegations that Sprint knowingly under-collected sales tax on bundled charges to New York cellular customers. When the case was brought several years ago, it was the first big false claims case brought by the State under the new False Claims regime that included tax violations under its realm. Sprint unsuccessfully tried to dismiss the lawsuit altogether, but a couple of years ago New York’s Court of Appeals held that the action could continue.
- Blog Post
Last month we published an article in State Tax Notes about my favorite topic: our win in the 2014 Gaied case. Folks around here are a bit tired of me talking about Gaied. Heck, there’s even a video out there! But I couldn’t let Gaied’s 3rd birthday go by without a mention. That would just be mean.
- Blog Post
On March 7th, a Superior Court in Connecticut issued a decision that could have a significant impact on some investment fund managers who live in Connecticut but manage funds in other states. In Jonathan A. Sobel v. Commissioner of Revenue Services, the Judge held that investment (and therefore intangible) income received by Mr. Sobel, a partner in a partnership that served as the general partner and advisor of certain investment funds, was New York source income and therefore Mr. Sobel could claim a credit on his 1997 and 1998 Connecticut resident tax return for taxes paid to New York (yes, the case has been going on that long!).
- Blog Post
The U.S. District Court for the Southern District of New York recently held that UPS violated an agreement it had signed with the state of New York, as well as New York law, when it transported unstamped, untaxed cigarettes from and between Native American reservations for a number of shippers and awarded the state compensatory and monetary damages, with what could mean up to $872 million.
- Blog Post
Vilma Bautista once worked for Imelda Marcos, the former first lady of the Philippines – who was so incredibly rapacious and wealthy that she famously owned more than 2,700 pairs of shoes. Last week, she found herself in the news for another, less interesting issue: as a party in a New York Tax Appeals Tribunal case.
- NewsCredit Donkey
- Blog Post
The New York State Bar Association Tax Section has made their feelings known about proposed legislation that could have a negative impact on the tax appeals process in New York, in a report principally authored by Paul R. Comeau, my partner at Hodgson Russ.
- Blog Post
Last year, we filed a lawsuit on behalf of Richard Chamberlain and Martha Crum against the New York State Tax Department, alleging that New York’s statutory residency scheme improperly subjected them to double taxation in violation of the Federal Commerce Clause.
- Blog Post
New income tax guidance has been released by the City of Detroit, aimed specifically at professional athletes. The guidance clarifies how professional athletes should apportion their income to Detroit for purposes of its city income tax.
- Blog Post
Matter of CLM Enterprises illustrates the long-established rule that form always wins over substance in the sales tax area. The taxpayer was a holding company that owned several car dealerships, all as single member LLCs, which are disregarded for income tax purposes but NOT sales tax purposes. The issue in the case concerned how it was treating loaner cars. For several administrative and liability reasons, the group decided that all loaner cars should be titled to the taxpayer. The loaner cars initially were acquired by the dealerships, but then were transferred by the dealerships to the taxpayer. No cash changed hands, however. This was not a “sale” in the ordinary context. Whatever the case, when customers used the loaner cars, expenses associated with this were allocated to the respective dealership.
- NewsBloomberg BNA Law Daily Tax Report
- Blog Post
Governor Cuomo’s proposed budget legislation for fiscal 2017-18 was released on January 18, 2017. In his briefing that evening, the governor remarked that one of the “main aspects of this budget is tax policy.” That’s certainly one way to captivate the attention of tax practitioners!
- Blog Post
The NYS Tax Department’s ongoing efforts to combat identify theft and deter fraud have yielded a new requirement for this filing season. Beginning with the 2016 tax year, all e-filed personal income tax returns must provide certain information from the taxpayer’s state-issued driver’s license or non-driver ID.
- Blog Post
Late last week the Tax Appeals Tribunal issued a decision (in Matter of Purcell) reversing several prior Administrative Law Judge determinations on a technical issue related to the calculation of the tax reduction credit that was available in the old Empire Zone Program. I actually covered this issue several years ago in a Noonan's Notes article. And though that alone doesn’t make this very exciting, the case is noteworthy given that the tax department had lost as many as 4 cases at the Administrative Law Judge level over the past several years on this issue, and undoubtedly has probably settled several others favorably for taxpayers. The Purcell case goes in the exact opposite direction as all these prior cases, and holds that the tax department’s methodology for computing this “tax reduction credit” was reasonable.
- NewsState Tax Notes
- Blog Post
Last week we had the opportunity to attend the first annual New York State Tax Summit, a daylong seminar put on by the New York State Department of Taxation and Finance at their offices in Brooklyn. It was a fantastic event, with senior Department officials presenting a wide variety of topics and issues for discussion. There were close to 200 attendees present. And the Agenda was impressive. Here are some of the highlights of the day:
- Blog Post
Chicago lawyer Stephen Diamond has made quite a name for himself in recent years for his perceived abuse of the Illinois False Claims Act (“FCA”). Many believe Diamond is misusing the FCA or is using it for self-serving reasons not consistent with the FCA’s intent.
- Blog Post
Chicago lawyer Stephen Diamond has made quite a name for himself in recent years for his perceived abuse of the Illinois False Claims Act (“FCA”). Many believe Diamond is misusing the FCA or is using it for self-serving reasons not consistent with the FCA’s intent.
- Blog Post
Chicago lawyer Stephen Diamond has made quite a name for himself in recent years for his perceived abuse of the Illinois False Claims Act (“FCA”). Many believe Diamond is misusing the FCA or is using it for self-serving reasons not consistent with the FCA’s intent.
- Blog Post
Chicago lawyer Stephen Diamond has made quite a name for himself in recent years for his perceived abuse of the Illinois False Claims Act (“FCA”). Many believe Diamond is misusing the FCA or is using it for self-serving reasons not consistent with the FCA’s intent.
- Blog Post
Chicago lawyer Stephen Diamond has made quite a name for himself in recent years for his perceived abuse of the Illinois False Claims Act (“FCA”). Many believe Diamond is misusing the FCA or is using it for self-serving reasons not consistent with the FCA’s intent.
- Blog Post
As practitioners who deal with New York income tax audits on a day-to-day basis, we often have a front row seat to new audit techniques and new areas of focus. And in recent years, we have noticed a lot more audit activity in the partnership or flow-through entity area. Most of this has centered around nonresident owners of flow-through entities, and more specifically the methodology in which these entities allocate income in and out of New York. As I have outlined before in some other articles (click here and here), often we can gain insight on trends like this by studying the audit guidelines that the Tax Department issues to its auditors. The Tax Department’s Nonresident Audit Guidelines are more widely-known, and available on the Tax Department's website., Over the years, however, the Tax Department has also issued different iterations of its Nonresident Allocation Guidelines, with the most recent version being issued in June 2013. But after about 17 focused minutes of Google searching (which is the maximum amount of time one should spend Googling something), I have not been able to find those guidelines anywhere on the Tax Department’s website, or on the Internet generally. That is, of course, until now. - NewsState Tax Today
- Blog Post
There are always “traps” in the tax law, where taxpayers unwittingly walk into a tax problem that they didn’t see coming. In the residency area, some taxpayers often got trapped on a move-in or move-out situation, with the Tax Department taking the position that “statutory residency” trumps “domicile.” Thus, a taxpayer who didn’t move into New York until, say, August of a particular tax year still could be taxed as a full-year resident if he or she ran afoul of New York’s statutory residency test (i.e., the taxpayer maintained a permanent place of abode for almost the whole year and spent more than 183 days in the state). Indeed, the Nonresident Audit Guidelines (see page 64) contained a whole section about this.Guess what? We may have closed this trap!
- Blog Post
One of the more interesting aspects I’ve seen in residency cases in my practice is the importance and understanding of a taxpayer’s intent in the overall analysis. That’s part of what makes residency cases so unique. There are likely very few situations in federal or state tax law where what is kicking around in somebody’s mind is critical to the determination of the tax issue. But the domicile test—which looks to discover where a taxpayer has his permanent or primary home—turns on the notion that the taxpayer’s intent can be a deciding factor. This can make the audit process really difficult. How do you prove to an auditor what your client was thinking? You can point to objective facts; you can point to case law; but how do you get into someone’s head? And more importantly, how do you convince an auditor to do the same? - Blog Post
It seems I can’t get through a work day lately without some tax alert, webinar invite, article, or tweet addressing the new IRS tangible property regulations. These new rules have caused quite the uproar in the tax community, as outlined by articles here, here, and here. These regulations are aimed at questions as to whether expenditures on tangible property are currently deductible, or whether they must be capitalized and recovered through depreciation over time. And the principal question that the final regulations address is whether expenditures relating to the maintenance and alteration of tangible property, including buildings and other fixed assets, are properly treated as repairs, which are currently deductible, or are required to be capitalized as an improvement to the property. That distinction—between deductible repairs and capital improvements—has been mostly developed through judicial decisions, based on facts and circumstances. But in 2003, the IRS issued Notice 2004-6 , announcing that it intended to propose regulations in this area. And with the expediency and speed we have come to expect from our government, final regulations were issued in September 2014, and more recently the IRS announced simplified procedures offering relied to certain small businesses. - NewsWall Street Journal
- Blog Post
One of the more interesting state tax issues we get to deal with as state and local tax practitioners involve questions in the sales tax area. One of the reasons is because the answer to every sales tax question is the same: “it depends.” State sales tax statutes have so many ins and outs, exemptions and exclusions, ifs, ands, ors, and buts that there rarely is a clear answer. And even if there is a clear answer, it often depends on the application of a variety of different facts and circumstances. This usually results in articles every year about the different tax consequences that can arise in silly circumstances, such as the taxability of bagels depending on whether or not they are sliced or not; candy bars being taxable based on whether or not they are in the candy or cookie aisle, etc.But the other interesting aspect of sales tax is that it touches everybody: every business, every taxpayer, every industry. A couple of years ago, we started to learn this firsthand when a lot of my income tax clients in the Wall Street area started contacting me about sales tax issues. Sales tax on Wall Street? What can that be about?
- NewsThe Trusted Professional
- NewsBuffalo Law Journal
- NewsHuffington Post
- NewsTax Analysts
- NewsAlbany Business Review
- NewsWall Street Journal
- NewsTaxAnalystNew York High Court Overturns Tax Tribunal's Definition of Statutory Resident
- NewsLaw360NY High Court Balks At Tax Authority's Residency Test
- NewsWIVB
Timothy P. Noonan explains how New York State sales tax are applied to discounted items.
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- NewsState Income Tax MonitorDon't Be Shocked if Auditor Over-Reaches for Data; Be Prepared
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- NewsWall Street JournalState Tax Probe Expands: New Jersey Man Who Bought Staten Island Home for Parents Could Owe New York
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BUFFALO, N.Y. — Timothy P. Noonan, a partner in Hodgson Russ LLP’s State & Local Tax and Tax Dispute Resolution Practice Groups, has been invited to write a monthly column for State Tax Notes, a leading publication in the state tax field.
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BUFFALO, N.Y. — Hodgson Russ LLP is pleased to announce that the following attorneys have been elected to the firm’s partnership: Timothy P. Noonan, David G. Reed, Jeffrey C. Stravino, and Brian K. Duffey.
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The Burton Award is presented in association with the Law Library of Congress. It honors 20 winners selected from nominations from the top 500 law firms in the United States and 10 winners from leading U.S. law schools.
Tim served on the board of the Erie County Bar Foundation and the St. Thomas More Guild. He is a past school board member at Ss. Peter and Paul School in Williamsville, New York, and he currently runs a contemporary music group at Nativity Church in Orchard Park, New York. In 2017, he was inducted into the Signum Fidei Society at St. Joseph's Collegiate Institute, a lifetime achievement award and the highest accolade bestowed by the school to alumni who are distinguished in professional career, community activities and who share in the spirit characteristic of the Christian Brothers. His most time-consuming community activity, though, is at home. Tim and his wife are the proud parents of 13 children (with 5 more grandchildren….and counting). He and his family were featured in an October 2015 profile on large Buffalo families published in Buffalo Magazine.
- New York State Bar Association
- NYSBA Committee on Continuing Legal Education
- Member, Advisory Board: Tax Notes State
Episode 55: IN FOCUS: “Hot Topics in NYS/NYC Residency and Personal Income Taxes”
Jonathan On Money
- Moving Abroad: Challenges & The 548-Day Rule
Changing your domicile can be a challenge. Changing your domicile to a foreign country is an even bigger challenge. Joe is joined by Tim Noonan and Diana Mathis for an in-depth discussion of the rules governing changes of residency out of New York to a foreign country. The panel also discusses the 548-Day Rule safe harbor within the New York tax law, which allows people to escape taxation as a resident if they spend enough time abroad and meet other requirements.
- SALT Minds: An Interview with Professor Edward Zelinsky
Joe is joined by esteemed legal scholar, Professor Edward Zelinsky of the Benjamin N. Cardozo School of Law, and Hodgson Russ colleagues Elizabeth Pascal and Timothy Noonan to discuss Professor Zelinsky’s ongoing legal battle against New York State’s Convenience of the Employer Rule. Professor Zelinsky shares stories about his original convenience rule court case and provides insight into how his legal theory evolved for his newest court case in opposition of the convenience rule.
- Obus and the Future of Statutory Residency
A major win for taxpayers, the decision in Matter of Obus v. New York State Tax Appeals Tribunal is final! Joe is joined by guests Tim Noonan, Andrew Wright, and Emma Savino to discuss this landmark tax case, which will dramatically shift the rules for New York’s statutory residency test. We break down the cases that led up to this point, what actually happened in Obus, why the impact of the case is significant, and what the future may hold for legal interpretation of what constitutes a permanent place of abode in New York. A once purely mechanical test, the statutory residency test now looks to have a major subjective component as part of the analysis, as a result of the Obus decision. Joe and his guests also give their thoughts on whether the State will take action in response to this major change.
- Residency Audits- Part 2
In a continuation of their discussion on tax residency, Tim and Joe dive into the ins and outs of tax residency audits, including a high level discussion of audit procedure. The pair talk about what taxpayers can expect if they get an audit notice, and highlight some of the realities of a New York tax audit.
- Residency Audits- Part 1
In this episode, Joe sites down with Tim Noonan in the first part of our discussion on tax residency. Changing your tax residency is not as simple as spending six months and a day in a new state. Tim and Joe discuss the ins and outs of New York State’s tax residency tests, and share thoughts on what factors tend to trip up taxpayers looking to make a move out of state.
