The American Families Plan & its impact on the real estate industry

Summary of the American Families Plan and the potential impact that it could have on the real estate industry.

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The American Families Plan & its impact on the real estate industry

TAX ALERT | April 29, 2021 | Authored by RSM US LLP

President Biden has announced The American Families Plan, representing a $1.8 trillion proposal focused on investing in increased childcare, healthcare, and education initiatives while extending many of the middle-class focused tax credits that were signed into law as part of the American Rescue Plan earlier this year. These initiatives and tax credits will primarily be funded through tax increases on high-income taxpayers as well as changes to the existing tax law. While the details of President Biden’s proposed plan are not yet available, there are several notable proposals that would be highly impactful to the Real Estate industry. The following is a brief summary of these proposals.

Tax Rates Increases

President Biden’s proposed plan would increase the maximum long-term capital gains rates from 20% to 39.6%for taxpayers making over $1 million annually. There is currently still ambiguity as to what will be includible in the $1 million threshold (gross income, adjusted gross income, taxable income, etc.). When factoring in net investment income taxes of 3.8%, the President’s proposal would increase the maximum rate paid on capital gains to a total of 43.4%.

The American Families Plan also proposes an increase to the top marginal ordinary income rate for individuals from 37% to 39.6%. This represents a reversal of the reduction in tax rate under the 2017 Tax Cuts & Jobs Act. 

Further Limitations on 1031 Like-Kind Exchanges

The President’s plan also takes aim at limiting a taxpayer’s ability to utilize section 1031 Like-Kind Exchanges to defer capital gains related to sales of real property. The plan would no longer provide taxpayers the ability to utilize section 1031 Like-Kind Exchanges if the gains realized are greater than $500,000. 

Repealing section 1031 Like-Kind Exchanges coupled with the proposed increase in capital gains tax rates could send ripple effects through the real estate industry, slowing the market with investors incentivized to hold existing assets for longer timeframes in the hopes of future administrations lowering the capital gains rate. 

Elimination of Capital Gain Treatment for Carried Interest

The use of carried interest by hedge fund and private equity managers often times affords them the ability to pay taxes on their share of income at preferable capital gains rates. While the Tax Cuts & Jobs Act extended the holding period required for carried interests to achieve long-term capital gain treatment from one to three years, President Biden is seeking to remove the eligibility of capital gains treatment on carried interest all together. Under the President’s plan, carried interest income allocations would be taxed as ordinary income as opposed to capital gains. 

At first glance, it may appear that the proposed increase to capital gains rates effectively eliminates the benefit of the carried interest provisions. However, if President Biden were successful in eliminating the capital gains treatment on carried interests, the carried interest amounts would be subject to ordinary tax rates even if the proposed increase to capital gain rates does not become law or re-negotiated down to a lower percentage as part of the lawmaking process. 

Real estate investors largely escaped the changes to the carried interest rules under the Tax Cuts & Jobs Act. Section 1231 gains, such as gains recognized from the sale of a rental property, were not subject to these rules. President Biden specifically called out the hedge fund industry when discussing these proposed changes to carried interests, but it is unclear at this time whether or not he intends to re-class carried interest allocations of Section 1231 gains to be ordinary income. Recent bills, such as The Carried Interest Fairness Act, have been introduced that would make section 1231 gains subject to the carried interest provisions so it does appear that this is on the table. 

Death as a Recognition Event

The proposed plan would require taxation of all unrealized gains in excess of the $1 million (or $2.5 million per couple when combined with existing real estate exemptions) as of the date of death. This will no longer allow for assets with large unrealized gains to escape taxation when passed down to generations upon death via a tax-free stepped-up basis. It appears that there could be exceptions to this tax liability upon death if the property either is donated to charity or is related to a family-owned business/farm that the heirs will continue to run. 

Excess Business Loss Limitation

As part of the Tax Cuts & Jobs Act, section 461(I) was created to suspend excess business losses of non-corporate taxpayers if the amount of the loss is in excess of $250,000 ($500,000 if filing a joint return). Section 461(l) limits a taxpayer’s ability to utilize losses of their business to offset other sources of income (wages, portfolio income, etc.). 

Although the Tax Cuts & Jobs Act limitation on excess business losses was set to expire for tax years beginning after Dec. 31, 2025, the American Rescue Plan Act of 2021 signed by President Biden earlier this year extended the loss limitation provisions for one additional year through 2026. The American Families Plan would permanently extend the section 461(l) loss limitation provisions, thus permanently restricting the deductibility of excess active pass-through business losses. 

Expansion of the 3.8% “Medicare Tax”

The American Families Plan proposal also makes broad references to expanding the scope of the current 3.8% “Medicare tax”. This “Medicare Tax” comes in two forms: 1) Self-Employment tax or 2) Net Investment Income tax. The plan discusses the tax being more consistently applied on income earned in excess of $400,000. Although details are not yet available as to what type of income the Biden administration is targeting with this proposal, this could open the door to active income earned from rental real estate activities or earned through S corporations being subject to Self-Employment Tax.

Takeaway

It is important to note that this is President Biden’s “wish list” and is not necessarily a list of what will ultimately become law. There is a lot of negotiation to be had before a bill is introduced or enacted. However, the proposal provides a glimpse into what the President has his sights set on for tax reform and many of these items will have a significant impact on the real estate industry. For this reason, taxpayers should begin to consider what these changes could mean to them and their business.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 313-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Scott Helberg, Jack Clarizio, Corey Pedowitz and originally appeared on 2021-04-29.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2021/the-american-families-plan-its-impact-on-the-real-estate-industr.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

President Biden unveils his American Families Plan

Biden’s plan to grow the middle class, expand economic growth and leave the US more competitive, may be funded with tax changes.

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President Biden unveils his American Families Plan

TAX ALERT | April 28, 2021 | Authored by RSM US LLP

On April 28, 2021, President Biden introduced The American Families Plan (the Families Plan). The Families Plan is estimated to cost $1.8 trillion according to a White House summary. The Families Plan sets forth the administration’s initiatives that they believe will grow the middle class, expand the benefits of economic growth to all Americans and leave the US more competitive. The Families Plan initiatives focus on the following broad areas:

  • Adds two years of free access to preschools and two years of community college as well as other investments in education
  • Provides direct support to children and families so that low and middle-income families will spend no more than 7% of their income on child care
  • Creates a national comprehensive paid Families medical leave program
  • Expands access to healthy meals to our nation’s students
  • Extends certain tax cuts in the American Rescue Plan
  • Extends the expanded health insurance tax credits in the American Rescue Plan

To pay for the Families Plan, President Biden proposed numerous tax changes. At a high level, the Families Plan would be offset with $1.5 trillion in revenue raisers that would primarily impact high-income individual taxpayers: Those revenue provisions would include:

  • Increase the top marginal tax rate to 39.6%
  • Increase the capital gains rate to match the top tax rate of 39.6% on all income for households making more than $1 million
  • Expansion of the 3.8% ‘Medicare Tax’
  • Treating death as a recognition event subject to certain exceptions
  • Eliminate the preferential rates for carried interests
  • Elimination of most of the remaining like-kind exchanges
  • Permanent extension of excess business loss limitation
  • Increase investment in the IRS for enforcement
  • Give the IRS authority to regulate paid tax preparers

Washington National Tax has summarized the key tax provisions of the Families Plan.

Increase in the top marginal rate

The President’s proposal would increase the top marginal rate on ordinary income from 37% to 39.6%. According to the White House summary, this rate increase would only affect the top 1% of taxpayers, and would apply to income such as interest, wages and income from flow through investments and other businesses.

Increase in capital gains tax rates for incomes over $1 million

Capital gains and qualified dividends are currently taxed at a maximum preferential rate of 20%. The administration’s proposal would eliminate these preferential rates for taxpayers with incomes of greater than $1 million, and instead subject this income to ordinary income tax rates. The White House summary indicates that this change would impact the top 0.3% of taxpayers.

Expansion of the 3.8% ‘Medicare Tax’

Under current law, certain types of income earned by high-income workers and investors are subject to an additional 3.8% tax. This generally takes the form of either the self-employment tax, additional Medicare tax or the net investment income tax, depending on the nature of the income. But these regimes do not capture all income. The President’s proposal appears aimed at eliminating the exceptions in order to ensure that taxpayers earning more than $400,000 would incur this 3.8% tax on all income – regardless of the source. For taxpayers already in the proposed 39.6% bracket, this proposal would push the nominal marginal federal tax rate on all income to 43.4%.

Treating death as a recognition event

To eliminate a taxpayer’s ability to avoid the increase in capital gains rates noted earlier by holding assets until death, the proposal would require taxation of all unrealized gains in excess of $1 million as of the date of death. The only exception to recognition would be for appreciation attributable to assets donated to charity. The summary indicates that the reform will be designed to ensure that Families owned businesses and farms would be protected and that no tax would be triggered when those businesses are transferred to heirs that continue to run the businesses.

Elimination of preferential rates for carried interests

Specifically calling out the hedge fund industry, the administration called for closing the ’carried interest loophole.’ Under current law, fund managers are sometimes able to enjoy preferential capital gains rates on their share of income from the fund, despite the fact that the income may effectively represent compensation for the manager’s services.

Elimination of most remaining like-kind exchanges

The tax law currently allows for the deferral of gains on transfers of real estate in situations where the taxpayer exchanges into other like-kind property. The proposal calls for an elimination of this deferral mechanism in circumstances where the gain exceeds $500,000. This would effectively eliminate the like-kind exchange in most circumstances. 

Permanent extension of excess business loss limitation

In 2017, the Tax Cuts and Jobs Act limited the ability of taxpayers to deduct ‘excess business losses’ against other types of income – capping the allowable net deduction to $500,000 per year. This provision was originally set to expire. Under the President’s plan, this provision would be made permanent.

Increase investment in the IRS for enforcement

President Biden’s office estimates that the overhaul of tax administration will generate approximately $700 billion in tax revenue over the course of a decade, net of investments made. The key components of the American Families Plan proposals include:

  • Provide resources to the IRS by way of multi-year stream of funding. The proposal directs approximately $80 billion to the IRS over a decade to fund an overhaul of technology, hire and train auditors to focus on complex investigations of large corporations, partnerships and global high-wealth individuals. The President’s proposal specifically directs allocation of resources for the enforcement against those with highest incomes, over $400,000. The resources will also be used to go after high wealth non-filers. 
  • Provide the IRS with information from third parties. This proposal is triggered by the need for the IRS to be able to verify income distributed to taxpayers by opaque sources, such as partnership and proprietorship income. The IRS needs mechanisms to cross check the accuracy of tax filings and improve compliance, similar to income streams such as wage, pension and employment income. This proposal will not impose additional burdens on taxpayers; instead, the proposal will require financial institutions to add certain information to their annual reports about aggregate account outflows and inflows.
  • Overhaul outdated technology to help the IRS identify tax evasion. Antiquated IRS IT systems need to be modernized to be able to respond to the needs of the compliant taxpayers, as well as unpack complex structures, like partnerships, where income is not easily traced.
  • Improve taxpayer service and deliver tax credits. This improvement to customer service will allow the IRS to communicate with taxpayers promptly and securely and provide accurate and timely answers to questions. This proposal also includes allocation of resources to efficiently deliver tax credits to taxpayers, including Child Tax Credit and Child and Dependent Care Tax Credits.
  • Regulate Tax Preparers. This proposal will give the IRS the legal authority to implement safeguards in the tax preparation industry to protect taxpayers from tax preparers who lack the ability to provide accurate tax assistance. This will also include higher penalties against dishonest preparers who fail to identify themselves on tax returns and who defraud taxpayers.

WNT Takeaways

The provisions outlined above would undoubtedly have profound implications for high-income taxpayers and business owners. The journey from proposal to legislation to law can be a long one – and it is reasonable to expect that there will be significant negotiations regarding many of these proposals once the legislative process begins. But it should be apparent that if even a handful of these proposals are enacted, particularly when one also considers the corporate tax provisions outlined in the American Jobs Plan, the changes would have a profound impact on the tax landscape.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 313-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Ed Decker, Alina Solodchikova, Christian Wood, Andy Swanson and originally appeared on 2021-04-28.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2021/president-biden-unveils-his-american-families-plan.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

IRS issues PPP expense deduction safe harbor for fiscal year taxpayers

IRS safe harbor for fiscal year taxpayers on accounting period in which to deduct PPP expenses provides choices and certainty.

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IRS issues PPP expense deduction safe harbor for fiscal year taxpayers

ARTICLE | April 26, 2021 | Authored by RSM US LLP

The IRS recently published Rev. Proc. 2021-20, providing a safe harbor regarding the accounting period in which to claim deductions paid for with PPP funds. This safe harbor allows taxpayers to elect to deduct expenses in the first tax year after the taxpayer’s 2020 taxable year return versus filing an amended return or administrative adjustment request.

To give some history, the SBA was instructed to administer PPP loans through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). At the time, it was known that these loans could be forgiven if the full amount of the loan was incurred for qualified costs: payroll costs, interest on a covered mortgage obligation, any covered rent obligation payment and any covered utility payment. Pursuant to the CARES Act, forgiven PPP amounts were excluded from gross income.

The IRS issued a notice and a revenue ruling stating that while the loan forgiveness was exempt from gross income, the amounts paid with such funds were not deductible expenses. In essence, PPP became a taxable item. This was not a popular conclusion for taxpayers and PPP borrowers requested Congress to provide a ‘fix’ for this unintended consequence. Then, on Dec. 27, 2020, the Consolidated Appropriations Act, 2021 became law and allowed the deduction of expenses related to loans forgiven or expected to be forgiven. 

The delay in legislative fix created issues for fiscal year taxpayers. Due to the prior IRS position of nondeductibility, fiscal year taxpayers may have already filed their 2020 tax returns prior to Congress passing the PPP deductibility fix. The safe harbor provided in Rev. Proc. 2021-20 allows impacted taxpayers a choice in how to claim their now allowed PPP expenses.

Safe Harbor Election

A taxpayer may elect to deduct expenses related to forgiven PPP loans on a timely filed, including extensions, original Federal income tax return or information return in the immediate subsequent year. The taxpayer does not need to amend their return or make an administrative adjustment request. To qualify the taxpayer must be a ‘Covered Taxpayer’ and the election must fulfill certain requirements contained within the revenue procedure.

A Covered Taxpayer must satisfied all of the follows conditions:

1. The taxpayer received an original PPP covered loan

2. The taxpayer paid or incurred original eligible expense during its 2020 taxable year

3. On or before Dec. 27, 2020, the taxpayer timely filed, including extensions, a Federal income tax return or information return, as applicable, for its 2020 taxable year

4. On its Federal income tax return or information return, as applicable, the taxpayer did not deduct the original eligible expenses because–

a. The expenses resulted in forgiveness of the original PPP covered loan; or

b. The taxpayer reasonably expected at the end of the 2020 taxable year that the expenses would result in such forgiveness.

The election must be made on the covered taxpayer’s timely filed, including extensions, Federal income tax return or information return for the first taxable year following its 2020 taxable year. A statement must also be attached to the filed return titled ‘Revenue Procedure 2021-20 Statement’ (and named RevProc2021-20.pdf for e-file attachments) and include the following information:

1. The Covered Taxpayer’s name, address and social security number or taxpayer identification number;

2. A statement that the Covered Taxpayer is applying the safe harbor;

3. The amount and date of disbursement of the taxpayer’s original PPP covered loan; and

4. A list, including descriptions and amounts, of the original eligible expenses paid or incurred by the Covered Taxpayer during the Covered Taxpayer’s 2020 taxable year that are reported on the Federal income tax return or information return, as applicable, for the Covered Taxpayer’s first taxable year following that 2020 taxable year.

New expenses not included as part of the original eligible expenses are not eligible to be deducted through this election by a Covered Taxpayer. Also, any expenses related to the PPP Second Draw are not original PPP covered loans and therefore are not eligible expenses.

Finally, this election does not protect the IRS from examining any issues related to claimed deductions and requesting additional information or documentation to verify any amounts described in the statements required for this election.

An impacted taxpayer should discuss the impact of amending returns or following this safe harbor with its tax advisor.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 313-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Ryan Corcoran and originally appeared on 2021-04-26.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2021/irs-issues-ppp-expense-deduction-safe-harbor-for-fiscal-year-tax.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

SBA announces opening date for restaurant program – April 30, 2021

SBA announces opening date for Restaurant Revitalization Fund – Registration on April 30 at 9 am EDT; applications on May 3 at 12 pm EDT.

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SBA announces opening date for restaurant program – April 30, 2021

ARTICLE | April 26, 2021 | Authored by RSM US LLP

Today (April 27, 2021), the Small Business Administration (SBA) announced the Restaurant Relief Fund will be open for registration starting on Friday, April 30, 2021 at 9 am EDT. Applicants can register and then apply starting on Monday, May 3, 2021 at 12 pm EDT. All eligible applicants are encouraged to submit applications as soon as the portal opens, even if the applicant is not a member of a priority group.

The SBA has provided a variety of guidance for potential applicants including a sample application, a knowledge base and a program guide. Potential applications should continue to visit sba.gov/restaurants for the latest guidance.

Documents an applicant should have ready for registration and application include:

  • IRS Form 4506-T, completed and signed by Applicant (digitally completed)
  • Any of the following documents demonstrating gross receipts:
    • Applicants that were in operation prior to or on Jan. 1, 2019, must supply documentation of gross receipts for 2019 and 2020; 
    • Applicants that began operations partially through 2019, must supply documentation of gross receipts for 2019 and 2020;
    • Applicants that began operations on or between Jan. 1, 2020 and ending on March 10, 2021 and Applicants that have not yet opened but as of March 11, 2021, but have incurred eligible expenses, must supply documentation of gross receipts and eligible expenses for the length of time in operations. 
    • Acceptable documentation of gross receipts and, if applicable, eligible expenses, includes the following: 
    • Business tax returns (IRS Form 1120 or IRS 1120-S); 
    • IRS Forms 1040 Schedule C; IRS Forms 1040 Schedule F; 
    • For a partnership: partnership’s IRS Form 1065 (including K-1s);
    • Bank statements; 
    • Externally or internally prepared financial statements such as Income Statements or Profit and Loss Statements; 
    • Point of sale report(s), including IRS Form 1099-K. 
  • For Applicants that are a brewpub, tasting room, taproom, brewery, winery, distillery or bakery: In addition to the documents in (1) above, documents evidencing that onsite sales to the public comprise at least 33% of gross receipts in 2019 included in your funding calculation, which may include Tax and Trade Bureau reports filed or to be filed that cover the period for which you are reporting gross receipts, or if applicable, eligible expenses.
  • For Applicants that are an Inn: In addition to the documents in (1) above, documents evidencing that onsite sales of food and beverage to the public comprise at least 33% of gross receipts in 2019 included in your funding calculation
  • For Applicants that have begun operations on or between Jan. 1, 2020 and March 10, 2021, and for Applicants that have not yet opened but as of March 11, 2021, have incurred eligible expenses may wish to submit a CPA Comfort Letter with their application as this letter provides the fastest SBA review.

The SBA is launching this program with only minimal notice of opening. Applicants should gather this information as soon as possible to be ready for opening day.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 313-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Ryan Corcoran, Tracy Burr, Mathew Talcoff and originally appeared on 2021-04-26.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2021/sba-announces-opening-date-for-restaurant-program-april-30-2021.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

SBA releases draft application and program guide for restaurant fund

SBA releases draft application as well as a program guide for the Restaurant Revitalization Fund. Potential applications should review.

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SBA releases draft application and program guide for restaurant fund

ARTICLE | April 18, 2021 | Authored by RSM US LLP

On April 17, 2021 the SBA published two very important pieces of information for potential applicants to the Restaurant Revitalization Fund – a sample application and a program guide.

Confirming many of our prior thoughts, the SBA guidance provides more certainty on what is necessary for the application.

A few observations about the released guidance:

The Program Guide and sample application confirm the comments that the following businesses will need to demonstrate that onsite sales to the public comprise at least 33% of gross receipts.

  • Bakeries
  • Breweries and/or microbreweries
  • Wineries
  • Distilleries

Applicants should also be prepared with ownership information and affiliate information. The sample application requires disclosure of all owners with 20% or more of the equity of the Applicant. Importantly, if no owner has at least 20% ownership of the Applicant, enough owners must be listed to get to an at least 20% combined equity ownership of the Applicant.

Applicants should also gather information about any PPP loans received during 2020 and/or 2021. The sample applications requires the Applicant to provide both the amount received and the PPP loan number.

Helpfully, the sample application provides tables to assist in calculating gross receipts of the Applicant. For many applicants, gross receipts will come from the 2019 and 2020 income tax returns. As we provided previously, gross receipts are not to include amounts received from any PPP loan, SBA 7(a) debt relief payments, EIDL loan, EIDL advance, targeted EIDL advance or state and local small business grants. Applicants may wish to consult with their tax advisor on gross receipts.

Applicants that started operations between Jan. 1, 2020 and March 10, 2021 or applicants that have not yet opened, but have incurred eligible expenses calculate grant amounts using the amount spent on eligible expenses, which are the same expenses that are qualified uses of this grant money.

The Program Guide contains many helpful definitions for applicants, including the definition of gross receipts. In what should be simplification, the Program Guide cross-references the line items on the tax returns to report as the gross receipts (generally the gross receipts net of allowances number).

Also contained within the Program Guidance are three ways for applicants to apply. Through a recognized SBA Restaurant Partner (list to be released), through SBA directly at restaurants.sba.gov, and telephonically at (844) 279-8898.

We anticipate at least one additional update to the program guide before the program is live. Potential applicants, though, should utilize these SBA resources to prepare to apply.

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Call us at (541) 773-6633 (Oregon), (208) 313-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Mathew Talcoff, John Nicolopoulos, Tracy Burr, Ryan Corcoran and originally appeared on 2021-04-18.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2021/sba-releases-draft-application-and-program-guide-for-restaurant.html

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

Tax aspects of President Biden’s American Jobs Plan

Washington National Tax summarizes key tax aspects of President Biden’s American Jobs Plan and the Made in America Tax Plan.

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Tax aspects of President Biden’s American Jobs Plan

ARTICLE | April 05, 2021 | Authored by RSM US LLP

On March 31, 2021, President Biden introduced The American Jobs Plan (the Jobs Plan). This $2 trillion jobs and infrastructure plan was a cornerstone of President Biden’s campaign and is a top priority of his administration.  With a focus on climate change, the Jobs Plan has a number of initiatives that set forth the administration’s initiatives related to green initiatives, infrastructure and job creation. The Jobs Plan focuses on the following broad areas:

  • Fix highways, rebuild bridges, upgrade ports, airports and transit systems
  • Deliver clean drinking water, a renewed electric grid and high-speed broadband
  • Build, preserve, and retrofit homes and commercial buildings, modernize schools and childcare facilities, and upgrade veteran hospitals and federal buildings
  • Create jobs and raise wages and benefits for essential home care workers
  • Revitalize manufacturing, secure U.S. supply chains, invest in R&D and job training
  • Strengthen workers’ rights to organize

To pay for the Jobs Plan, President Biden proposed numerous tax changes. At a high level, the Jobs Plan proposes to:

  • Raise the corporate tax rate to 28%
  • Increase the global minimum tax paid to 21%
  • Impose a corporate minimum tax on book income
  • Eliminate tax benefits for the oil and gas fossil fuels sector
  • Increase corporate tax enforcement

Washington National Tax has summarized the key provisions of the Jobs Plan as well as the tax provisions in the accompanying Made in America Tax Plan.

Fix highways, rebuild bridges, and upgrade ports, airports, and transit systems

President Biden is proposing that Congress make investment in roads, bridges, rails, ports, airports and transit systems. Many of these projects are funded by excise taxes collected into the Highway Trust Fund and the Airport and Airways Trust fund. Transportation Secretary Pete Buttigieg stated that neither a gas tax nor a mileage tax would be part of the Jobs Plan.

Green energy tax incentives

President Biden’s proposal includes provisions related to new clean energy technologies. He is proposing a new production tax credit along with investment in 15 decarbonized hydrogen demonstration projects in distressed communities. He is also focused on retrofitting carbon capture and sequestration at industrial facilities for steel, cement and chemical production. President Biden is also proposing a direct payment (rather than a tax credit against income) for the section 45Q carbon capture and sequestration tax credit to spur investment in this technology.

Eliminate tax benefits for fossil fuels and reinstate Superfund environmental excise taxes

President Biden is proposing eliminating tax benefits for the oil and gas fossil fuels sector. Additionally, he is proposing to restore payments from polluters into the Superfund Trust Fund.

Tax provisions

The Made in America Tax Plan (the Tax Plan) was issued alongside the American Jobs Plan. The tax proposals are designed to increase the corporate tax rate to 28% and close certain tax loopholes created by the Tax Cuts and Jobs Act of 2017. A summary of the provisions follows.

Beyond the increase in the corporate tax rate from 21% to 28%, the Tax Plan is generally focused on a series of international tax proposals that would have a significant impact on multinational businesses and substantially modify key provisions of the Tax Cuts and Jobs Act of 2017 (the TCJA). In 2017, the TCJA imposed a 21% tax on so-called global intangible low-taxed income (GILTI) which the TCJA generally defined as income earned overseas by controlled foreign corporations of U.S. taxpayers (other than Subpart F income) that exceeds a threshold amount. However, the TCJA also allowed corporate taxpayers to deduct 50% of their GILTI income, resulting in an effective tax rate on GILTI of only 10.5%. The Biden administration believes that these provisions encourage offshoring of jobs and profit shifting. In an attempt to remedy this and further discourage these practices, the Tax Plan will eliminate the 50% deduction for corporations under GILTI, ensuring that corporations pay a higher global minimum tax rate of 21% instead of 10.5%. In addition, the new global minimum tax rate will be calculated on a country-by-country basis in order to limit the ability for corporations to offset losses incurred in one country against income earned in another. The Tax Plan proposal may also eliminate the current law exemption from GILTI for income equal to 10% of the foreign corporation’s business assets. This could significantly increase the effective tax rate on foreign income and could result in U.S. tax even where the taxpayer has no net foreign income.

The Tax Plan also proposes to make corporate inversions (where companies would change jurisdictional headquarters via merging or acquiring a foreign entity in order to reduce U.S. taxes) more difficult and less appealing for companies. In addition to this, the Tax Plan will deny any deductions for offshoring jobs. To incentivize investment in U.S. jobs, the Tax Plan will provide a credit to support onshoring of jobs.

In addition, the Tax Plan would entirely eliminate foreign-derived intangible income (FDII) tax incentives created under TCJA, which provides a deduction to businesses that sell domestic goods and services to foreign consumers. The revenue generated from the repeal of FDII would be used to expand R&D incentives but the plan description released by the White House does not list any specific incentives it would expand. Some possibilities may include: repeal of the TCJA provisions requiring capitalization and amortization of section 174 research and experimentation expenditures beginning in 2022; or increasing the section 41 research credit rate under the regular and Alternative Simplified Credit (ASC) methods.

The Biden administration also plans to supports a global minimum tax rate that will be implemented on a multilateral level globally in order to prevent other countries from engaging in a ’race to the bottom‘ by exempting corporate profits from local tax. In this regard, we expect the Biden administration to support the efforts by the Organization for Economic Development and Cooperation (OECD) to develop a framework for a global minimum tax that other countries can use as a basis for internal legislation designed to prevent corporate tax evasion on a global basis.

The White House description of the Tax Plan also includes a discussion of a proposed corporate minimum tax on the book income of ’large corporations.’ This provision, as described, would impose a 15% minimum tax on the income corporations use to report their profits to investors. This description appears to be similar (or the same as) a Biden campaign proposal, but with certain terms undefined. The campaign proposal called for the imposition of a 15% minimum tax on global book income in excess of $100 million. In the coming days we expect additional clarification on details of this provision.

Fossil fuels and polluting industries

As a part of the President’s goal to put the country on a path to net-zero emissions by 2050, the Tax Plan aims to eliminate special subsidies, tax loopholes and special foreign tax credits benefitting the fossil fuel industry. It will also focus on holding polluting industries accountable to help fairly cover the cost of cleanups.

IRS enforcement

The tax provisions outlined above are designed to close tax loopholes that allow corporations to avoid or evade U.S. taxes. By changing corporate tax provisions in areas too easily abused, the Biden administration hopes to bring fairness to the tax system. The Tax Plan will also ramp up tax law enforcement against corporations and ensure that the Internal Revenue Service has the resources it needs to effectively enforce the tax laws. The changes in corporate tax law and increased IRS resources will be part of a soon to be announced broader enforcement initiative targeting tax evasion among corporations and high-income individuals.

WNT takeaways

President Biden’s American Jobs Plan is an opening proposal by the administration with respect to infrastructure and job creation. While there is much interest with both the Democrats and Republicans to improve the country’s infrastructure, the parties vary widely on how much to spend and what the priorities should be. It will be up to Congress to negotiate and ultimately pass the infrastructure legislation. Much discussion over the next few months will relate to whether the legislation will have bipartisan support, or whether it will be enacted through the budget reconciliation process (which requires only a majority vote from both chambers of Congress).

Further, it is expected that the American Jobs Plan will be followed by a second round of economic proposals next month that will likely include other social programs prioritized by the Democrats, including changes and expansions to health care and insurance coverage, child care, community college tuition proposals and others.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 313-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Alina Solodchikova, Ramon Camacho, Deborah Gordon and originally appeared on 2021-04-05.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/services/business-tax/tax-aspects-of-president-bidens-american-jobs-plan.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890

The IRS provides further guidance on the Employee Retention Tax Credit

he Relief Act made changes on how the Employee Retention Tax Credit works during the first two quarters of 2021.

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The IRS provides further guidance on the Employee Retention Tax Credit

TAX ALERT | April 04, 2021 | Authored by RSM US LLP

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act) provided a number of changes to the Employee Retention Tax Credit (ERTC). Most of these changes are only applicable starting Jan. 1, 2021 and (at the time) only applied to the first two quarters of 2021. Congress has since extended the ERTC from June 30, 2021 to Dec. 31, 2021.    

We discussed many of the Relief Act changes in our article on the IRS’s initial guidance in Notice 2021-20. The IRS has now issued Notice 2021-23 with some additional guidance on the Relief Act changes that are effective in 2021.

  • The Relief Act provisions allow governmental colleges or universities (such as state universities) to apply for the credit (if otherwise eligible) for 2021.   
    • The Notice provides that the IRS will use section 1.170A-9(c) for the definition of governmental college or university and use 1.170A-9(d) for determining a governmental entity providing medical or hospital care.   
    • A related rule provides that the wages used in determining the ERTC qualified wages for a governmental college or university or entity providing medical/hospital care includes most, but not all, wages paid to governmental employers that would otherwise be exempt from FICA/Medicare (for example, certain employees of state governments under sections 3121(b) (7)).
  • The Relief Act provisions changed the ERTC gross receipts eligibility test from a “more than 50% decline in gross receipts” to a “more than 20% decline in gross receipts” for 2021.  
    • The Notice confirms that the gross receipts test for the first two quarters of 2021 is NOT under the special two-quarters rule allowable in 2020. Under the two-quarters rule, once a company had a more than 50% reduction in gross receipts for a quarter, the company was also treated as meeting the ERTC eligibility rule for the following quarter, even if the company’s gross receipts rebounded in that next quarter. With this change, in 2021 the company must satisfy the “more than 20% decline in gross receipts” on a quarter-by-quarter basis.   
    • The Notice also discusses the Relief Act provision allowing a company to elect to use a look-back rule (applying the gross receipts numbers from the previous quarter, rather than the current quarter, in showing a more than 20% decline in gross receipts). While not completely clear, it appears that the employer makes this election on a quarter-by-quarter basis.
  • The Notice provides special rules for companies that were not in existence in 2019. Generally, the company can use the first or second quarter of 2020 (as applicable) to show the more than 20% decline in gross receipts.
  • The Notice discusses the Relief Act change for 2021 that allows an employer using the section 51 Work Opportunity Credit for a given employee to nevertheless claim an employee retention credit based on wages paid to that employee (if otherwise eligible under the ERTC rules). However, the employer cannot use the same wages for both the Employee Retention Credit and the Work Opportunity credit. 
  • The Notice provides more guidance on the rules around advanced credits under the ERTC. Under the Relief Act, for 2021, only a ‘small employer’ can use Form 7200 to claim the ERTC.  
    • However, even a ‘small employer’ can only claim 70% of the ‘average quarterly wages’ paid in 2019. However, both a ‘large employer’ and a ‘small employer’ can reduce payroll tax deposits as a mechanism for obtaining the credit earlier than under the Form 941.  
    • The Notice provides guidance on how a small employer should determine the average quarterly wages, including guidance for seasonal employers. In general, the employer averages the wages from the four quarters in 2019 reported on Form 941 Line 5c (Medicare wages and tips). An employer not in existence in 2019 can generally use the average quarterly wages for 2020. Other detailed guidance is provided for other fact patterns.
    • As a note, because the first quarter of 2021 is now complete and most payroll companies have closed, or will soon close, the Form 941 processing period, most companies will have to use the Form 941 X to claim the credit for the first quarter of 2021.

Let’s Talk!

Call us at (541) 773-6633 (Oregon), (208) 313-7890 (Idaho) or fill out the form below and we’ll contact you to discuss your specific situation.





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This article was written by Karen Field and originally appeared on 2021-04-04.
2022 RSM US LLP. All rights reserved.
https://rsmus.com/insights/tax-alerts/2021/the-irs-provides-further-guidance-on-the-employee-retention-tax-.html

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/aboutus for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

KDP is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KDP LLP can assist you, please call us at:

Oregon Office:
(541) 773-6633

Idaho Office:
(208) 373-7890