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Tax Controversy News

Are Owners of Cannabusinesses Eligible for the Qualified Business Income Deduction Under Section 199A?

Brandon N. Mourges | Feb 28, 2019

Section 199A of the Internal Revenue Code, introduced by the Tax Cuts and Jobs Act (“TCJA”), created an opportunity for business owners to substantially lower their income taxes.  Subject to many qualifications, beginning in 2018, business owners were potentially eligible for up to a 20% deduction on “qualified business income” (“QBI”).  For those owning a…

Loughman Case Illustrates Potential Impact of Entity Choice on Income Tax Liability for Cannabusinesses

Brandon N. Mourges | Feb 20, 2019

Recognition of Internal Revenue Code (“I.R.C.”) § 280E and its potential to limit deductions can have a material impact on the ongoing operation of a cannabusiness.  While operational concerns require attention, improper tax classification of an entity can result in unnecessary additional tax being owed.  In Loughman v. Commissioner, T.C. Memo 2018-85, the United States…

Section 280E Remains a Problem for Maryland Cannabusinesses: How to Minimize Taxable Income through Proper Classification of Business Costs

Brandon N. Mourges | Feb 14, 2019

The Maryland Medical Cannabis Commission (“the MMCC”) recently reported to the Maryland legislature on “the deleterious effects of the federal tax code on medical cannabis businesses.[1]”  As stated in its report, I.R.C. § 280E creates significant additional tax costs not faced by other industries and limits the industry’s ability to offer discounted supply to veterans…

Recent Report from Maryland Medical Cannabis Commission on Compassionate Use Fund Highlights Disparate Tax Treatment of Cannabusinesses

Brandon N. Mourges | Feb 12, 2019

In a December 2018 letter to Governor Hogan, the President of the Senate, and the Speaker of the House, the Maryland Medical Cannabis Commission (“MMCC”) discussed plans to fund the Compassionate Use Fund.[1]  As medical cannabis is categorized as a Schedule I drug and is not recognized for medical use by the federal government (more…

The Tax Cuts and Jobs Act: What Everyone Should Know Before Filing Their 2018 Taxes

Michael J. March | Feb 6, 2019

The smell of tax season is in the air. Accountants and tax attorneys alike are sharpening their pencils, replacing the batteries in their calculators, and stocking up on coffee. But something feels different this year. . . The Tax Cuts and Jobs Act (“TCJA”). Everyone has heard about it, but what exactly does it mean…

Final Section 199A Regulations: Interpretation of W-2 Wages and UBIA Thresholds May Significantly Limit the QBI Deduction

Brandon N. Mourges | Feb 1, 2019

When it was announced that the Tax Cuts and Jobs Act included a new 20% deduction for qualified business income (“QBI”) of pass-through businesses, many business owners started planning for huge tax savings.  Hopefully, their exuberance was not misplaced and was based on a thorough review of the new tax law.  Aside from many types…

Final Section 199A Regulations: Safe Harbor Created By Notice 2019-07 Brings Additional Certainty on Application of QBI Deduction to Rental Real Estate Enterprises

Brandon N. Mourges | Jan 31, 2019

Along with the recent issuance of regulations under section 199A of the Internal Revenue Code (“I.R.C.”), the Internal Revenue Service (“the Service”) also published a revenue procedure setting forth a safe harbor under which rental real estate will be treated as a “trade or business” pursuant to I.R.C. § 199A.  For those in the real…

Section 199A: How “Reasonable Compensation” Will Be Defined and How it May Impact the QBI Deduction

Brandon N. Mourges | Jan 31, 2019

From its inception, Section 199A made it fairly clear that the deduction for qualified business income (“QBI”) would not apply to all income in respect of pass-through businesses.  Aside from limitations dependent on the nature of the industry (i.e., the “specified service trade or business” provisions of I.R.C. § 199A(d)(2)), the total wages paid to…

Final Section 199A Regulations: Tax Planning for Businesses with Gross Receipts from Both Specified Services and Non-Specified Services

Brandon N. Mourges | Jan 29, 2019

Although Section 199A will reduce the tax burden for many owners of pass-through businesses, classification as a “specified service trade or business” (“SSTB”) can severely limit its application for many others.  While certain businesses will find it extremely difficult, if not impossible, to avoid such a classification (e.g., law firms, accounting firms, consulting firms), there…

Final Section 199A Regulations: Initial Takeaways on Clarification of Definition of “Specified Service Trade or Business”

Brandon N. Mourges | Jan 28, 2019

Since the passage of the Tax Cuts and Jobs Act, business owners and tax practitioners alike have focused on the potential effect of Section 199A.  Though it has been clear for some time that the 20% deduction afforded to those with “qualified business income” would be a boon for businesses structured as pass-through entities, it…

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