Roundtable Weekly - June 22, 2018

Internet Sales Tax

Supreme Court Rules States Can Collect Sales Tax from Online Retailers; Uniform Collection Standards Present Significant Challenge

The Supreme Court yesterday ruled 5-4 in South Dakota v. Wayfair to expand States' authority to collect sales and use taxes on Internet consumer purchases from retailers who do not have a physical presence in a state. 

The Supreme Court yesterday ruled 5-4 in South Dakota v. Wayfair to expand States' authority to collect sales and use taxes on Internet consumer purchases from retailers who do not have a physical presence in a state.

  • Real Estate Roundtable President and Chief Executive Officer Jeffrey DeBoer commended the Court's long-anticipated ruling.  He noted the decision "rejects an antiquated 'physical presence' standard. That test exempted on-line retailers from collecting sales and use taxes – yet imposed those obligations on traditional 'brick-and-mortar' retailers.  DeBoer also noted the ruling "will enable states to collect much-needed revenue to provide public services and invest in local infrastructure projects."  (Roundtable Statement, June 21)
  • The Roundtable on March 5, 2018 joined The International Council of Shopping Centers (ICSC), Investment Program Association, Nareit®, the National Association of REALTORS® , the National Multifamily Housing Council, NAIOP, the American Farm Bureau Federation and the South Dakota Farm Bureau Federation in filing an amicus curiae brief.  (Roundtable Weekly, March 9) 
  • While the Wayfair decision overturns previous case law, it also creates the potential for a patchwork of state-level collect and remit statutes, which may lead to efforts by Congress to simplify States' tax collection practices. 
  • Justice Anthony Kennedy wrote in the majority opinion: "Eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems. Indeed, as the physical presence rule no longer controls, those systems may well become available in a short period of time, either from private providers or from state taxing agencies themselves. And in all events, Congress may legislate to address these problems if it deems it necessary and fit to do so." (Supreme Court opinionSouth Dakota vs. Wayfair
  • In the dissent, Chief Justice John Roberts reflected his belief that the decision could preclude a federal solution from Congress: "Armed with today's decision, state officials can be expected to redirect their attention from working with Congress on a national solution, to securing new tax revenue from remote retailers." (Supreme Court opinionSouth Dakota vs. Wayfair

ICSC President and Chief Executive Officer Tom McGee said, "We understand this is a major step in a long process, but look forward to working with policymakers and business owners to find state-level legislative solutions which promote fairness and competition." (CoStar News, June 21) 

The Roundable's DeBoer added, "We stand ready to assist policymakers should they respond to today's decision with legislation that provides our nation's businesses with fair standards to collect the tax that is owed on online sales."  (Roundtable Statement, June 21)

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Opportunity Zones - Tax Policy

Treasury Designates More than 8,700 Census Tracts as Opportunity Zones

The Treasury Department on June 20 designated more than 8,700 low-income census tracts in the United States, Puerto Rico, and territories as qualified Opportunity Zones. (IRS Notice 2018-48)

A Roundtable Tax Policy Advisory Committee working group is finalizing a comment letter to the Treasury Department and IRS with recommendations on how to structure implementing rules that facilitate productive real estate investment.

  • Congress created the Opportunity Zone tax incentive program in the Tax Cuts and Jobs Act. Incentives reward Opportunity Fund investors with a capital gains deferral or exclusion on their invested capital in low-income communities.
  • Opportunity Funds must invest in tangible business property located in a qualifying zone, which can include real estate, and the tax benefits are tied to the investment holding period.  The capital gain on an Opportunity Fund investment is excluded from tax altogether if the asset is held for 10 years or more. (Opportunity Zones: An Innovative Investment Vehicle Created by the TCJA Accounting Today, June 6, 2018).
  • Real estate investment aligns with the underlying objectives of the Opportunity Zone program – job creation, infrastructure development and growth in the tax base supports local public services. 
  • Opportunity Zones were the topic of a panel discussion at The Roundtable’s Tax Policy Advisory Committee (TPAC) meeting last week. Speakers included Shay Hawkins, Tax Counsel for Senator Tim Scott (R-SC), the original author or Opportunity Zone legislation. Treasury’s Tax Legislative Counsel Tom West also addressed a number of questions related to Opportunity Zones. 

A TPAC working group is finalizing a comment letter to the Treasury Department and IRS with recommendations on how to structure implementing rules that facilitate productive real estate investment.  The letter will address topics such as the Opportunity Fund certification process, the requirements necessary for real estate to be treated as a qualified Opportunity Zone investment, and the tax consequences of real estate asset sales and acquisitions by an Opportunity Fund during the holding period.

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Tax Reform - Tax Reform Implementation - Tax Reform Technical Corrections

Six-Month Anniversary of Tax Reform Showing Success; House Ways and Means Committee Chairman Kevin Brady Awarded Roundtable’s “Champion of the Economy” Award

Marking the half-year anniversary of the final passage of the Tax Cuts and Jobs Act (TCJA), House Ways and Means Committee Chairman Kevin Brady (R-TX) joined Speaker Paul Ryan (R-WI) and Secretary of the Treasury Steven Mnuchin in recognizing the law's benefits to American taxpayers and businesses.  (Video, National Association of Manufacturers, June 21)

  House Ways and Means Committee Chairman Kevin Brady (R-TX), center, was awarded The Real Estate Roundtable's Champion of the Economy Legislative Leadership Award for his efforts on the Tax Cuts and Jobs Act. 

 

  • “In the six months since we reformed the tax code, we have the fastest growth in investments, new equipment, and technology since 2011. We’ve now seen almost nine out of ten manufacturers increase their investments—investing in their business, workers and their future.”  (Brady remarks, June 21).  Brady also touted tax reform’s results to-date in a Wall Street Journal commentary, “Six Months After Tax Reform, Something Big Is Happening.” 
  • Chairman Brady was awarded The Real Estate Roundtable's Champion of the Economy Legislative Leadership Award last week for his efforts on the TCJA. 
  • Roundtable President and CEO Jeffrey DeBoer and Roundtable Chair William C. Rudin (Co-Chairman & CEO, Rudin Management Company, Inc.) presented the award during The Roundtable’s 2018 Annual Meeting.  DeBoer said, “Consumer confidence is at a 17-year high. Nearly one million jobs have been created since tax reform passed.  The 3.8 percent unemployment rate has been matched only once since 1969.  Wage growth is accelerating – 2.8 percent year-over-year last month.  GDP growth is widely expected to come in well over 3 percent in the second quarter.  All of this is happening as inflation remains stable near the Fed-targeted rate of 2 percent. In short, the bill has kick started the American economy and extended the economic cycle.”
  • DeBoer added, “Chairman Brady successfully achieved what he set out to achieve—a positive investment environment, greater job growth, and more money in the pockets of American families and businesses.”

In his acceptance comments, Brady noted that the Ways and Means Committee is “continuing to clarify new parts of the tax code, work with Treasury and get technical corrections made.”  Brady also said his goal is to continue encouraging growth and investment.  “Early signs are very encouraging. The best is yet to come.” 

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