Two Legislative Changes to Pay Attention to

By: Matt O’Kane

Here’s how the recent legislative changes will affect you:

Spousal Homestead Transfer

A new law signed by Governor DeSantis extends the documentary stamp tax exemption for the conveyance of homestead property between spouses. As background, the State of Florida imposes documentary stamp tax of seventy cents per $100 of consideration. Consideration includes, among other things, mortgage obligations or other liens. Prior to last year, the conveyance of homestead property from one spouse to another spouse, or any interest therein, was subject to documentary stamp tax if the homestead property was encumbered by debt. Thus, if homestead property was held in the name of one spouse and was encumbered by $100,000 mortgage, the transfer of a one-half interest of the property to the other spouse would be subject to documentary stamp in the amount of $350. Last year, a new exemption eliminated the documentary tax expense, if the deed or other instrument was recorded within one year after the date of marriage and the only consideration for the transfer or conveyance is the amount of a mortgage or other lien encumbering the homestead property at the time of the conveyance. The new exemption extends the exemption by eliminating the one year requirement. The revised exemption goes into effect July 1, 2019.

Sales tax on Commercial Rental Fees

For the third year in a row, the sales tax rate on commercial leases has been reduced. Beginning of January 1, 2020, the State of Florida’s sales tax on rental payments for the lease of commercial real property will be reduced from 5.7% to 5.5% for rental payments received for occupancy periods beginning on or after January 1, 2020. Commercial landlords and management companies sending out invoices for occupancy periods beginning on or after January 1, 2020 should revise their invoice software to account for this sales tax reduction. Note that this sales tax reduction does not impact the local discretionary sales surtax imposed by many Florida counties.

Trump Signs Tax Bill Into Law

By:  Amanda Wilson

President Trump signed the tax reform bill into law today.  A summary of the key changes can be found here.

Are Your Partnerships Ready for 2018?

By:  Amanda Wilson

While the news is filled with the ongoing tax reform activity in Congress, there is one tax change that is already in place to take effect January 1, 2018 – the repeal and replacement of the tax audit regime for partnerships.  For all tax years beginning on or after January 1, 2018, the existing TEFRA audit regime is being replaced with a new audit regime.  The tax matters partner is being replaced with a partnership representative – and the partnership representative is the only person that the IRS will deal with when auditing the partnership.  The partnership representative has the sole authority to participate in the audit and bind the partnership when it comes to dealing with the IRS, so it will be important to get the selection of your partnership representative correctly.  Once chosen, the partnership representative cannot be changed for a tax year without the IRS’s consent.  In addition, if there is a partnership audit, any adjustments will be made at the partnership level and will result in a tax liability for the partnership unless the partnership elects to push out the liability to the existing partners.  This means that a partner can be liable for tax adjustments for periods in which that partner did not have an ownership interest even in the partnership!  Due diligence for acquisitions of partnership interests that occur after January 1, 2018 will be much more involved on the tax side as a result.

So, if your ownership structure includes entities that file an IRS Form 1065 Partnership Tax Return (which can and usually does include multi member limited liability companies), you need to look at your organizational documents to see if they address these upcoming audit rule changes.  If you do not see the term “partnership representative” anywhere, then you will likely need to update.

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