Estate Repeal Almost Happens

On June 8 the US Senate voted 57-41 to enact the "cloture" rule to proceed to enact legislation to repeal the US estate tax. The motion failed to obtain the 60 votes needed to block debate and therefore further consideration of estate tax repeal was temporarily postponed. However it is considered quite likely that some form of estate tax legislation will be considered again soon that will drastically reduce the exposure of US citizens and US domiciliaries to the tax. Some Individuals covered by treaties, such as certain Canadians, Swiss, and British may also benefit.

Some Mergers of Non-US Corporations May be Tax-Free

The IRS has determined that corporate mergers and consolidations undertaken by foreign corporations may qualify as tax free reorganizations the same as those undertaken by domestic corporations, provided all requirements are met. The rule is effective for mergers and consolidations occurring after January 22, 2006.

New York Provides Relief to Nonresidents

In a recently issued memorandum [TSB-M-06)(5)I] the NY Department of Finance has revised its position on the taxation of nonresidents. The memo covers situations in which an employee whose assigned or primary work location is in New York performs services at that location and at a "home office" located outside New York. Any normal work day spent at the "home office" will be treated as a day worked outside NY (i.e. general not taxed in NY) provided the "home office" is a "bona fide employer home office". The memo describes the factors to be considered to determine if he employee's "home office" is a "bona fide employer home office".

New York Not Entitled to Income Tax on Retired Nonresident Partner's Shares of NY Profits

An administrative law judge in New York has ruled that New York State is not entitled to personal income tax on the profits of a NY law Firm that are paid as retirement funds to a retired partner of the Firm living outside New York. The rule applies even when the payments are based on current profits of the Firm. (New York State Division of Tax Appeals, - Determination DTA No.820099 Feb 2, 2006).

Possible Federal Legislation Defining "Nexus" for States

The US Congress has been proceeding with proposed legislation that would expand the protection of P.L. 86-272 (the "Commerce Clause") beyond net income taxes to transactions involving services and intangibles and would define the "nexus" standard. (H.R. 4845 and S. 2721)