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The American Horse Council keeps you up to date with important tax court cases and regulations with its bi-monthly Tax Bulletin. The Tax Bulletin is a member benefit, and thus is not intended for reproduction. For more information on federal legislation, equine health and regulatory issues, taxes, animal welfare, racing, recreation, and showing please visit our website at www.horsecouncil.org.
Copyright 2020. All rights to this AHC Tax Bulletin No. 395 is retained by the American Horse Council. No reproduction or distribution of this Tax Bulletin is permitted without prior written consent of the AHC.
Congress, President Deliver $2 Trillion Relief Package, Address Many Horse Industry Concerns
By, Bryan Brendle, American Horse Council
Following a week of intense negotiations, on Friday, March 27 House lawmakers finally passed – and the President signed into law – the Coronavirus Aid Relief and Economic Security (CARES) Act, teeing up approximately $2 trillion in emergency aid to American taxpayers, small business, independent contractors and non-profits and charities. Because most equine enterprises characterize themselves as small businesses and include many non-profits such as state associations and equine rescue operations, the package addresses many challenges facing the horse industry. The following are highlights from the relief package.
“PHASE 2” CORONAVIRUS RELIEF LEGISLATION INCLUDES IMPORTANT TAX PROVISIONS
By, Maddie Schueler, CPA, Dean Dorton, Lexington, KY
More than one week prior to enactment of the CARES Act, on March 18, President Trump signed legislation providing support to Americans affected by coronavirus. The Families First Coronavirus Response Act, or H.R. 6201, provides for paid sick leave and free coronavirus testing and expands food assistance and unemployment benefits. Notably, H.R. 6201 also provides businesses with tax credits for qualified sick and family leave wages paid to employees.
TREASURY AND IRS ISSUE GUIDANCE ON DEFERRING
TAX PAYMENTS DUE TO COVID-19 OUTBREAK
By Randy Catanese, Esq., Los Angeles, CA
On March 18, 2020, and following President Trump’s emergency declaration pursuant to the Stafford Act, the U.S. Treasury Department and Internal Revenue Service issued guidance allowing all individual and other non-corporate tax filers to defer up to $1 million of federal income tax (including self-employment tax) payments due on April 15, 2020, until July 15, 2020, without penalties or interest. The guidance also allows corporate taxpayers a similar deferment of up to $10 million of federal income tax payments that would otherwise be due on April 15, 2020, until July 15, 2020, without penalties or interests. The March 18 guidance did not change the April 15th filing deadline. The Administration, however, subsequently pushed back the filing deadline to July 15, aligning the filing and payment due dates.
CALIFORNIA AB-5 STAKES OUT MAJOR CHANGES IN WORKER CLASSIFICATION
© B. PAUL HUSBAND, A Professional Corporation, North Hollywood, CA
AB-5 is a measure enacted quickly by the California legislature, expressly intended to codify the California’s State Supreme Court decision in Dynamex Operations West, Inc. v Superior Court 4 Cal. 5th 903 (2018). Dynamex and AB-5 changed existing law significantly. This new line of authority uses a new test, the “ABC Test” to determine whether workers will be treated as employees or independent contractors. Application of the ABC Test heavily favors findings of employee status instead of independent contractor status, compared to the results of applying California’s longstanding Borello test. The Borello test is largely, but not completely discarded by Dynamex and AB-5. Borello remains operative law for some of the exceptions to AB-5.
IRS ISSUES NEW FINAL AND PROPOSED REGULATIONS
REGARDING BONUS DEPRECIATION DEDUCTION
By Randy Catanese, Esq.
The Tax Cuts and Jobs Act (“TCJA”) enacted in late 2017 increased the amount of Bonus Depreciation from 50% to 100% of the purchase price for property placed in service after September 27, 2017 and before January 1, 2023, so long as the property is eligible. Generally, horses which are eligible property include racing prospects, racehorses, broodmares and stallions. To qualify, these horses must be used predominantly within the United States. Other property to be eligible must have a recovery period of 20 years or less under the Modified Accelerated Cost Recovery System. The asset must be “placed in service” during the tax year where the bonus depreciation is claimed by the taxpayer. Under the TCJA the IRS was directed to promulgate regulations related to Section 168(k) of the Internal Revenue Code, as amended.
OPTIMIZING CHARITABLE GIVING
By Marsha Heinke, DVM, EA, CPA, CVPM, Grafton, OH
2018 Tax Law changes impacted the strategy for annual charitable giving, since the standard deduction increased substantially. The Tax Cuts and Jobs Act increased the standard deduction from $6,500 to $12,000 for individuals (adjusted annually for inflation) and from $13,000 to $24,000 for married joint filers. The change resulted in many more taxpayers taking the standard deduction. The Tax Foundation estimates only about 13.7% of taxpayers will itemize in 2019, down about 17 percentage points from years prior to 2018.
International Corner: The Sourcing Rules Often Provide Surprising Tax Results
By Robert Misey, Esq.
Reinhart Boerner Van Deuren s.c.,
Milwaukee, WI and Chicago, IL
I have never met Bob Baffert and I do not know his tax advisor, but whenever the Triple Crown races occur this year, I look forward to watching him on television with the King from Burger King. Nevertheless, I have always wondered how his tax advisor sources the income he receives from Burger King for being seen with the King.
The AHC Tax Bulletin is a digest of current tax developments affecting the horse industry. The AHC Tax Bulletin is for informational purposes only and not intended to take the place of professional tax counsel.