Bradley attorney Bruce Ely was quoted in Tax Notes State on the surprise IRS Notice approving state passthrough entity workarounds to the controversial SALT cap enacted as part of the Tax Cuts and Jobs Act of 2017. The guidance allows a workaround to the $10,000 cap on the state ad local tax deduction first adopted by Connecticut. The strategy involves a state imposing entity-level tax on passthroughs and creating an offset individual income tax credit for the entity's member. The timing of the notice, one week after the presidential election, has elicited questions from some passthrough experts.
"My first question was, why now?" said Ely. "We've heard that Treasury officials have been directed to issue any remaining guidance on TCJA by the end of the year, so this may simply be a part of that last batch."
Ely said he expected a flurry of legislative activity and widespread consideration of model legislation promoted by the Parity of Main Street Employers coalition.
The original article, "Danger Ahead? IRS Greenlights Passthrough Workaround to SALT Cap," appeared in Tax Notes on November 12, 2020. (Login required.)