Texas Tax Lawyer A Tax Journal Fall 2018 • Vol. 46 • No. 1 www.texastaxsection.org TABLE OF CONTENTS FROM OUR LEADER: • The Chair's Message Catherine C. Scheid, Law Offices of Catherine C. Scheid SPECIAL ATTENTION • Apply to the 2019-2020 Leadership Academy • Congratulations to Judge Elizabeth Ann Copeland! ARTICLES: • Business Consolidations: Special Considerations under the Texas Unemployment Compensation Act Scott C. Thompson, Haynes and Boone, LLP • Estate planning subsequent to the enactment of tax reform Audrey Young, RSM US LLP Rebecca Warren, RSM US LLP Carol Warley, RSM US LLP • Divorce and Tax Randall B. Wilhite, Fullenweider Wilhite, P.C. • Recent Developments in Federal Income Taxation: “Recent Developments are just like ancient history, except they happened less long ago” First Wednesday Tax Update, August 1, 2018 Bruce A. McGovern, Professor of Law and Director, Tax Clinic, South Texas College of Law Houston • Recent Developments in Federal Income Taxation: “Recent Developments are just like ancient history, except they happened less long ago” First Wednesday Tax Update, September 5, 2018 1 Bruce A. McGovern, Professor of Law and Director, Tax Clinic, South Texas College of Law Houston • Recent Developments in Federal Income Taxation: “Recent Developments are just like ancient history, except they happened less long ago” First Wednesday Tax Update, October 3, 2018 Bruce A. McGovern, Professor of Law and Director, Tax Clinic, South Texas College of Law Houston PRACTITIONER’S CORNER: • Tax Reform: Now What? Eric Solomon, Ernst & Young LLP • Unanticipated Pitfalls In Dealing with Texas Tax Laws Ira A. Lipstet, DuBois, Bryant & Campbell, LLP • South Dakota v. Wayfair: Do you have what you need? Jay Chadha, Norton Rose Fulbright US LLP COMMITTEE ON GOVERNMENT SUBMISSIONS: • Comments on Proposed Regulations Concerning the Deduction for Qualified Business Income under Section 199A of the Internal Revenue Code October 1, 2018 General Tax Committee Partnership and Real Estate Tax Committee Estate and Gift Tax Committee 2 SECTION INFORMATION: • Statement of Direction • 2018 – 2019 Calendar • Tax Section Council Roster • Tax Section Committee Chair and Vice Chair Roster The name and cover design of the Texas Tax Lawyer are the property of the State Bar of Texas Tax Section 3 Dear Fellow Tax Section Members, With the Astros having won the American League Division Series for 2018 and having put up a gallant fight for a 2018 World Series spot in the playoffs, and the Texans improving their chances for a playoff spot this fall, I am honored to deliver the following report for our fall edition of the Texas Tax Lawyer. I would also like to thank our Editor, Michelle Spiegel, for her continued commitment and hard work in delivering an outstanding Texas Tax Lawyer publication 3 times every year. Overview of Our Busy Summer The new officers met over the weekend of July 13, 14 and 15 2018 to begin planning for the upcoming year. This was preceded by our Council Retreat which was held in conjunction with the Annual Meeting on Thursday, June 21, 2018. In addition, the Tax Section held its first meeting of the Chairs, Vice Chairs and Council on Friday, August 24, 2018 at the Houston offices of Norton Rose Fulbright. As a result of these meetings, below are a few documents that have been approved: 1. The Calendar for the 2018-2019 Fiscal Year; 2. The List of Chairs and Vice Chairs for the committees; and 3. The Statement of Direction. The 2018 Annual Meeting was held in Houston, Texas and we give a special thanks to the Annual Meeting chair, John Strohmeyer, together with a planning committee including the CLE Committee chairs and a number of Tax Section leaders, including past Tax Section Chair and current Council member Alyson Outenreath, for having put together a great program. Continuing This Year The Tax Section is excited to announce that the successful webcast series “First Wednesday Tax Update” will continue to be offered the first Wednesday of each month with a focus on Recent Developments in Federal Income Taxation. The webcast will be presented by Bruce McGovern, Professor of Law and Director, Tax Clinic, South Texas College of Law Houston (and may occasionally include other guest speakers). We hope you will make plans to watch the webcast each month, but if you miss it, the webcast will be available on the Tax Section’s 24/7 online library within a couple of weeks. Watch your email for sign up information! Special thanks to Sara Giddings, Co-Chair of the Solo and Small Firm Committee, for coming up with this idea for providing convenient and relevant continuing legal education for our members, and to Bruce McGovern, Chair of the General Tax Committee for bringing Sara’s idea to life. The webcast is free to Tax Section Members. Leadership Academy The Leadership Academy, chaired by Rob Morris, is a program developed to guide the next generation of Texas tax lawyers in taking ownership of their careers and leading the Tax Section. The class meets four times over a year, which each session held in a different city and focusing - 1 - on a particular aspect of tax law. The deadline for applications for the 2019-2020 Leadership Academy class is January 11, 2019. Committee on Governmental Submissions The Committee on Governmental Submissions, co-chaired by Henry Talavera, Jeffry Blair, Ira Lipstet, and Jason Freeman, and the substantive committees of the Tax Section have been extremely busy this year providing comments to the Texas Comptroller of Public Accounts and the Internal Revenue Service. On October 1, 2018, comments were submitted to the Internal Revenue Service. The principal drafters were Professor Bruce McGovern, Chair of the General Tax Committee, Chris M. Goodrich, Vice Chair of the General Tax Committee, Nathan Smithson, Chair of the Partnership and Real Estate Tax Committee, Will Becker, Argyrios Saccopoulos and Vu Khoa, each a Member of the Partnership and Real Estate Tax Committee, Carol G. Warley, Laurel Stephenson, and Celeste C. Lawton, each a Co-Chair of the Estate and Gift Tax Committee, Corey Junk, Vice Chair of the Estate and Gift Tax Committee, Jeffry M. Blair, Chair of the Corporate Tax Committee, and Kelly Rubin, Vice Chair of the Corporate Tax Committee. The comments are a magnificent scholarly collaboration of the above committees, and addresses the government’s request for assistance with the Proposed Regulations providing guidance on the application of Section 199A of the Tax Cuts and Jobs Act of 2017. The comments suggest two operational rules: (1) how qualified property contributed to a partnership or S Corporation should be its pre-contribution unadjusted basis immediately after acquisition (“UBIA”); and (2) that certain basis adjustments under Sections 734 and 743 should be qualified property for purposes of determining UBIA. The comments also address how the proposed regulations excluding qualified business income (“QBI”) for 707(a) payments received for services may unfairly impact partners who would otherwise have QBI from a valid trade or business and suggests that guaranteed payments under Section 707(c) for the use of capital should not be excluded from QBI. The comments also: • request assistance from the Treasury for additional elaboration on the “performance of services in the field of health” and additional regulatory clarification in determining QBI under code section 864(c)(8) upon the sale of a partnership interest; • request clarification from the Treasury on the definition of a primary beneficiary for lifetime and testamentary trust planning and provide additional guidance on how the IRS will assess whether trusts have “substantially the same primary beneficiary or beneficiaries”; • request clarity regarding the 199A proposed regulations and the net investment income tax and distribution standards under a trust; • suggest that “if a trust or estate has a QBI net loss that the loss carryover be retained at the entity level”; and • suggest that charitable remainder trusts, charitable lead trusts and their beneficiaries should be eligible for the Section 199A deduction because the legislative history indicates it was enacted to provide a deduction for taxpayers other than a corporation based on QBI. Pro Bono Dockets The Pro Bono Committee, co-chaired by Juan Vasquez and Rachael Rubenstein, assisted taxpayers at the Lubbock Regular and Small Tax Case docket on September 17, 2018, the Dallas - 2 - Regular Case docket and San Antonio Regular and Small Tax Case docket on October 1, 2018, and the Houston Regular Tax Case docket October 15, 2018. Similar events are scheduled throughout the state of Texas for the remainder of the calendar year at various locations including Dallas, El Paso, Houston, Lubbock, and San Antonio. The Texas Tax Court Pro Bono Program was established by past Chair and now sitting Tax Court Judge Elizabeth A. Copeland. The Texas Pro Bono Program is now used as a model for other state bars. Meeting with the Texas Comptroller’s Office Our annual meeting with the Texas Comptroller of Public Accounts office is scheduled for Thursday, November 13, 2018 in Austin, Texas. Presentations from speakers from the Texas Comptroller’s Office, the Counsel on State Tax, the Texas Taxpayers and Research Association and the Multi State Tax Commission will be sprinkled throughout the day. The speakers will include Fred Nicely who is Legislative Counsel with the Counsel on State Tax, Dale Cramer, who used to be with the Comptroller’s Office and is now with Texas Taxpayers and Research Association, Chris Barber of the Multi State Tax Commission along with the Texas Comptroller Glenn Hegar and his staff. Portions of this program should soon be available on the Tax Section‘s 24/7 Free Online CLE Library. Many thanks to the Texas Comptroller of Public Accounts, Glenn Hegar, his staff and the State and Local Tax Committee, co-chaired by Sam Megally and Stephen Long for their hard work and efforts to plan this program and make it available to members of the Tax Section.