Association News Rochester Chapter

LEGAL ALERT FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC: LEGAL ALERT: IRS Issues Proposed Regulations and Guidance on Opportunity Zones.  Read below or download the document.

On October 19, the IRS and Treasury Department issued long-awaited proposed regulations, Revenue Ruling 2018-29 (the "Revenue Ruling"), and draft forms regarding the Opportunity Zone program to encourage private investment in low-income communities.

Enacted as part of the Tax Cut and Jobs Act of 2017, Sections 1400Z-1 and 1400Z-2  of the Internal Revenue Code of 1986, as amended (the "Code") establishes the Opportunity Zone program as the first new federal economic development tax incentive since the popular New Markets Tax Credit Program was enacted in 2000.  This program is designed to provide a federal tax incentive for investors to reinvest capital gains generated in 2018 into economically distressed areas. 

The program allows a taxpayer to defer federal income tax on capital gains due upon the sale of property(any property type, real or personal) if the capital gains are reinvested within 180 days in a Qualified Opportunity Fund ("QOF") in a Qualified Opportunity Zone ("QOZ").  A QOZ is a low-income area, determined on a census tract basis, where new investments, under certain conditions amplified under the new regulations and Revenue Ruling, may be eligible for preferential tax treatment. Those gains are deferred until December 31, 2026; or, if earlier, the gains will be recognized upon the sale of the investment in the QOF. If the investment in the QOF is held for ten years, a taxpayer may elect to step-up basis in the investment to eliminate tax on any appreciation on the investment value. There are approximately 9,000 QOZs in the United States, including 514 QOZs in New York State.

The regulations and the Revenue Ruling contain proposed guidance addressing the type of gains that may be deferred by investors, the time by which corresponding amount must be reinvested in QOFs, and the manner in which investors may elect to defer specified gains.

For example, only capital gains may be deferred, and taxpayers must invest in a QOF within the 180-day period beginning on the day of the sale or exchange of the capital asset. Taxpayers may make multiple elections within these 180 days.

In addition, the regulations amplify rules relating to QOFs, including self-certification, valuation of QOF assets and guidance on qualified opportunity zone businesses. Proposed Form 8996, Qualified Opportunity Fund, will be used by QOFs to self-certify and for annual reporting compliance. The Revenue Ruling discusses particular QOZ issues pertaining to a QOF's purchase of an existing building located in a QOZ, providing that the basis of the underlying land purchased with an existing building is not taken into account in determining whether such a building is deemed "substantially improved" in accordance with the regulations.

A public hearing on the regulations is scheduled for January 10, 2019 at 10:00 a.m. in the IRS Auditorium in Washington, D.C.  In the meantime, you can review a full text of the  IRS regulations and Revenue Ruling on its website. We will continue to provide updates as the regulations move toward adoption.

LEGAL ADVISORY FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC: States and Brick-and-Mortar Stores Benefit From Recent U.S. Supreme Court Decision Regarding Internet Sales Tax

Legal Backdrop:
In 1992, the U.S. Supreme Court determined in Quill Corporation v. North Dakota that the Constitution (specifically the Commerce Clause) barred states from mandating that businesses collect state sales taxes unless the business had a substantial connection to the state and established the "physical presence" rule.  On June 21, 2018, the Court in South Dakota v. Wayfair, Inc. et al. overruled Quill in a 5-4 decision, thus removing the physical presence rule and allowing states to collect sales tax from e-commerce.  Justice Kennedy, writing for the majority (joined by Justices Thomas, Ginsberg, Alito, and Gorsuch) said that states were losing upward of $33 billion annually in tax revenues as a result of Quill and the "physical presence rule as defined by Quill is no longer a clear and easily applicable standard.

In the time of Quill, less than 2 percent of Americans had internet access and mail-order sales totaled roughly $180 billion annually. Today, nearly 90 percent of Americans have internet access and mail-order sales have progressed to e-commerce and annual sales tallied a staggering $453.5 billion in 2017.  With more at stake, states like South Dakota that do not have an income tax and rely heavily on sales tax were bound to act.

Procedural HistoryContinue Reading ...

Real Estate Brokers who were licensed for at least 15 consecutive years prior to July 1, 2008, are NOT exempt from Ethics Training.  However, they are exempt from the Fair Housing and Agency training requirements for their New York State license.

CCIM 103 is *CANCELLED* for November 12-15, 2018. CCIM 103 is *CANCELLED* for November 12-15, 2018. It will be rescheduled in early 2019. Stay tuned!

Recently, the New York State Department of State, Division of Licensing Services has indicated it would be auditing licenses and the use of corporate titles. In 2013, the DOS issued two opinions prohibiting the use of corporate titles by associate brokers and salespersons. Below, please find an updated article on the matter and the two DOS opinions as well as an article addressing corporate titles and teams. Continue Reading ...

LEGAL ALERT FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC: Update: DEC Accepting Additional Comments on Proposed SEQR Amendments

As a follow up to a March 14, 2017 legal alert on proposed SEQR amendments, the New York State Department of Environmental Conservation ("DEC") published a notice of revised rulemaking in the New York State Register on April 4, 2018 regarding DEC's proposed amendments to the New York State Environmental Quality Review Act ("SEQR") regulations, codified at 6 N.Y.C.R.R. Part 617 (the "Proposed SEQR Amendments").  The revised rulemaking describes the revisions DEC has made to the Proposed SEQR Amendments based on comments received during the public comment period. Continue reading ...

ADVISORY FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC: Proposed General Permit Aims to Standardize Wastewater Management

On March 31, 2018, the New York State Department of Environmental Conservation ("DEC") opened a public comment period regarding the potential issuance of a State Pollution Discharge Elimination System (SPDES) general permit that would provide coverage for wastewater discharges to groundwater from licensed wineries, breweries and hard cideries in New York state. In doing so, the DEC is soliciting public input on several questions listed at the end of its Advanced Notice of Proposed Permit.

Under existing law, any winery, brewery or hard cidery discharging process wastewater must obtain an individual SPDES permit if it is making or using a disposal system or point source discharge which may cause or might reasonably be expected to cause pollution to waters of the state (including groundwater). Process wastewater generated in these categories of production is considered an industrial waste that can have significant ranges in pH and contain high levels of oxygen demanding organic material and solids.

In recent years, New York state has witnessed a resurgence in licensed wineries, breweries and hard cideries. Consequently, DEC has determined that there is a need for standardized wastewater management to reduce the potential for water quality impacts. Due to the similar nature of operations of these kinds of processing facilities, DEC believes that a general permit would streamline the SPDES permitting process for these industries, reducing the costs and administrative burden to both itself and the regulated entities, while providing adequate protection to the state's water resources.  Continue Reading ...

LEGAL ADVISORY FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC: Opportunity Zones Could Spur Private Investment in Low Income Areas

The latest tax reform passed in the Tax Cuts and Jobs Act (TCJA) created a new incentive which will impact real estate development in low-income communities by creating "Qualified Opportunity Zones."[1] The impact of these Qualified Opportunity Zones will be felt by municipalities, businesses and investors.

Impact on Municipalities

Under this new law, the Governor will nominate roughly 500 population census tracts as Qualified Opportunity Zones. These census tracts must either be located within a "low income community"[2] or be contiguous with a low income community. If the nominated census tract is contiguous with a low income community, the median family income in the census tract can be no more than 125% the median family income in the low income community. The governor is limited in the number of census tracts he can nominate, with the number of nominations being limited to 25% of all low income communities in the state and only 5% of these nominations can be census tracts contiguous with low income communities. With over 2,000 eligible census tracts in New York state, this will undoubtedly create a great deal of lobbying and politicking from local municipalities across the state in effort to get their low income communities nominated as a Qualified Opportunity Zones. Continue reading ...