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Tax Section work supports entrepreneurs

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The Tax Section is celebrating a big win after its experts helped convince the U.S. Treasury Department that a special class of entrepreneurs deserves a tax deduction.

Tax Section logoThe advocacy included face-to-face meetings with regulators in Washington, D.C., and a meticulously researched, heavily footnoted, nine-page comment letter. The result is big savings for entrepreneurs, especially small business owners, said Tax Section Chair Michael Minton of Dean Mead Minton & Zwemer in Ft. Pierce.

“This is a very good example of how membership in a section can effectuate change,” Minton said. “One of the things I’ve always preached is that the section gives you a platform to interact with people in Washington, D.C., in a way that you might never have unless you work with one of the big megafirms.”

The October 3, 2018, comment letter is titled, “Request for Regulatory Clarification to Confirm that a Code Section 250 Deduction Applies to an Electing Code Section 962 Shareholder.”

The comment was submitted to the IRS on behalf of the Tax Section and attributed to principal authors Steve Hadjilogiou, Michael J. Bruno, Keith Hagan, and Shawn Wolf.

Hadjilogiou, — “Haji” to his friends — co-chairs the section’s International Taxation Committee and is a Miami-based partner with McDermott Will & Emery.

He described himself as pleased.

“I don’t know that we deserve the full credit for convincing the Treasury Department for taking this position, but I’d like to think that they listened to us,” he said. “I think it’s a great result for the people who own these businesses.”

Hadjilogiou says the argument involves the “GILTI” (pronounced “guilty”) regime, or “global intangible low-taxed income,” and whether a business pays a 21 percent rate, or a 10.5 percent rate.

Who benefits?

“It’s really any individual or trust that owns a foreign corporation either directly or through a flow-through entity like a partnership or an ‘S’ corp.”

Hadjilogiou said a typical beneficiary could be a South Florida resident who owns a business in South America, or the countless American entrepreneurs who live abroad.

In their comment letter, Hadjilogiou and his team argued that their interpretation is what Congress had in mind when it passed the latest round of tax reforms.

“The TCJA (Tax Cuts and Jobs Act,) is meant to encourage ‘hardworking families, entrepreneurs, and Main Street innovators,’ so doubly penalizing small business owners who want to expand overseas by denying them a corporate rate reduction seems contrary to these goals.”

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