Anyone in the real estate business is aware of the powerful, impactful and flexible Opportunity Zone (OZ) Program which became effective Jan. 1, 2018 as part of the Trump Administration’s bi-partisan Tax Cuts and Jobs Act (2017 Tax Act). However, developers are generally required to modify their traditional game plan of contributing property, receiving equity as “carried interest” in the partnership and navigating the related-party and self-constructed asset rules in order to comply with some of the unique structuring requirements under Internal Revenue Code (IRC) Section 1400Z and related Regulations which control the OZ Program.

The OZ program currently allows up to a current five-year federal (and in all states other than CA, MS, NC, NY and MA) tax deferral on virtually any U.S. short-term or long-term capital gain, other than gains generated on related-party transactions (20% common ownership). For gains invested into a Qualified Opportunity Fund (QOF) by Dec. 31, 2021, the OZ program allows the taxpayer to increase their tax basis in the QOF by 10% after holding the QOF interest for 5 years. Provided the taxpayer has held the QOF for the required five-year holding period on the earlier of: i) Dec. 31, 2026 or ii) the disposition date of the QOF interest the taxpayer only reports 90% of the deferred tax gain. For example, a taxpayer deferring a $1 million gain will report $900,000 on Dec. 31, 2026 (or on an earlier disposition or “Inclusion Event” date).

The real impactful benefit from the OZ program comes in the form of complete tax exemption on any post-reinvestment appreciation in the OZ investment(s) after holding the QOF for at least ten years. While seldom factored into projected investment returns, all depreciation and credits claimed on OZ projects are also exempted from recapture after meeting the 10-year hold threshold – an incredible tax benefit for OZ investors.
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1. Do not leave the most important professional decision you make in building your tax team to chance. The chance the best tax candidate will respond to your online tax job ad is not optimal this way. The truth is it requires an expert to go out and actively recruit the most talented tax professionals and invite them to speak with you privately.

2. Experienced tax recruiters understand corporate clients are very busy and value discretion and confidentiality on a tax executive search.

3. Our level of understanding of tax executive searches, our one-on-one interviewing and screening skills ensure more successful, long-term matches on a tax search. Our personalized approach enables us to be more discerning, and not based on superficial characteristics you will encounter during a few interviews.

4. Interviewing correctly is a time-consuming process. Working with us saves you time since we thoroughly pre-screen and vet personalities to find tax professionals who align with your preferences and values.

5. Relying on online resumes submitted through public resume portals increases the risk of unpleasant personality surprises and poor worth ethic. An experienced tax recruiters’ responsibility is to screen out incompatible candidates and report their findings to clients.
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The Nebraska sales tax exemption for manufacturers applies to businesses that are involved in fabricating, assembling, processing, refinishing, or refining activities. In addition to performing any of these necessary activities, 50% or more of the manufacturer’s revenue must be generated from the sale of products resulting from these activities. Any machinery and equipment the manufacturer intends to claim must also be used 50% or more of the time performing a “manufacturing” task. However, the machinery and equipment does not have to come into direct physical contact with the tangible personal property being produced for sale in order to be considered manufacturing machinery or equipment. If the machinery and equipment meet all these requirements, then the Nebraska sales tax exemption for manufacturers will apply.

In Nebraska, manufacturing means an “action, or series of actions, performed upon tangible personal property, either by hand or machine, which results in that tangible personal property being reduced or transformed into a different state, quality, form, property, or thing.” Manufacturing requires a physical change to the tangible personal property within the process and does not simply require an increase in the value of a product without a physical change to the item in question. See both Neb. Rev. Stat. Sec. 77-2701.47 and Neb. Admin. R. & Regs. Sec. 1-107.

When Does Manufacturing Begin and End in Nebraska?

The Nebraska sales tax exemption for manufacturers covers items that are used within the manufacturing process and excludes items that are used before manufacturing commences or post manufacturing. Based on the definition provided by the Nebraska Department of Revenue, manufacturing begins with “the storage of raw materials” and manufacturing ends “after finished goods are transported to a warehouse for storage.” For example, machinery and equipment involved in the receiving of raw materials or the removal of finished goods from storage for customer delivery are not considered part of the manufacturing process and fall outside the purview of this exemption.
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The June 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. reshaped the landscape of sales tax obligations across the United States, ushering in the era of economic nexus. This landmark decision overturned the previous requirement of physical presence for establishing nexus, opening the door for states to enact economic nexus legislation. Alongside this shift, a new focus on the concept of trailing nexus emerged, presenting a continuation of tax obligations even after a business no longer meets the nexus criteria.

In this article, we’ll define economic nexus and trailing nexus, and how the two may dictate your tax obligations regarding the states in which you operate. Here’s what we’ll cover:

Understanding Economic Nexus and Thresholds: Discusses economic nexus thresholds and varying state regulations.
What Is Trailing Nexus? Defines trailing nexus.
Examples of Trailing Nexus Policies: Explores examples of trailing nexus policies by state.
Practical Considerations for Businesses: Discusses tips on how to handle trailing nexus in your state.
Not what you’re looking for? Let’s talk. Reach out to us at info@milesconsultinggroup.com.

1. Understanding Economic Nexus and Thresholds
Economic nexus, as per the nexus definition, refers to the connection between a business and a state based on economic activity rather than physical presence. Each state sets its own threshold for economic nexus, determining when a business is required to collect and remit sales tax. For instance, in Arkansas, the nexus law sets the threshold at $100,000 in sales or 200 separate transactions, whereas in California, it’s $500,000. These thresholds vary significantly from state to state, adding complexity to sales tax compliance for businesses operating across multiple jurisdictions.
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The R&D tax credit is a governmental incentive designed to encourage research and development activities in the US. This credit offers a dollar-for-dollar reduction on federal taxes for qualified expenses related to developing new or improved products, processes, software, technique, formula, or invention.

Although claiming this credit can offer considerable benefits for companies engaged in Research and Development efforts, the process is not without its challenges. Three Common Challenges You May Face while Claiming R&D Tax Credits:

Documentation of Qualified Activities and Expenses

Insufficient documentation is a common challenge with the R&D tax credit. Accurately identifying what constitutes a qualifying R&D activity and having the proper support can be challenging for taxpayers. It is important that the taxpayer implements a system for maintaining records and documentation. While R&D activities must meet specific criteria related to developing new or improved products, processes, or software, having a robust record keeping process is important

Companies must keep track of their activities and expenses and make sure they are tied to the qualifying activities while adhering to IRS regulations
Updates to R&D Tax Credit Law

The R&D Tax Code is complex, and lack of awareness and understanding is a common challenge for the taxpayer. Staying informed of any updates in tax legislation is crucial. Being up to date ensures an understanding of how changes to the code might affect your company’s qualifying R&D activities

To overcome the challenge of ever-changing tax laws, taxpayers should engage experts who specialize in R&D tax credits.

Staying Compliant and Audit Ready
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Tax compliance significantly affects your business’s financial health and customer relationships. Understanding the taxability of your products or services is essential for smooth business operations. Here’s why accurately determining the taxability of your offerings is vital to your business’s success.

Legal Compliance and Avoidance of Penalties
Adhering to Regulations: Each state and country has specific tax laws that dictate which products and services are taxable. Failure to comply with these laws can result in significant penalties, fines, and interest on unpaid taxes. By determining the taxability of your offerings, you ensure that your business complies with all applicable tax regulations.
Avoiding Legal Disputes: Incorrectly charging or failing to charge sales tax can lead to legal disputes with tax authorities. These disputes can be time-consuming and costly and have the potential to harm your business’s reputation and operations. Properly determining taxability helps avoid these legal complications.

Financial Health and Cash Flow Management
Accurate Pricing: Understanding the taxability of your products or services allows you to set accurate prices that include the appropriate tax amounts. This ensures that your pricing strategy is transparent and aligns with your financial goals.

Preventing Unplanned Expenses: If you fail to collect the correct sales tax amount from customers, your business may have to cover the shortfall. This can lead to unexpected expenses and a negative impact on your cash flow. Proper taxability determination helps you collect the right amount upfront, avoiding financial surprises.
Customer Relations and Trust

Transparency with Customers: Customers expect pricing transparency, including applicable taxes. Accurately determining and displaying tax amounts builds trust with your customers, as they can see that your business is honest and compliant with tax laws.
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In the evolving landscape of state taxation, companies must navigate the complexities of sales and use tax nexus. With the surge of e-commerce and remote work, a comprehensive understanding of both economic and physical nexus becomes a powerful tool to ensure compliance and streamlined business operations.

What Is Nexus?

In the context of state taxation, Nexus refers to the connection or link between a business and a state that justifies the state’s authority to impose tax obligations on the business. Traditionally, this connection was based on a physical presence, but the advent of digital commerce has led to the adoption of economic nexus standards by many states.

Physical Sales and Use Tax Nexus

Physical nexus is established when a business has a tangible presence in a state. This can include:

Office Locations: Having an office or any other place of business in the state.
Employees: Employing workers who reside or work in the state.
Inventory and Warehousing: Storing inventory or goods in a warehouse located in the state.
Property: Owning or leasing property in the state, including real estate and tangible personal property.
Sales Representatives: Having sales representatives, agents, or contractors operating in the state.
Physical presence has traditionally been the primary criterion for establishing nexus, ensuring that businesses with a substantial and tangible connection to a state contribute to its tax base.

Economic Sales and Use Tax Nexus

In the digital age, economic nexus has emerged as a pivotal concept in state taxation. It is based on the economic activity a business conducts within a state, regardless of physical presence. This concept gained prominence following the landmark 2018 Supreme Court decision in South Dakota v. Wayfair, Inc., which upheld the state’s right to impose sales tax obligations on out-of-state sellers based on economic thresholds, marking a significant shift in state taxation practices.
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After thirty years and more than one thousand tax executive searches, we have learned quite a few lessons in the tax executive search profession. This article is about the lessons we have learned repeatedly. By learning these lessons in advance, you will benefit from this knowledge on your next tax executive search. As CFOs work to contain costs at multinational organizations, they often minimize recruiting fees in their tax department budgets. This is a costly mistake in the long run because doing so companies block their access to an extraordinary pool of tax professional talent that will not submit their resume to an online ad or a company portal. The reason is tax professionals desire greater privacy when considering a new tax opportunity. This hidden population of tax executive candidates can only be introduced the old fashioned way, by retaining a tax recruiter to cold call hundreds of tax executives about your tax opportunity. There is a significant difference in the talent pool available to a company when they retain a recruiter to go out and conduct a thorough search of the marketplace for talented tax candidates.

There is a positive impact on an organization who chooses to conduct a thorough search by an experienced tax recruiter, versus conducting a search on your own. There is a difference in tax savings to an organization whenever they invest in attracting the best of the tax profession to their tax organization. Investing in your tax team will have a positive financial impact on your company. The CFOs I have worked with over the years who treat their tax executives like Gods and Goddesses know their inhouse tax teams are saving millions(billions) of dollars to the company bottom line every year or over a ten year period. One tax executive I know came up with more than one billion in savings over a ten year period on an IP strategy. The company would have been charged over one billion US tax dollars by the country tax revenue authorities over ten years if they had overlooked this tax savings opportunity. CFOs supporting their tax leaders with the staff and budget they need to operate proactively are knocking it out of the ballpark with tax strategy home runs. However, management needs to support their inhouse tax team to produce a treasure chest of tax savings opportunities for the company. The idiom “penny-wise, pound foolish” is often used to describe something that is done to save a small amount of money now but will cost a large amount of money in the future.” This idiom is the best way to describe the difference between retaining an experienced tax recruiter or conducting a tax executive search on your own.

Conducting A Tax Executive Search On Your Own

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A nexus study and taxability review determine where a company might have state tax exposure and the extent of that exposure. We work with our clients to identify their activities in various states and analyze the types of transactions engaged in within those jurisdictions.

Determining exposure before a proposed acquisition is good business. We also assist in determining possible exposure before a state comes to audit. And finally, we bridge the gap with respect to financial statement disclosure.

As part of each project, we work with clients to answer the following types of questions:

• What is nexus?
  • Do we have physical presence nexus?
  • Do we have economic nexus?
• Is my product or service taxable?
• Are there any available exemptions (e,g, food or medical exemptions, sales to qualified non-profit entities)?
• Must I start collecting and remitting sales and use tax?
• I’ve collected tax from a given state and have not remitted it-what now?

Once we determine possible exposure, we assist clients in receiving maximum benefit from available amnesty programs, contract for voluntary disclosure agreements, work with their customers to determine if they have self-assessed taxes (and can therefore reduce exposure for our client) or simply document their exposure.

Economic Nexus

In the United States, the sales tax landscape drastically changed due to the U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. In June 2018, the High Court made a landmark decision that it is constitutional for the State of South Dakota to enact an economic nexus law. This established precedent and paved the way for states to establish additional ways companies may establish nexus in their jurisdiction.

Now all states which impose a state level sales tax (as well as some local jurisdictions) have enacted economic nexus laws. As a result, companies must now consider both their physical footprint (employees offices, inventory) and the level of sales activity they have in a given state. Once nexus has been established companies need to consider registering for sales tax, collecting and remitting tax, and then filing tax returns. We call that “compliance.”

What Is Economic Nexus?

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Amending Sales And Use Tax Returns