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Ext. PublicationThe Tax Navigator – State Decoupling, Data Center Incentives and Limited Partner Tax Developments
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Join Sean Muller, The Tax Navigator, as he surveys the latest federal and state tax developments: Washington, D.C.’s effort to decouple from OBBBA, broader state conformity challenges, IRS guidance encouraging tax payers to rely on online resources and tightening incentives for data centers as states weigh water and energy use. The discussion also reviews ongoing litigation shaping the self‑employment tax treatment of limited partners, including the Denham and Sirius matters, and highlights recent energy credit updates, such as IRS Notice 2016‑15.
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Detailed Description of The Tax Navigator – State Decoupling, Data Center Incentives and Limited Partner Tax Developments
00:00:00
Sean: Congress did not do a whole lot last week. The only thing they really did was the decoupling of D.C.
00:00:06
Sean: Our Congress does actually have authority over Washington, D.C., and Washington, D.C., was attempting to decouple from OBBBA, and Congress did not want them to do that.
So they have passed the rule that D.C. cannot decouple, but now D.C. is trying to argue that they missed their window and that they can decouple.
00:00:25
Sean: Other states are struggling with decoupling as well because of the revenue hit for them, but they haven’t all passed their rules around that. Some taxpayers in these states may have to wait to file or may have to amend their returns, depending on if decoupling happens or not for them.
00:00:45
Sean: The IRS has come out and said “Please use the website for helpful hints; don’t call,” because it’s going to be tough to get ahold of them. So they begged them for their online resources. They’re going to IRS.gov to answer many of their questions.
00:00:59
Sean: Data centers — people are getting tired of having data centers built next door to them. So the states are taking a “meat cleaver” to some of the incentives around them.
00:01:08
Sean: And these data centers now have to prove not just the jobs and the construction they’re going to add to the state — they’re going to have to show water consumption and energy consumption to see if a data center is even worthwhile for that piece.
00:01:23
Sean: On the self-employment issue with limited partners, the deal with Sirius that we talked about last month: the Denham case, which Denham actually lost in the First Circuit — they lost the Tax Court — they’re on appeal at the First Circuit right now, and they made oral arguments last week.
00:01:39
Sean: And they are certainly arguing what Sirius did as strict interpretation of a limited partner versus this functional test that the IRS was successful against Denham at the Tax Court and Soroban.
00:01:54
Sean: There’s also Steve Cohen, who is actually in Tax Court right now, the owner of the Mets. His hedge fund had an assessment against him for the same issue of being a limited partner, and he is making the Sirius argument as well about strict interpretation at Tax Court.
00:02:09
Sean: So lots going on for the treatment of limited partners, lots of commentary around what that looks like. The IRS did release Notice 2016-15 last week talking about energy credits, and what’s a prohibited foreign entity and then also a calculation. More to come on that.
00:02:27
Sean: Congress is in recess next week, so we’ll try to cover some of these energy credit notices in coming episodes.
This episode of The Tax Navigator was recorded prior to publication. Some references or updates discussed may reflect information current as of the recording date.
