Federal Taxation

Our tax lawyers advise clients at all stages of their creation and growth.  Initially, we address the issue of entity choice and the ramifications of operating through a C corporation, S corporation, limited liability company, partnership or disregarded entity.  We also provide ongoing tax advice on operational and management issues.  Our lawyers are particularly proficient in advising clients on many operational tax issues, such as the treatment of intercompany transactions under the consolidated return rules, fringe benefits, accounting methods, structuring and tax treatment of corporate-owned aircraft, reportable transactions and disclosure (including the federal tax implications of FIN 48), and the structuring of litigation settlements.  We also work closely with our clients with respect to the structuring and compliance aspects of charitable contributions, including contributions of inventory.

Our tax lawyers regularly defend against assessment and collection of assessed civil penalties, and seek refund of civil penalties that have been paid.  In several instances, we have developed and asserted legal arguments of first impression to the Internal Revenue Service that a civil penalty was not properly imposed, and have achieved refunds on that basis.  We have addressed civil penalties ranging from a few thousand dollars to tens of millions of dollars.

Our tax lawyers counsel businesses and executives regarding the structure and federal tax consequences of various forms of executive compensation.  We regularly address such matters as the following:

• Golden parachute rules
• Restricted stock
• Incentive stock options
• Nonqualified stock options
• Profits interests
• Phantom stock arrangements
• Bonus arrangements
• Non-cash fringe benefits
• Withholding

Our tax lawyers assist our clients in the structuring of public and private offerings of debt and equity securities, as well as equipment and facilities leases.  We advise lenders and borrowers with respect to the tax consequences of complex borrowing transactions, including imputed interest and original issue discount, bond premium, interest rate and other derivatives, limitations on the deductibility of interest, cancellation of indebtedness, contingent payments, variable rates and cross-border issues.  We also have extensive experience representing issuers, borrowers, underwriters and letter of credit banks with respect to tax-exempt financings.

Our tax lawyers work extensively with foreign-based businesses with U.S. operations regarding the complex U.S. tax rules that apply to their ownership and operations.  For example, we have experience advising foreign-based businesses and individuals on the formation of new U.S. entities and expansion of existing U.S. operations.  We also advise U.S.-based businesses with respect to non-U.S. investors, borrowers, lenders, sellers, buyers and service providers, and the application of U.S. withholding regimes.  We also have experience with respect to compliance with the U.S. transfer pricing rules.

Our tax lawyers have extensive experience in structuring and implementing tax-deferred like-kind exchanges under Section 1031.  If the client is acquiring property in advance of selling the client’s own property, we can structure a reverse exchange.  If the client wishes to count construction dollars toward the client’s exchange, we can structure a build-to-suit exchange.  If the client is a limited liability company taxed as a partnership, we present alternative structures.  For example, one structure is geared to the situation where some LLC members wish to do an exchange, and other members wish to cash out.  We even have a structure for identifying as replacement property improvements constructed on land held by the client’s affiliate.  We understand that a like-kind exchange often is only a single aspect of a larger transaction, in which there may be several tax-planning opportunities.  If a client is acquiring, constructing, and/or selling real property and related assets, we can structure and implement the exchange with a view toward facilitating the client’s transactional and other tax-planning goals.

Our tax lawyers work closely with our corporate and commercial lawyers representing public and private corporations and other entities in developing and implementing innovative, tax-efficient structures for taxable and tax-free equity and asset acquisitions and divestitures.  Although each transaction presents unique planning opportunities and challenges, our collective experience with a continual flow of complex transactions serves as a foundation to take advantage of these opportunities and to overcome these challenges.

Our tax lawyers have extensive experience in advising clients that are classified as partnerships for tax purposes, including general and limited partnerships, limited liability companies and limited liability partnerships.  Our tax lawyers have advised clients with respect to partnership/LLC roll-ups and restructurings, including mergers, divisions and redemptions of partnership/LLC interests, and restructurings in connection with workouts.  We deal regularly with partnership tax issues such as income and loss allocations, disguised sales, debt-financed distributions, Section 754 (basis step-up) elections, book-ups of capital accounts, contributions/distributions of appreciated property, issuance of profits interests, conversions of partnerships to corporations, and the application of the centralized partnership audit regime.  We also work closely with clients that have elected S corporation status or are classified as disregarded entities, advising them with respect to their tax planning and compliance.  We have obtained favorable private letter rulings for clients that have inadvertently terminated their “S corporation” status.

Our tax lawyers regularly advise on all aspects of federal payroll taxes.  We analyze federal employment tax withholding and reporting requirements for various transactional and ownership structures, and advise on alternative structures providing more favorable employment tax results.  Where errors are discovered, we advise clients on how best to address those errors, and have defended employment tax disputes on issues such as worker classification, timing of deposits for the exercise of employee stock options, and Combined Annual Wage Reporting payroll mismatches.  Our federal tax lawyers will team with Vorys state and local tax lawyers to address simultaneously related state or municipal payroll tax matters such as state unemployment tax, workers’ compensation and municipal wage taxes.  We also regularly advise clients regarding federal employment tax requirements for foreign workers temporarily in the U.S. on various types of visas granted for that purpose, and for U.S.-based employees that are deployed to foreign countries by a U.S. employer.

Our tax lawyers are part of a multi-disciplinary team that Vorys established to assist clients in navigating the legal and regulatory framework of the Qualified Opportunity Zone (QOZ) program.  We advise on the potential federal and Ohio tax benefits available to investors through the QOZ program and the requirements that investors must satisfy to obtain those benefits, on the structuring and documenting of QOZ transactions in a manner consistent with QOZ program requirements, and on ongoing QOZ project compliance. 

Our tax lawyers regularly represent real estate developers, home builders and owners with respect to properties from Massachusetts to Hawaii.  We have wide-ranging experience advising clients concerning acquisitions and dispositions of real estate, including tax-deferred, like-kind exchanges (including complex multi-party and multi-property exchanges and non-simultaneous, reverse and build-to-suit exchanges), condemnations, and other capital gain planning techniques.  Our tax lawyers also provide structuring advice with respect to real estate leasing, sale-leaseback, development, joint venture and financing transactions.  We regularly help clients navigate the depreciation and capitalization rules.  Finally, we have significant experience with bond-financed projects, and have worked extensively with investors and developers with respect to transactions involving federal and state historic, New Markets, and low-income housing, tax credits, as well as qualified opportunity zone tax benefits.

Our tax lawyers regularly provide structuring advice to our public and private clients with respect to such matters as the following:

• Intra-group divisions and mergers
• Recapitalizations
• Spin-offs, split-offs and split-ups
• Intra-group asset sales and licenses
• Dividend planning
• Entity conversions
• Other internal restructurings

We also counsel creditors and debtors with respect to tax issues such as bad debt deductions, cancellation of indebtedness and utilization of net operating losses.

Federal tax laws are complex, frequently changing and often demand legal counsel solely focused on them.  Therefore, many lawyers call on attorneys with extensive experience in federal tax law when needed.  At Vorys, we often assist other law firms that serve as the principal counsel for clients on matters requiring in-depth experience in the federal tax arena.  Whether we are formally engaged by the client or the principal counsel, we work collaboratively with the appropriate parties in structuring tax-efficient solutions.  The principal counsel can have confidence that we understand our supporting role in these limited-scope engagements.  Recent examples of transactions in which we have acted as special tax counsel include:

• Complex flow-through entity restructurings
• The sale of an S corporation with an Internal Revenue Code Section 336(e) election
• The issuance of a complex “profits interest” in a joint venture
• A private settlement agreement involving dozens of flow-through entities with substantial intercompany debt
• With respect to a hotel, a part like-kind exchange/part tax-deferred contribution and rollover to the joint venture purchaser

Examples of additional situations that would be good candidates for such engagements:

• Rollover of gain into a qualified opportunity zone investment
• A debt workout
• Structuring a complex like-kind exchange (e.g., reverse, build-to-suit, leasehold, or partners wanting to go their separate ways)
• Need to sell equity interests (due to, e.g., licenses), but corporation has unwanted assets
• Avoiding the “anti-churning” rules on a rollover
• Avoiding the “disguised sale” rules on a complex LLC or partnership formation
• Avoiding an adverse allocation of tax basis in a divestiture involving an earn-out
• A litigation settlement (e.g., tax treatment and required reporting)
• A tax dispute with the Internal Revenue Service

Our tax lawyers represent business and individual clients in audits and other proceedings at all administrative levels of the Internal Revenue Service and in the federal courts.  We have had particular success with the Internal Revenue Service Appeals Office.  We can advise on whether bankruptcy or an offer-in-compromise is more advantageous for a troubled business, and have defended “responsible persons” against personal liability and collection of trust fund taxes.  We regularly advise our clients regarding proper handling of notices of levy and liens, and we assist clients with lien removal in order to complete sales of encumbered property.  We also have obtained private letter rulings from the Internal Revenue Service to obviate potential future controversies and have negotiated favorable “closing agreements” with the Internal Revenue Service, including through the Pre-Filing Agreement Program.

Our tax lawyers have extensive experience in representing real estate developers, non-profit organizations, syndicators, investors and lenders in transactions involving federal and state historic tax credits (HTC), federal and state low-income housing tax credits (LIHTC), and new markets tax credits (NMTC).  We work as part of a team of Vorys attorneys, including commercial real estate and finance attorneys, who handle every component of tax credit transactions.

Our tax lawyers regularly counsel venture capital and other investment funds as to fund structure, including complex structuring designed to permit tax-exempt entity and foreign investment.  We also advise our fund clients regarding the structure and tax implications of portfolio investments, including investments involving a partial rollover of assets by the seller into a fund vehicle, and/or a pre-acquisition “F Reorganization” of the acquired company.  Finally, we advise our business clients concerning structuring issues associated with obtaining venture capital investment.