PROACTIVE ADVICE

Tax and Estates

LEADERSHIP: Joan C. Arnold

Pepper Hamilton LLP’s Tax and Estates Practice Group stands out for providing thorough, practical advice.

Pepper’s Tax and Estates Practice Group provides comprehensive tax counseling and representation. Our tax practice is different from that of most major law firms – we go beyond just answering tax questions by providing independent, practical advice, tailored to each client’s local and global business objectives. Our tax counseling is informed by our understanding of the “big picture,” including the impact of our advice on client financial statements.

Pepper’s tax practice is highly ranked by Chambers USA: America’s Leading Lawyers for Business, and many of our practitioners are recognized by Best Lawyers, Chambers, and other publications that rank lawyers based on client and peer feedback. We also have won numerous awards for our work on transactions from M&A Advisor, Acquisition International, and similar publications. Our lawyers are thought leaders in the tax community, having served in leadership positions in the American Bar Association Tax Section, International Fiscal Association, Federal Bar Association Tax Section, the American College of Tax Counsel, and the American Institute of Public Accountants. They also regularly speak and write on a wide selection of tax issues relevant to our clients’ businesses at events, and in periodicals, sponsored by the Tax Executive Institute, Association for Corporate Growth, the American Bar Association, Financial Research Associates, and the Financial Executive Alliance, among others.

More detail on our practice is included below.

Private Equity Practice

Pepper’s tax practice represents a number of private equity firms of all sizes, including some of the largest private equity firms in the world. We work closely with Pepper’s fund formation and transactional lawyers to ensure that our clients’ funds and transactions are tax-efficient for U.S. purposes. We advise our clients on acquisitions, dispositions, refinancings, portfolio company debt purchases and bolt-on acquisitions and management company transactions. In short, we are actively involved in all of our private equity clients’ transactions.

Our assistance includes structuring of acquisition financing, avoidance of unrelated business taxable income and effectively connected income, avoidance/minimization of phantom income, planning to achieve capital gains treatment and structuring to permit tax-efficient leveraged recapitalizations. We regularly work with attorneys and tax advisors around the world in structuring global private equity funds and transactions. We also assist private equity funds with post-closing tax planning, including recapitalizations and U.S. taxability of distributions, and for post-closing advise. We liaise with our client’s return preparers to explain how transactions should be treated for tax purposes, and often work with portfolio companies to provide ongoing tax advice and project work. Pepper tax attorneys regularly write and speak on topics relevant to private equity funds and their managers.

International Tax

We help multinational clients develop and implement strategies that support their overall international tax plan, while complying with the rules of different jurisdictions.  We help clients navigate the complexities of inbound and outbound tax issues. We are working closely with U.S. businesses on implementation strategies under the Tax Reform Act. Our goal is to develop a comprehensive plan that maximizes profits and reduces overall risk.

NOL Practice

Net operating loss (NOL) carryforwards are valuable tax assets. However, a number of complex anti-loss trafficking tax rules must be considered to determine if and when these tax assets can be used. The most important of these rules is Section 382 of the Internal Revenue Code.

Any corporation reporting an NOL carryforward should obtain a Section 382 Study, most importantly to comply with tax return and financial statement requirements. Our NOL team has significant experience in the 382 area, including the receipt of significant private letter rulings from the IRS, and can provide equity roll forward analysis, net unrealized built-in gain/built-in loss analysis, consolidate return NOL issues, and overall transaction planning. We are also actively involved in tracking and commenting on IRS and Treasury modifications to Section 382 rules. Our nationally recognized attorneys frequently speak at the American Bar Association Tax Section, Federal Bar Tax Section, Tax Executives Institute and AICPA meetings on Section NOL usage, as we are a national recognized practice.

Transaction Cost Studies

Pepper has deep experience advising clients on achieving their goals in corporate transactions, including through cost deductibility studies. The Pepper attorneys who focus on this area have each prepared and/or reviewed hundreds of cost deductibility studies.  We also have significant experience with accounting method reviews, including income deferral and expense acceleration.  In this regard, we have successfully secured private letter rulings, accounting method changes and exam resolutions for client planning and projects. Pepper studies have been upheld on audit, and we have experience in defending our clients at every level of a controversy, from the audit through litigation. 

Pepper’s approach to transaction tax issues is different than the Big 4 and other accounting firms. Each study we conduct is led by a partner who has spent his or her entire career on transaction tax issues, including cost deductibility studies. These projects are not staffed by junior personnel to maximize profitability. Also, we work with our clients to maximize deductions and income deferral.  Positions are tailored to specific client needs and facts, while the Big 4 may be unwilling to suggest deductions that their audit teams are not comfortable pursuing.  Unlike accounting firms, the work Pepper does may not be subject to discovery by the IRS.  This has proven to enhance positions on audit.  Additionally, as a law firm, Pepper can draft documents to effectuate positions when required.

Earnings and Profits Studies

The tax reform bill signed into law late in 2017 requires certain U.S. corporations that have earnings in foreign subsidiaries and potentially investments in other foreign corporations to calculate the post-1986 accumulated and current-year earnings and profits (E&P) of the foreign corporation to determine the U.S. federal Income tax consequences of the deemed repatriation of certain income. E&P determination often requires a review of transactions and tax positions taken over many years, or even decades. An E&P analysis should be performed well in advance of transactions or other corporate actions that will be taxed based on the E&P balances of the company.

We have performed E&P studies for Fortune 100 companies, portfolio companies of private equity firms and public companies. We recently authored BNA Tax Management Portfolio, No. 764-4th,Dividends — Cash and Property, in which issues of E&P, dividends and repatriation of income are addressed. In performing an E&P analysis, we provide a detailed review of the corporate events, tax returns, acquisitions and dispositions, financial statements, and other documents, and, from this information, we populate an E&P schedule on a year-by-year basis and an entity-by-entity basis. This E&P schedule can then be used to determine whether a particular transaction results in taxable income to the various parties to the transaction. This analysis can be critical to determining taxes that will be due with respect to a particular distribution or repatriation transaction.

State and Local Tax Services

Pepper handles state tax appeals for large companies, small businesses and individuals.  We handle matters related to corporate income taxes, personal income taxes, property tax, sales and use tax, franchise tax and a variety of other local taxes. We have handled appeals and/or litigation matters in numerous states, including California, Florida, Georgia, Illinois, Indiana, Kentucky, Ohio, Pennsylvania, Maryland, New Jersey, New York, North Carolina, Virginia, West Virginia and the District of Columbia. We have worked with our clients to ensure proper tax compliance through nexus studies and, where necessary, by entering into voluntary disclosure and amnesty programs. We also have worked with our clients and lawmakers to draft and propose state tax legislation.

Our state and local tax services are comprehensive. In addition to the services described above, we regularly review and structure business transactions to minimize related  state and  local taxes. We also assist clients in analyzing, developing, and implementing strategies to minimize their state and  local taxes on an ongoing basis, including through various credits and tax incentives. In addition to income, franchise and sales and use  taxes, we have worked with clients regarding gross receipts  taxes and license fees, telecommunication  taxes, severance  taxes, premiums  taxes, personal income  taxes, and property  taxes.

REIT Tax Services

Our tax lawyers provide advice on REIT formation, mergers and acquisitions, debt and equity issuances, joint ventures, and real estate transactions. We assist REIT clients in structuring business transactions and investments in compliance with the myriad complex tax rules governing REIT qualification, including the use of taxable REIT subsidiaries and captive REITs. We represent our REIT tax clients in tax controversies and other matters before the IRS.

Regulated Investment companies

We counsel on tax issues related to regulated investment companies (RICs), other pass-through entities and their shareholders. In particular, we are experienced in tax issues in the structuring, formation and operation of RICs and other investment partnerships.  We assist in the preparation of tax disclosure statements contained in offering material of mutual funds and investment partnerships, and preparation of tax opinions in connection with such offerings, as well as in mergers of RICs.

Structured Finance

Pepper is experienced in the representation of financial institutions and issuers in connection with asset-backed securitizations, collateral mortgage obligations, mortgage-backed securities, collateralized loan obligations, trust preferred securities and various other structured finance vehicles.  We assist in determining and structuring various vehicles for conducting asset-backed securitizations, including pass through investment trusts, partnerships, limited liability companies and special purpose corporations/Delaware business trusts. We have significant experience advising on the taxation of real estate mortgage investment conduits (REMICs).  We have prepared opinions and tax disclosures, and provided planning and structuring advice, for REMICs involving billions of dollars, in particular addressing taxable mortgage pools and debt equity issues.

Nonprofit Organizations

Pepper represents many public charities, private foundations, trade associations and other tax-exempt entities, ranging from universities and hospitals to civic organizations and social clubs, on the tax and business issues specific to these entities, as well as on other legal issues that may affect any organization, for-profit or nonprofit. We are experienced in tax-exempt entity structuring and governance, unrelated business taxable income, self-dealing and excess business holdings situations, intermediate sanctions, employee benefit structures, property tax exemptions, and a wide array of complex planning and fiduciary issues for private foundations, public charities, and other nonprofit entities.

Trusts and Estates

We counsel individuals and closely held businesses on protecting family wealth. Our highly experienced trusts and estates lawyers and paralegals concentrate exclusively on formulating and implementing creative strategies to transfer resources within, and preserve capital for, the client's family. Pepper’s services go beyond the traditional “probate” practice – in addition to advising on all aspects of planning, administration and litigation of estates and trusts, we are experienced in issues involving closely held businesses, retirement accounts, insurance, charitable gifts and foundations, valuation and planning for incapacity.

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