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Reid-Kyl Federal Online Poker Bill

October 19th, 2012 No comments

A draft bill for federal online poker said to come from the offices of Senators Harry Reid and Jon Kyl was leaked to the media earlier today. Read the full text of the bill, titled “Internet Gambling Prohibition, Poker Consumer Protection, and Strengthening UIGEA Act of 2012,” here.

Gaming attorney Ian Imrich has offered his initial comments on the bill. I’ll post some thoughts after combing through its seventy-three pages.

Angels in the Big Apple?

May 13th, 2012 No comments

Just over a week ago I wrote about New York’s poor ranking as a state for entrepreneurship and small businesses. State Assemblymaker Micah Kellner is making an effort to change that, especially for newer businesses.

Mashable is reporting a bill titled the Angel Investor Income Tax Credit is making its way through both houses in the state. Read here the current version of A09958, the State Assembly bill.

The bill allows up to a 25% tax credit for angel investors who invest from $25,000 to $1 million in a “qualified business” in New York State.

The colloquial definition of an angel investor is a high net worth individual who puts up funds for a start-up in exchange for some equity or other interest.

Of course, this bill defines the term, stating an angel investor is someone who qualifies as an “accredited investor” under Rule 501 of Regulation D of the Securities Act of 1933.

Accredited investors range from certain companies to charities to high net worth individuals. Read the list of accredited investors here.

The bill, however, exempts some accredited investors, including investors controlling at least fifty percent of the qualified business and venture capital firms.

So to what types of businesses should angel investors consider giving their money to obtain the credit?

The business, whether a sole proprietorship, partnership, or corporation, is a “qualified business” as long as it

  • (i) did not generate more than $1 million in gross revenues in the year immediately preceding the year the investor seeks to claim the credit;
  • (ii) does not have more than twenty-five full-time employees, at least sixty percent of which must be employed in the state;
  • (iii) has operated in the state for no more than seven consecutive years; and
  • (iv) has received no more than $2 million in investments eligible for the credit from one or more angel investor.

The credit would apply against New York State income tax. An angel investor with no New York State income tax for the year the investment is made cannot make use of the credit that year. The bill, however, does allow an investor to carry over an unused portion of the credit to a subsequent tax year.

In the Mashable piece, Kellner is quoted for saying “[t]he last thing I want is the next Twitter or Facebook being developed in New York, only to be commercialized and have their company headquarters end up in Connecticut. [Startup jobs] are good jobs and I want them here in New York.”

I don’t see how passage of this bill would keep a booming start-up in New York for the long-term. An angel tax credit isn’t why Twitter has kept its headquarters in San Francisco. A controversial measure extending an exemption from San Francisco’s payroll tax is why.

The bill was introduced in the State Assembly on April 26 and referred to the Committee on Ways and Means. The bill’s Senate equivalent was introduced on May 9 and referred to the Committee on Investigations and Government Operations.

U.S. Online Poker: Legislative Update

March 18th, 2012 No comments

Discussion about the possible legalization of online gambling in the U.S. has been gaining more and more traction for some time. An update here on the current legislative developments is long overdue.

California: In late February, Senate Bill 1463 was introduced. The bill would legalize online poker in California, and has a goal of raising $200 million for the state general fund. The bill is co-authored by Senate President Pro Tem Darrell Steinberg. According to the complete bill history for Senate Bill 1463, the bill may be acted upon on or after March 26.

Iowa: This past Thursday, Iowa House Speaker Kraig Paulsen said the State House does not plan to take up Senate File 2275, which would legalize intrastate online poker in Iowa. The State Senate had recently approved the bill in a 29-20 vote. The bill is all but dead.

Mississippi: In late February, House Bill 1373 was introduced. The bill would have legalized online gambling within the state. The bill is now dead.

Nevada: Nevada is far ahead of any other state in this area, having legalized intrastate online poker late last year. In January, the Nevada Gaming Control Board finalized the Technical Standards for Gaming Devices, and the Minimum Internal Control Standards were finalized in February. At this time, it is unclear when online operators will be permitted to accept real-money deposits. Some speculate late 2012.

New Jersey: In early February, Senate Bill 1575 was introduced. The bill would legalize online gambling within the state. Just over a year ago, Governor Christie vetoed a bill that would have legalized intrastate online gambling, citing constitutional concerns. Current bill sponsor Senator Lesniak believes he has addressed these concerns. The bill failed to advance through the legislature during the final voting session this past week, however, so it may not be subject to a vote for at least six more weeks.

Tax Strategies Now Prior Art, Not Patentable

September 26th, 2011 No comments

In the United States, a patent on an invention is considered not valid if the invention has been described in prior art. Essentially, prior art refers to all information made available to the public before a certain date that may be relevant to a patent’s claim of originality.

Patents in the tax realm have been controversial. This doesn’t come as a surprise. Think about it: Suppose someone devises a strategy to minimize the tax burden in a complicated set of facts and then patents it. Then, future taxpayers may be prohibited from applying the same strategy.

Well, tax patents no more. On September 16, 2011, President Obama signed into law the Leahy-Smith America Invents Act, which declares that any strategy for reducing, avoiding, or deferring tax liability is insufficient to differentiate a claimed invention from the prior art.

The U.S. Patent and Trademark Office has more:

[Patent] applicants will no longer be able to rely on the novelty or non-obviousness of a tax strategy embodied in their claims to distinguish them from prior art. Section 14 [of the Act] aims to keep the ability to interpret the tax law and to implement such interpretation in the public domain, available to all taxpayers and their advisors.

Note that the law does not apply to already existing patents. According to Accounting Today, there are currently more than 130 issued tax-related patents.

(Hat Tip: TaxProf Blog)

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