In addition to leading Boutin Jones, Kent will continue to provide tax and estate planning for high net-worth individuals, and succession planning for closely-held businesses. Kent will also continue to volunteer in the region, and will serve as President of the Broadway Sacramento Foundation Board of Directors. He previously served as President of the Sacramento Estate Planning Council and is a Past Trustee of the Sutter Medical Center Foundation. “This is an incredibly exciting time to be leading our firm,” Kent notes. “There is tremendous opportunity in the Region, and I am thrilled to be working alongside our outstanding group of attorneys to help our business—and our clients’ businesses—thrive.”
Kent will be joined on the Boutin Jones Inc. Board of Directors by shareholders Iain Mickle, Bob Swanson, Jim Moore, Bashar Ahmad and Julia Jenness. Julia continues as a board member after having successfully led the firm as President for the past four years.
The Sacramento Business Journal recently named Boutin Jones as the second largest law firm in Sacramento in its annual rankings of regional firms. Boutin Jones has nearly 50 attorneys who represent clients in the areas of Agribusiness; Banking, Bankruptcy and Creditors’ Rights; Corporate and Securities; Employment Law; Estate Planning, Probate and Trust Administration; Healthcare; Litigation; Real Estate; and Tax.
Attorney Elizabeth Key has joined the Boutin Jones law firm where she will practice civil and business litigation. A 2018 graduate of the University of California, Davis School of Law and a 2014 graduate of the University of Oregon, Elizabeth also served as a Judicial Extern to the Honorable Troy L. Nunley, Eastern District of California. She is a former summer associate at Boutin Jones, and in 2016 she was the recipient of the Women Lawyers of Sacramento Scholarship.
Errol Dauis has joined the firm’s employment law practice where he will work with employers to provide employment law advice and counsel. He is a former Judicial Extern for Judge John A. Mendez, United States District Court for the Eastern District of California. He is also active in the community, having served on the Board of Directors of La Raza Centro Legal, including having served as its President. He is a current member of the Board of Directors for the Davis Food Co-op. Errol is a graduate of the University of California, Davis, School of Law and California State University, Long Beach.
Rabia Z. Reed has joined Boutin Jones Inc. as an attorney practicing employment litigation. She is a graduate of the University of California, Davis, School of Law and earned a Scottish Masters of Arts with Honors from the University of Edinburgh, Scotland. At UC Davis School of Law, she was active in a number of organizations and served as class commencement speaker. In addition to English, she is fluent in Norwegian, Swedish and Danish, and conversational in Brazilian Portuguese. She is active in the local legal community and serves as a Board Member for the South Asian Bar Association of Sacramento (SABA).
Like others throughout California, we have been looking for ways to support those impacted by recent wildfires. There are a number of worthwhile organizations working hard to assist our communities, so for those seeking ways to give, we are sharing three that we have chosen to support among the many worthy groups that exist. Please consider joining us by donating, if you are able, to one of these groups or another organization. To support those impacted by the Camp Fire: North Valley Community Foundation (www.nvcf.org). To support those impacted by the Carr Fire during the summer: Tri Counties Bank Carr Fire Fund 2018 (https://www.gofundme.com/tcb-2018-carr-fire-fund) and Shasta Regional Community Foundation (https://www.shastarcf.org/).
Boutin Jones Inc. and Clear Advocacy, LLC have entered into a strategic alliance to provide lobbying and government relations expertise in the California capital to clients of both firms and those of the law firm members of SCG Legal, an international network of independent law firms. Clear Advocacy, LLC is a full service governmental relations practice based in Sacramento. The principals, Peter Kellison, Fred Main and Kevin Pedrotti, each have over 30 years of lobbying experience. The firm represents a broad range of clients in retail, financial services, health care, and other businesses.
Boutin Jones is one of the largest law firms in the Sacramento region. The firm represents businesses and individuals in a wide range of matters, including litigation, corporate, securities, real estate, employment, tax, health care, trusts and estates and creditors’ rights. SCG Legal is comprised of 148 independent law firms in 82 countries.
Clear Advocacy partner Fred Main stated, “We look forward to working with the clients of Boutin Jones and those of the member firms of SCG Legal in California’s challenging legislative and regulatory environment.”
Boutin Jones’ managing shareholder, Julia Jenness, remarked, “We are pleased to have formed this strategic alliance with Clear Advocacy. Our clients, and those of the SCG member firms, now have access to the lobbying and government relations services needed to address California’s complex administrative environment.”
For more information about this strategic alliance, contact Jim Leet at Boutin Jones (916) 321-4444 or Fred Main at Clear Advocacy (916) 479-7400.
Corporate and securities attorney Tanya Syed has joined Boutin Jones Inc. She earned both a J.D. from the University of Pennsylvania Law School and an MBA from the Wharton School of Business. She also earned a B.A. from the University of Southern California.
Tanya will be representing public and private companies on the entire range of corporate transactions. She has guided clients through complicated legal transactions, ranging from initial public offerings, restructuring, debt and equity offerings, mergers and acquisitions and other exit transactions. She has also been active in volunteering her time to a number of pro bono legal programs, and in addition to English, speaks Spanish, Urdu, Hindi and can communicate in American Sign Language.
Bruce Timm, Shareholder and a member of the Employment Law and Litigation practice groups, is presenting a 1.5 hour course, “Civil Litigation Strategies: How to Win Your Case Before Trial,” on October 12, 2018, from 1:30 p.m. to 3:00 p.m. at the Sacramento County Public Law Library, located at 609 – 9th Street, Sacramento, CA. MCLE credit available. To register, go to www.saclaw.org.
The recent tax act passed in December 2017, formerly known as the Tax Cut and Jobs Act (“2017 Act”), contains tax incentives designed to encourage new investment in low income communities within the United States. The 2017 Act establishes a procedure for the governor of each state to nominate special low income regions within the state called Qualified Opportunity Zones. The state governor’s nominations are then certified by the Internal Revenue Service (“IRS”) as “Designated Qualified Opportunity Zones.” As of the date of this article, California has completed the nomination process and has received a certification from the IRS establishing Designated Qualified Opportunity Zones to encourage new business and investment activity in low income regions. Many other states have also completed the certification process. To learn more about the regions designated in California, see http://dof.ca.gov/Forecasting/Demographics/opportunity_zones/.
An investor’s investment in an Opportunity Zone Fund (defined below) permits an investor to defer paying tax on capital gain realized by the investor in another taxable transaction. For example, if an investor sells real estate, stock or business assets in a taxable transaction, the investor can defer recognition of the gain and avoid paying federal income tax by reinvesting in a corporation, partnership, limited partnership, limited liability company or other business entity in which at least 90% of its assets are located in a Designated Qualified Opportunity Zone (“Opportunity Zone Fund”). To qualify for such deferral, the investor must reinvest the amount of gain for which deferral is sought in an Opportunity Zone Fund within 180 days from the date of the taxable sale or exchange.
Reinvestment in an Opportunity Zone Fund defers recognition of taxable gain from the date of the taxable sale until the earlier of: (i) the investor’s sale or liquidation of the investor’s interest in the Opportunity Zone Fund (“Opportunity Zone Investment”), or (ii) December 31, 2026. Additionally, through a basis adjustment, the deferred gain inherent in the Opportunity Zone Investment is reduced by 10% after the investment has been held for five years, and by an additional 5% after seven years. If the investor holds the Opportunity Zone Investment on December 31, 2026, then, regardless of whether he or she continues to hold the investment, the investor must recognize the deferred gain on that day, subject to any basis increases received for holding the property for five or seven years. If the investor holds the Opportunity Zone Investment after December 31, 2026, and for at least ten years, the investor receives a stepped-up basis in the Opportunity Zone Investment to fair market value and future appreciation is not subject to tax. Subject to the occurrence of the recognition event in December 2026, recognition of deferred gain can be substantially reduced.
To illustrate this concept, assume an investor sells stock or other investment assets which results in a realized gain of $10,000,000 (the proceeds received by the investor in the sale might have been much greater depending on the investor’s income tax basis in the asset when sold). If the investor then decides to reinvest $6,000,000 in an Opportunity Zone Fund within 180 days following the sale, the investor’s recognized gain from the earlier taxable transaction is reduced by the same amount and is deferred. At least initially, the deferred gain is transferred to the Opportunity Zone Investment. The $6,000,000 in deferred gain results a current federal tax savings of $1,200,000 where the deferred gain is computed at the federal long-term rate of 20%.
Continuing the above illustration, the investor would recognize the remaining $4,000,000 in taxable gain in the year of the sale. Had the investor reinvested the entire $10,000,000 of realized gain in an Opportunity Zone Fund, 100% of the gain realized on the investor’s earlier taxable sale would have been deferred. The investor’s deferred gain, now residing in the Opportunity Zone Investment, is reduced by 10% after the investment is held for at least five years, and by an additional 5% after the investment is held at least seven years. For this investor, the $6,000,000 deferred gain would be reduced by $900,000 after seven years. In other words, the $900,000 reduction in deferred gain is forever excluded from tax. As mentioned above, the investor would pay tax on any deferred gain deferred in the Opportunity Zone Investment on December 31, 2026. Thereafter, if the investment is continued three more years (for a total holding period of ten years), the investor’s basis in the Opportunity Zone Investment is stepped up to fair market value, including future appreciation.
There is no analogue for the deferral mechanism provided by the 2017 Act apart from the investor’s death! Unlike the requirements for “like-kind” exchanges under Internal Revenue Code Section 1031 (“1031 Exchange”), the investor may actually receive the proceeds of the taxable sale directly. Any taxable gain resulting from the sale can be deferred with a subsequent investment in an Opportunity Zone Fund, so long as the reinvestment occurs within 180 days of the taxable sale. Although a 1031 Exchange shares the same 180 day reinvestment requirement, all of the sale proceeds received by the investor must be assigned to a qualified intermediary before closing, and all such sale proceeds must be reinvested in like-kind replacement property. Any cash, received by the investor in the exchange transaction, including amounts representing the investor’s unreturned basis in the property sold, trigger recognition of gain. These new rules are much more generous.
The new law is silent as to whether the 3.8% Net Investment Income Tax (“NIIT”) is also deferred. Since the NIIT is calculated based on the gain taken into account in computing taxable income for the year, it would seem to be deferred to the same extent that it would be in a 1031 Exchange. There are many other significant open questions for which we expect guidance from the IRS in the future.
Given the new tax deferral opportunity, we expect syndications of Opportunity Zone Funds to significantly increase in the future. Due diligence is necessary to make sure that the benefit will be associated with reasonable investment risks. When considering ways to reduce your gain, keep in mind the economic choices that you are making when investing in Opportunity Zone Funds. We note that a 1031 Exchange out of an Opportunity Zone Investment will likely not be possible when the investment is liquidated. Our attorneys can work with you, your financial advisor and CPA to advise you in connection with the sale of your business or investment assets and can assist you with any decision to invest in an Opportunity Zone Fund.
Legal disclaimer: The information in this article (i) is provided for general informational purposes only, (ii) is not provided in the course of and does not create or constitute an attorney-client relationship, (iii) is not intended as a solicitation, (iv) is not intended to convey or constitute legal advice, and (v) is not a substitute for obtaining legal advice from a qualified attorney. You should not act upon any of the information in this article without first seeking qualified professional counsel on your specific matter.
We are pleased to welcome associate attorney Emile Khoury to our firm. He comes to Boutin Jones after serving as a judicial clerk for the Hon. Barbara Madsen, Washington State Supreme Court. Emile, who will be part of our corporate and securities practice, is a graduate of San Francisco State University and Gonzaga University School of Law.