Demystifying the Tax Overhaul

Invest: Miami partners up with local experts to make sense of the new tax legislation

“The hardest thing in the world to understand is the income tax.”–Albert Einstein

 

March 2018 — In December 2017, Congress passed the biggest tax reform legislation in more than three decades. The bill will affect most taxpayers, but the biggest question for many is: How? The Tax Cut and Jobs Act represents one of the largest reductions in corporate tax rates in U.S. history, dropping from 35 percent down to 21 percent. The bill also lowers individual tax rates for most Americans, as well as small business owners, but there’s a lot more than that going on in this major tax overhaul.

For that reason, Invest: Miami 2018 is dedicating an entire chapter to tax reform. With the help of our expert partners, we are deciphering the legislation and laying out for our readers what it means for South Florida residents, business owners and investors. Until the book is released, here is a bit of what you can expect from this year’s newest edition.

We recently spoke with J. Michael Custer, who leads the tax practice at CPA and advisory firm Kaufman Rossin. The firm just published a series of blog posts on how the Tax Cuts and Jobs Act will affect the specific industries most active in South Florida.

Here’s a sneak peek at what Mike had to say about the tax bill:

 

Mike Custer of Kaufman Rossin.

How have your clients reacted so far to the new tax legislation?
There was a certain amount of anxiety about the unknown after the new legislation was passed. Whenever the rules change, it takes time for people to figure out what’s going to happen moving forward. There are certain parts of the legislation where we know specifically how they’re going to change our clients’ behavior. On the other hand, there are a whole host of items presented in the bill that have no direction yet. Tax law is never black and white; it is still evolving. That’s why we’re here. We understand the policy and the policy issues, but we make a living by reading the rules, the guidance and even the lack of guidance. That’s where paid professionals really earn their value – interpreting these policies for particular industries and specific clients.

Will this legislation affect population growth in Miami and Florida in general?
Tax policy is a funny thing: it is designed to change human behavior. The fact that there is no individual income tax here in the state of Florida has always been a big draw. Is someone who was going to come into Florida before this tax change going to change her mind? I don’t think so. Are individuals going pick up the pace of moving into Florida? It’s a possibility. It comes back to travel times, housing supply and good schools.

Are businesses seeing the tax decreases they were expecting from the legislation?
Pass-through entities (like S corps and LLCs) got a 20 percent deduction. Many were thinking that since they paid 40 percent already, their rate would drop to 20 percent.  That’s not the case. It’s a 20 percent deduction. So if you make $1 million, you get a 20 percent deduction, bringing your taxable income down to $800,000, and then that’s subject to your top rate of 37 percent. So the effective rate went from 37 percent to around 30 percent, not from 40 percent down to 20 percent. A lot of people were not interpreting it that way initially.

 

For more from Mike Custer and other experts on how the tax legislation will affect you and your business, look for the tax chapter in this year’s edition of Invest: Miami.

For more information about Kaufman Rossin click here.
To pre-order your copy of Invest: Miami 2018 with the new tax chapter, click here.

Government That Works

February 2018 — On February 6, 2018, Governor Wolf delivered the 2018 Budget Address for the state of Pennsylvania. As tribute to the Eagles for making history at the Super Bowl, he opened his speech with the famous chant, “Fly, eagles, fly,” congratulating the team on their victory. Wolf compared the pride that Eagles fans have for their team to the pride that Pennsylvanians have for their state.

The governor touched on the victories he has accomplished, especially in education, since he was elected in 2015. As the focus of his administration, Wolf reversed the billion-dollar cuts that were made in the education budget prior to his term. The number of kids attending pre-kindergarten courses has increased by half, high school graduation rates have exceeded 86 percent and STEM education has moved up the ranks to second in the nation. “Rebuilding our schools is the beginning of rebuilding our economy but it’s just the beginning,” he said.

 

Another focus of his administration: job creation. Since Governor Wolf took office, Pennsylvania has gained approximately 180,000 jobs.

With Pennsylvania’s economy continuously growing, Wolf laid out a comprehensive budget plan to ensure that the commonwealth prospers. This plan includes a $2 billion proposal for infrastructure investment over the next decade, which will go towards rebuilding bridges, roads and highways.

Wolf outlined a $225 million budget to improve education, as well. This includes $100 million for basic education funding, $20 million for special education, $30 million for Pre-K Counts, $10 million for Head Start and $15 million for the Pennsylvania State System of Higher Education. Another $50 million will go towards technical education.

Additionally, the proposal includes the establishment of a state severance tax. Wolf points out that Pennsylvania is one of the only states with an abundance of natural gas resources but no state severance tax. He explains, “And let’s understand exactly what a severance tax is. It’s a tax paid by people mostly outside of Pennsylvania to use our natural resources.”

Governor Wolf’s commitment to jobs that pay, schools that teach and government that works is clearly addressed in his 2018 Budget Address. Invest: Philadelphia is looking forward to seeing what the future holds for the Keystone State.

To read the full transcript of Governor Wolf’s speech, click here.

 

Georgia State of the State: Orchards of Opportunity

February 2018 — On Thursday, January 11, 2018, Governor Deal gave his final state of the state address. He started off the speech with an anecdote about planting a tree for the next generation of leadership in Georgia: “I am not planting this tree for me. I am planting it for those who come after me.”

Deal continued his nature symbolism by comparing Georgia’s accomplishments to orchards of opportunity. Each success under his administration represents a separate orchard. The successes include accomplishments in the film industry, the education sector, infrastructure, criminal justice reform and even mental health.

As expected, Governor Deal touched on the key points of his administration in his address. He noted the importance that the film industry has had in Atlanta in the past decade. Ten years ago, Atlanta’s film industry generated $241 million in economic impact. In 2017, it generated $9.5 billion and employed 92,000 workers with above-average salaries. The industry has grown so much that in 2016 the state of Georgia was ranked the number one filming location for most successful movies.

But the film industry is not the only sector that has made strides. In particular, Governor Deal noted that the Georgia government has increased K-12 education spending by $3.6 billion in the last seven years, making the total education expenditure $14 million during his administration. Deal emphasized the importance of educating the youth of today to prepare them to become the workforce of tomorrow.

In terms of higher education, Georgia is one of only three states to have more than one top-20 university. Also, since Deal took office, the HOPE scholarship and grant programs — which were on the verge of bankruptcy — have been reinstated and continue to provide higher education learning opportunities to many students. The HOPE Career Grant, which covers full tuition for Georgia students enrolled in technical schools that educate the workforce for high-demand fields, was also created.

Governor Deal touched on infrastructure improvements by mentioning the Transportation Funding Act enacted under his administration. The act provides a 10-year, $11 billion transportation investment plan that is unprecedented in the state of Georgia and will promote sustained growth in the region for decades to come.

The governor not only mentioned his past accomplishments but also laid the groundwork for his last year in office. He is proposing a $50 billion state spending plan that continues to prioritize the same sectors, especially education.

Governor Deal has been leading Georgia since 2011. His term as governor will end this November. To read his state of the state address in full and to get more details, click here.

“Fly, Eagles, Fly!”

February 2018 — On Sunday night in bitter cold Minneapolis, the Philadelphia Eagles brought home their first championship win since 1960, beating the New England Patriots 41-33 in a hard-fought battle. And if that’s not enough to get you excited, Bud Light is keeping its promise. The beer company officially announced that it will be providing free beer (to those 21-plus in age, of course) at 25 bars along the parade route in Philadelphia on Thursday, February 8.

While the Eagles went into Justin Timberlake’s high-energy halftime show with a 10-point lead — thanks primarily to a surgically executed and gutsy trick play where Super Bowl MVP Nick Foles caught a pass from tight end Trey Burton on a fourth and goal — the Patriots came out of halftime like bulls out of the gate. But they couldn’t sustain the momentum, and despite Tom Brady’s history of pulling off the Hail Mary, it was the Birds who were flying high when the last second ticked off the game clock.

 

Nick Foles may have been the obvious star of the game, stepping up to play quarterback after the unexpected loss of Carson Wentz and proving that you don’t need to be a 5-time Super Bowl vet to dominate on the gridiron, but besting the Patriots was truly a team effort. As head coach Doug Pederson said, “An individual can make a difference, but a team makes a miracle!”

For the Eagles, the win means the coveted Vince Lombardi trophy, Super Bowl rings, healthy postseason bonuses and the prestige of being national champions, but what does it mean for the city of Philadelphia?

Thousands of fans have flocked to Philly to partake in the post-win festivities. Monetarily speaking, this has been great news for the city’s hospitality industry, but it’s not so good news for out-of-town fans. People seeking hotels in Philadelphia were out of luck, with zero availability in the downtown area and seriously over-inflated prices on the outskirts of the city. The Marriott Courtyard Bloomington, for example, was offering rooms for $699 a night when the usual rate is about $89 to $161 a night.

There’s no question that this Super Bowl win will provide much more than just monetary gains for the City of Brotherly Love. The Eagles not only won as historic underdogs but also beat a true football dynasty, providing a sense of community pride (and serious bragging rights) for the people of Philadelphia for a long time to come. They won against all odds and in the face of many obstacles. The boys in green have rewritten Philly sports history. And it’s not just a win for the Eagles; it’s a win for all the people of Philadelphia. Fly, Eagles, fly!

For more information about the Philadelphia Eagles, visit http://www.philadelphiaeagles.com/

The state of play

How Florida is tackling unemployment by encouraging growth and education

Rick Scott Governor – State of Florida

 

Florida has seen the second biggest drop in unemployment in the U.S. What have you and your administration done to achieve these figures?

Unemployment is at 4.9 percent, and we’ve added some 1.26 million private-sector jobs, which is double the national rate. Four years before I was elected, Florida lost 832,000 jobs. To tackle this, we cut 4,600 regulations, cut taxes 55 times and recruited 900 companies either to come to Florida or expand into the state. We’ve gone on trade missions around the world, and we’ve made sure that our universities are focused on where the greatest job needs are. We’ve asked “how can we help businesses here to be more successful than they are anywhere else?” That is our attitude, and we are better than anyone else in the country. We have to keep cutting taxes and reducing regulations. U.S. News & World Report has said Florida is first for higher education, but we have to keep getting better. We have to make education more affordable and make sure the colleges and universities are very focused on where the jobs are. We now have 25 percent of universities’ budgets tied to three things: What does it cost to get a degree? What field can you get a job in? How much money do you make? We’ve got to make sure we are focused on getting people ready for careers and dealing with the system.

 

Technology, life sciences and healthcare are all growing sectors in the State of Florida. What is being done to encourage the growth of these sectors?

We’ve got to make these sectors more successful here than in any other place in the world. We have to build relationships, which is why one of the things we do as part of Enterprise Florida is consultations with businesses to help them do better. We make sure they have the right workforce, and we do that through a variety of programs through our state colleges and universities. We’ve got to keep reducing their taxes so they can reinvest in their businesses because when they reinvest in their businesses, we get more jobs.

 

What impact has a greater emphasis on developing education had on Florida? How will education develop in the future?

Tuition fee increases have been halted. They were increasing at 15 percent plus inflation every year when I came into office. We haven’t seen an increase in four years at our universities or state colleges. We reimburse the schools according to what’s important to students, lower tuition fees and getting a good-paying job when they finish. We have the highest graduation rates of the 10 most populous states. We’ve increased our funding for universities by almost 50 percent since I got elected. The most important thing is that every child has opportunity. It doesn’t matter where you live or how you grew up, I want every child to have the dream of this country

Fad or Future? Deciphering Cryptocurrency

January 2018 — A one-bedroom penthouse condo with bay views in Miami was listed on Redfin in early December. What makes this listing newsworthy is that the seller is only accepting Bitcoin as payment.

Most of us recognize Bitcoin as the first and most well-known cryptocurrency. Since its inception seven years ago, it has been making waves — tidal waves, some might say. Its value surged 1500 percent against the dollar in 2017 as it gained popularity among both Wall Street and real estate investors. Still, there are many skeptics who warn that Bitcoin is entirely speculative and that where there is a steep rise, there must also be a steep fall.

Whatever your feelings about this “money of the future,” 2017 was the year Bitcoin and other cryptocurrencies joined the global financial system. It looks like they’re here to stay — and no longer just as the de facto currency of cybercrime.

As Miami gears up to host the North American Bitcoin Conference, hailed as the “most important blockchain conference of the year,” on January 18-19, 2018, Invest: Miami decided to take a closer look at what this buzzworthy yet nebulous concept of cryptocurrency is exactly.

In the simplest terms, cryptocurrency is “virtual” money created from code whose economy is monitored by blockchain technology — basically, entry into a public ledger through a process called mining — rather than by a central server. Think of a database whose entries are limited, must be verified and can’t be changed unless specific conditions are met.

Money, after all, is all about verified entry into some kind of database of accounts, balances and transactions. Just look at your bank account.

With a limited and controlled supply, cryptocurrencies are not changeable by governments, banks or any other centralized institution, so they’re secure from political influence. They’re not subject to inflation; rather, their value is preserved and often even increases over time. Proponents laud cryptocurrency for its security, stability and deflationary quality even as critics denounce it for these very same things.

While it is unlikely that cryptocurrencies will replace cash anytime soon (unless you’re looking to buy that Miami penthouse, of course), Bitcoin has been steadily gaining investor approval. Today, this “digital gold” has a total value of $9 billion, but it also has a precarious relationship with volatility. Only time will tell whether there is a cryptocurrency bubble — and whether that bubble will burst.

Latin lives

Governor Rick Scott talks about the Latin America Summit

Hosted by the Governor of Florida, Rick Scott, the 2017 Latin American Summit on October 2 in Miami will bring together leaders from the region to discuss important issues such as human rights, democracy and ensuring economic prosperity. The summit focuses on Florida’s relationship with the region and will help to build and solidify partnerships between the two areas. Governor Scott spoke to Capital Analytics about the summit:

What is the main focus of the summit?

This summit seeks to address two key areas: trade and democracy. We will have a variety of people from both Latin America and the U.S. speaking to address how these two themes are ultimately intertwined. When we have strong democracy, we have strong trade partners.

If you look at Latin America and compare some of the more recent challenges we have seen, and how it has affected Florida’s economy, you get widely different stories. Take the difference between Venezuela and Argentina. Venezuela was once a huge trade partner of ours, but now, under Maduro, our trade had drastically decreased. Then you consider Argentina and President Macri’s transition to power. Florida is experiencing an increase in trade. Democracy in Latin America is a big deal for our country, but even more so to Florida as trade often comes here first.

But it is also about bringing businesses together to network and create more even business. Aside from the one-day conference’s agenda, we will be coordinating lunches and dinners for more intimate and targeted networking opportunities.

How will the Summit address regional challenges like the situations in both Venezuela and Cuba?

The summit will facilitate a dialogue and enable key leaders to talk about where we as a region are and where we need to go.

The Trustees of the Florida State Board of Administration (SBA) unanimously approved my proposal to prohibit the State of Florida from doing business with any organization that supports the Maduro regime. As Floridians and Americans, we are against the brutal treatment of the Venezuelan people. We must look to do anything we can to support freedom and democracy, and that is what this summit intends to support.

It was important for me that we address what is happening in Venezuela at the summit particularly because a lot of people in Florida are from Venezuela, and they have family that are in Venezuela still.  They’re struggling and not getting the materials or medicine they need. Additionally, it’s important to the world economy that we continue to promote democracy, and the summit seeks to do this.

What does hosting this type of conference in the State of Florida say about its position as a leader in the region?

We are a leader for Latin America and I hope will continue to be. We are one of the largest trade partner to many countries in the region, and many Latin Americans live, own property and work in Florida. From my position as governor, I have the opportunity to serve in one of the fastest growing states in the country. It has cut taxes while increasing revenue, has unparalleled job growth and has an education sector that is becoming increasingly competitive. All this enables us to be a strong model of democracy, business growth, prosperity and more for the region at large.

Some of the confirmed speakers include:

Congresswoman Ileana Ros-Lehtinen, Florida’s 27th Congressional District
Congressman Lincoln Diaz-Balart, Florida’s 21st Congressional District
Congressman Mario Diaz-Balart, Florida’s 25th Congressional District
Congressman Francis Rooney, Florida’s 19th Congressional District
Donna Hrinak, President, Boeing Latin America
Archbishop Thomas Wenski, Metropolitan of the Province of Miami
Emilio T. González, Ph.D., Director and Chief Executive Officer, Miami-Dade Aviation Department.
Paul F. Browning, President and Chief Executive Officer, Mitsubishi Hitachi Power Systems Americas (MHPS-AMER), Inc.
Romaine Seguin, President, UPS Americas Region
Paulo Cesar de Souza e Silva, CEO, Embraer S.A
Susan Segal, President and CEO, Americas Society/Council of the Americas
Marcelo Mindlin, Chairman and CEO, Pampa Energía S.A.
Juan M. Kuryla, Port Director and CEO, PortMiami

You can find out more information:

http://www.flgov.com/2017/07/24/governor-scott-to-host-2017-latin-american-summit/

InterContinental Miami – luxury hospitality in the heart of the city

What are the main factors attracting visitors to Miami-Dade County, and how can it build on its strengths to attract more people?

Miami-Dade and Downtown in particular have come a long way since I moved back to Miami to become GM of the InterContinental Miami in 2009. I remember when the streets around the hotel were empty once the clock struck 5 pm, but now there is activity at all hours of the day. The residential growth of the past decade has had a positive effect on our neighborhood, because tourists are naturally drawn to areas where locals spend their time. Today, downtown is a destination for business and lifestyle, and it’s up to us to manage that growth. We’re making strides through investments in our new science and art museums, improvements along Flagler Street and innovative projects like Biscayne Green, but challenges still exist as we look for new ways to improve access and mobility. Traffic is problematic, major events cause road closures, and we need to upgrade our public transit systems, which is something that visitors from around the world expect when they arrive in a world-class city.

 

 

 How well has the hospitality industry weathered the recent problems of Zika and falling currencies in traditional overseas markets?

Last year, we experienced only a nominal impact from Zika at the InterContinental Miami. Two corporate events were postponed by risk-averse groups, but our leisure travel business remained intact throughout the summer and 2016 was another strong year for us. Since then, we’ve been working year-round with the authorities and our hotel peers to create and implement a 10-point plan that will make sure we’re ready to mitigate any mosquito-borne threat that South Florida faces in the future. We’ve also managed to sustain our strong occupancy amidst a strong dollar. We credit this to our hotel’s popularity among business travelers and groups hosting large meetings and events.

To what extent does the current growth of hospitality and home-sharing apps such as Airbnb create competition for the traditional hospitality sector? Is there enough regulation to keep the playing field even?

Miami is reportedly one of Airbnb’s top-five markets in the country, and that’s no surprise given our rise as a global destination. Some have sought to ban these services outright, but that’s unrealistic. The reality is that we’re already co-existing with home-sharing services. The difference is that a property like InterContinental Miami appeals to business and leisure travelers seeking the comforts of a luxury hotel – from daily housekeeping and a top-notch restaurant and bar downstairs, to a pool deck overlooking Biscayne Bay and a luxurious spa. Short-term rentals may cater to a specific niche in the market, but there’s no substitute for the exceptional hospitality that a full-service hotel can deliver. That being said, we need to protect our visitors and residents by ensuring short-term rental properties are safe and regulated appropriately. Also, we must preserve the tourist tax revenues that conventional hotels have been collecting for years and which support critical services.

How much of an impact would the reducing of Visit Florida’s budget have on the tourism and the meetings and convention industry in Miami?

The budget was in jeopardy, but the elected officials in Tallahassee saw the value of marketing Florida’s brand around the world. We are deeply thankful for Gov. Scott’s support, as well as the support of Florida’s legislature for fully funding Visit Florida in 2018. The state legislature’s decision to fund Visit Florida means that Florida, and Miami in particular, will continue to attract millions of tourists every year, strengthening this city’s already thriving hospitality industry and growing its local economy, including new jobs.

 With a growing amount of hotel rooms in the Downtown area, how can the InterContinental differentiate itself from the competition? What are the midterm goals, plans and outlook for the InterContinental in Miami?

There have been new hotels opening their doors around downtown Miami over the past few years, so we’re always looking for new ways to keep our competitive edge. Earlier this year, we remodeled and relaunched Toro Toro, complete with a new menu, an expanded lounge, and a new private dining room, “El Matador Room”. We’re also introducing new technologies. One of my favorites is an app called Zingle that allows guests to request any service – from the morning paper to milk and cookies – from their smartphone. We even host a local competition each year to choose new skyline dancers for our digital canvas (we take nothing for granted!). The InterContinental Miami has been operating for almost 35 years and many of our team members have been with us for more than half that time. I like to think that longevity and consistency define who we are and set us apart in an increasingly competitive field. Looking ahead, we’re going to keep our focus on providing exceptional hospitality to our business and leisure travelers, while ensuring the services and amenities we offer stay creative and innovative.

What can be done to further promote the meetings and conventions industry in Miami?

Miami knows how to host a large event, be it the Super Bowl, the Major League Baseball All-Star Game, Art Basel, Ultra Music Festival, and more. We’re also making sizable investments in our local infrastructure through the renovation of Miami Beach Convention Center, improvements at Miami International Airport and the launch of the Brightline rail system, both of which will make getting to Miami easier. Now we’re working with our partners at the GMCVB to spread the word out and send a message that Miami is a great destination for business and vacation.

For more information on InterContinental Miami, please visit icmiamihotel.com

Twitter: InterConMIAMI

Instagram: interconmiami

Facebook: InterContinental Miami

Better Together

Invest: Miami speaks to Nicholas Remillard, President & CEO, World Strategic Forum

What was the initial vision of the World Strategic Forum, and how has it developed over the years to what we see today?

A lot of the forums in Miami deal with solely Latin America, but we want to bring all the regions together. There’s still a strong component of the Americas, but there’s also a large component for Asia and Europe. Miami has a mixed population. There is an increasing amount of Europeans living here, as well as people from Africa and Asia. People come from all over the world to Miami to do business.

The airports and ports are increasing the amount of trade they do and expanding their shipping mandates beyond Latin America. A lot of the cargo shipping contracts are with China, for instance. Miami International Airport is running daily flights to the Europe and the Middle East.

What is the significance of holding the forum in a place such as Miami and how does the audience here differ from other locations like Paris or in Canada?

Miami, it’s a brand by itself. It has a lot of appeal, and people tend to come here with their spouses or family so that they can have  a vacation as well as attend the forum. The Biltmore in Coral Gables is a perfect location for us. It’s a nice area, and on the practical side, we don’t lose our clients up to 2 o’clock on the beach.

There has been a lot of infrastructure development in Miami. So in the 2017 program, we had a bigger component on infrastructure. There’s also a large section on cybersecurity, which is another big issue in Miami. But it’s a work in progress. We’re developing new content for 2018. It will bring a different identity to the Miami conference that will make a difference from all the other events.

We don’t want to have an event in Miami and then have a similar one in Paris because they would be competing even though the same organization. However, the branding makes a big difference. Those attending the event in Miami have a unique experience.

How can we ensure that innovation and ideas are nurtured across borders?

There’s not enough communication between countries. Latin America is a perfect example in that it is a group of countries that don’t connect enough on a regular basis. They are a number of countries with a lot to share, but there isn’t enough dialogue. In our mind, unity is the key to everything. For example, even though the UK has voted to leave the European Union (EU), Europe has never been so strong. It’s amazing how the different EU states communicate and trade with each other. They exchange policies, and they have regulations that don’t just affect one country, but the entire union.

Given the recent political change in the U.S. What are the biggest challenges to cross-border corporation in the Americas?

President Donald Trump wants to redefine all the agreements between Canada, Mexico and the US. This is not exactly a bad thing, because they’re old agreements that need updating for all parties. Now it’s an opportunity to go back to the drawing board, but the biggest obstacle is the change in governments.

There next general election in Mexico is scheduled for 2018, so we’ll get a chance to see what the reaction is there. Mexico is a huge market for the US, and it’s bad to have economic or commercial conflict with your next door neighbor.

What is the biggest issue that has an impact on the global economy?

The threats to cyber security are worrying. The autopilot systems in airplanes and computer systems in cars make them vulnerable to hacking. There are a lot of smart technologies and innovation in industry at the moment. Yet there isn’t enough regulation to stop hackers. Smart technology is becoming a part of our everyday life, with the Internet of Things. It is even being used in the healthcare industry. Threats to cybersecurity can mean life-threatening situations. There needs to be industry-wide best practices to prevent serious incidents caused by hacking. This takes some kind of international consensus, which means cross-border cooperation.