New Tax Limitation on State and Local Deductions for Individuals

The start of 2018 brings plenty of new changes to the U.S. tax code for individuals and businesses.  One such change involves new limitations on state and local tax deductions for individuals.

Beginning in 2018, the Tax Cuts and Jobs Act ("FCJA") now generally limits an individual's ability to claim federal itemized deductions for state and local (and certain foreign) taxes.  The FCJA provides that an individual may claim an itemized deduction for any taxable year - up to a maximum amount of $10,000 for combined state and local personal property taxes, real property taxes, and income taxes paid or accrued during the year.  Married individuals filing separately have a $5,000 per year limit. Certain foreign and sales taxes are also included.

This limitation does not apply to state, local, or foreign property taxes.  It also does not apply to state or local sales taxes that are paid or accrued in carrying on a trade or business or for the production of income.  However, the limitation does apply to state and local incometaxes paid or accrued in carrying on a trade or business or for the production of income. 

The limitation on state and local tax deduction has a sunset provision and is set to expire after 2025. 

NAFTA agreement soon to be renewed?

The North American Free Trade Agreement between the United States of America, Canada and Mexico is active since January 1994. Even though it has proven to be very helpful for the economy in the region, treaties do get old. In contrast to modern treaties, it lacks rules catered to medium-sized enterprises, e-commerce, labor laws and the environment.

 

Originally the NAFTA should have been amended along with entering into the Trans-Pacific Partnership (TPP), however the Trump administration has withdrawn support for the TPP and seeks to update NAFTA between the three original countries. In May 2017 the Congress was formerly notified to renegotiatethe NAFTA by the US Trade Representative Robert Lighthizer.

 

The renegotiations started in August 2017 and so far there have been 7 formal rounds of negotiations. Most recognized were the US proposals for the "rules of origin", which require automobiles to have 85% of regional value content and 50% US content. Also new to the treaty would be the "sunset provision" according to which the treaty expires after 5 years, unless the three parties renew it, and a rule about the dispute settlements, where NAFTA panel rulings in state-to-state disputes shall not be binding for the parties. Other proposals include the limitation of access to the US government procurement market.

 

Many of these proposals have been made without congressional consent. The Trade Representative Lighthizerhas however defended the proposals, claiming that these would reduce the US trade deficits. Some believe that those high demands are just a negotiation tactic, to get other concessions from Canada and Mexico.

 

It is disputed if the President of the United States has the power to withdraw from the NAFTA by himself, without congressional consent. There is no specific US-law granting such powers, which leads some to say that the President cannot withdraw from the treaty without the consent of the Congress. On the other hand, the Constitution gives the President authority to conduct foreign affairs, which is the argument of the opposing side to argue, that the President is able to terminate agreements himself.

 

Equally disputed is the question if the amendments of the NAFTA need congressional consent. The Trump administration already indicated though that under TPA 2015 it would seek congressional approval of the amendments. Both chambers of Congress need to take an "up-or-down" vote, which means that there will be no amendments made by Congress.

 

The future of NAFTA is uncertain at this point, even more so as the questions of consent of the Congress are not yet answered. It remains to be seen how the three parties conduct their negotiations.

Nuernberg Higher Regional Court Rules that Wet Floors at Pools are Self-Evident Dangers

The High Regional Court of Nuremberg ruled in one of the cases presented, that wet floors in a public pool area are not an unforeseeable safety hazard for a visitor (Az. 4 U 1176/17).

 

In Nuremberg Germany, a woman visited a public pool with a sauna area. After using the sauna, the woman fell due to the wet floor on the wooden floors alongside the pool area. She broke her toe and suffered a contusion on her tailbone. She sued for damages for pain and suffering and the medical expenses.

 

She argued that as a guest of the public pool she should have been made aware of the moisture on the floor and should have least been a rubber mat or a caution sign.

 

The lower court had already rejected her claim, reasoning that public pools are usually wet and that the owner of the public pool had no obligation to put out any further signs or security measures. The lower court argued that an absolute safety in an area with water is unachievable the court argued.

 

The Higher Regional Court of Nuremberg rejected the claim as well. Adding to the lower court's ruling, it stated that only those dangers needed to be taken care of, of which the guest is not apparently aware. However that the side of a public pool is wet, should be apparent to any visitor. Furthermore the owner of the pool had already installed wooden floors and a handrail to make sure visitors could enter the water safely. There is no obligation to install any further safety features for the visitors, including no rubber mats or safety signs.

Just One Minute of Your Voice - Legal Implications of Lyrebird's New Digital Voice Replication Technology

A program called Lyrebird promises to create a digital voice using your own voice, with just one minute of recording you. The startup company lists speech synthesis for people who have lost their voice as one of the possible applications of the program.

The program, named after the Australian Lyrebird that is known for its ability to mimic any natural or artificial sounds of its surroundings, has some demo records on its website to show potential customers, what Lyrebird is capable of. The demos even include various sentences spoken by Donald Trump and Barack Obama, which have been created from the audio data from the former presidents' past public speeches.

Even though the demo phrases have actually been spoken by the two presidents in the past, it shows a glimpse into potential future problems of the Lyrebird system. The voice recognition features and digital voice replication is such an exact copy of the original, that anyone listening to it, could think it is the real Donald Trump talking. In theory, the artificial voice could be used by anyone in an attempt to impersonate or bypass voice identification features. The company has already highlighted this problem on their website, noting that the recordings are not necessarily trustworthy. In fact, the Lyrebird program might call into question the role of one's voice as strong evidence, particularly in court cases or it will even lead to deniability of any voice recording.

The company has already implemented a digital watermark to every voice recorded to stop any forgery. However, critics already point out how a misuse of such technology could lead to horrific political outcomes, if for example, the spoken words are potential threats of war or other powerful statements seemingly spoken by a well-known politician.

Still, the importance and impact of the new voice technology has already been recognized by other companies, such as Google and Baidu.

It remains to be seen what the companies actually do to minimize harm for their clients.