• Tariff-driven business model changes may affect P.L. 86-272 protections and trigger throwback exposure.

• Throwback and throw-out rules can tax income in original states when destination states don’t impose income tax.

• Reshoring strategies tied to tariffs should be reviewed through a tax lens to manage nexus and apportionment exposure.

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Tariff uncertainty continues to challenge manufacturers and distributors. In response, many businesses are making fast, sometimes reactive decisions: shifting fulfillment strategies, diversifying suppliers, and reworking customer contracts. While these steps are often necessary to protect margin, they can have unexpected ripple effects — particularly when it comes to state income tax exposure.

As operations evolve, companies may unknowingly trigger state-level tax rules — including throwback and throw-out provisions — that can increase tax burdens in their home states. These rules are rarely top of mind during operational planning, but, in today’s climate, they should be.

What You Think You Know: Public Law 86-272 Protections

Public Law 86-272 (P.L. 86-272) has long been a helpful shield. It protects companies from state income taxes when their only activity in each state is asking for orders for tangible personal property, and when orders are approved and fulfilled from outside that state.

But P.L. 86-272 isn’t a blanket exemption — and it doesn’t prevent other states from taxing that same income through alternative mechanisms. That’s where throwback and throw-out rules come in.

In response to evolving e-commerce practices and the Multistate Tax Commission (MTC’s) revised Statement of Information on P.L. 86-272, several states have taken steps to limit the scope of this federal protection:

• California: Issued Technical Advice Memorandum 2022-01, aligning closely with the MTC’s guidance. The memorandum specifies that certain internet-based activities, such as post-sale help via electronic chat or email, may exceed the protections of P.L. 86-272.

• New York: Released draft regulations incorporating the MTC’s examples, showing that interactive internet activities could lose P.L. 86-272 immunity. The regulations are currently in draft form and subject to change.

• New Jersey: Announced a policy change to evaluate P.L. 86-272 protection on an entity-by-entity basis within combined groups, potentially altering the tax obligations of group members.

• Minnesota: Circulated a draft revenue notice in April 2023 proposing adoption of the MTC’s revised guidance, signaling a move towards stricter interpretations.

Businesses using these states should closely examine their internet-based activities to assess potential tax implications under the updated interpretations of P.L. 86-272.

Throwback and Throw-Out Rules: Why They Matter

In states that enforce these rules, untaxed sales into other states can be “thrown back” to the state of origin. Here’s how:

• Throwback rules require that if you’re not taxed on a sale in the destination state (for example, due to P.L. 86-272), the income from that sale must be reported in the state where the goods were shipped from.

• Throw-out rules remove untaxed sales from the apportionment formula, which can artificially inflate your tax burden in the states where you do pay.

These rules can significantly shift your tax liability — especially if you’re shipping into multiple states where you have no nexus but generate substantial sales volume.

In a recent engagement for a new client, we found that the location of the client’s warehouse was the largest factor in planning when potential throwback was considered. If the client relocated operations from a throwback state to a non-throwback state, the impact on the sales factor in the apportionment formula was neutralized. Setting up operations in a state with throwback led to an inflated sales factor in the apportionment formula and an unexpected state tax liability.

Having conversations before transactions is extremely valuable as proper planning can lead to potential tax savings.

Why Tariff Responses Are Quietly Changing Your Tax Profile

Tariffs aren’t just a global trade issue, they’re reshaping day-to-day decisions inside U.S. companies. For many manufacturers and distributors, the last year has been a series of rapid adjustments: rethinking where goods come from, how they’re delivered, and how quickly orders get to customers.

You may have shifted fulfillment closer to major markets to cut lead times. Maybe you’ve swapped offshore suppliers to sidestep new tariffs. Some companies have moved toward direct-to-consumer models, while others have quietly changed how customer orders are approved or supported.

Individually, these decisions may feel operational. But taken together, they have a real impact on how income is sourced and taxed across states. They can shift your exposure under throwback or throw-out rules — especially if your sales are increasing in states where you don’t currently have income tax obligations.

In short, what begins as a supply chain fix can evolve into a state tax issue — often without anyone realizing it until filing time.

Reshoring and Tax Considerations Go Hand in Hand

For many companies, reshoring has become a practical response to ongoing tariff uncertainty. Bringing operations back to the U.S. can reduce exposure to trade risk and improve supply chain control — but it also reshapes how and where your business is taxed at the state level.

Operational changes like relocation or restructuring can result in:

• Nexus creation in new states

• A shift in which sales are protected by P.L. 86-272

• Adjustments to your apportionment formula

• New reporting obligations, credits, or incentive opportunities

While every business has unique goals, involving tax professionals early in reshoring or fulfillment planning can help find potential exposure or compliance gaps — without delaying execution.

For example, when companies shift operations to avoid tariffs by opening new distribution hubs or adjusting shipping routes, the tax impact extends beyond coordination. These changes may influence how income is apportioned and whether certain sales fall under throwback or throw-out rules.

Tax professionals can support this process by:

• Modeling apportionment changes: Projecting how operational shifts affect sales factor weighting

• Evaluating throwback exposure: Estimating tax impacts from untaxed destination-state sales

• Finding new nexus points: Highlighting where physical or economic presence may trigger new filings

These insights help companies anticipate tax consequences tied to operational agility (without crossing into trade policy or legal advice). It’s about making sure strategic decisions don’t lead to unintended risk at the state level.

What You Can Do

Protecting your company from unexpected throwback exposure doesn’t require slowing down — it just takes coordination. Here are three practical steps to take now:

1. Evaluate protected sales: Identify where you’re relying on P.L. 86-272 and whether the destination states impose income tax.

2. Map shipping and fulfillment models: Understand where goods originate and whether origin states apply throwback rules.

3. Review apportionment exposure: Determine how throw-out rules or untaxed sales may affect your overall income distribution.

Tax May Not Be the Driver — But It’s in the Passenger Seat

You’re adapting to economic pressure with speed and creativity. But every supply chain move or sourcing shift may have tax implications your business didn’t see coming.

P.L. 86-272 may protect your business in some states, but it doesn’t stop others from taxing that income using throwback or throw-out rules. And when tariff-driven decisions lead to reshoring, the tax impact becomes even more layered.

Understanding how these state rules apply can keep your strategy intact and your risk exposure in check.

Where Tax Strategy Meets Business Agility

MGO is a national tax, audit, and consulting firm serving growth-minded organizations across manufacturing, distribution, and consumer sectors. Our State and Local Tax (SALT) team works with companies navigating complex operational shifts, helping you align your tax strategy with business agility.

From throwback analysis to nexus reviews, we bring practical insight that supports fast-moving decisions and long-term resilience. Talk to us today about how to keep your operations moving — and your tax strategy aligned.

The post How Tariff Changes Could Affect Your State Tax Profile appeared first on MGO CPA | Tax, Audit, and Consulting Services.

A Colorado-based design-build firm specialized in creating parking structures and other facilities for government entities, such as libraries, hospitals, and administrative buildings. Known for taking projects from concept to completion, the company handled both the design and construction phases. But because they didn’t own the completed structures, they assumed they couldn’t benefit from related tax incentives. 

Challenge 

While the firm regularly incorporated energy-efficient features into its designs, leadership was unaware that the energy efficient commercial building deduction under IRC Sec. 179D (179D) allowed primary designers of government-owned buildings to receive the tax benefit — even if they didn’t own the property. Without this knowledge, the company was missing out on valuable tax savings that could directly impact their bottom line. 

Approach 

Introduced to the company through a banking contact, MGO identified the opportunity and explained the 179D deduction in plain terms. At the time, the deduction offered up to $1.80 per square foot for energy efficiency improvements across three building systems: 

• Building envelope: Structural, exterior materials and insulation to optimize energy performance 

• HVAC: Systems meeting high efficiency ratings 

• Lighting: Energy-efficient lighting such as LED installations 

Because the firm acted as the primary designer for government-owned facilities, the government entity could allocate the deduction to them. MGO guided the client through the certification process — reviewing designs, materials, and energy calculations to confirm compliance with the required standards. 

Value to Client 

The project yielded approximately $250,000 in tax deductions — savings the company could reinvest in future projects. Beyond the immediate benefit, the engagement opened the firm’s eyes to an incentive they had never considered. They continued to apply 179D opportunities to other qualifying projects, creating an ongoing tax savings strategy that complemented their core business. 

Helping You Capitalize on Hidden Opportunities 

Tax incentives can be complex — and easy to overlook without the right guidance. MGO’s tax credits and incentives professionals can help you identify and claim the benefits you’ve earned.  

Contact our team today to find out how we can help you uncover savings to strengthen your business. 

The post Case Study: Unlocking Tax Savings for a Government Structure Designer  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• The new tax bill introduces a graded holding period for QSBS, with gain exclusions based on how long shares are held.

• The fixed gain exclusion under Section 1202 increases from $10 million to $15 million for qualifying shares issued after July 4, 2025.

• The asset cap for calculating the 10X adjusted basis exclusion rises from $50 million to $75 million, expanding potential gain exclusions for shareholders.

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The One Big Beautiful Bill Act, signed into law July 4, 2025, makes three significant changes to Section 1202. These changes affect the five-year holding period required and the amounts of gain exclusion under the law.

Here are answers to frequently asked questions about these changes:

How was the holding period requirement revised?

Under prior law — and for qualified small business stock (QSBS) shares prior to the Act taxpayers must hold QSBS shares for five years from the date of issue for any gain exclusion which is 100%.

For QSBS shares issued after the date of the new law, there is a so-called “graded” holding period. Thus, if you hold shares for three years from the date of issue, the gain exclusion is 50%. If four years from the date of issue, the gain exclusion is 75%. If shares are held for five years, which is consistent with prior law, the gain exclusion is the longstanding 100%.

This change affects both the holding period and the amount of gain excluded depending on the applicable holding period achieved.

Has the gain exclusion increased under the new law?

Yes, Section 1202 gain exclusion is based upon the greater of (a) $10 million (the “fixed” amount) or (b) 10 times adjusted basis in the qualifying QSBS shares (the “10X” amount). The new law makes changes to both elements of this gain exclusion calculation.

What is the change to the $10 million exclusion?

For qualifying shares issued after the enactment date of the new law, the “fixed” gain exclusion amount is now $15 million. Further, this $15 million amount is indexed for inflation for years beginning after 2026.

What is the change to the 10X adjusted basis gain exclusion?

The 10X exclusion provision involves the fair market value of the QSBS corporation’s assets at the time it issues qualifying shares. If the assets at this date are valued at, hypothetically, $27 million, then the 10X adjusted basis element yields an aggregate gain exclusion of $270 million for all shareholders.

Existing law was based on an asset cap of $50 million. The new law increases that cap to $75 million. Thus, hypothetically, if a corporation had an asset valuation upon conversion after the passage of the new law of $69 million, the aggregate gain exclusion for shareholders would be $690 million. This example reflects an increase in total gain exclusion by $190M over the prior maximum exclusion of $500M.

Like the $15 million element of gain exclusion, this asset provision is also indexed for inflation for years after 2026.

What New Section 1202 Changes Mean for You

These increases in gain exclusion expand the number of eligible entities that may consider a 1202 conversion. The increases also offer a significant expansion of the basic gain exclusion and continued adjustment upwards due to inflation indexing.

These are positive changes for development stage enterprises, the capital allocation flowing to them, and the entrepreneurs and investors involved in such businesses.

How MGO Can Help

Understanding the new Section 1202 rules is key to accessing available tax benefits — especially as you plan for growth, fundraising, or a future exit. Our tax professionals can help you assess eligibility under the revised law, develop documentation strategies, and prepare for investor reviews, audits, or transactions. Contact us today to learn how we can support your goals.

The post New Tax Act Changes to Qualified Small Business Stock Under Section 1202 appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Beginning in 2025, domestic R&D expenses under Section 174 will once again be immediately deductible, offering potential cash flow benefits.

• Companies that previously amortized R&D costs may be able to file Form 3115 and adjust past filings to recapture deductions.

• With IRS scrutiny rising and state tax rules varying, proactive planning and clear documentation are critical to maximizing benefits and minimizing risk.

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The return of immediate research and development (R&D) expenses under Section 174 is one of the most consequential shifts in the 2025 tax landscape — yet many mid-market companies have not updated their plans to reflect the change. From documentation of risk to transition-year amendments, these are the most common questions we’re hearing from finance and tax leaders:

What exactly is changing with Section 174 in 2025?

Beginning in tax year 2025, domestic R&D expenditures will once again be immediately deductible in the year incurred. This change reverses the five-year amortization requirement introduced under the Tax Cuts and Jobs Act (TCJA). However, current IRS guidance shows that amortization will still apply to certain foreign R&D expenses unless more legislative or regulatory relief is provided. Businesses should evaluate both domestic and international R&D classifications in preparation for the shift.

Will this improve our 2025 cash flow position?

It may — provided the new expensing rules are properly integrated into your financial and tax forecasting. Immediate expensing of domestic R&D reduces taxable income in the same year the costs are incurred, lowering overall tax liability. Companies that have not yet adjusted their estimated tax payments or quarterly modeling may be overstating liabilities and missing near-term cash flow efficiencies.

Can we amend our 2022–2024 returns based on this update?

In some cases, yes. Companies that previously amortized Section 174 expenses may be eligible to file Form 3115 to change their accounting method and apply a Section 481(a) adjustment. This could allow for partial or full deduction of deferred R&D costs in 2025. However, the benefits and eligibility vary depending on your current method, the types of R&D involved (domestic versus foreign), and whether returns were previously extended, filed, or audited. A review of your filing history and applicable IRS guidance is necessary before proceeding.

Currently, there is uncertainty as to whether Form 3115 will be required to change the method from capitalization to expensing of these costs. The IRS needs to provide guidance in this area and whether or not small businesses that have average annual gross receipts of under $31 million that have not filed their 2024 tax return yet will need to capitalize their R&D costs on the 2024 tax return and then file an amended return to expense these costs.

Should we still separate costs that qualify for the R&D tax credit?

Yes — and this distinction is critical. While Section 174 requires capitalization (or expensing, beginning in 2025) of all R&D costs, the R&D tax credit under Section 41 applies to a narrower subset of those costs. Documentation should clearly delineate which expenditures qualify for credit versus which are deducted under Section 174. Maintaining separate records supports credit claims and mitigates examination risk.

Will this affect our state tax filings?

It may. Some states conform to federal Section 174 treatment automatically, while others decouple and apply their own rules. This can create differences in how R&D is deducted at the state level. For companies working in multiple states, it’s important to review each jurisdiction’s treatment of R&D expenses and track how decoupling may affect apportionment, deductions, and compliance requirements.

What are CFOs and tax leads overlooking most frequently?

In our recent tax reform webinar polling, we asked CFOs and tax leaders how Section 174 has impacted their company’s R&D and tax planning. Their responses:

• 17% said Section 174 changes had a significant impact

• 24% said they made some adjustments

• Over 50% indicated the impact was minimal or unclear

This suggests a gap between policy changes and planning execution. Many companies have not yet updated forecasts or examined whether transition-year filings could improve cash position. As a result, opportunities to unlock deductions or perfect quarterly payments may be unrealized.

What actions should we be taking now? 

Section 174 expensing should be addressed proactively during 2024 planning and Q3-Q4 reviews. Start by reviewing how R&D is treated in your current financial models and incorporate the updated expense rules into your 2025–2026 forecasts. If you amortized expenses in prior years, evaluate whether filing a method change (Form 3115) could allow you to recapture deductions, depending on what guidance is issued by the IRS from a procedural standpoint.

It’s also essential to keep clear and contemporaneous documentation — especially if you’re claiming R&D credit or have international R&D exposure. The IRS has increased scrutiny around improper claims and substantiation. Additionally, continue checking IRS guidance related to foreign R&D and coordinate any tax position changes with your broader strategy and compliance obligations.

Strategic Considerations

Section 174 expensing brings welcome relief for businesses investing in innovation, but it also introduces complexity — especially for companies with multi-year R&D planning or global footprints. By updating forecasts, assessing historical filings, and aligning documentation now, CFOs and tax leaders can better prepare for the 2025 transition and minimize risk. Early action supports stronger compliance, cash management, and credit positioning in an evolving regulatory environment.

How MGO Can Help

Our tax professionals have deep experience navigating the complexities of Section 174 and R&D credits. Whether you need help modeling the impact of immediate expensing, evaluating a method change, or separating costs for credit eligibility, we can guide you through every step. Contact us today to align your R&D strategy with the latest tax reforms and uncover potential savings.

The post Answers to Your FAQs About Section 174 R&D Expensing appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Aligning international tax strategy with global supply chain planning helps reduce tax exposure, capture incentives, and increase operational agility.

• Ignoring exit taxes, transfer pricing, or cross-border compliance risks can create multi-year tax liabilities, penalties, and restructuring costs.

• Involving tax leaders early in global supply chain restructuring leads to smarter decisions, improved timelines, and long-term business scalability.

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In today’s dynamic global business environment, aligning your organization’s international tax planning with supply chain planning strategy isn’t just a best practice — it’s essential. From shifting trade relationships and tariffs to increased scrutiny from global tax authorities, your company’s ability to make tax-informed supply chain decisions can directly impact cash flow, risk profile, and competitive positioning.

Here’s how your tax and operations leaders can collaborate to build a globally agile structure, and why international tax strategy must be at the core.

Why International Tax Strategy Must Drive Global Supply Chain Decisions

Mid-market organizations are rethinking their operational footprint — reshoring, nearshoring, or diversifying supplier bases. But without a clear international tax lens, these shifts can trigger unintended consequences: exit taxes, loss of treaty benefits, or transfer pricing risks.

A tax-aligned supply chain strategy allows you to:

• Forecast and manage global tax liabilities

• Capture incentives and avoid inefficiencies

• Make faster, more informed decisions across jurisdictions

Integrate International Tax Early in the Planning Process

Waiting until after operations moves are underway can leave your business with a fragmented tax structure that requires costly remediation. This is especially critical for mid-market companies operating across the U.S., EMEA (Europe, the Middle East, and Africa), or APAC (Asia-Pacific) regions, where cross-border structuring can create unexpected tax burdens. Tax should be involved from the outset — modeling scenarios across jurisdictions, projecting costs, and identifying risk exposure.

For example:

• Moving production from China to Mexico might avoid certain tariffs — but could expose your business to exit taxes in China or permanent establishment risk in Mexico.

• Relocating intellectual property (IP) from Ireland to the U.S. might trigger a deemed disposal event under local exit tax regimes.

Technology platforms and predictive models can help tax teams simulate these impacts before major decisions are finalized.

Strengthening Transfer Pricing and Global Compliance

Global tax authorities are tightening enforcement — especially around transfer pricing and cross-border restructurings. If your tax structure no longer reflects your actual operations, you may face:

• Double taxation

• Disallowed deductions

• Penalties and disputes

Update your transfer pricing documentation to reflect the new supply chain model. Intercompany agreements, economic analyses (including IP valuation), and jurisdictional reporting must all align with your post-transition structure.

Unlock Incentives Through Coordinated Strategy

Supply chain shifts aren’t just about avoiding risk — they’re also an opportunity to capture new value. Jurisdictions including the U.S., Canada, Mexico, and certain European Union countries offer targeted tax incentives for reshoring, green investment, R&D, or job creation.

If these incentives aren’t launched early in planning, your business could miss out. Tax should coordinate with operations and finance teams to explore:

• U.S. federal and state credits for manufacturing investment

• R&D credits tied to newly localized functions

• Foreign tax credits or deferrals available in new jurisdictions

Create a Globally Scalable Tax Playbook

Reactive tax planning doesn’t scale. As your organization enters new markets, integrates M&A targets, or adds new suppliers, your international tax model must be flexible and supported by a clear global tax governance framework.

A forward-looking playbook helps you:

• Align tax structure with business decisions

• Build global tax governance into location changes, IP moves, and new legal entities

• Reduce friction during rapid growth or operational transformation

The Path Forward: Strategy, Agility, and Risk Reduction

International supply chain restructuring can unlock efficiency, improve margins, and reduce geopolitical exposure — but only if tax is at the table from the start.

Organizations that treat tax as a strategic partner rather than a compliance function are better positioned to navigate volatility and create long-term value.

How MGO Can Help

At MGO, we help companies navigate the complexities of global tax strategies and cross-border operations. From international structuring and transfer pricing to tax technology and incentive optimization, we serve clients across manufacturing, life sciences, technology, and more.

We work closely with CFOs and tax executives to align tax planning with business transformation — supporting global agility, regulatory compliance, and strategic growth. Let’s talk about how your international tax strategy can support your global operations.

The post How to Align Your Global Supply Chain and International Tax Strategy appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Key Takeaways: 

• For decades, P.L. 86-272 protected activities like door-to-door sales and attending trade shows from taxation outside a company’s home state. 

• With more business conducted online, states want to expand the list of unprotected activities to include offering digital tools like chatbots and online portals. 

• Legal challenges are slowing down new regulations, but we expect enforcement efforts to continue to evolve. 

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Public Law 86-272 (P.L. 86-272) has played a defining role in shaping the boundaries of state income taxation since its passage in 1959. This federal statute prohibits U.S. states from imposing a net income tax on businesses with in-state activities limited strictly to the solicitation of orders for sales of tangible personal property, provided those orders are sent outside the state for approval and fulfillment. 

Historically, this law shielded out-of-state sellers with minimal physical presence in other states from income tax obligations. A classic example is a door-to-door salesperson who travels into a state to solicit orders but does not maintain an office, inventory, or engage in other business operations locally. 

Over time, the Multistate Tax Commission (MTC) published a widely-referenced list of protected activities — which included limited engagements such as attending trade shows for fewer than seven days or carrying product samples without taking orders on the spot. 

However, commerce has evolved since the 1950s. Business models today often blur the lines between physical presence and digital engagement. And in this increasingly digital marketplace, states are re-evaluating what it means to “solicit orders” and what activities should fall outside the protections of P.L. 86-272. 

Online Activities and Expanding Interpretations 

Modern business interactions rarely resemble the sales strategies in place when P.L. 86-272 was enacted. E-commerce sites allow for real-time order processing, customer service through chatbots, product recommendations powered by algorithms, and interactive tools that go far beyond simple solicitation. Recognizing these changes, tax authorities have begun to update their interpretations of unprotected activities to include many actions a company can perform digitally without a single employee stepping foot in the state. 

In 2021, the MTC approved revisions to P.L. 86-272 — including a new section on activities conducted via the internet. This section states:  

“As a general rule, when a business interacts with a customer via the business’s website or app, the business engages in a business activity within the customer’s state.” 

It also provided eight examples of internet-based activities that, if not de minimis, are unprotected. Some examples include using chatbots to provide post-sale assistance, placing “cookies” on customers’ computers, and allowing users to submit credit card applications or job applications through the website. 

A few states have indicated they will follow the 2021 statement but have not yet issued updated state regulations. Only a few states have issued formal guidance on unprotected internet activities. 

However, these interpretations are controversial. Taxpayers and business advocacy groups argue that states are stretching P.L. 86-272 beyond its original scope. States, on the other hand, maintain that the law must adapt to reflect a marketplace that no longer relies on door-to-door sales or mailed catalogs. 

A Patchwork of State Responses 

States are moving forward at different paces. Several efforts to formally incorporate expanded definitions of unprotected internet activities into regulation or statute have encountered legal and procedural obstacles. 

For example, New York finalized its regulations, which broadly interpreted unprotected digital activities in December 2023. These regulations were quickly challenged in court. Recently, a New York lower court upheld the validity of the regulations while limiting its enforcement to the period following their publication in December 2023. 

In California, enforcement of the Franchise Tax Board’s revised interpretation of PL 86-272 stalled following a lawsuit challenging the state’s guidance on procedural grounds. The state is expected to rework and reintroduce the effort in response. 

When New Jersey introduced proposed regulations incorporating parts of the MTC’s new guidelines on how PL 86-272 should apply to modern forms of business and customer interactions, opposition quickly followed. The same organization challenging California’s efforts issued a public statement objecting to New Jersey’s proposal and indicated litigation would follow if the rules were finalized. On June 16, 2025, New Jersey finalized its regulations despite the public comments in opposition. 

Clearly, there is tension between evolving interpretations and longstanding statutory protections. The outcome of these legal battles could shape state tax enforcement policies for years to come. 

How MGO Can Help 

For companies engaged in interstate sales and operating in the digital space, navigating the changing tax landscape can be challenging. Historically safe activities may now expose you to state income tax filing obligations if those activities fall outside the scope of PL 86-272 protections. In some cases, even simple customer interactions on a website could trigger nexus under newer interpretations. 

For that reason, it’s crucial to work closely with a state and local tax (SALT) advisor who closely monitors regulatory developments in all 50 states and regularly evaluates your business practices to assess exposure risks. 

Our dedicated SALT team can review how you interact with customers in each state, track where you offer digital tools like chatbots or application portals, and provide proactive guidance when expanding into new states or launching new platforms. 

Reach out to our team today to get clarity on the evolving boundaries of PL 86-272 and prepare for a more nuanced and potentially riskier state tax compliance landscape. 

The post The Future of Public Law 86-272 in the Digital Age appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Many estate plans are outdated, improperly executed, or non-existent.

• Trusts can protect family assets and support responsible inheritance.

• Open communication with heirs about roles and expectations can reduce future conflicts and confusion.

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According to a survey from LegalShield, nearly 60% of U.S. adults don’t have a will — even though 90% acknowledge they need one. Even among those with estate planning documents in place, 22% have never updated them. They may have missing or incorrect beneficiaries or improperly titled assets, diminishing the legal protection those documents were designed to protect from probate.

These numbers tell us that a significant number of families are unprepared to transfer wealth effectively or protect it for future generations. Many beneficiaries also mistakenly believe that what they inherit will be taxed as income — a common misconception that can add unnecessary confusion to the process.

For families looking to preserve wealth while empowering heirs to manage their inheritance responsibly, trusts can offer long-term benefits when implemented with care and updated regularly. In this article, we’ll examine several potential trust structures and provide guidance to help your family achieve its wealth preservation goals.

Why Trusts Matter for Generational Wealth

A well-structured trust can:

• Safeguard assets from creditors, lawsuits, and potential divorces

• Provide a framework for responsible access to funds

• Support heirs with varying levels of financial maturity

• Maintain family intentions across multiple generations

• Reduce the administrative burden on surviving family members

But the real value lies in thoughtful design and consistent maintenance. Setting up a trust isn’t a one-time activity; you must revisit and update it periodically to reflect changes in your growing family, financial circumstances, and state laws.

Here are a few different trust structures that can help you achieve your goals:

Dynasty Trusts

A dynasty trust can last multiple generations — potentially hundreds of years in some cases. These trusts keep inherited assets outside of each heir’s taxable estate, reducing exposure to estate taxes over time. They can also be structured to distribute income or principal according to specific rules, helping beneficiaries avoid overspending or becoming financially dependent on the trust.

These trusts help preserve the value of large estates across generations by shielding inherited assets from estate taxes, creditors, or future divorces. They also allow grantors to express family values through distribution requirements — like completing college or maintaining employment.

Because a dynasty trust can span decades, it’s crucial to choose a trustee (or succession of trustees) with clear oversight protocols.

Spendthrift Trusts

For families concerned about a beneficiary’s spending habits or personal stability, a spendthrift trust adds another layer of protection. These trusts restrict a beneficiary’s ability to access or assign their interest in the trust to others, preventing them from squandering the funds or using them as collateral for personal loans.

Spendthrift provisions can stand alone or be added to a broader irrevocable trust. They are especially helpful when a beneficiary struggles with addiction, financial discipline, or legal troubles.

This type of trust requires a trustee who can exercise discretion over distributions, so it’s usually best handled by a neutral third party rather than an heir.

Irrevocable Trusts

An irrevocable trust permanently transfers ownership of assets out of the grantor’s estate. Once established, the grantor no longer has control over the assets and changes generally require court approval or beneficiary consent.

Though less flexible than revocable living trusts, irrevocable trusts are often used to reduce estate tax exposure, protect assets from lawsuits or future claims, or facilitate Medicaid planning or other eligibility-based programs.

They can also hold life insurance policies, real estate, or business interests, helping families plan for liquidity and facilitate a smooth transition across generations.

Addressing Common Estate Planning Pitfalls

Even when a trust is in place, several issues can undermine its effectiveness:

• Improper titling of assets: Assets must be formally retitled into the name of the trust. A mismatch between legal documents and account ownership may derail the estate plan.

• Beneficiary adjustments: Make sure the beneficiary designations on accounts like life insurance and retirement are aligned with the beneficiary on the trust. Mismatches are common and can undermine your estate plan.

• Outdated documents: Wills and trusts prepared a decade ago most likely do not reflect your family’s current situation. Review and update the plan after life events like marriage, divorce, births, deaths, disability, or significant changes in assets.

• Lack of preparedness: Set to take place over the next two decades, the Baby Boomer generation’s “Great Wealth Transfer” will move an estimated $84 trillion to spouses, dependents, and charities. Most heirs have no idea how much they will inherit, or even where to find estate documents in the event of a parent’s death or incapacity. At a minimum, connect heirs with the estate attorney who has the documents.

• Lack of communication: In many cases, family conflicts arise not from a lack of resources but from a lack of communication. Parents who explain their estate decisions ahead of time, such as why they selected a particular child to be an executor or trustee or how real estate will be divided, help reduce confusion and resentment. Including a written letter of intent with estate documents provides additional context beyond the legal language.

• Naming multiple co-executors: Many parents name two or more adult children as co-executors or trustees to be “fair”. In reality, this creates gridlock when siblings can’t agree on next steps. If you believe putting one sibling in charge will breed conflict, consider naming an independent trustee — like a corporate trustee service — instead.

How MGO Can Help

Trusts can protect wealth, but the real protection comes from thoughtful planning, proactive communication, and timely updates.

At MGO, we work with families to assess current estate tax exposure and identify and design appropriate estate tax minimization structures to align with your ultimate goal. We also help facilitate family discussions and connect heirs with the right advisors to assist in smooth transitions of estates.

Whether you’re establishing a trust for the first time or reevaluating an outdated estate plan, our team can provide insight into trust strategies tailored to your family’s values, financial goals, and long-term objectives.

Contact us today to explore how we can support your family with your estate planning.

The post Trust Structures to Protect Your Family Wealth and Empower the Next Generation appeared first on MGO CPA | Tax, Audit, and Consulting Services.

Bill Penczak: Mike, when we talk about MGO’s tax strategy for clients, credits come up a lot. Why are they such a focus? 

Michael Silvio: Because they’re often overlooked, and they can be game changers. Credits like R&D, cost segregation, 179D, and energy incentives can mean real money in clients’ pockets. We don’t just file tax returns; we look for ways to reduce taxable income through proactive planning. 

Bill: Let’s start with R&D credits. A lot of people think they’re only for high-tech companies. How do they apply more broadly? 

Mike: That’s a big misconception. We’ve helped manufacturers, food processors, even auto part designers claim R&D credits. The test is whether you’re solving technical problems or improving products and processes, not whether you wear a lab coat. One of my favorite examples: two guys who started an aftermarket auto parts business landed a contract with a major automaker. We found them more than $750,000 in R&D credits over three years, and that helped keep their business alive during the 2008 downturn. 

Bill: That’s powerful. What about 179D? Can you break that down? 

Mike: Sure. 179D is a deduction for the energy-efficient design of buildings and is available to developers, designers and builders that own these buildings. It is also available for the primary designers of government structures — think schools, libraries, hospitals. Most people assume you have to own the building, but if you’re the designer, you can also qualify. We had a design-build firm that had no idea this was even an option, and we helped them secure a $250,000 deduction they wouldn’t have otherwise seen. Keep in mind that under the “Big Beautiful Bill” this incentive sunsets as of June 20, 2026.  Construction must begin before this date to qualify for this incentive. 

Bill: And cost segregation. How does that fit in? 

Mike: Cost seg accelerates depreciation for real estate owners by identifying components that can be written off faster. We do that work, which is rare for a firm our size. That means we can act quickly when clients buy or renovate a property, and we often tie it into other credit strategies to create more value. 

Bill: Sounds like planning ahead is key. 

Mike: Exactly, always. I was just on a call with a client who’s running out of depreciation and facing big rental income. We didn’t just tell them to buy another building; we connected them with passive-loss investments that offset the income legally. It’s that kind of strategic, creative thinking that makes a difference. 

Bill: So, these aren’t just tax tricks — they’re real financial tools? 

Mike: 100%. And we tailor them to each client. No one-size-fits-all here. It’s about understanding the business and finding opportunities others might miss. 

Bill: Appreciate the insights, Mike. 

Mike: Always a pleasure, Bill. Let’s do it again. 

Want to see what tax credits might be hiding in your business? Let’s start a conversation. 

The post MGO Stories: Thinking Outside the (Tax Credit) Box appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• High-net-worth individuals often have multiple income streams and need to coordinate tax strategies across entity types and asset classes.

• The proper structuring of investments can often have a significant positive impact on the economic gain realized.

• Start to plan at least 18 to 24 months before the sale of a closely held business to ensure proper structure, boost business valuation, and improve after-tax outcomes.

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You’ve built significant wealth. As a result, taxes have become more than just a line item in your budget — they’re a force that can quietly erode your returns, complicate your business exit, and reshape your legacy.

Fortunately, you have a window of opportunity to take control. Proactive tax planning can help you align today’s strategies with tomorrow’s vision — whether you’re juggling multiple businesses, eyeing a potential sale of an investment, or preparing to transition out of your company.

This article examines how to approach tax planning to maximize your earnings and stay ahead as tax laws shift.

Understanding the Tax Implications of Different Income Streams

The average high-net-worth individual typically has around seven income streams. These can include salaries and wages, pensions and annuities, interest, dividends, capital gains, rental and royalties, business profits, and more.

Each type of income can face different tax rules and rates — which makes planning across all sources critical.

For example, you might defer income into years where your marginal rate is lower (such as in retirement or during a gap year after a business sale), accelerate deductions in high-income years to offset earnings, or swap investment property using a 1031 like-kind exchange to defer recognition of capital gains.

Strategically harvesting investment losses can also help manage bracket thresholds and your exposure to the net investment income tax (NIIT).

Also, consider how you generate income through various entities. Sometimes, an investment’s structure can have a greater impact on tax outcomes than the investment itself.

For example, at the federal level, income from a C corporation is taxed at both the corporate (21%) and shareholder levels (up to 23.8% on dividends), resulting in effective tax rates that leave less than half of earnings in your control once you layer in state taxes. In contrast, S corporations and other passthrough structures may offer favorable pass-through treatment and qualify for a QBI deduction (20% of the business income).

Planning for Business Exits with Taxes in Mind

Selling a closely held business may be a once-in-a-lifetime event. The company may make up a large portion of your net worth and, with so much at stake, the tax treatment of the sale can dramatically alter the outcome.

We recommend that business owners start preparing for a sale at least 18 to 24 months in advance. But even if a sale isn’t on the immediate horizon, business owners should operate as though the company is always “for sale”. Opportunities often arise unexpectedly and financials that aren’t sale-ready can delay or derail a deal. Minimize all working capital kept in the business for at least the year preceding a sale. You will not be paid any more money for a business with a ton of working capital versus the minimum.

A knowledgeable CPA can help you identify red flags, clean up reporting, and implement strategies that improve the business’s financial profile so you’re prepared to act when the timing is right.

A longer timeline gives you runway to halt unnecessary reinvestment and boost earnings before interest, taxes, depreciation, and amortization (EBITDA) — directly affecting the sale price and reducing excess working capital.

Structuring the Deal

The structure of a sale plays a crucial part in the tax treatment of potential gains. Many sales of closely held businesses take the form of asset sales rather than stock sales, mainly because asset purchases offer more favorable terms to the buyer. When a buyer purchases the company’s assets, they avoid inheriting legacy liabilities and can allocate the purchase price among depreciable assets for future tax benefits.

However, even for transactions legally structured as a stock sale, buyers may use a Section 338(h)(10) election to treat the deal as an asset sale for tax purposes. This hybrid structure provides the buyer with the benefits of an asset acquisition while technically acquiring the stock.

From the seller’s perspective, both methods can yield similar tax outcomes. The gain from the sale typically flows through to the owner as a capital gain. If any portion of the purchase price is allocated to depreciated fixed assets, there may be a small amount of ordinary income due to depreciation recapture. As long as the owner is actively involved in the business at the time of sale, it’s generally exempt from the 3.8% NIIT.

In some cases, especially in deals involving private equity, buyers want to retain the existing owner’s involvement, so the buyer may acquire a majority interest and require the seller to continue managing the business. This is often structured through an F-reorganization, which allows for tax deferral on the portion of the business not immediately sold.

Another common feature of modern deals is the earnout: a portion of the sale price that’s paid over time based on the company’s future performance — usually tied to EBITDA targets. Earnouts can create significant tax planning opportunities and risks when they extend over several years.

Finally, for owners concerned about a large tax hit, investing the gain into Qualified Opportunity Zone (QOZ) funds can provide a way to defer capital gains and potentially reduce future taxes. This benefit was made permanent by the One Big Beautiful Bill Act.

Working closely with a CPA who understands these nuances allows you to align the terms of the sale with your broader financial goals.

Potential Section 1202 Tax Saving Strategies

Selling qualified small business stock (QSBS) may qualify for Section 1202 treatment. This tax provision allows individuals to avoid paying taxes on up to 100% of the taxable gain recognized on the sale of QSBS. The gain exclusion is worth $10 million or 10 times investment basis and applies to C Corporation stock issued after August 10, 1993, and before July 4, 2025, held for at least five years.

The recently passed One Big Beautiful Bill Act increases the Section 1202 exclusion for gain to $15 million or 10 times basis for QSBS acquired after July 4, 2025, and held for at least five years. There is a reduced gain excluded if the stock issued after July 4, 2025, is only held for three years (50% exclusion) or four years (75% exclusion).

Section 1202 creates an effective tax rate savings of up to 23.8% for federal income tax, and many states follow the federal treatment — resulting in even more substantial savings.

How MGO Can Help

Tax outcomes are rarely 100% predictable, but we can help shape them with foresight and planning.

Now is the time to take a closer look at your income, investments, and business interests. Don’t wait until the tax code changes. Schedule a planning session with an MGO advisor to start building a roadmap today.

The post Proactive Tax Planning Strategies for Exiting Your Closely Held Business appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Cross-border supply chain changes can trigger exit taxes, compliance penalties, and tax inefficiencies if not planned with international tax in mind.

• Proactive coordination between tax and operations helps reduce global tax exposure, unlock incentives, and speed of execution across jurisdictions.

• Country-by-country reporting (CbCR), transfer pricing alignment, and entity structuring are critical to avoiding double taxation and audit risk.

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Global supply chain changes are rarely just operational — they’re deeply connected to international tax exposure. From exit taxes and transfer pricing risks to missed incentives and compliance hurdles, tax leaders must be part of the decision-making process from day one.

6 Supply Chain and International Tax FAQs

In this FAQ, we answer the most frequent questions our clients ask when planning cross-border restructurings, relocations, or supplier changes — so your business can move faster, smarter, and with fewer tax surprises.

1. What are the international tax risks when shifting supply chain operations?

Relocating manufacturing, coordination, or key functions across borders creates exposure to multiple tax regimes. Common risks areas include exit taxes, transfer pricing, permanent establishment issues, and customs duties. Without early tax planning, these costs can result in long-term liabilities or missed opportunities.

2. How do exit taxes work, and when do they apply?

Exit taxes are levied when valuable functions, assets, or risks — such as intellectual property (IP), staff, or customer relationships — are moved between countries. For example, transferring IP from Ireland to the U.S. may trigger a deemed disposal under Irish tax law. These taxes can be significant and must be modeled early in any restructuring.

3. What should I know about transfer pricing when moving suppliers or functions?

Transfer pricing must reflect your current business operations. If you shift suppliers, relocate production, or move functions without updating your intercompany pricing, tax authorities may challenge the arrangement — leading to adjustments, penalties, and double taxation. All intercompany agreements and transfer pricing documentation must align with your post-change structure.

4. Are there tax incentives available when reshoring or nearshoring operations?

Yes. Countries such as the U.S., Canada, Mexico, Ireland, and Singapore offer targeted tax credits and incentives for domestic investment, clean energy transitions, and R&D localization. Examples include:

• U.S. federal/state manufacturing credits

• Job creation and infrastructure grants

• R&D and capital investment incentives

However, these must be planned early to capture their full value.

5. How can technology help manage international tax complexity?

Tax technology platforms help model jurisdictional impact, manage data for compliance reporting (like CbCR), and simulate the tax effects of operational changes. Integrated enterprise resource planning (ERP) and tax systems also improve visibility and reduce risk in real-time decision-making.

6. What role should international tax play in supply chain strategy?

International tax teams should be involved from the start of any supply chain realignment. Embedding tax early helps you find risks, unlock incentives, and structure deals for long-term compliance and flexibility. A reactive approach often results in avoidable costs, delays, and exposure.

Next Steps for Smarter Global Planning

Successfully navigating international tax risks requires more than compliance — it takes a forward-thinking approach aligned with your global operations. At MGO, we support CFOs and tax leaders with international tax planning, transfer pricing analysis, and incentive identification to help reduce exposure and drive business agility.

Learn more about our International Tax and Transfer Pricing services or contact us to discuss how we can support your global growth strategy.

The post Frequently Asked Questions About International Tax and Supply Chain Realignment appeared first on MGO CPA | Tax, Audit, and Consulting Services.