Come for fun in the sun – stay for tax advantages! Incline Village is a little bit of paradise on the Nevada side of Lake Tahoe — the skiing mecca — where on "Billionaires' Row," bold-face names like Michael Milken; Larry Ellison, Oracle co-founder; David Duffield, PeopleSoft co-founder; and Gene Pretti, CEO of investment managers Zazove, boast lavish mansions on the big blue lake.
Many affluent executives — especially those in California's tech and financial industries – prior to a major liquidation event, establish residency in Incline, a tony sun-drenched playground of winter and summer sports. Why do they come? Nevada has no state personal, business or corporate income tax. Besides, Incline Village is a gorgeous place.
ThinkAdvisor recently interviewed several Incline residents, including members of the financial services industry, to learn more about what this unincorporated town of just five square miles — a hop, skip and jump from San Francisco, Los Angeles and Silicon Valley — offers.
The big wirehouses all have offices there — Bank of America Merrill Lynch, Morgan Stanley, Wells Fargo and UBS — as do a number of small independent financial advisors. There is obviously a demand for wealth advice in Incline.
"People who want to protect their assets come up here. A lot of folks in California who have made a lot of money in tech and are selling their companies or vesting options want to do that as a Nevada resident," says entrepreneur Jameson Stafford, 42, founder-CEO of Elevate Blue, a tech startup studio he launched in Incline last October.
Big investors are not in short supply. "Active capital in town," including angel funding and "people with connections to venture capital" were not the least considerations in Stafford's decision to establish his incubator-like business in Incline, he says. Right now, Elevate Blue has 22 investors, half of whom are located in town, and the so-called "tech accelerator" has brought four startups nearly to the point of fundraising.
Financial advisors who may be flirting with the idea of relocating to Incline, a picturesque jewel on Lake Tahoe's North Shore with temperatures in the 70s and 80s June through October and rarely below the 20s in winter, will be interested in what Mike Kazmierski, president and CEO of the Economic Development Authority of Western Nevada (EDAWN), has to say:
"We've seen a surge in the financial sector. The state of Nevada is very friendly to the financial industry. Our regulations are not as stringent – we don't overregulate or micromanage. We have a favorable corporate environment."
Apple's money management corporation, Braeburn Capital, is based in Reno, presumably to avail itself of Nevada's tax hospitality.
Financial advisor Owen Hill, principal of North Lake Tahoe Financial Services, has lived in Incline for 33 years. He began his career as an FA with American Express Financial Advisors in Reno, then set up a fee-only shop in Incline in 1979. The certified financial planner does lots of financial planning and retirement planning.
"I feel like I don't have much competition here. I'm as busy as I can be. Bank of America and Wells Fargo aren't really what I call competitors because they don't do what I do [in serving clients]," says Hill, who is paid an hourly fee. With the Silver State's secrecy laws around corporations, Incline has a reputation as a tax haven where investors register shell corporations and fudge residency to escape tax liability. Nickname: "Income Village."
But "most [ploys] don't work because [for example] companies are taxed in the states where they earn their income," says George Ashley of Ashley Quinn, a CPA and consulting firm in Incline. The former revenue auditor with the state of California has catered to high-net-worth individuals there since 1979.
"There's a misconception that by incorporating your business in Nevada, somehow you can save other states' taxes even if you're doing business in those states. But there's absolutely no truth to that. If you're operating a business in California and reincorporate in Nevada, California is going to be able to tax you, whether you're incorporated in Nevada or on the moon!"
Ashley helps folks through the complex maze of establishing Nevada residency. The chief issue for Californians is how to shed their Golden State residency. For wealthy individuals, California state taxes are among the highest in the country.
The majority of Ashley's clients are approaching retirement age and moving to Incline in anticipation of a liquidity event, either selling large stock holdings in public companies or selling their closely held businesses.
Recently, Ashley arranged a phone meeting with a financial advisor in Palo Alto, California, who sought him out to determine: If he moves to Nevada but his clients are still mostly in California, will he have to pay California taxes?
Ashley's suggestion was to incorporate his practice, likely as an S-corp, thereby having the corporation earn his revenue. He would then be paid a high salary, earned in Nevada, the state where he would render his services.
"Basically, all the income that would be California source income [on which California bases tax liability] would be converted into Nevada source salaries and wages," Ashley explains.
In Incline Village, rich and famous entertainers, such as Beach Boys' singer Mike Love, luxuriate in privacy – away from the glitz and glare of L.A.
Now rumors are circulating that Tesla Motors CEO Elon Musk has just purchased a home in Incline. The firm has opened a big battery factory in the nearby Reno-Sparks region.
