|
September 14,
2009
Dear Professional Advisor,
Greetings from
Immanuel St. Joseph's Foundation. I am pleased to share with you the
latest news from Washington, tax law updates, PLRs, Case Studies and
timely articles. We provide this weekly eNewsletter and web site to
our professional advisor friends as a complimentary service.
Please feel free to call me at 507-385-2932 if I can run a proposal
or be of assistance to you.
Cordially
yours,
Bob Weiss
Immanuel St. Joseph's Foundation
1125
Mulberry St.
Mankato, MN 56001 |
| |
| Immanuel St. Joseph's
Foundation |
September 14,
2009 |
GiftLaw Weekly eNewsletter -
September 14, 2009
- WASHINGTON
HOTLINE
- PLR THIS
WEEK
- CASE OF THE
WEEK
- ARTICLE OF THE
MONTH
|
WASHINGTON HOTLINE
Tax Quote of the Week
"It is impossible
to simplify the tax code without at the same time affecting the
fairness of the tax code."
-- William G. Gale
Baucus
Healthcare Plan Favors Co-Ops
Following an address by
President Barack Obama to the members of Congress on September 9,
2009, Senator Max Baucus (D-MT) promised to present his healthcare
bill to the Senate Finance Committee by the end of
September.
Senator Baucus had released a framework for his
proposed bill earlier in the week. He had been meeting with both
Democratic and Republican Senators (a group they call the gang of
six) and gave the other five Senators opportunity to provide
feedback on his bill. He indicated that there had been substantial
input from both the Democratic and Republican members of his
group.
The two most significant parts of this plan are a
commitment to healthcare co-ops as recommended by Senator Kent
Conrad (D-ND) and a decision to tax high-cost healthcare plans. The
tax on high-cost healthcare plans will be 35% of the amount that
exceeds $8,000 for individuals and $21,000 for a family plan. The
35% tax will be paid by healthcare insurance companies.
The
total cost over 10 years for the Baucus healthcare plan is
approximately $900 billion. Part of the cost will be covered by the
tax on high-cost insurance plans and the balance will come from
savings in Medicare and Medicaid costs.
Grassley Urges
Bipartisan Bill
Senator Charles Grassley (R-IA) is the
Ranking Member on the Senate Finance Committee. He has been involved
in "hundreds of hours" of meetings with Senator Baucus to "grapple"
with the complexities of healthcare.
In response to the
announcement by Senator Baucus that he was moving forward with a
healthcare bill, Senator Grassley noted, "Healthcare is so
far-reaching, major changes should not be enacted without
broad-based bipartisan support. In addition, the bills presented so
far in Congress haven't even met the major goal of lowering health
care costs. It's obviously time for a new kind of effort that would
focus on fixing what's broken and not make things
worse."
Senator Grassley then listed five areas that he
suggests the healthcare bill should focus on. These are as
follows:
1. Affordability -- There should be
competition within the medical insurance industry. Market exchanges
and the ability for the companies to sell insurance policies across
state lines will enhance affordability.
2. Consumer
Protections -- The bill should include new protections to limit
the ability of insurance companies to refuse to provide coverage or
to cancel policies.
3. Medicare Improvements -- The
Medicare system could be improved through better data analysis and
values-based purchasing.
4. Malpractice Reform -- The
cost of "defensive medicine" and malpractice insurance for doctors
can be reduced by tort reform.
5. Federal Insurance
Programs -- Senator Grassley opposes any new federal insurance
program because he claims that it would "not curb medical inflation
or improve the healthcare delivery system."
Editor's
Note: This information on the progress of the healthcare bills
is offered for educational purposes. Your editor and this
organization do not take a specific position on any bill. The
information is made available because of the importance of
healthcare to everyone.
Baucus Discloses Healthcare
Bill Framework
On September 5, 2009, Senator Max Baucus
released a 17-page outline of his promised 1,000-page bill. The
Senate Finance Committee bill is anticipated to be released before
the end of September. It will be the fifth healthcare bill passed by
a congressional committee.
The Baucus bill is significant in
several respects. Because it is the last of the five bills, it
includes many specifics that have been debated and discussed in the
other bills. In addition, it is significantly different in its focus
on healthcare co-ops rather than a public insurance option. His bill
also rejects the House surtax in favor of a tax on high-cost
insurance plans paid by medical insurance companies.
The very
comprehensive framework of the Baucus bill includes a discussion of
eight different areas. These are families and small businesses,
insurance reforms, healthcare credits, universal coverage,
co-operative healthcare programs, preventive care, patient outcomes
research and revenue provisions.
1. Families and Small
Businesses
For businesses with less than 25 employees and
an average wage under $40,000, there will be tax credits for 2011
and 2012. The tax credits will cover a portion of health insurance
costs. Families will benefit from a new program for Part D Medicare
drug discounts. States will establish health care exchanges to
facilitate efficient sale of insurance policies. Finally, each state
will create an "Ombudsman Office" to serve as a consumer
advocate.
2. Insurance Reforms
Insurance
companies will not be able to refuse coverage to you for
pre-existing conditions and will not be able to cancel your coverage
because you are ill. Premiums will be based only on family
composition, age, smoking status and geography. There will be
options for interstate purchase of insurance that are designed to
lower costs.
3. Healthcare Credits
Those
individuals who are from 100% to 300% of the poverty line will
qualify for health care tax credits. These credits are designed to
offset part of the cost of private health insurance. A small
business with fewer than 25 employees whose average wage is under
$40,000 will also qualify for healthcare credits.
4.
Universal Coverage
All U.S. Citizens and legal residents
will be required to have coverage through an employer, a public
program such as Medicare or Medicaid or individual coverage. Persons
with current coverage may keep their existing plan. Uninsured
individuals who do not purchase coverage will pay a penalty of $750
per year. Companies with over 50 employees must offer coverage or
pay a similar penalty per employee.
5. Health Care
Cooperatives
All 50 states and the District of Columbia
will create new nonprofit healthcare cooperatives. Their sole
activity will be issuing health benefit plans to individuals and
small businesses. The healthcare co-ops will receive grants and
loans from the U.S. Health and Human Services
Department.
6. Preventive Care
Medicare will
provide a wellness plan every two years to individuals. The wellness
plans for Medicare and Medicaid will also include incentives for
healthy lifestyles. These will target risk factors such as high
blood pressure, high cholesterol, tobacco use, overweight or obesity
and diabetes.
7. Patient-Centered
Outcomes
There will be a new nonprofit institute that is
designed to research healthcare. It will attempt to analyze and
disclose the patient outcomes for various organizations and types of
care.
8. Healthcare Plan Revenue
Increases
Health insurance with annual premiums of over
$21,000 for a family plan or $8,000 for an individual plan will be
subject to a tax of 35% on the excess amount. This tax will be paid
by the insurance company. Insurance companies will each need to
determine what actions to take with respect to individual premiums
as a result of the tax.
Flexible spending accounts will be
limited to contributions of $2,000 per year. Both flexible spending
accounts and the healthcare saving accounts will be permitted to
purchase only prescription drugs. There will not be FSA or HSA
expenditures for vitamins and other supplements.
The HSA
penalty for nonqualified medical or other expenditures will be
increased from 10% to 20%. Businesses that make payments of $600 to
any corporation will now be required to file Form 1099 at the end of
each tax year.
Finally, nonprofit hospitals will be required
to disclose the levels of charity care. The 5% standard for charity
care advocated by Senator Grassley has been dropped, but there will
be unspecified "new standards for charity
care."
Applicable Federal Rate of 3.4% for September
-- Rev. Rul. 2009-29; 2009-37 IRB 1 (18 Aug. 2009)
The
IRS has announced the Applicable Federal Rate (AFR) for September of
2009. The AFR under Sec. 7520 for the month of September will be
3.4%. The rates for August of 3.4% or July of 3.4% also may be used.
The highest AFR is beneficial for charitable deductions of remainder
interests. The lowest AFR is best for lead trusts and life estate
reserved agreements. With a gift annuity, if the annuitant desires
greater tax-free payments the lowest AFR is preferable. During 2009,
pooled income funds in existence less than three tax years must use
a 4.8% deemed rate of return. Federal rates are available by clicking
here.
|
PLR THIS
WEEK
PLR - 200935041 Exempt Status Not Threatened By
Restoration Efforts
Charity is tax exempt under Sec. 501(c)(3) and is
classified under Secs. 509(a)(1) and 170(b)(1)(A)(vi). Charity's
exempt purpose is to preserve, memorialize and display the
historical architecture of the city where it is located. Charity
embarked on a revitalization effort of the façade of a Sec.
501(c)(7) private social club's building. The building is on the
National Register of historic buildings. Charity raised public funds
to support its preservation and revitalization efforts connected
with the façade. Charity signed an agreement that allowed the
National Trust for Historic Preservation to review building
materials, methods and guidelines to ensure the restoration is done
according to the standards set forth by the Department of the
Interior. In addition, National Trust will ensure that none of the
public funds will be used to provide a private rather than public
benefit. Charity proposed to expand its restoration work to interior
rooms that are used only by the members of the private social club.
In order to obtain permission from the Exempt Organizations division
of the IRS, Charity signed an amended agreement with the social club
that allows the general public to tour the building on a given day
every other month and allows those with academic pursuits to tour
the building by appointment. Virtual tours through the Internet will
also be freely available.
The Service ruled that the issue is
whether the public is given substantial access to the interior rooms
so as to not violate the requirement under Sec. 501(c)(3) that no
benefit inures to the benefit of any private individual. The Service
determined that the requirements for public access exceed those
listed in Example 1 of Treasury Regulation Reg. 1.170A-14(d)(5)(iv).
Therefore, the expenditure of public monies on interior room
restorations of the private social club will not negatively impact
Charity's exempt status
To view the full PLR Click
Here.
|
CASE OF THE
WEEK
The Values-Based Charitable Remainder
Trust
Stacy Powers, 40,
has led an interesting life. At the age of one, Stacy was put up for
adoption. Stacy's mother was a homeless woman with little resources
to care for a young child. Soon thereafter, Dr. and Mrs. John Powers
adopted Stacy. The Powers were very affluent and educated, but sadly
were unable to have their own children. Not surprisingly, the
adoption of little Stacy was a dream come true for the
Powers.
Over the next twenty years of Stacy's life, the
Powers smothered Stacy with love, affection, time and money. Stacy
was a long way from her humble and tough beginnings. Stacy soon
became very accustomed to the constant "spoiling" and financial
support of her parents. As a result, Stacy possessed little drive
and initiative. In fact, her idea of a productive day consisted of
shopping trips and hours at the salon. Over the next twenty years,
Stacy continued on this path. While a good person with a good heart,
the Powers felt that Stacy did not develop and mature as an
adult.
During a visit with their estate planning attorney,
the Powers expressed their concerns about Stacy. The Powers did not
want to leave their entire estate to Stacy fearing that she would
simply spend it away. Instead, the Powers wanted an estate plan that
provided retirement and financial security and a love of
philanthropy.
What planned gift would give Stacy
philanthropic involvement? How could this planned gift be structured
to provide Stacy with retirement and financial
security?
To view the solution to this Case of the Week
Click
Here.
|
ARTICLE OF THE
MONTH
Current Planned Gifts III - Life
Estates
Under Sec.
170(f)(2) of the Internal Revenue Code, a person may give a
remainder interest in a personal residence or farm to a charity and
reserve the right to live there for one or two lives. But what if
circumstances change and the donor no longer desires to live in the
home? Or perhaps mother and father created a two-life estate and
father passes away? Are there options that mother should now
consider? Fortunately, there are several potential flexibility
options for a life estate donor.
Assume that John and Mary
Jones, both age 75, transfer the remainder interest in their
$300,000 home to charity. As owners, they agree to be responsible
for the maintenance, insurance and taxes. To make certain that both
John and Mary understand their obligations, they sign a Maintenance,
Insurance and Taxes (M.I.T.) agreement with the charity.
One
caution must be emphasized with respect to the "M.I.T." agreement -
the charity must have a life estate in the home and there can be no
prearranged obligation to select any of the possible flexibility
options. The IRS will deny the charitable income tax deduction if
any binding obligation exists. In any case, the purpose of having
flexibility options is enhanced by not choosing one until the time
for a later change of ownership.
To view the full Article
of the Month Click
Here.
|
Note: Case studies, articles, commentary and other
materials in the GiftLaw system are included solely as educational
information. Articles and editorial comments are offered as an
educational service to friends of this organization, and may not
always reflect our official position on any issue. Since case
studies or articles may not always reflect the current AFR or tax
law, it may be necessary to run any illustration with a current
version of Crescendo to obtain updated information. If professional
services are required, all persons shall consult with their
qualified professional advisors. Tax Quotes are courtesy of Jeffery
L. Yablon, Washington, D.C.
© Copyright 1999-2009
Crescendo Interactive, Inc.
|
| Immanuel St. Joseph's
Foundation |
September 14,
2009 |
| |
Thank you for your interest in
gift planning. To access any of this updated GiftLaw information,
please select our web page by clicking here.
Cordially
yours,
Bob Weiss
Immanuel St. Joseph's Foundation
| |
