Lancaster Law Blog

Insurance Coverage for Adult Children Under Act 4 Optional for Employers

Christina Hausner — Mon, 08 Feb 2010 11:38:33 -0500

We have had a number of inquiries and comments on our blog post regarding Act 4, the amendment to Pennsylvania's insurance company law relating to health insurance coverage for adult children up through and including age 29. Prior to Act 4, if an employer offered dependent coverage, insurance companies were only required to provide coverage to children on their parents' insurance until the age of 19. The Pennsylvania Insurance Department estimates that almost 40% of those who were uninsured in Pennsylvania are between the ages of 19 and 29.

A key phrase of Act 4 provides that the insurer's obligation to provide coverage to a child of an insured employee beyond a specified age, up through and including the age of 29, is "at the option of the policyholder", meaning the employer. Also, coverage would be provided at the insured employee's expense. Employees may wonder why an employer would not choose to provide this coverage and what the value is of legislation mandating insurers to offer coverage while giving employers the ability to opt out. In addition, if an employer is self-insured, Act 4 does not make any change in what coverage must be offered because it applies only to insurers.

While insurers may appreciate the opportunity to provide coverage to the group of young adults who are underserved, employers are not likely to be as supportive. It has been projected that the mandate would increase employees' contributions to their group health insurance, since insurance laws require additional costs to be spread among all employees, and not just those with adult children. This may result in overall health insurance premiums rising for employers and all employees. In addition, this effect could result in more employers becoming self insured to avoid legal mandates such as extended adult child coverage or Pennsylvania mini COBRA application requiring COBRA coverage for employers employing fewer than 20 employees.

You can visit the Pennsylvania Insurance Department's website for additional information regarding Act 4.

2010 Amendments and Updates to PA Support Calculations and Procedures

Aaron Zeamer — Wed, 27 Jan 2010 14:17:34 -0500

The Pennsylvania Supreme Court has recently issued the updates to the Pennsylvania Support Rules and Guidelines, which go into effect on May 12, 2010. The Pennsylvania Support Rules and Guidelines are required to be updated every four years and many times involve only an update to the child support schedule with little or no substantive changes to the rules. This year, however, there are a number of significant changes and in some instances, may have a major effect on the calculation of child or spousal support. Below are some of the more significant changes to the 2010 Amendments to the Pennsylvania Support Guidelines:

1. The first and potentially most significant change is in the application of the support guidelines to circumstances where the monthly household income is in excess of $20,000. Previously, the child support schedule ended at a combined adjusted net income for the parties at $20,000. The new schedule includes a combined adjusted net income of up to $30,000. Therefore, the basic child support schedule can be used where the parties' income is up to or equal to $30,000 per month. This should provide some much needed uniformity in calculating support for parties who have a substantial monthly income up to $30,000.

2. Additionally, under the current guidelines for child support, if the parties' monthly net income exceeded $20,000, the Court was instructed to apply the analysis as found in the Melzer v. Witsberger decision in order to calculate the support amount payable. This analysis contained a presumptive minimum but then required the court to apply a number of factors in order to determine the final amount of support. The 2010 changes to the support guidelines eliminate the use of the Melzer calculation and instead apply a formula to determine the child support obligation which can be found at new Rule 1910.16-3.1.

The elimination of the Melzer analysis is likely to result in a much more uniform application of the support procedure in high income cases in which the parties' net monthly income exceeds $30,000. Previously, in high income cases, there was a presumptive minimum amount of support established by the rules and the court was then required to apply a multitude of factors in order to mold a child support award. The elimination of that analysis will likely result in a much more consistent and understandable procedure to calculate child support in high income cases. This is certainly more consistent with the rules for lower income cases which were established to standardize and provide consistency across the state in calculating child support.

3. There have been changes to the spousal support calculation in the updated guidelines. Most notably, the language requiring the Court to consider the duration of the marriage when determining the duration of a spousal support or alimony pendente lite (APL) award has been added directly to the rule providing for spousal support and APL. This language was previously contained in the rule allowing for deviations from the calculations and the effect may be to have the Court take a much more serious look at the duration of the marriage when determining the duration of a spousal support or APL award. An additional comment has been added to address the addition of this language and states specifically that the language was moved "to prevent the unfairness that arises in a short-term marriage when the obligors required to pay support over a substantially longer period of time than the parties were married and there is little or no opportunity for credit for these payments at the time of equitable distribution." Whether or not this language will have a substantial effect in the calculation of spousal support or APL where there has been a relatively short marriage remains to be seen since the language has always been contained within the rules.

4. An additional change to the child support calculation which has the potential to effect not only high income cases, but also those which fall within the basic child support schedule is that the updated rules explicitly, presumes that the non-custodial parent (the parent paying the support), is spending at least 30% of the time with the child or the children and therefore expenditures on things such as food and entertainment, which vary depending upon how much time a parent spends with a child, is built into the new schedule. The comment to Rule 1910.16-4 goes on to provide that a deviation either upward or downward may be had where the non-custodial (paying) parent has little or no contact with the children or where that parent has substantial expenditures during his parenting time, but has infrequent overnights with the children. While this language is contained within a comment to the rule and is therefore only guidance in its application, this rule has the potential to significantly affect a number of parties providing support in this state who either exercise a minimal amount of time with their child or who may exercise significant periods of custody which don’t count as overnight periods of custody but have large expenditures during that time.

5. A few other of the noteworthy changes in the 2010 updates include a change to the application of the Mortgage Deviation Credit in a support award. Specifically, the rules now have specifically provided that a mortgage deviation is no longer applicable and cannot be applied after a final resolution of the economic claims between the parties to a divorce. This rule is contrary to current case law and specifically states in the comment that to the extent this rule conflicts with current case law, the case law is superseded.

6. Finally, the self-support reserve amount or the minimal amount which a party must earn in order to subject them to a support obligation has been increased to $867.00 per month, which was the 2008 federal poverty level.

These rules go into effect on May 12, 2010, so a current support order would not be subject to change simply because of the new guidelines. However, if in the future the Order is required to be modified, then these rules would have application to a current support order and may, depending on the circumstance, have a substantial impact.

2009 Tax Deduction for 2010 Haiti Earthquake Donations

Matthew Grosh — Tue, 26 Jan 2010 16:24:38 -0500

The tragic events recently suffered in Haiti have spurred millions of dollars in donations from American taxpayers to relief agencies devoted to helping earthquake victims. Through special legislation enacted on January 22, 2010, those taxpayers will generally be able to claim those deductions on their 2009 returns. It is hoped that the immediate benefit will spur even more current donations.

However, there are some limitations.

First, because donations to qualified charities are considered itemized deductions, the new provision will be unavailable to taxpayers who utilize the standard deduction.
Second, qualifying contributions are limited to cash and do not include property donations. Qualifying cash contributions can be made by text message, check, credit card or debit card.
Third, to qualify, donations must be made specifically for the relief of victims in areas affected by the January 12, 2010 earthquake in Haiti, and they must be made after January 11, 2010 and before March 1, 2010.
Fourth, the donations must be made to bona fide, qualified charities. The IRS maintains a database of such charities, but many churches and government agencies qualify even though they are not listed.
Please also note that donations to foreign organizations are generally not deductible.

Finally, it is also important to keep a record of your donation. For donations by text message, the phone bill will suffice as long as the name of the charitable organization is listed.

DUI Penalties: Driving with a Suspended License

Matthew Grosh — Thu, 14 Jan 2010 14:09:43 -0500

Much has been written about the physical dangers of driving under the influence. Additionally, in previous blog posts we have discussed the legal penalties DUI charges can bring, such as jail time, expensive fines and lengthy drivers license suspensions. As if you needed another reason to be wary, I've got one for you: stiff penalties for driving while your license is suspended.

Section 1543(b) of the Pennsylvania Motor Vehicle Code states that if the drivers license of a person driving a motor vehicle has been suspended as a result of DUI or DUI related charges (more on this later), such driver shall be fined $500 and serve at least 60 days in jail upon conviction. However, if that driver has a blood alcohol content ("BAC") of .02% (much lower than the standard DUI BAC threshold of .08%) then the penalties are increased to a $1000 fine and a minimum of 90 days in jail. Repeat offenses of the .02% BAC rule will lead to significant increases in fines and jail time.

Moreover, there are a few wrinkles in the law that make section 1543(b) applicable in more situations than you might think. First, section 1543(b) applies to license suspensions arising from acceptance into ARD, convictions of driving under the influence of a controlled substance, and refusals of breathalyzer and other BAC tests.

Second, it sometimes happens that a license is under multiple, consecutive suspensions (both DUI related and not) and the DUI suspension has not yet become effective. In other words, a license is currently under suspension for a non-DUI related reason, and the DUI related suspension will begin once the non-DUI suspension has been completed. In such a situation, section 1543(b)(2) requires such a suspension to currently be treated as DUI related even though the DUI related portion of the suspension has not yet commenced.

And if that is not enough to give pause, section 1543(c) invokes an additional one year license suspension on top of any current suspensions. Clearly, the best way to avoid the implications of section 1543(b) is to drink responsibly and avoid DUI charges.

Child Custody and Relocation

Julie Miller — Wed, 06 Jan 2010 16:22:22 -0500

One of the most hotly-contested issues facing Judges in custody cases is whether to allow a custodial parent to relocate to another state with the children. This has become quite common, particularly as people have made and developed relationships through the internet. Relocation cases are difficult for all parties involved: the non-custodial parent is shocked and horrified at the prospect of losing regular contact with his or her children and the prospect of not being able to move to a perceived better opportunity is equally difficult for the custodial parent. Often, these cases are not able to be resolved through the custody conciliation process and they end up at a hearing before a Judge.

My practice is to remind clients involved in all custody litigation, including relocation cases, that the Judge deciding the case is a stranger making decisions about what is in the best interest of your family. He or she has no prior knowledge of your family, you and your ex-partner's history, your children's behaviors, likes and dislikes. Depending on your case, it can be helpful or can add to your burden.

Regardless, when considering whether to permit a custodial parent to relocate with the children, Judges’ must adhere to the test set forth in Gruber v. Gruber. The Court, in considering what is in the best interest of the children, must consider the following three-prong Gruber test:

1. The benefit of the move and the likelihood that the move will substantially improve the life of the custodial parent. The Court must consider whether the move is merely a momentary whim of the custodial parent.

2. The integrity of the motives of both parents, the one asking to move and the one opposing the move.

3. The availability of a realistic, substitute visitation schedule that will foster the relationship between the children and the non-custodial parent.

Initially, the parent proposing to move has the burden of demonstrating the advantage to the parent and children.

The Gruber test has been interpreted by Pennsylvania appellate and trial courts both to permit and deny relocation requests. This makes relocation cases nearly impossible to predict for clients, as they are fact sensitive and the results are often fact-driven. However, it is my experience that the more involved a non-custodial parent is in the day-to-day activities and education of their children, the more difficult it is for the custodial parent to persuade the Court that a relocation is in the children's best interests.

Any parent involved in a custody relocation situation should consider the issues above and have a candid conversation with his or her legal counsel before making decisions regarding relocation.

Federal Estate Tax: A Time to Live and a Time to Die

Jon Gruber — Wed, 30 Dec 2009 16:05:43 -0500

The writer of Ecclesiastes did not have tax law in mind when he said that there is a time to live and a time to die. However, because Congress did not act to extend the current federal estate tax law, the tax expires on December 31. The federal estate tax is scheduled to resurface in 2011 at a rate of 55% on estates valued at $1 million or higher.

During the time that the tax is not in effect, it will be replaced by a 15% capital gains tax on inherited property that is sold (subject to the taxpayer's right to use current values to save at least $1.3 million of assets from capital gains).

In short, there is great uncertainty regarding estate taxes which probably will not be resolved until some time next year. At that time, Congress could reauthorize the estate tax, possibly retroactive to January 1. Such a law, even though retroactive, could be constitutional.

On the other hand, perhaps this is the ideal time persons with a substantial estate should do the right thing for their families by reviewing their estate planning documents.

Updated COBRA Continuation Links on the Department of Labor Website

Christina Hausner — Tue, 29 Dec 2009 17:11:42 -0500

The United States Department of Labor's Employee Benefits Security Administration released two new resource links on the COBRA Continuation coverage.

According to the United States Department of Labor (DOL) the FAQ and other information will be updated sometime this week. If you are interested in receiving immediate updates from the DOL, consider subscribing to their COBRA webpage. By subscribing you can receive notification when the site is updated with new information.

COBRA Subsidy Extended

Christina Hausner — Wed, 23 Dec 2009 14:59:57 -0500

Legislation enacted by Congress and signed by President Obama on December 21, 2009, extends the ARRA COBRA premium reduction eligibility for two months, from December 31, 2009 to February 28, 2010, and increases the maximum period for receiving the subsidy to a total of 15 months instead of 9 months.

With the new changes, the law provides that the 65% premium subsidy for COBRA continuation health benefits is available to individuals who are eligible for COBRA as a result of an involuntary termination between September 1, 2008 and February 28, 2010. The law previously required that both the involuntary termination and the eligibility for COBRA coverage occur before the last effective date of the subsidy, but now only the involuntary termination need take place on or before February 28, 2010, not the COBRA eligibility.

Last month, when we posted on the duration of the COBRA ARRA subsidy, we noted that legislation was introduced to extend the deadline for eligibility as well as the duration of the subsidy. The change enacted this month was not a result of passage of the October legislation but rather changes added to the Department of Defense 2010 Appropriations Act.

Plan administrators must provide notice of the new extension rights to those who became assistance eligible individuals on or after October 31, 2009, or who were involuntarily terminated after October 31, 2009. It is anticipated that regulations specifying the content of the notices will be promulgated, but such notices need to be provided by February 19, 60 days from the effective date of the COBRA subsidy extension legislation.

It appears that beneficiaries whose subsidy expired and who didn't pay the full premium, now may have the opportunity to receive retroactive subsidized coverage. In addition, beneficiaries who did pay the full COBRA premium can be refunded by the employer or receive an offset against future COBRA premiums.

This bill was signed with little fanfare, however, the United States Department of Labor has posted a news statement on their website.

Legal Humor for the Holidays

Matthew Grosh — Wed, 16 Dec 2009 15:43:06 -0500

'Tis the season to be jolly, at least that is what we are told. With the stresses that accompany last minute shopping, crowded malls, rising credit card debts and dysfunctional family members, finding that holiday jolliness can be difficult at times. To help you find that holiday joy, I have combed the web for some light-hearted legal bits related to the holiday season. And yes, you may find this hard to believe, but sometimes lawyers can actually be funny. Admittedly, it doesn't happen often, but it does indeed happen.

"The Night Before Christmas" in legal-speak. Sadly, this piece is not that big of an exaggeration as to how lawyers write in legal documents. There's also an alternate version.
In the same vein, here is a politically correct and legalese version of a Christmas card and a holiday email, both from an attorney.
Want to rock around the Christmas tree lawyer style? Then this website is for you! I'll bet these CDs just fly off the shelves. Seasons Briefings!
Ever wondered what it would be like to see the detectives on "Law and Order" interrogate Santa? You're in luck -- here you go! I hope Santa was read his Miranda warnings or his confession may be inadmissible in court.
Here's an amusing Christmas letter from a lawyer's son. I have a feeling this kid is going to end up with lumps of coal in his stocking.

From all of us at the Lancaster Law Blog, Merry Christmas, Happy Hanukkah and Season's Greetings!

IRS Standard Mileage Rate for 2010

Matthew Grosh — Wed, 09 Dec 2009 15:07:30 -0500

The Internal Revenue Service has announced a new standard mileage rate for 2010, which is generally used to estimate the costs of operating an automobile for tax purposes. The new rate, effective January 1, 2010, is 50 cents per mile, down 5 cents from last year. In addition, the standard mileage rate for medical or moving and medical expenses has been lowered to 16.5 cents per mile, and the rate for charitable purposes remains at 14 cents per mile.

While there are generally no Pennsylvania laws requiring employers to use the IRS' rate, there may be some tax advantage for doing so. The IRS will deem employers who make qualifying reimbursements up to 50 cents per mile as meeting their accounting requirements, thus no income reporting or withholding is required for those reimbursements. However, employers need to make sure that their employees have provided adequate proof that the mileage was strictly for business use. Qualifying employees who are not reimbursed for their business mileage will be able to deduct 50 cents per mile on their individual tax returns.

Who Makes Your Health Care Decisions if You Do Not Have a Living Will?

Matthew Grosh — Tue, 24 Nov 2009 15:51:51 -0500

Who makes your medical decision for you if you are unable? The answer to this question is even more difficult if the decision involves the removal of ventilators, feeding and water tubes. In these situations, friends and family of the patient have become engaged in bitter disputes over (1) who gets to make those decisions and (2) what your wishes regarding treatment would have been?

A valid Living Will answers both of those question. Living Wills are governed by Act 169 of 2006 (the "Act"), where they generally become effective when the subject of the living will is deemed to be in an "End-Stage Medical Condition". The Act goes on to describe such a condition as an ". . . incurable and irreversible medical condition . . . that will . . . in the opinion of the attending physician to a reasonable degree of medical certainty result in death, despite the introduction or continuation of medical treatment." Examples include brain-death, irreversible comas or other vegetative states where there are no curative treatments to make you better, but only palliative treatments (such as ventilators and feeding tubes) that prolong the process of dying but have no curative properties. With a valid Living Will, you have already declared what your wishes are regarding treatment and named who should carry out your wishes.

But what if you do not have a Living Will and are in an End-Stage Medical Condition? Because most people in such a condition are neither capable of or competent to describe their wishes and name who should carry them out, the Act allows certain people to step forward to declare themselves as your Health Care Representative. At the very least, the person generally must be able to establish that they were a close friend. If multiple individuals step forward, the Acts gives priority to the following groups from highest to lowest in rank:

· Current spouses and adult children from prior marriages,

· Adult children,

· Parents,

· Adult siblings,

· Adult grandchildren, and

· Adult close friends.

If there are disputes among Health Care Representatives, the decision of the highest priority Representative governs. If there are multiple members of the same priority group, the decision is determined by a majority vote of that group. If no majority decision can be reached, several ethics committees from various groups may act as a dispute resolution service. In the alternative, costly guardianship proceedings may be commenced in the courts as a last resort. Of course, while such a dispute regarding care is ongoing, no drastic measures to cut off treatments to the patient may be made.

Thus, there is a system in place for deciding about treatments and representatives should you enter an End-Stage Medical Condition without a Living Will. However, there is no way to be sure who will step in on your behalf and what decisions they will make. If you wish to plan your own fate, a valid Living Will is essential.

First-Time Homebuyer Tax Credit Extended Into 2010 and Now Available to Certain Existing Homeowners

Matthew Grosh — Thu, 12 Nov 2009 16:32:58 -0500

In a previous post, the 2009 Homebuyer Credit Extension and Related Divorce Issues, and in a more recent post, I discussed a possible extension of the First-Time Homebuyer Tax Credit, which was applicable only to home purchases completed on or before November 30, 2009. Well, congress has indeed extended the credit into next year and also made it available to certain taxpayers who already own a home.

For first time homebuyers, the credit is now applicable if the sales contract is fully executed by April 30, 2010 and the closing occurs by June 30, 2010. Moreover those dates are extended to April 30, 2011 and June 30, 2011 respectively for qualifying members of the military serving extended duty outside of the country. You are generally a qualified first-time homebuyer if you have not owned and used another personal residence at any time during the three years prior to the date of the new purchase.

The credit remains to be valued at the lesser of 10% of the purchase price or $8,000 and can be part of your refund if you owe less than $8000 in taxes. There are also phase-outs of the credit for taxpayers with certain adjusted gross incomes (over $125,000 for singles and $225,000 for married couples), but those are significant increases of the original income caps. Further, the credit is not available when a home purchase price exceeds $800,000. For more information on the mechanics of the original credit, please refer to this previous post and the other posts mentioned above.

A reduced amount of the credit (up to $6,500) is also now available to certain existing homeowners who have lived in their current home for five out of the last eight years. The same deadlines, income caps and purchase price limitations discussed above apply. Moreover, although your new home must be your principal residence, there is nothing in the new legislation requiring you to sell your existing home.

Thus, if you are even thinking of purchasing a new home, it may be a good idea to check out your local market because April will be here before you know it.

Update on the COBRA Subsidy and When it Will End

Christina Hausner — Wed, 04 Nov 2009 14:13:13 -0500

We have posted on the 65% COBRA subsidy several times since the American Recovery and Reinvestment Act (ARRA) was enacted. ARRA provided for a premium subsidy for COBRA continuation health benefits to "assistance eligible individuals." Those individuals are defined as an employee or member of his/her family who is eligible for COBRA continuation coverage:

1) at any time between September 1, 2008 and December 31, 2009

2) elects COBRA coverage, and

3) is eligible for COBRA as a result of an involuntary termination between September 1, 2008 and December 31, 2009.

Some changes may be effected if the Extended COBRA Continuation Protection Act of 2009, H.R. 3930, introduced in the House of Representatives on October 26, 2009 and referred to Committees on Education and Labor, Energy and Commerce, and Ways and Means, is enacted.

Following are some of the highlights and possible changes with regard to the eligibility requirements and timing of the COBRA subsidy.

Upon Eligibility for Group Coverage or Medicare

Eligibility for the premium reduction ends when an individual becomes eligible for other group health coverage or Medicare. It is the recipient of the subsidy who is responsible for reporting eligibility. If an individual continues to receive the subsidy after he/she is eligible for other group health coverage, the individual may be subject to an Internal Revenue Code penalty of 110% of the subsidy provided after they became eligible for the new coverage. Be aware that anyone who suspects that someone may be receiving the subsidy after eligibility for group coverage or Medicare may report this to the IRS using form 3949-A Information Referral. These provisions would not be affected by the proposed Extended COBRA Continuation Protection Act of 2009.

After Nine Months of Subsidy

ARRA provides that the subsidy ends after nine months or when the maximum period of COBRA coverage ends, whichever occurs first. The proposed Extended COBRA Continuation Protection Act of 2009 would extend the nine months to fifteen months. It would also extend the maximum period of COBRA continuation coverage to 24 months.

Year End Issues

Is the subsidy available to an employee whose termination occurs in December of 2009, but the loss of coverage occurs after December 31, 2009? The IRS answered with a clear no in Question 13 of Notice 2009-27 . If the loss of coverage is after December 31, 2009, the individual is not an assistance eligible individual, even if he is terminated before December 31. The 65% assistance payment currently only applies to individuals who both experience an involuntary termination prior to December 31, 2009 and who are eligible for COBRA continuation coverage before December 31, 2009.

This is relevant due to the widespread practice of continuing active employee medical coverage through the end of the month in which a termination of employment occurs, and starting COBRA eligibility the first day of the subsequent month. Any employee of an employer who has adopted this common administrative practice and who is involuntarily terminated in December of 2009 will not be eligible for the 65% COBRA subsidy since eligibility for COBRA continuation coverage would only begin on January 1, 2010, one day beyond the December 31, 2009 deadline.

Absent additional guidance from the IRS or an extension of the ARRA deadline by Congress, employers who wish to avoid this result can consider changing their plan rules and administrative practices to start COBRA coverage on the last day of the month of an involuntary termination of employment instead of the first day of the following month. Or, employees who are to be involuntarily terminated in December, can be terminated in November.

If H.R. 3930 is enacted into law, it would extend the December 31, 2009 deadline to June 30, 2010, providing that assistance eligible individuals are those who are eligible for COBRA between September 1, 2008 and June 30, 2010 as a result of an involuntary termination between September 1, 2008 and June 30, 2010.

Extension Pending on First-Time Homebuyer Tax Credit

Matthew Grosh — Tue, 03 Nov 2009 14:45:00 -0500

CNN is reporting that the Senate will likely extend the credit through April of 2010. In addition, they are also planning on adding a $6,500 credit for current homeowners who have lived in their current residence for at least five continuous years. If you are interested in learning more about the first time home-buyer tax credit refer to my previous blog posts 2009 First-Time Homebuyer Tax Credit and 2009 Home Buyer Credit Extension and Related Divorce Issues.

Will the Federal Estate Tax Go Away in 2010?

Matthew Grosh — Tue, 27 Oct 2009 16:03:47 -0500

Many of you may remember that back in 2001, Congress enacted legislation that was supposed to have repealed the Federal Estate Tax (the "FET"). However, anyone familiar with the Tax Reconciliation Act of 2001 (the "Act") knows differently.

In general, estates are only subject to FET if they exceed the Applicable Exclusion Amount (the "Exclusion"). Instead of permanently repealing the FET, the Act gradually increased the Exclusion from $1 million in 2002 to $3.5 million in 2009. In addition, the maximum FET rate was lowered from 50% to 45% over the same period. The Act is then scheduled to repeal the FET, but only for 2010. Starting in 2011, the FET reverts to pre-2001 levels with a $1 million Exclusion and a maximum rate of 55%.

Consequently, this leaves it to the current Congress to pick up where the Act left off and either make the one-year repeal permanent or extend the FET at or near current levels into 2010, and beyond. The Wall Street Journal recently reported that the House of Representatives is working on legislation to fix this matter permanently.

“The House legislation would continue the 2009 estate tax parameters indefinitely. It would exempt estate wealth under $3.5 million, or up to $7 million for a married couple, and tax inheritances above that amount at 45%.”

While the main intention is to set the Exclusion and maximum FET rates at current levels, there may be some dispute from lawmakers seeking a higher Exclusion.

As the end of the year is rapidly approaching, this legislation must be addressed in the near future. We will monitor the situation, so please check back for any updates.

What Happens if You Refuse a Breathalyzer or Blood Test after a DUI Arrest?

Matthew Grosh — Thu, 22 Oct 2009 16:17:38 -0500

In a previous blog post, I addressed how in cases of driving under the influence, the blood alcohol content ("BAC") of the offender affects the severity of the sentences. Clearly, obtaining an accurate measurement of BAC is very important to law enforcement officials. As a result, after someone is arrested for DUI and transported to a hospital or police station, breathalyzer or blood tests are administered to specifically determine the suspect's BAC. Over the years many people have asked me if they can simply refuse to submit to those tests. Surprisingly, you can in fact refuse to take such a test. However, if you do, your driver's license will be suspended for at least one year and you will subject yourself to further possible disadvantages.

The suspension arises from the so-called "Implied Consent" law, which is found in section 1543 of the Pennsylvania Motor Vehicle Code, . Generally, section 1543 states that anyone who ". . . drives. . . a vehicle in this Commonwealth shall be deemed to have given consent to one or more chemical tests of breath, blood or urine for the purpose of determining [BAC] . . . if a police officer has reasonable grounds to believe the person . . ." is under the influence of alcohol or a controlled substance. More simply stated, in the eyes of the law, anyone driving a vehicle in Pennsylvania has already implicitly consented to BAC testing. Refusals to submit to BAC tests will result in a license suspension of at least one year. Moreover, such suspension will be in addition to any suspension that arises from the DUI charges themselves if a conviction occurs.

In addition to the suspension, a refusal can lead to other detrimental consequences. First, the DUI charge will be placed in the third tier for sentencing purposes, resulting in harsher sentences and more expensive fines. Essentially, this treats the offender as if they had a BAC equal to or higher than .16 percent. This is obviously detrimental to drivers whose charges would have been treated as first or second tier offenses had they submitted to the BAC test.

Additionally, the refusal itself can be used against suspects at trial to prove a consciousness of guilt. At the time of testing, a DUI suspect is told that if they refuse the BAC test, they will lose their license for at least one year. At trial, prosecutors will argue that instead of submitting to BAC testing, refusing suspects chose to lose their licenses for one year because they knew that their BAC would likely be above the legal limit.

Those disadvantages underscore the need for competent legal representation when facing DUI charges. In the future, we will address other topics related to DUI, including field sobriety tests, licensing issues and the consequences of driving with a suspended license, so please be sure to check back.

Training Session for Certified New Homesale Professionals

Julie Miller — Thu, 15 Oct 2009 15:22:46 -0500

On September 29, 2009, Matt Grosh and I served as faculty members at a training session for Certified New Home Sales Professionals, which was held at the Lancaster County Association of Realtors. The three-day training was focused on marketing and selling new construction and offered continuing education credits to real estate agents with varied levels of experience.

The focus of my presentation was on the Fair Housing Act of 1968 and 1988 (FHA) and its effect on the marketing, advertisement and sale of new homes. The FHA provides for equal treatment of protected classes and individuals regardless of their race, religion or national origin. Matt Grosh focused his presentation on contract law and the effect of contract principles on agreements for the sale of real estate.

The seminar gave the participants an opportunity to discuss the methods by which they advertise and market their homes and how they avoid issues that could cause concern for disparate treatment in home sales. There were a number of questions regarding how to market properties without running afoul of the federal and state fair housing statutes. The discussion generated during the question and answer period was additionally informative and productive. There were approximately 25 real estate agents in attendance, many of whom are also members of the Building Industry Association of Lancaster County.

Residential Energy Tax Credits

Matthew Grosh — Thu, 08 Oct 2009 15:22:54 -0500

Many of you have received marketing materials from contractors of various types encouraging you to take advantage of recent changes to the rules regarding residential energy tax credits. This opportunity to make your home more energy efficient and save money on taxes was created by the American Recovery and Reinvestment Act of 2009 (the "Act").

The tax savings arise out of revisions to two separate credits. The first is known as the Credit for Non-Business Energy Property, which was not available for the 2008 tax year. It allows taxpayers to claim a credit equal to 30% (up from 10% prior to the Act) of the cost of qualified energy-efficient improvements made to their residences in 2009 and 2010. Qualifying property can include such items as high efficiency heat pumps, air conditioners, water heaters, windows, doors, insulation materials and certain roofs. For a more precise list of qualified improvements, please see the Energy Star website. Originally, there was a lifetime cap of only $500.00 for this credit. However the Act made two significant changes to the cap: 1) the maximum amount was raised to $1,500.00; 2) the cap is now only applicable to the 2009-2010 tax years combined and not to a taxpayer's lifetime.

The other credit is the Residential Energy Efficient Property Credit. This credit is equal to 30% of the cost of residential energy efficient property placed in service before January 2017. Examples of such property improvements include solar electric and water heating systems, small wind energy systems and geothermal heat pumps. Again, a more specific list of qualified energy systems can be found on the Energy Star website. This credit has already been extended through 2016, and applies to vacation homes in addition to principal residences. Previously, credits for solar, wind and heat systems were capped at $2,000.00, $4,000.00 and $2,000.00 respectively. However, the Act removed those caps entirely, providing the potential for substantial tax saving for environmentally conscious taxpayers.

2009 Home Buyer Credit Extension and Related Divorce Issues

Matthew Grosh — Wed, 23 Sep 2009 15:07:17 -0500

Back in July I wrote about the first-time homebuyer tax credit that applies to home sales occurring before December 1, 2009. However, there is some great news for prospective homeowners unable to squeeze in a purchase in that timeframe: Reuters is reporting that the credit may be extended for another six months. With bipartisan support in Congress and recent hints that President Obama will back such an extension, the amendment is likely to pass.

Also, we have received queries from readers regarding the effects of divorce on the credit. A common occurrence in divorces is that an ex-spouse's name continues to remain on a deed while he or she no longer lives in the residence. As long as the ex-spouse has not lived in the house at all over the past three years, and as long as the divorce was finalized three or more years ago, the ex-spouse will qualify as a first-time homebuyer because the house is not his or her primary residence. Of course, this assumes that the ex-spouse does not reside in other real property that he or she owns.

The situation is different when a married couple is separated and the divorce has not been finalized. Under the rules governing the credit, ownership of a primary residence by one spouse imputes ownership onto the other spouse even if they are legally separated. In such a case, it does not matter if the other spouse's name is on the deed or not both spouses will be disqualified as first-time homebuyers.

Using Form 990 as a Fundraising Tool

Matthew Grosh — Tue, 15 Sep 2009 15:31:43 -0500

Tax-exempt and nonprofit organizations can now find a marketing opportunity in an unusual place, their tax return. It's no secret that people generally hate filling out tax returns almost as much as they hate paying their actual taxes (click here to see an amusing letter sent to the IRS by a disgruntled taxpayer). So it may come as a surprise to many tax-exempt and nonprofit organizations that they can use their well prepared tax returns for an important purpose - fundraising.

Many donors use the website GuideStar.org to access the most recent Form 990, which are the annual tax returns filed by tax-exempt organizations. This can help guide donors in assessing organizations for charitable contributions. Recently the IRS has changed Form 990 enabling it to serve as a powerful public relations tool.

For example, in Part I, Line 1, the preparer is directed to,"[b]riefly describe the organization's mission or most significant activities". This gives the preparer a great opportunity to use positive, inspirational and persuasive language to sell the organization to potential donors. Also, this portion of the tax return will likely be the first entry a potential donor may read, thus it's important to utilize this properly to promote your organization's mission. The usual droll prose used to fill out most tax returns should be avoided and, because it is a tax return, don't stretch the truth.

In Part III, Line 4 the preparer must describe how the organization's three largest programs serves its tax exempt purpose. This is another great opportunity to describe and promote exactly how the organization fulfills its mission. The description of programs should be in depth and as specific as possible. Consider answering these questions when filling out Part III, Line 4:

Who was helped?
How many people were helped?
How many volunteers were used?
How much money was raised and disbursed?
Are there any statistical results?

Give the potential donor confidence that his money will be well used.

Also note that in Part X, Line 1, it asks for the amount of money an organization is keeping as cash in a non-interest-bearing account. If this entry reflects a large sum of money, it gives potential donors the impression that the organization is merely sitting on the money it receives instead of using it to fulfill its mission. As a practical matter, it's best to structure the organization's finances so that little or no money should appear in this portion of the tax return.