Colorado Probate Blog - Wade Ash Woods Hill & Farley, P.C.

Don’t Defer Planning Your Estate Because The Estate Tax Might Be Repealed

In 2001, when the estate tax exemption was $675,000 and George W. Bush was President, Congress “repealed” the estate tax. But the repeal was phased in over ten years and was then scheduled to last for only one year. Instead of actual repeal, what we got, under President Obama, was a reinstated estate tax with a much higher exemption of $5 million, indexed for inflation. The Republican party now controls both houses of Congress as well as the White House, and we are again hearing calls for repeal of the estate tax.

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Health Insurance Subsidies Confirmed to be Available to Taxpayers in all States

On June 25, 2015, the Supreme Court of the United States held in the King v. Burwell decision that tax credits for health insurance premiums are available to taxpayers in every state, regardless of whether those taxpayers live in a state which has established its own health insurance exchange or a state which instead uses a federally-established exchange.  Chief Justice Roberts delivered the 6-3 decision.

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Similarities of Prohibition and Legalization of Marijuana

Much has been written about the similarities between the currently evolving legalization of marijuana and the Prohibition Era of the 1920s and 1930s. Al Capone has been likened to a Mexican drug lord and the federal government’s ineffective efforts at curbing consumption during each time have been highlighted.

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Congress Authorizes New Accounts for Disabled Individuals

Late December 16, 2014, Congress passed (and the President indicated he will sign) the Achieving a Better Life Experience Act (ABLE), creating a new type of tax-advantaged savings account to help meet financial needs of disabled individuals and their families.  The ABLE Act authorizes states to create these accounts (similar to 529 plan accounts for paying higher education expenses) starting in 2015.  Persons could make contributions to the accounts for named beneficiaries, and the accounts grow tax-free, similar to 529 plan accounts.  The accounts would not be considered "available assets" that would limit a beneficiary's qualification for Medicaid or other needs-based government benefits. Contributions to an account each year are limited to the gift tax annual exclusion (not five times that, as for 529 plan accounts), and if distributions are made for "qualified disability expenses" the beneficiary is not taxed on the distributions as part of his or her income.  The beneficiary must be disabled or blind under Social Security, and that condition must have occurred before the beneficiary reached age 26.

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Congress Passes Extender Bill Including Charitable IRA Rollover

Late December 16, 2014 Congress passed the tax extender bill, but only through December 31, 2014.  President Obama indicated he will sign this bill. This means that those at least age 70 1/2 may make their charitable gifts up to $100,000 directly from their IRAs for 2014 (and also use that to meet part or all of their Minimum Required Distributions for 2014), but we'll have to go through this same exercise in 2015.

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House Passes "Permanent" Bills as Opposed to Extenders

Congress did not pass an extension of the opportunity for taxpayers age 70-1/2 and older to contribute up to $100,000 from an IRA directly to charity, so that income exclusion expired at the end of 2013. On May 29, 2014, the House passed H.R. 4619 (The "Permanent IRA Charitable Contribution Act of 2014") that would make that income exclusion permanent. In addition, the House also passed H.R. 3134 (The "Charitable Giving Extension Act") which would allow an individual taxpayer to deduct charitable contributions made after December 31, but before the due date of the individual's return; and H.R. 2807 (The "Conservation Easement Incentive Act of 2013") that would make permanent some of the liberalized rules for deducting the value of charitable contributions of conservation easements (that also expired at the end of 2013). Tax extender bills have stalled in the Senate, so it is unknown whether this will pass in time to permit taxpayers to make this kind of contribution in 2014.

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Tax Extender Legislation (including renewal of IRA Charitable Rollover) Clears First Hurdle

The effort to renew the IRA Charitable Rollover provision, which expired at the end of 2013, recently gained some momentum in Congress. On April 3, 2014, the Senate Finance Committee approved the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act, which would retroactively extend a number of important and popular tax provisions through December 31, 2015. The House Ways and Means Committee Chair has also recently indicated that a vote would be permitted on an extenders package. The date of any vote on this or similar extender bills in the House and the full Senate is yet to be determined, but it may well be postponed until after the fall elections.

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501(c)(4)-Gate: Shocking IRS Scandal or Business as Usual?

By Merry Balson, Esq.

Over the last few weeks I’ve been glued to the media reports as the IRS scandal, dubbed by some "501(c)(4)-Gate", has unfolded. After all, it is not often that the Exempt Organizations division of the IRS makes national news once, much less multiple times in the same month, focusing so much of the nation’s attention on my line of work. If you’ve followed this story at all, you too might be as shocked as members of Congress were to learn that the IRS has targeted various categories of politically backed organizations applying for tax-exempt status. While I am certainly not condoning this kind of behavior, targeting of groups by the IRS, lengthy delays in processing applications, and seemingly unnecessary requests for information from new organizations seeking exemption is certainly not a new phenomenon. Over the last few decades the IRS has targeted gay and lesbian organizations, credit counseling organizations, housing assistance organizations, family-controlled organizations and anyone else the IRS may think either does not deserve the much coveted tax-exempt status or (in the IRS’ experience) is likely to abuse that status. Remember too that, like many other areas of government, the IRS budget has been cut time and again over the last decade or more. While more senior agents have retired, the IRS has either not filled the positions, or filled them with far less experienced personnel who have not had the luxury of their predecessor’s training. Complaints have mounted for years that the IRS is understaffed and undertrained, that processing times for 1023s and 1024s (the applications organizations file with the IRS to obtain tax-exempt status) have become unreasonably long (up to more than a year at this point for many organizations), and that IRS agents routinely ask for seemingly unnecessary and burdensome information in their follow-up requests to new organizations seeking tax-exempt status, but until now, no one in Washington seemed to notice or have any motivation to make any changes. The singling out of political organizations of any nature would absolutely be inappropriate, but to those of us familiar with the long standing problems with the IRS, if the investigations uncover that an internal practice like this existed, it would not be entirely surprising, and though deplorable, it would certainly not be "shocking" given the IRS’ history. We can only hope that whatever the outcome, this new attention to the IRS Tax-Exempt/Government Entities division will bring about some long needed changes that will benefit all tax-exempt organizations, and maybe too a serious review of whether granting tax exemption to any political organization is an appropriate and intended use of taxpayer funds.

Read more about the IRS’ history of burdening nonprofits in the New York Times article published on June 3, 2013 at New York Times.

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