Wednesday, March 14, 2012
Southern Yacht Club – West End Park
105 Roadway Drive, New Orleans, LA 70124

8:00 – 8:30 a.m. Registration & Continental Breakfast
8:30 – 11:30 CE Seminars
New Orleans SFSP and/or NAIFA GNO members: $20
Guest Fee: $30.00

RSVP by Thursday, March 8 to Dianne Smith
Email: sfspnola@bellsouth.net
Call (504) 737-0089    or    FAX (504) 737-0091

Please mail payments to:
N.O. SFSP or NAIFA GNO, 1016 Colonial Club Drive, Harahan, LA 70123

Go-Coil provides coiled tubing services to exploration and production companies operating in the United States onshore and offshore oil and gas markets. View the full press release here. 

The HELP program was founded in early 2004 by Judge Jay Zainey, of the United States District Court for the Eastern District of Louisiana, to provide attorneys in New Orleans with the opportunity to assist homeless individuals with legal matters on a single consultation, advice only and/or limited representation basis. The program has since expanded throughout 15 states.

For more information on the program, visit www.homelesslegalprotection.com.

Philanthropy is a tax, albeit a voluntary tax. It is the way we in America support education, social services, the needy and religion. Without this, our government would have to assume the responsibility of funding these services. This could only be accomplished through taxes. Most people believe that providing services through governmental bureaucracy is very inefficient and expensive. If this is true, then all of our taxes are lower than they would otherwise be if Americans did not generously support these needed causes. Therefore, such contributions are really a tax (a substitute
for taxes) and a debt that all of us owe. By giving we reduce the country’s overall taxes, but we can also benefit personally as a result of our tax code structure. These benefits are of a financial nature but also a personal nature since donating funds to charity, and I may add time and services, can be a very rewarding experience. 

This article is based upon the tax laws now in effect and on the assumption that the tax code structure will not change even though rates, exemptions and deductions may be modified. Examples of tax savings resulting from charitable donations and bequests are listed below. These calculations are based on a 33 percent federal income tax rate, a 6 percent state income tax rate and a 35 percent estate tax rate with no state inheritance tax.

A $100,000 cash donation could reduce the donor’s income taxes by $39,000 (33 percent plus 6 percent), resulting in an after tax cost of $61,000. 

If the donor dies shortly after this donation, then his estate would have been reduced by $100,000, resulting in an estate tax saving of $35,000, further reducing the after-tax cost of this donation to $26,000 ($61,000 minus $35,000). In this example, our federal and state governments will have subsidized about 75 percent of this donation. 

If the donor does not want to part with this prior to his death, he could bequeath $100,000 to a surviving spouse, or if his estate is not subject to estate taxes, then to his children with a request that they donate $100,000. This would reduce the cost of this donation to the family unit to $61,000 since there would be a $39,000 income tax saving. If a donor wants to donate to a particular charity in his will rather than parting with the amount during his lifetime, it may make more financial sense to bequeath the amount of the proposed donation to a surviving spouse or children with a request that the recipient donate the funds to the charity. This donation method provides an income tax benefit to the family unit and does not deprive the donor of the use of these funds during his lifetime. An estate tax benefit is not applicable since this taxpayer would have had no estate taxes to pay.

All lawyers have a debt to the Louisiana Bar, particularly since our professional fees have not been subjected to sales taxes. We also don’t have to buy an occupational license. Therefore, we are obliged to support the Louisiana Bar. One of the best ways to support the Bar is through contributions to the Louisiana Bar Foundation (LBF), whose funds are used for Bar-related causes. The LBF will work with a donor to dedicate a contribution for a particular use. 

There are many vehicles available to transfer assets to charitable institutions which, for tax purposes, are known as 501(c) (3) entities. The first question is what type of property should be donated; the second, how should the donation be made.

Donations can be made in cash or with capital gain or other property. A likely subject of a gift is publicly held securities that have been held by the taxpayer for more than a year. If securities held for more than a year are donated rather than cashed, then the donor would avoid the capital gain taxes due if securities were sold. 

Donations also can be made of a remainder interest in property with the donor retaining an income equivalent, i.e., an amount equaling a percent of the value of the property, or can be made of the income if the donor wants to retain the principal. These various donation alternatives include Charitable Remainder Unitrust, Charitable Remainder Annuity Trust and Charitable Lead Trust. Gifts made to a 501(c)(3) entity should be coordinated with personal estate planning objectives such as the taxpayer retaining the income interest or remainder interests or transferring those interests to others.

More than 254,000 law firms were considered in the selection process, but only 966 were selected nationally. LexisNexis® Martindale-Hubbell® identified U.S. law firms of 21 or more attorneys, where at least one out of three lawyers achieved the AV® Preeminent™ Peer Review Rating. This rating indicates the rated lawyer has been deemed by his or her peers to have demonstrated the highest level of ethical standards and legal ability.

Martindale-Hubbell Peer Review Ratings are driven by the confidential opinions of lawyers and members of the judiciary who provide reviews of lawyers about whom they have professional knowledge. To learn more about Martindale-Hubbell Peer Review Ratings, please visit http://www.martindale.com/ratings. 

Joel advises and implements estate plans, including drafting Wills, trusts and advance directives, handles and reviews estate administrations, counsels families on financing long-term care needs, including long-term care insurance and Medicaid eligibility and counsels families on financial and legal planning for disabled family members, including special needs trusts  to preserve eligibility for governmental benefits.

Joel is a member of the National Academy of Elder Law Attorneys, the Special Needs Alliance, the American College of Trust and Estate Counsel, the Birmingham Estate Planning Council, and the American Bar Association Sections on Taxation, Real Property and Trusts and Estates.  He has been listed in Best Lawyers in America in the areas of Elder Law and Trusts and Estate for over 30 years. Best Lawyers recognizes those who most excel in the legal profession, based upon extensive evaluations by colleagues and other legal professionals.  Joel also is listed in Alabama Super Lawyers (2008-2012) and was listed in the “Top 100 Lawyers in Estate Planning” in Worth Magazine in 2005.

Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a rigorous multi-phased process that includes a statewide survey of lawyers, an independent research evaluation of candidates, and peer reviews by practice area.

The first Super Lawyers list was published in 1991 and by 2009 the rating service had expanded nationwide. In February 2010 Super Lawyers was acquired by Thomson Reuters, the world’s leading source of intelligent information for business and professionals.

The U.S. News – Best Lawyers® “Best Law Firms” rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their relevant practice areas, and a review of additional information provided by law firms as part of the formal submission process. An unprecedented amount of data was collected in the project’s second year and this combined data resulted in the 2011-2012 “Best Law Firms” rankings.

Baldwin Haspel Burke & Mayer received Tier 1 ranking in the areas of Elder Law, Non-Profit/Charities Law, Tax Law and Trusts & Estates Law; Tier 2 ranking in Admiralty & Maritime Law; and, Tier 3 ranking in Commercial Litigation and Insurance Law. According to Best Lawyers®, “achieving a high ranking is a special distinction that signals a unique combination of excellence and breadth of expertise.”

To be eligible for a ranking, a law firm must also have at least one lawyer who is included in Best Lawyers® as part of the annual peer review assessment. Five BHBM attorneys received this honor earlier this year, including:

Jerome J. Reso, Jr. – Non-Profit/Charities Law, Tax Law, Trusts & Estates

Leon H. Rittenberg III – Non-Profit/Charities Law, Trusts & Estates

John A. Rouchell – Elder Law, Tax Law

William B. Schwartz – Personal Injury Litigation

Karl J. Zimmermann – Tax Law

Individual Income Taxation

 2012 Cost of Living Adjustments Announced

The Internal Revenue Service has issued Rev. Proc. 2011-52 containing the cost of living adjustments for various provisions in the Internal Revenue Code for 2012. Due to inflation, many of the various income thresholds and limitations have been increased for 2012. A non-exhaustive list is provided below:

Partnership Taxation

Entities Treated as Limited Partnerships for Purposes of Passive Activity Limitations under IRC § 469

The IRS has issued proposed rules (REG-109369-10) detailing new circumstances in which an interest in entity will be treated as an interest in a limited partnership under IRC § 469.  In particular, the new rules address the determination of whether a taxpayer materially participates in an activity as defined under IRC § 469(h)(2).  IRC § 469(h)(2) provides as follows:

Except as provided in regulations, no interest in a limited partnership as a limited partner shall be treated as an interest with respect to which a taxpayer materially participates.

Under the proposed rules, an interest in an entity will be treated as an interest in a limited partnership under IRC §469 if:  (1) the entity is classified as a partnership and; (2) the holder of the interest does not have rights to manage the entity at all times during the entity’s taxable year.  Under the proposed rules, the rights to manage an entity include the power to contractually bind it.

Prior to the proposed rules, the IRS relied on liability limitations in order to determine whether an interest is an interest in a limited partnership as a limited partner.  Under the proposed rules the IRS stated that they, “[A]dopt an approach that relies on the individual partner’s right to participate in the management of the entity.”

Employment Taxation

Voluntary Compliance Program for Misclassified Workers

The IRS has launched a new voluntary compliance program that allows employers to prospectively reclassify workers as employees that such employers have erroneously treated as independent contractors. 

Generally, section 530 of the ’78 Revenue Act (as amended) provides retroactive and prospective relief from employment tax liability for employers who misclassified workers as independent contractors using the common law facts and circumstances standards.  Section 530 applies only if:

1) The taxpayer does not treat an individual as an employee for any period, and does not treat any other individual holding a substantially similar position as an employee for purposes of employment tax for any period (the substantive consistency requirement);

2) For post-’78 periods, “all federal returns (including information returns) required to be filed by the taxpayer” with respect to the individual for such period “are filed on a basis consistent with the taxpayer’s treatment” of the individual as a non-employee (the reporting consistency requirement); and

3) The taxpayer had a “reasonable basis” for not treating the worker as an employee (judicial precedent or IRS rulings, a past IRS audit, or a long-standing practice of a significant segment of the relevant industry) (the reasonable basis requirement).

Previously, the Section 530 relief only applied for taxpayers under audit.

Under the new initiative, the IRS has determined that it would be beneficial to create a program that allows for voluntary reclassification of workers as employees outside of the examination context and without the need to go through normal administrative correction procedures applicable to employment taxes.  The voluntary classification settlement program is available to taxpayers who are currently treating their workers as independent contractors or other non-employees and want to prospectively treat the workers as employees.  See IRB 2011-41.

Estate Planning

Tax-Free IRA Distributions for Charitable Donations

As we approach the end of the 2011 taxable year, clients that are charitably inclined and own traditional or Roth IRAs may wish to make a donation from such IRAs directly to a charity.  Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, taxpayers that are 70.5 years of age or older may directly transfer as much as $100,000 per taxable year to qualified charitable organizations through December 31, 2011.  The taxpayer may exclude the amount of such a donation from gross income.  See IRC § 408(d)(8).  Furthermore, the donation will qualify as a distribution for purposes of satisfying the required distribution amount for such taxable year.  However, the payment must be made directly from the IRA to a qualified charitable organization and does not include payments made to supporting organizations as defined under IRC § 509(a)(3).

Reminder!

Preparer Tax Identification Number Reminder

This is a reminder for all tax practitioners to renew Preparer Tax Identification Numbers (PTINs) for 2012.  PTINs must be renewed on a yearly basis.  Additionally, the IRS has issued a revised Form 2848, Power of Attorney, which includes a section requesting PTINs for tax professionals.

STATE TAXATION

Franchise Tax

Foreign Limited Partners Not Subject to Franchise Tax

The Louisiana First Circuit Court of Appeals has ruled that limited partners in a limited partnership doing business in Louisianawere not subject to franchise tax because the companies did not own or use directly any part of their capital or property in the state in a corporate capacity.  See UTELCOM Inc. v. Bridges, 2011 WL 4017522, 2010-0654 (La.App. 1 Cir. 9/12/11).  The court so found that the language in La. Admin. Code §61:I.301(D), which provides that the indirect ownership of property through another entity or venture subjects a corporation to franchise tax, was an impermissible expansion of the statute by the Louisiana Department of Revenue. 

The taxpayers in this case were subsidiaries of Sprint Corp. and limited partners in Sprint Communications LP, which was registered inLouisianaas a foreign limited partnership and conducted business in the state.  The Louisiana Department of Revenue assessed franchise tax on the taxpayer on the basis that Sprint chose to do business in the state through the limited partnership directed by the by the taxpayer and its wholly-owned subsidiaries.  The court determined that the Louisiana Department of Revenue did not show how Sprint directed the activities of the limited partnership or its limited partners but only suggested “that they were united in their purpose.”  The court ruled that without a “unity of purpose” the Louisiana Department of Revenue could not rely on its administrative inclusion of a unity of purpose in La. Admin. Code §61:I.301(D).

If you would like to receive BHBM Email Tax Alerts to stay informed on the latest changes in tax law on the Federal and State level, please email Katie Kelly at kkelly@bhbmlaw.com.