Summary
Spring, 2001
ESTATE AND GIFT TAX REPEAL -- NOT YET
We have been following closely, and with great interest, recent news from Washington regarding Federal Estate and Gift Tax reform. It has long been clear to us that predicting future Congressional action is a very inexact science at best, and to some degree, even a waste of time. At this point, however, it seems clear that outright immediate repeal of the Estate and Gift Tax provisions of the Code has virtually no chance of happening. Gradual repeal over a period of ten years could perhaps occur, but it is far too early to predict such a result. Compromises very likely will be made during the course of the legislative process that could alter the provisions of legislation now under consideration. We will continue to monitor developments in the area and will report further in the next issue of Summary.
SMALL BUSINESS TAXPAYERS FINALLY PREVAIL
Sellers of small businesses frequently have to sell on an installment basis, taking a down payment and the balance of the purchase price in installments of a number of years. The law was changed several years ago, to require a seller of an accrual basis business to report 100% of the gain in the year of sale even though full payment would not be received for years because installment payments were spread out. This cased a severe impact on small business owners because of the lack of buyers able to pay in full at closing. Just a few returned the law to its pre-1999 basis to allow installment reporting. Once again, the seller can report for tax purposes the pro rata portion of each installment payment which represented a gain over his basis in the year actually received. We are frequently involved in the sale or purchase of a business -- call us if we can help.
The new rules are much more favorable for anyone charitably inclined. Since retirement benefits are both hit by death taxes and are ordinary income, the net after tax for high net worth persons can be significantly reduced by designating a charity.
Although the new rules are proposed to be effective with respect to distributions made after December 31, 2001, they give plan administrators and IRA owners the option of following either the new rules or the old rules for distributions made during 2001.
This summary of the new rules is not intended to be exhaustive (the proposed regulations consume 25 pages of fine print in the Federal Register), and we encourage any of you who have questions in respect to their application, or would like further explanation of their details to let us know. We'll be delighted to respond.
ANOTHER NOTICE TO GIVE YOUR EMPLOYEES
OSHA's Final Rule requires businesses to deal with the repetitive stress and other ergonomic injuries of their workers. Every business covered by the rule must disseminate basic information to its employees about Musculoskeletal Disorders (MSDs), the risk factor of work activities, the signs and symptoms of an MSD, a description of OSHA's standards, and instructions about how to report an MSD. No further action is required unless an employee reports an MSD. Employers must begin to disseminate information to employees by October 14, 2001. Give us a call about the FAQs, and Information Kit, listing the Rule's exceptions for small businesses.
BE HONEST ABOUT WHERE YOU WORK
Illinois has decided that a business should not be allowed to misrepresent its corporate location. Effective January 1, 2001, a business may not use an assumed or fictitious name that intentionally misrepresents where the business is located or operating, or falsely state or represent that it is located in the area covered by the telephone directory in which it is posted. P.A. 91-906
SEXUAL DISCRIMINATION...
The following recent decisions concern sexual discrimination, a woman may control precisely her ability to become pregnant. The EEOC rejected the argument that the insurance plan covered only abnormal physical or mental conditions. Coverage included Viagra where patients complained about decreased sexual interest or energy. EEOC Questions and Answers about Contraception Decision
NEW HEALTH BENEFITS ADVICE FROM DOL
The Department of Labor has unveiled new information and educational tools designed to help Americans make informed decisions about employment-based health benefits. These tools include:
Health Benefits Passport, developed to address concerns that individuals need a reference card when emergencies occur, including a three-fold flyer explaining the minimum information consumers need to know to use their health benefits and an attached medical emergency card with which individuals can consolidate contact telephone numbers and information about their health plans.
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Newborns Card and Poster, explaining the rights to hospital lengths of stay and continuing health coverage following childbirth or adoption for mothers and newborns.
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Health Benefits Law Kit, a series of nine fact sheets explaining various health benefit laws.
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Employer Quality Briefcase, an outline briefcase of internet links to major health care websites.
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Know Your Rights Button, a lapel button which carries the slogan "Know Your Benefit Rights" and a DOL hotline number.
For more information visit the DOL's website USDL:01-09(12/19/00).
BEFORE WE GO...
We are pleased to announce that a new associate, F. Richard Skweres, has joined us. We did his legal work at Loyola University School of Law. Glad to have you aboard, Rick.
GOOD NEWS TO RETIREMENT PLAN PARTICIPANTS
Those of you who have struggled with the complexity of minimum distributions from qualified plans and IRA accounts will be pleased and relieved to learn that the IRS has issued new proposed regulations that significantly simplify the calculation of minimum payments form and the designation of beneficiaries of such accounts. Better yet, those of you wanting to limit withdrawals to the least possible amount will find that the new rules in general will permit smaller required amounts, and thus less current taxes due, more tax free accumulation, and larger payouts to beneficiaries.
Perhaps even more surprising is the extent to which the rules relating to minimum distributions have been simplified. Under the new proposed rules one simple table is used by virtually everyone to calculate required minimum distributions, and the calculation is made by simply dividing the account balance at the end of the preceding year by the age-based factor from the table. Further, in most cases the calculation is the same regardless of how is the designated beneficiary, or the age of the designated beneficiary.
Post-death payout rules have also been simplified and liberalized. A designated beneficiary must be an individual, but benefits may be paid over the remaining life expectancy of the beneficiary. In the event no beneficiary is designated, then if the account owner dies before his required beginning date, benefits may be paid over the remaining life expectancy of the owner, determined immediately prior to death. Where the owner dies his required beginning date without having designated a beneficiary the the account balance must by paid out within five years after the death of the owner. No longer does the payout method elected by the account owner govern post-death payouts. In addition, the new proposed rules no longer require that beneficiaries be designated prior to the required beginning date. Instead, beneficiaries may be designated at any time prior to death, and may be changed as the owner desires.
Also, the new rules provide for some post-mortem planning because events up to December 31 of the year after the participant's death are taken into account in determining the beneficiary, thus, disclaimers could be highly advantageous.
YOU CAN HARASS A FORMER LOVER
What happens when two employees who had been involved in a consensual sexual relationship break up and one begins to harass the other in the workplace? In the case the female employee verbally and physically harassed the male and sought to embarrass him in front of colleagues and students. The court said that five elements are necessary for an employee to establish a claim of "hostile environment", that:(1) the employee belongs to a protected group; (2) the employee was subjected to unwelcome harassment;(3) that the harassment was based on the employee's sex;(4) the harassment affected a "term. condition or privilege" of employment; and (5) that the employer knew or should have known of the harassment and failed to intervene. Mr. Succar had failed to establish the third element, that his sex was the underlying reason for the harassment. Title VII is not a shield against harsh treatment in the work place. Succar v. Dade County School Board. (CA 11, 10/13/00)
...YOU CANNOT LIE ABOUT HARASSMENT...
What happens when an employee lies in the course of an employer's investigation of a sexual harassment claim about another employee, and is terminated? Because no EEOC investigation was pending when the termination occurred, the statutory protection for participation in an EEOC investigation did not apply.
In addition, the court held that it is important for an employer to be able to conduct an investigation and to obtain truthful information on which to make its decisions. Here the employer was found to have conducted a thorough investigation and to have reasonably concluded that the employee lied. As a result the employer was entitled to exercise its business judgment to terminate an employee it reasonably believed had lied in the investigation. EEOC v. Total Systems, Inc. (CA 11 08/07/00)
