Retroactive Tax Laws – But They Can’t Do That, Can They?

by Richard Kiely

We all know that change is likely coming to the tax regimes governing individual income and gift and estate taxes – but what if the change is already here? There are a number of potential effective dates floating around for President Biden’s tax bill, with some in the future and some already in the past.

The uncertainty of the substantive changes coupled with potential retroactive effective dates may leave many individuals looking for some form of steady ground, and understandably asking themselves, “but they can’t do that, can they?” After all, the U.S. Constitution says no “ex post facto Law shall be passed.” And understandably, a taxpayer should be able to confidently rely upon the law in place when they enter a transaction without fear that the same, published law might not later govern their transaction. Read more

The Disappearing Deduction for Colorado State Income Tax Purposes

by Kami Pomerantz

On June 23, 2021, Governor Polis signed Colorado House Bill 21-1311 into law. The Bill makes significant changes to a number of Colorado state income tax laws. One change of note is an amendment to C.R.S. § 39-22-104. The amendment limits the amount of itemized deductions under Section 63(d) of the Internal Revenue Code that a high-income taxpayer may claim for Colorado state income tax purposes. The law is effective for tax years beginning on January 1, 2022. The limit applies to taxpayers who have a federal adjusted gross income of $400,000 or more in the tax year. For a taxpayer who files a single return, the taxpayer’s itemized deductions are capped at $30,000 for state income tax purposes. For taxpayers who file a joint return, the taxpayers’ itemized deductions are capped at $60,000. This limitation does not apply to taxpayers who take the standard deduction for federal income tax purposes. Read more

Why Trust Situs is Important

by Richard Kiely

When does a trust’s situs, also known as principal place of administration, move?  What is enough to trigger a move?  Should a trustee be concerned about their trust’s situs?  These are all great questions that often get overlooked in the years and decades after a trust is created and well into its administration by a trustee.

Trust situs is an important issue for several reasons.  Situs can dictate which state’s income tax applies, e.g., California vs. New York vs. Wyoming; situs is a factor in determining what law governs the administration of the trust; and situs often determines where a trustee or beneficiary might seek judicial relief.  Accordingly, determining and possibly relocating trust situs is a significant decision for a trustee’s consideration. Read more

Holland & Hart’s Upcoming Tax and Estate Planning Speaking Engagements

Holland & Hart invites you to join us at two upcoming virtual events with sessions featuring our tax and estate planning attorneys.

On May 26th, Holland & Hart is proud to present our first annual Wyoming Tax Conference. This free conference, held from 9:00 AM to 12:00 PM, will feature Holland & Hart’s experienced and talented tax attorneys discussing a range of topics from Wyoming’s tax structure to a federal tax outlook for the year. During the conference, Rebecca Schroer will present on “Use of Unregulated Wyoming Private Family Trust Companies,” addressing Wyoming’s continual rise in popularity as a trust situs. View the full agenda and register online to hear updates on important federal and state tax developments.

Following the Tax Conference, Holland & Hart is honored to sponsor the 41st Annual Estate Planning Retreat. Join us on June 11th and 12th to hear from a faculty of experienced attorneys, professionals, and judicial officers who will speak about the latest updates, key legislation, and best practices in trust and estate law.  Rebecca’s session on “Foundations: Introducing Evidence” will be given along with two co-presenters.  The panel will review the process for laying a foundation and discuss evidentiary issues that often arise in probate litigation.  You can register and view more details online, and make sure to use the code EPR21PLATINUM to receive a discount on your registration.

Holland & Hart is grateful to have the opportunity to engage with our community and to provide education and resources through events and speaking opportunities. Check our online events page to stay up to date on all upcoming Holland & Hart events.

Preparing for Potential Tax Reform – Consider Wealth Transfer Planning in 2020

by Kami Pomerantz

Current planning environment. While 2020 has been challenging in many ways, it has also provided favorable conditions for tax and wealth transfer planning. The U.S. is experiencing historically low interest rates, some assets have low valuations due to economic volatility, and current tax laws are favorable for wealth transfer planning transactions. These factors combine to allow individuals to transfer assets out of their taxable estates at a reduced transfer tax cost.

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Tax and Estate Planning Perspectives

by Kami A. Pomerantz

From a tax and estate planning perspective, we would like to make you aware of the following:

Tax Filing Extensions:

The IRS has extended the filing and payment deadline for all 2019 income tax returns to July 15, 2020. This means that no penalty or interest will be assessed for an individual’s failure to file or pay income taxes, regardless of amount, until after July 15, 2020.

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New IRS Addresses for Filing Estate Tax Returns

by Jody H. Hall, Paralegal

The Instructions for Form 706 released in November 2018 included new addresses; however, we felt a reminder could be useful since the filing address changed mid-year.  Effective for United States Estate (and Generation-Skipping Transfer) Tax Returns (Form 706) filed after June 30, 2019, Form 706’s should no longer be sent to the Cincinnati campus for filing, but should instead be sent to:

Department of the Treasury
Internal Revenue Service
Kansas City, MO  64999

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Possible Legislative Change for Retirement Planning

by Kami Pomerantz

On May 23, 2019, the U.S. House of Representatives passed the Setting Every Community Up for Retirement Enhancement Act of 2019 (H.R. 1994) referred to as the SECURE Act.  The SECURE Act passed with broad support in the House with a vote of 417-3.  The SECURE Act incorporates many provisions in Retirement Enhancement Savings Act of 2019 (S. 972), also known as RESA, which has extensive bipartisan support in the Senate.  Recently a small group of Senators blocked passage of RESA in an attempt to allow 529 Plan funds (educational savings account funds) to be used to support home-schooling.  However, due to generally strong bipartisan support in the Senate and House as well as retirement plan industry support, it is expected that some form of RESA will ultimately pass, the two bills will be reconciled, and that the reconciled bill will become law. 

The SECURE Act makes it easier for many Americans to save for retirement.  Most of the provisions provide more flexibility to employers and reduce administrative costs regarding creation and implementation of employer related retirement plans.  It is hoped that these reforms will allow employers to create more robust retirement plans and to encourage their employees to participate in such plans. 

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Understanding the Child Care Contribution Tax Credit

by Kami Pomerantz

The Child Care Contribution Tax Credit (the “CCTC”) provides a valuable tax credit against a taxpayer’s Colorado state income tax.  The credit equals 50% of the amount of a contribution made to a qualifying Colorado charitable organization that promotes child-care.  At the end of August, the IRS issued proposed regulations amending Treas. Reg. Section 1.170A-1.  The proposed regulations would limit the deductibility for federal purposes of charitable donations that qualify for a state or local tax credit like the CCTC.  While at a glance the proposed regulations seem to have a negative impact, in reality, for most taxpayers who itemize their federal deductions, the CCTC will remain an effective way to make charitable contributions at a substantially reduced net cost.

The CCTC applies to contributions of cash, (contributions of stock do not qualify) to Colorado institutions that support child care for children under 12 and to certain approved charities.  Under prior law, these contributions were deductible as charitable contributions for federal and state income tax purposes.  In addition, a taxpayer could credit 50% of the contribution against the taxpayer’s Colorado state income tax liability.  These deductions and credits substantially reduced the after -tax cost of such donations to taxpayers.  A taxpayer in the 35% federal tax bracket and subject to the 4.63% Colorado state income tax rate could make a charitable contribution of $30,000 for a net out of pocket cost of $8,847.

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Planning Opportunities Under the New Tax Cuts and Jobs Act

By Chelsea May

In December, President Trump signed into law what is commonly referred to as the Tax Cuts and Jobs Act.  This legislation, which is mostly effective as of January 1, 2018, is the first major reform to the federal tax code since 1986 and affects almost every individual and business taxpayers in some way or another. For individuals, the top tax rate has temporarily dropped from 39.6% to 37% and the standard deduction has nearly doubled.  Personal exemptions are repealed and the mortgage interest deduction is limited to interest on a mortgage of $750,000 or less per married couple. The AGI limitation for deductions of cash donations to public charities increased from 50% to 60% and the deduction for alimony payments was repealed (for divorces or separations executed after December 31, 2018).  Corporate tax rates have dropped from a 35% top rate to a permanent 21% flat rate, a 20% deduction is now available for certain pass through entity income and the corporate AMT has been repealed.

The new tax act also increased the federal estate and gift tax exemption amount. Specifically, for lifetime gifts and the estates of any decedents passing between January 1, 2018 and December 31, 2025, the estate tax and GST tax exemption amounts were increased to $10 million per person, adjusted for inflation occurring after 2011 (expected to be about $11.2 million for 2018). The marginal transfer tax rate remains at 40%. Read more