Newsletter - Archives
Volume 1, Issue 1, dated June 30, 2000
Is this the end for the Federal estate tax?
Not likely. Sorry to disappoint, but the threatened repeal of the federal estate tax is a popular issue so it's no wonder it pops up every major election year.
You may recall that the last major push for the elimination of federal estate taxes occurred in 1996 (not surprisingly, an election year). The result was an addition to the 1997 Taxpayers Relief Act which increased the personal exemption for gift and estate taxes from $600,000 to $1,000,000 over a period of ten years and made limited concessions to farmers and small business owners.
You might be surprised to learn that in the last Congress, more than 50 bills were introduced involving the federal estate tax. Most called for elimination of the taxes, or some sort of reduction. These bills received little or no press.
This year, on June 9, 2000, the United States House of Representatives passed H.R. 8 calling for the elimination of estate taxes. A vote in the Senate was promised on June 26, 2000; as this newsletter went to press, no vote had been scheduled. President Clinton has threatened a veto if the bill passes.
The reality is that only a very small percentage of taxpayers actually pay federal estate tax. In 1997, just over 40,000 estate tax returns were actually filed with the Internal Revenue Service. Unlike many state inheritance taxes, which begin taxing estates on the first dollar, the first $675,000 is exempt from federal estate tax. In addition, there is an unlimited deduction for spouses.
The federal estate tax was implemented at the early part of the 20th century in order to insure that extremely wealthy Americans such as the Rockefellers and the Vanderbilts did not escape taxation as they passed down wealth from one generation to the next. The tax has undergone major changes over the years, including the consolidation of the federal estate and gift tax systems and increase in unified credit for individual taxpayers.
Most tax professionals anticipate that this newest attempt to eliminate the federal estate tax will result in more changes to the gift and estate tax system. It is highly likely that in order to avoid a presidential veto and the subsequent challenge by the Senate, a compromise will be reached which will further increase the personal exemption and allow greater concessions to farmers and family-owned businesses.
For more information on this topic contact Kelly Phillips Erb.
What does the new e-signature legislation mean for your business?
If you follow the news at all, you are probably aware that President Clinton signed new legislation recently which renders electronic signatures as legally binding as their paper counterparts. The Millennium Digital Commerce Act, S. 761, has been hailed by business as a boon to electronic business and the efficiencies which it is expected to bring. On the other hand, it is seen as a potential trap for the unwary consumer by consumer protection groups concerned that unsuspecting surfers may click into a binding contract without even realizing it.
Under the new law e-signatures are valid for all contracts, with limited exceptions. It also makes it easier to comply with certain federal statutes using e-signatures, including federal securities regulations. Finally, the new law contains provisions intended to promote the use of electronic signatures in international trade, and to prevent other countries and international organizations from interfering with electronic contracts.
The law does not mandate a particular technology for e-signatures, nor does it require that signatures be encrypted. Indeed, the definition of an electronic signature is quite broadly defined in the Act. This is another area of concern for consumer advocates, who fear that merely clicking “ok” or “continue” could result in binding contracts not intended by the consumer.
Consumer protection advocates managed to gain some important concessions, however. Consumers must consent to receiving and signing contracts online. In addition, certain types of documents, such as wills and certain health-care related documents, may not be signed using electronic signatures.
The bill supersedes most state legislation regarding digital signatures, except for provisions enacted as part of the Uniform Electronic Transactions Act. Most state consumer protection laws remain unaffected by the new law.
For more information on this topic contact Chris Erb.
For an interesting if somewhat dated article by attorneys from the international law firm of Baker & McKenzie check out Findlaw's resource page. The American Bar Association (ABA) also has a summary and status of the legislation on its cyberlaw website. The commercial website for PenOp has many interesting links and summaries on electronic signatures and authentication from a commercial point of view. Link to the bill and a history of its journey through Congress on Thomas, the Congressional website.
Social Security extended past “retirement”
Sit back and imagine your retirement… For many of us, we picture lounging about in floppy hats and loud, checkered pants playing the occasional game of golf. But the reality is that more and more seniors are spending their retirement… working?
It's true. More than ever, seniors are spending their golden years working in some capacity. While the extra years’ pay benefited some in prior years, others had to be careful to monitor their earnings so that their Social Security benefits were not affected. Prior to this year, too much additional income resulted in a lower Social Security benefit to senior workers. Congress, responding to this trend, passed a new law this year that changes that.
The new law, retroactive to January 1, 2000, allows seniors to work past full retirement age without their Social Security benefits being reduced due to the amount of their earnings. This means that annual earnings would only affect the amount of Social Security benefits for those seniors who qualified to receive benefits but had not yet reached full retirement age. The earliest age to qualify to receive Social Security benefits is age 62, though full retirement age is currently 65. With the new law, full retirement age will gradually increase to age 67 for persons born after 1938.
What does this new law mean? For many, it means more income. Since the law is retroactive, some seniors may receive a check for additional Social Security benefits owed since January but not yet paid. A substantial increase in income may affect estimated tax payments for the taxable year 2000.
If you believe you might be affected, you may want have additional federal taxes withheld from your Social Security check in order to avoid a penalty at tax time. If you want to have those taxes withheld, you'll need to complete a federal form W-4V.
For more information on this topic contact Kelly Phillips Erb.
European travelers don't need visas to the United States … or do they?
Travel between the United States and Europe these days is easy these days indeed, a little too easy. After all, Europeans don't even need a visa to come to the United States, or do they?
Well, the technical answer is that they do, only the United States has waived the requirement for nationals of certain countries coming to the United States for fewer than thirty days. Before your European colleagues arrange for that US vacation or business trip, though, make sure they are eligible for the visa waiver.
Many Europeans traveling to the United States (and vice versa) have become complacent, and assume visas are a thing of the past. They are not. Just ask the French client of mine who almost found himself on a plane back to Paris after he was almost denied entry at Philadelphia airport, or the German client who was only allowed to enter after presenting a letter I had prepared outlining why his travel was in fact legitimate B-visa activity.
Normally, business and vacation travelers entering the United States for a limited period of time who will be retaining their employment and housing outside of the United States enter under the B-visa. In order to reduce the burden of entry for citizens of certain, mostly industrialized, countries, the United States developed a pilot program called the visa waiver program, which allowed short term visitors to enter the United States without actually applying for the B-visa. This program was recently made permanent, thereby ensuring that most European travelers may continue to enter the United States without the hassle of applying for a separate visa.
There is, however, a catch. While the requirement that a visa be obtained has been waived, the traveler entering under the waiver program must still abide by all of the restrictions and requirements of the B-visa, as well as those for the waiver.
For example, the foreign national must be a citizen of one of the countries eligible for the waiver program, and must plan on remaining in the United States for no longer than 90 days. The traveler may not intend to remain in the United States permanently, and may not be gainfully employed in the United States.
This last requirement is the most difficult, and can lead to a great deal of trouble for foreign business travelers. Generally speaking, any work done in the United States must be compensated by a foreign employer in foreign currency, and any benefits to that work should accrue in that entity's home country. Sales meetings, administrative meetings, and certain types of service calls are all examples of legitimate travel under the B-visa. European travelers who are contemplating setting up a branch or subsidiary in the United States should be particularly cautious, as the line between startup efforts which fall under the B-visa and those which do not can become exceptionally difficult to discern. If you have any doubt at all, contact an attorney before traveling to the United States.
Once a foreign national enters under the waiver program there is no way to extend or change the visa. The traveler must leave the United States at the end of the time authorized upon entry (and stamped on the I-94 arrival departure card) or face potentially serious consequences. As a result, business travelers who may find it necessary to change plans or remain in the United States for longer than 90 days should consider applying for a B-visa rather than entering under the waiver program.
For more information on this topic contact Chris Erb.
For a list of consulates and country specific information on visa applications, see the State Department's consular affairs web page. The State Department also has a visa services web page for visa applications, including visitor visas. The Immigration and Naturalization Service (INS) is part of the Department of the Treasury, and has primary responsibility for regulating immigrant and nonimmigrant visas. The INS website has detailed information on visas and visa petitions.
For better, for worse, for richer, for poorer (literally)
In the pre-World War II United States, the vision of the perfect family was a married couple with 2.5 children, a station wagon and a dog. Generally, these families were single income families in which the head of household, usually the father, worked and supported the family. With the advent of World War II and “Rosie the Riveter”, that began to change slightly. More and more women began going off to work and earning a second income while their husbands were at war. This posed problems for the Internal Revenue Service. Since 1913, one income had usually equaled one tax return. There were rarely other considerations.
However, with the advent of an increasing number of two-income families, a better approach was needed. So, in 1948, Congress adopted the joint tax return. The idea was that tax for a married couple would be paid equal to twice the income of a single filer. Income and deductions would be filed in the aggregate.
In the 1960s, the United States was changing again. More single women were earning college degrees and going to work. Married women still largely stayed at home. As more and more single women entered the workplace, single filers began objecting to what was ironically referred to as the “singles penalty”. The singles penalty was based on the notion that a married couple received the equivalent of two single-person deductions regardless of whether there were two incomes. This was unfair, claimed the singles, because married couples split expenses and thus did not deserve two full deductions and exemptions. In fact, the singles claimed that the tax system was, in effect, subsidizing marriage.
In 1969, Congress, responding to this charge, enacted an amended tax structure, which provided for a joint return for married persons with a scaled-down deduction equal to less than two single filers. This system, with some minor concessions in 1986 to higher income joint filers, has remained in place since that time.
In the late 1980s and 1990s, the family structure in the United States changed yet again. More and more couples were choosing to live together rather than get married; like the yuppies of the early 1980s, these couples were given a nickname, “DINKs” (Double Income No Kids) . A number of reasons were given for this phenomenon. One reason is the so-called “marriage penalty” which essentially gives single filers who live together tax advantages not available to married filers. As individual income levels rose, so did the income tax brackets of single filers. However, single filers retained the full personal exemption and standard deduction, unlike married filers. Additionally, the impact of the “phase out” which limits or eliminates many deductions and credits at certain AGI (adjusted gross income) levels is more dramatic for high-income married filers than for high-income single filers. For example, the AGI phase-outs for Educational IRAs are between $95,000-110,000 for single filers and $150,000-160,000 for joint filers; clearly the single filer has the advantage.
The result has been the introduction of several tax bills designed to eliminate or reduce the “marriage penalty”. The most recent version of the bill, slated for a vote this year, resembles the 1948 tax bill in that it allows two full deductions for married couples regardless of the level of income. Opposition to the bill is growing, and the President is threatening a veto. One fear is that the bill will prove to be a mere temporary fix and will result in the same debate that led to the 1969 amendments.
For more information on this topic contact Kelly Phillips Erb.
For a detailed if somewhat outdated analysis and history of the so-called 'marriage penalty," the Congressional Budget Office prepared a report on the subject in 1997.
Designing your web site can be fun - and dangerous
It wasn’t supposed to be like this. Free-spirited graphic designers set loose on a new digital world were supposed to unleash incredible personal creativity, creativity which would knock the socks off of all your clients and make up for dealing with all of the body piercing, ratty corduroys, and unkempt goatees favored by these creative geniuses. Enter the lawyers...
Designing a web site for your business is fraught with potential problems and pitfalls. This article will identify a few of those, with the idea that if you can recognize them you may be able to avoid them. Here they are, in no particular order.
Don’t use a competitor’s name in your metatags. Many companies would love to snag new customers as they enter the competition’s front door. The Internet equivalent is entering the competition's name in your metatags, so that search engines will find you at the same time. Don’t do it - there are a host of trademark and other issues which may prove costly if the competition gets wind of your clever ploy.
Don’t reserve a well-known trademark as your domain name if you don’t have a legitimate claim to it. There is a name for reserving or using famous domain names to capitalize on known trademarks at their expense - it’s called cybersquatting, and the penalties can be severe if a court decides you had a “bad faith intent to profit” from the name. On the other hand, if you do have a legitimate claim to a name which might be desirable to others, get it fast, before they do.
Be careful when putting your frame around content generated from someone else’s web site. Someone did this to the Washington Post, and they didn’t like it. Before you lead people to an article or other content which you will be framing within your own web site, get permission. At the very least, make sure to credit the creator of the content somewhere in the frame.
Be careful about linking to information deep within another web site. Recently, a federal court decided that linking to information deep within another web site is trespassing, thereby throwing a wrench in the works for search engines, which specialize in that sort of thing. It may also pose problems for others who use such links to promote their products, at least without the permission of the owner of the linked web site. Although the law is still developing on this point, when it doubt, link to the site’s home page, and let the surfer do the work.
Reserve all the versions of your domain name. This is one everyone knows, but you can never be too careful. If you are going to be depending heavily on your domain name, and particularly if you hope to build a brand, don’t just reserve yourcoolname.com, reserve .org and .net as well. In addition, if you intend to do business in other countries, consider reserving the extension for that country as well.
For more information on this topic contact Chris Erb. |
