New Farm Bill Signed into Law
Obamacare and Health Reimbursement Arrangements
Apparently, some HRA providers think that they have found a way around the Obamacare restrictions on HRAs by utilizing a Health Reimbursement Plan (HRP). But, according to IRS Notice 2013-54, Q & A No. 1, other types of group health plans that are used to purchase coverage on the individual market cannot be integrated with that individual market coverage for purposes of Obamacare’s annual dollar limit prohibition.
As we have been noting for some time, Health Savings Accounts (HSAs) are a great tool for handling medical expenses. See our article here. An HSA is a tax-advantaged savings account for medical expenses. To make contributions to the account, the account holder must have a high deductible health plan (HDHP) – at least $1,250 for individuals and $2,500 for families in 2014. Out-of-pocket costs (including deductibles and co-pay amounts) are capped at $6,350 for individuals and $12,700 for families in 2014. The maximum contribution amount for 2014 is $3,300 for an individual and $6,550 for families. Obamacare puts additional restrictions on HSAs in 2014 by prohibiting their use to buy over-the-counter medications and increasing the penalty for withdrawals used for non-medical purposes from 10 percent to 20 percent. So, an HSA lowers your taxable income, account earnings are tax-free and distributions for medical expenses are not included in income. An HSA owner now may consider whether to stick with their current HDHP or find one in a government exchange. That analysis will depend on the level of taxpayer subsidies that can be obtained by getting an exchange-based HDHP, among other considerations. However, in many states, Obamacare is having the effect of increasing average premiums for individuals purchasing policies from the exchanges. The Department of Health and Human Services issued a report on February 4, 2014, noting that the average deductible for a bronze plan in the states with a federal exchange is $5,095 per year for an individual and the average catastrophic plan has an annual deductible of $6,346. It is likely that most people will do better not buying their insurance through an exchange, even with the taxpayer subsidies.
As for Obamacare in general, a new report by the non-partisan Congressional Budget office (CBO) indicates that it will cost the economy nearly 3 million jobs. On the heels of that report, the White House made another unilateral change to the law. This time (it’s about the 30th time the White House has changed the law without congressional approval), employers with 51 to 99 employees do not have to offer health insurance or pay a fine until 2016. That’s another year beyond the deadline which had already been moved to January 1, 2015. That should largely get the issue out of the media until after the 2014 elections.
I am not sure what you want to do with that information, but at least be aware of it. Clearly, Fed policy has resulted in an overvalued market and a correction is due. Just how big the correction will be is the key question. Another question is how any significant correction would impact your client’s business and planning options.
On the jobs front, the February jobs report was dismal. While the economy added 113,000 new jobs, that’s less than one-half of the number needed every month for another 3 years for the economy to return to its pre-2009 status. The labor force participation rate hovers around 60 percent, a level so low that it hasn’t been seen since the late 1970s. So, while the unemployment rate dropped to 6.6 percent, it did so not because the economy grew, it did so because the labor force continues to shrink. Additional taxes on work and new incentives to not work won’t help that number.
Federal Estate Tax
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Registration is now open for our exciting summer seminars!
We have scheduled a Farm Income Tax, Estate, and Business Planning Seminar, co-sponsored by the Indiana and Kentucky Societies of CPAs, for June 5-6, 2014, at theWest Baden Springs, Indiana Hotel (French Lick Resort).
We are also hosting a Farm Income Tax, Estate, and Business Planning Seminar, co-sponsored by the Idaho, Wyoming, Montana and Washington Societies of CPAs, June 26-27, 2014, in West Yellowstone, Montana.
Both seminars are designed to provide attendees with a comprehensive and practical understanding of major agricultural tax, estate and business planning issues in a beautiful, relaxed setting. More information for both seminars is available here on our website.
As always, we've posted a number of legal annotations this month, providing you with a ready summary of the recent legal cases that are important to your business. You can access the complete searchable list of annotations here, but following are several of the most important:
Loving, et al. v. Internal Revenue Service, et al., No. 13-5061, 2014 U.S. App. LEXIS 2512 (D.C. Cir. Feb. 11, 2014), aff'g., 917 F. Supp.2d 67 (D. D.C. Jan. 18, 2013)
Rev. Proc. 2014-20, I.R.B. 2014-09 (Feb. 5, 2014)
Koster v. Harris, No. 14-0067 (E.D. Cal. filed, Feb. 3, 2014)
Snellman v. Comr., T.C. Sum. Op. 2014-10
Barthell, et al. v. Liermann, et al., 21 Neb. App. 730 (2014)
Establishment of MyRA (announcement by President Obama in State of the Union Address)
Argus Leader Media v. United States Department of Agriculture, 2014 U.S. App. LEXIS 1683 (8th Cir. Jan. 28, 2014), rev’g 900 F. Supp. 2d 997, 2012 U.S. Dist. LEXIS 139069 (D. S.D. Sept. 27, 2012)
Bobrow v. Comr., T.C. Memo. 2014-21
Rev. Proc. 2014-18
Ries Enterprises, Inc. v. Comr., T.C. Memo. 2014-14
Alli v. Comr., T.C. Memo. 2014-15
RJW Williams Farms, Inc. v. Topflight Grain Cooperative, Inc., No. 4-13-0220, 2014 Ill. App. Unpub. LEXIS 109 (Ill. Ct. App. Jan 23, 2014)
Bowen v. Norfolk Southern Railway Company, No. 3:12-9226, 2014 U.S. Dist. LEXIS 8366 (S.D. W.V. Jan. 23, 2014)
Allen v. Dairy Farmers of America, No. 5:09-cv-230, 2014 U.S. Dist. LEXIS 8343 (D. Vt. Jan. 23, 2014)
Town of Barnstable v. Federal Aviation Administration, et al., No. 12-1362, 2014 U.S. App. LEXIS 1159 (D.C. Cir. Jan. 22, 2014)
Rocky Mountain Farmers Union, et al. v. Corey, et al., 730 F.3d 1070 (9th Cir. 2013), pet. for reh'g. den., No. 12-15131 (9th Cir. Jan. 22, 2014)
Priv. Ltr. Rul. 201403012 (Sept. 25, 2013)
CCA 201403006 (Sept. 26, 2013)
Estate of Woodward v. Franklin, No. M2012-01408-COA-R3-CV, 2014 Tenn. App. LEXIS 13 (Tenn. Ct. App. Jan. 14, 2014)
Trosen v. Trosen, No. 20130034, 2013 N.D. LEXIS 6 (N.D. Sup. Ct. Jan. 14, 2014)
Jagers v. Federal Crop Insurance Corp., No. 12-1342, 2014 U.S. App. LEXIS 688 (10th Cir. Jan. 14, 2014), aff'g., No. 12-1342, 2012 U.S. Dist. LEXIS 135266 (D. Colo. Sept. 21, 2012)
In re Clark, No. 12-00649, 2014 Bankr. LEXIS 97 (Bankr. D. Idaho Jan. 10, 2014)
Florida Wildlife Federation, Inc., et al. v. Environmental Protection Agency, No. 4:08cv324, 2014 U.S. Dist. LEXIS 1343 (N.D. Fla. Jan. 7, 2014)
Denton v. Foster Poultry Farms, Inc., No. 12-0328, 2014 U.S. Dist. LEXIS 1090 (W.D. La. Jan. 6, 2014)
West v. Comr., T.C. Memo. 2014-2
Adeyemo v. Comr., T.C. Memo. 2014-1
Carter v. Bavuso, No. 12-4545-00 (Va. Sup. Ct. Jan. 3, 2014)
In re Friendship Dairies, No. 12-20405-RLJ-11, 2014 Bankr. LEXIS 13 (Bankr. N.D. Tex. Jan. 3, 2014)
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