Apr, 2006

"Don't give 'til it hurts--give 'til it feels good." "Give not from the top of your purse but from the bottom of your heart." Authors unknown

Above graphs from CNN Money

Monthly Features Recent Economic News Seven Economic Indicators Major Index Twelve Month Charts Mid Month and Recent Updates West Virgina Changes Law on Gift Annuities Charity Provisions Still In? Bush Tax Cuts IRS 2004 Statistics of Income Bulletin Monthly Magazine MISC - Assisted Living Costs / Tax Scam Tax Relief Act of 2005 Update Roth IRA Versus 401(k) FDIC Insures Retirement Deposits News Sources Past Issue Archive

Recent Economic News

Bernanke: Rate hike pause wouldn't signal the end - 4/27/06 MarketWatch
Fed Chairman Ben Bernanke said that the Fed might pause to allow more time to see economic data, and then resume raising rates. The most recent data have not changed the Fed's assessment that further rate hikes may be needed to keep risks in balance. Analysts and markets expect the Fed to raise rates on May 10 and possibly again in late June. Bernanke said he still expects growth to moderate this year and he sees a "reasonably favorable" outlook on inflation. He expects a gradual cooling but not a sharp slowdown in housing. He said rising energy costs remain a risk to both growth and inflation.

Stunning 13.8% increase in new home sales - 4/26/06 MarketWatch
New home sales unexpectedly increased by 13.8% in March to a seasonally adjusted annual rate of 1.213 million, the highest level of the year, the Commerce Department estimated Wednesday. The increase more than reversed the 10.9% decline in sales in February. It was far stronger than the mild increase to 1.10 million annualized that was expected by economists surveyed by MarketWatch.

US Durable Goods Orders Up 6.1% - 4/26/06 MarketWatch
Orders for new U.S.-made durable goods increased 6.1% in March, led by strong demand for airplanes, machinery and electronics, the Commerce Department said Wednesday. The increase in new orders was the largest since May 2005 and far exceeded the 2.1% gain expected by economists. The big story in March was continued strength in orders for civilian aircraft, which increased 71% in March after a 60% gain in February. Excluding the 14% rise in transportation goods, new orders rose 2.8% in March, the biggest gain since August. Orders for core capital equipment goods - the best indication of business investment plans - increased 3% in March.

Consumer Confidence Hits 4 Year High - 4/25/06 MarketWatch
U.S. consumer confidence confounded expectations and hit its highest level in almost four years in April, the Conference Board said Tuesday. The consumer confidence index rose 2.1 points to 109.6 in April from a revised 107.5 in March. The increase was unexpected. Economists forecast a decrease to about 106.3 in April from the initial estimate for March of 107.2, largely because of higher prices at the gasoline pump, according to a survey conducted by MarketWatch.

No Stop Sign Yet: Inflation Revs Up - 4/20/06 MarketWatch
Fed Watchers Backpedal After CPI's March Surge - Climbing gasoline prices helped push inflation higher last month, the government reported yesterday, heightening concerns that businesses may be passing more of their energy costs to consumers. The Labor Department's consumer price index, a widely followed inflation gauge, rose 0.4 percent in March after edging up a mild 0.1 percent the month before. The report caused analysts to reconsider predictions that the Federal Reserve will soon stop raising interest rates to keep inflation under control. Much of the March increase in the CPI reflected a 3.6 percent jump in gasoline prices.

Interest Rate Increase to Stop? - 4/19/06 Wall Street Journal
After raising interest rates in late March, Federal Reserve officials concluded they were almost done in the lengthy process of tightening monetary policy, meeting minutes show. 'The record gave the strongest signal yet that an expected rate increase by the Fed at its next meeting May 10 may be the last for some time."

Consumer Prices Climbed .4 Percent in March - 4/19/06 NY Times
Consumer prices shot up in March, reflecting higher costs for gasoline, clothing and hotel rooms, with core inflation rising by the biggest amount in a year. The Labor Department reported that its closely watched Consumer Price Index rose by 0.4 percent, far higher than the modest 0.1 percent gain in February. The inflation surge was led by higher gasoline prices, which jumped by 3.6 percent. With oil prices climbing to record levels above $70 per barrel this week, analysts said motorists should be braced for more pain at the pump in coming months.

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THE ECONOMY: SEVEN INDICATORS - From CNN Money (as of 4/26/06)

The Indicator	What It's Telling Us	Next Update
Consumer Confidence	Confidence hits 4-year high	May 29
Retail sales	Strong auto sales helped spur strong growth	May 11
Leading Economic Indicators	Index sinks for 2nd straight month	May 18
Manufacturing Activity (ISM)	Expanding but slow growth	May 1
Industrial Output	Q1 growth: 4.5% at annual rate	May 16
Job Growth	211,000 jobs added in Mar	May 5
Inflation (CPI)	Surprising upward pressure	May 17

West Virginia Changes Law on Gift Annuities
West Virginia recently passed legislation that breaks its longstanding silence regarding gift annuities (HB 4679, approved by the Governor on March 30, 2006). The new law is effective June 9, 2006, and will require a charity wishing to issue gift annuities in West Virginia first to notify the state's Insurance Commission. Charities that have already issued annuities in West Virginia have until September 30, 2006 to submit their notification. Other requirements of the new law include the insertion of specific disclosure language in all West Virginia annuity agreements. Issuing charities must have been in existence for at least 3 years and have available assets of $300,000 or more.
4/19/06 PGCalc

Charity Provisions Still In?
Despite previous reports indicating that a package of charitable giving and charity reform proposals had been removed from the pending tax reconciliation bill (H.R. 4297), the measures are still in play, according to congressional staff and lobbyists. A Senate Finance Committee spokesperson told Tax Analysts April 10 that Finance Committee Chair Chuck Grassley, R-Iowa, a tax bill conferee, considers the charity measures to be "very much on the table." Also, Independent Sector, an umbrella organization of nonprofits that has been lobbying taxwriters on the charity provisions, said April 10 that the charity measures "continue to be very much a part of the discussions."

The proposed charity reform measures include:

• Penalizing participation in tax shelters;
• Requiring unrelated business income tax returns to be certified by an outside auditor or counsel;
• Prohibiting charitable deductions for contributions to donor-advised funds held by Type III supporting organizations;
• Prohibiting donor-advised funds and supporting organizations from making payments and distributions to donors and related parties;
• Requiring organizations that don't have to file annual information returns to notify the IRS each year; and
• Allowing the IRS to give state officials information pertaining to proposed actions regarding exempt organizations.

Among the proposed charitable giving provisions are tax-free distributions from IRAs to charities, a charitable deduction for nonitemizers, and incentives for donations of property for conservation purposes.
Tax Analysts, Inc. quoted in Planned Giving Design 4/16/06

IRS 2004 Statistics of Income Bulletin
The Internal Revenue Service today announced the release of the Winter 2005-2006 issue of the Statistics of Income Bulletin, which includes an article on preliminary data from individual income tax returns for 2004. In 2004, Adjusted Gross Income (AGI) rose for the second year in a row, increasing by 8.9 percent to $6.8 trillion. The largest component of AGI, salaries and wages, increased 6.0 percent to $4,977.9 billion, while net capital gains rose 53.2 percent to $442.1 billion. Taxable income increased 10.6 percent to $4.6 trillion.
For more information, click here
IRS Newswire 4/7/06

Bush Tax Cuts
The House-Senate Conference continues to conduct informal discussions about the Tax Relief Act of 2005 (TRA 2005). In his weekly radio address, President Bush made a strong plea to the House and Senate to extend the tax cuts.
He noted that the tax relief was working. President Bush stated, "We doubled the child tax credit and reduced the marriage penalty, and we put the death tax on the road to extinction. We also cut taxes on dividends and capital gains and extended incentives for small businesses so that they could grow and create new jobs."
After the tax reductions in 2001 and 2003, the American economy recovered and unemployment is now 4.7%. This is a lower unemployment level than the average for the past three decades. President Bush continued, "To keep our economy growing, to keep our businesses investing and to keep creating jobs, we need to ensure that you keep more of what you earn - so Congress needs to make the tax relief permanent."
GiftLaw 4/07/06

Assisted living, home care costs climb: study - 3/27/06 Reuters
Older Americans in need of care face sharp spikes in the cost of increasingly popular assisted living quarters and home health aides, according to a study. The average price tag for a private one-bedroom unit in an assisted living facility rose 7 percent in 2006 to about $33,000 per year, compared with a 5 percent rise in 2005, according to a survey by insurer Genworth Financial Inc.. The average hourly rate for most home health aides climbed 19 percent to $22.15 per hour, compared with a 2 percent rise in 2005, the study found. The average cost for a private room in a nursing home, by contrast, rose 2 percent to about $71,000 in 2006, after rising 6 percent in 2005.

New - Now it's an Email Tax Fraud Scam - 3/24/06 MarketWatch
Fraudsters are sending out fake emails informing taxpayers that they're being audited, or that they're eligible for a refund. Of course, you're directed to click to a Web site and provide sensitive personal data, such as your Social Security and bank account numbers. The scary thing is, those who create these types of emails are getting better at their trade. It can be difficult to discern that these messages and Web sites aren't authentic. If you haven't initiated the telephone call or typed in the Web site address yourself, avoid divulging personal account information.

TRA 2005 House-Senate Conference Meets
After two weeks of delay, the House-Senate Conference considering the Tax Relief Act of 2005 (TRA 2005) finally met. The Conference elected Senate Finance Chair Charles Grassley (R-IA) as Chairman. Sen. Grassley faces the difficult task of bringing together the House and Senate. Senators would like to include both dividends and capital gains relief plus alternative minimum tax relief in the bill. In order to pay for these items, the bill will need to also include various revenue raisers. House Ways and Means Chair Bill Thomas (R-CA) has consistently opposed revenue raisers. He stated, "What someone might call an appropriate revenue raiser, I might call that policy for the sake of finding money. And I don't think we should ever look at policy for the sake of money if what we put in place to find that money is not meritorious in itself."
GiftLaw 3/17/06

Roth IRA Versus 401(k)
While many people focus mainly on their 401(k) plan for retirement, they should be giving more consideration to the Roth IRA. The major advantage of the Roth IRA is that your tax break comes when you withdraw your money...it is tax-free and many argue that tax rates in the future will be much higher than they are now. Additionally, Roth IRAs offer more investment options, don't include mandatory withdrawals and Roth IRAs won't hurt your Social Security situation. Money you take out of a 401(k) increases your income and can increase the tax you pay on Social Security benefits. The 401(k) does have the advantage of higher contributions, you can often borrow money from your 401(k) plan, which Roth IRAs don't allow, and your employer may match part of your contribution. Maybe having both is best!
Financial E-News 3/15/06

FDIC to insure retirement deposits up to $250,000
The Federal Deposit Insurance Corp.'s Board of Directors on Tuesday approved rules to raise the insurance coverage limit for certain retirement account deposits to $250,000 from $100,000, effective April 1. The rule change conforms to a deposit insurance reform law passed by Congress this year that merges the bank and savings insurance funds and expands coverage for the first time in more than 25 years. The insurance limit for regular bank deposits remains $100,000 but the new rule allows the FDIC and National Credit Union Administration boards to consider future inflation-based increases, the first of which could be available in 2011.
"The increase in deposit insurance coverage on certain retirement accounts is a significant change," said Martin J. Gruenberg, the FDIC's acting chairman. The $250,000 limit applies to combined per-person deposits in traditional and Roth individual retirement accounts and other "self directed" accounts such as 401(k) and Keogh plans at a single institution.
Reuters News 3/14/06

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