Planned Giving News Magazine

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News Stories

Houses Approves IRA Rollover
The U.S. House of Representatives approved an IRA Charitable Rollover provision, included in pension reform legislation (H.R. 4) passed late Friday night. The provision provides an exclusion from gross income for certain distributions of up to $100,000 from a traditional individual retirement account (IRA) or a Roth IRA, which would otherwise be included in income. To qualify, the charitable distribution must be made to a tax-exempt organization to which deductible contributions can be made. The provision would be effective for two years through 2007. To read a summary of all the charitable provisions in H.R. 4, click here.
H.R. 4 now heads to the Senate for consideration where passage is far from certain. Because the bill is not a conference report, it is subject to amendment and potentially unlimited debate (i.e., "normal order" in the Senate). In addition, Majority Leader Bill Frist (R-TN) has indicated he will allow a vote on the pension bill only AFTER another bill with billions of dollars of tax "extenders," minimum wage provisions and a permanent reduction in the estate tax is approved. At one time, charitable incentives were being considered as additions to this so-called "trifecta" bill instead of H.R. 4. As such, things remain fluid. NCPG will continue to work with coalition members and congressional staffers through the August recess to map out a strategy for securing passage of the IRA Charitable Rollover.
7/31/06 NCPG

Estate Tax Legislation Update
The House Ways and Means Committee added charitable giving incentives to H.R. 4, the Pension Protection Act of 2006. The full House passed the bill by a vote of 279-131. Included are many of the charitable tax provisions that used to be in the C.A.R.E. bill of 2003, including "Charitable IRA Rollover."
The bill would also make charitable gifts by Subchapter S corporations more attractive. There is also proposed regulation of donor advised funds and supporting organizations. The bill would impose the excess-benefit tax to some self-dealing transactions between donors and the donor advised funds and supporting organizations that they established. It would also extend the private foundation excess business holdings tax (Sec. 4953) to donor advised funds and supporting organizations. Like private foundations, they would have to dispose of closely-held business interests within five years of receipt if donors and related parties owned over 20% of the business. We knew that that the Senate had been advancing charitable legislation over the past few years, but at least during this session of Congress the House had been silent.
7/28/06 Christopher R. Hoyt Univ. of Missouri (Kansas City) School of Law
In what might be a major blow to efforts to lower estate taxes this year, Republican leaders have decided to put off a vote on the issue until after the August recess, when the legislative calendar will be crowded with other measures," the Wall Street Journal reports. "House Republicans, led by Ways and Means Chairman Bill Thomas" of California, blocked an attempt from Senate Majority Leader Bill Frist, R-Tenn., "to add estate-tax overhaul to a bill aimed at shoring up the private pension system that is nearing final congressional agreement and might be brought up this week.
7/25/06 Govtexec.com
Senate Finance Committee ranking minority member Max Baucus, D-Mont., told reporters July 24 that some of the charitable reforms previously passed by the Senate as part of its broad tax reconciliation package will be included in a final pension reform conference report.
7/25/06 PGDC.com

Government Moves to Cut IRS Estate Tax Attorneys
The federal government is moving to eliminate the jobs of nearly half of the lawyers at the Internal Revenue Service who audit tax returns of some of the wealthiest Americans, specifically those who are subject to gift and estate taxes when they transfer parts of their fortunes to their children and others. The administration plans to cut the jobs of 157 of the agency's 345 estate tax lawyers, plus 17 support personnel, in less than 70 days. Kevin Brown, an I.R.S. deputy commissioner, confirmed the cuts after The New York Times was given internal documents by people inside the I.R.S. who oppose them.
The Bush administration has passed measures that reduce the number of Americans who are subject to the estate tax - which opponents refer to as the "death tax" - but has failed in its efforts to eliminate the tax entirely. Mr. Brown said in a telephone interview Friday that he had ordered the staff cuts because far fewer people were obliged to pay estate taxes under President Bush's legislation. But six I.R.S. estate tax lawyers whose jobs are likely to be eliminated said in interviews that the cuts were just the latest moves behind the scenes at the I.R.S. to shield people with political connections and complex tax-avoidance devices from thorough audits.
7/24/06NYTimes

New Scam Warning
Following a recent increase in scam e-mails, the Internal Revenue Service reminded taxpayers to be on the lookout for bogus e-mails claiming to be from the tax agency. The IRS saw an increase in complaints in recent weeks about these e-mails, which are designed to trick the recipients into disclosing personal and financial information that could be used to steal the recipients' identity and financial assets.
"The IRS does not send out unsolicited e-mails asking for personal information," said IRS Commissioner Mark W. Everson. "Don't be taken in by these criminals."
The IRS has seen a recent increase in these scams. Since November, 99 different scams have been identified, with 20 of those coming in June - the most since 40 were identified in March during the height of the filing season. Many of these schemes originate outside the United States.
The current scams claim to come from the IRS, tell recipients that they are due a federal tax refund, and direct them to a Web site that appears to be a genuine IRS site. The bogus sites contain forms or interactive Web pages similar to IRS forms or Web pages but which have been modified to request detailed personal and financial information from the e-mail recipients. In addition, e-mail addresses ending with ".edu" - involving users in the education community - currently seem to be heavily targeted.
IR-2006-104 7/10/06

Be Prepared For ID Theft
It may have already happened to you: A letter arrives in the mailbox from your bank or alma mater, stating that a hacker break-in or lost laptop has compromised sensitive data on thousands of people, and that you could be among the unlucky ones. What to do?
(editor's note - rather than condense the article and leave out important details, please access the article in it's entirety at http://www.futurefocus.net/idtheft.doc)

"Strong Feelings" on Estate Tax Compromise Following a preliminary vote on estate tax repeal legislation that fell three votes short of the required 60 in the Senate last week, Republicans and Democrats have been involved in negotiations on an estate tax compromise. The Republican efforts continue to be lead by Sen. Jon Kyl (R-AZ) and the Democratic efforts by Sen. Max Baucus (D-MT). Sen. Kyl continues to advocate an estate exemption of $5 million and an estate tax rate of 15%. Sen. Charles Grassley (R-IA), Chair of the Senate Finance Committee, suggested that a second rate of 30% for estates over $30 million should be used. Other Senators have discussed a potential rate of 35% for estates over $35 million. Sen. Baucus met with Democratic senators to discuss a potential estate tax compromise. Sen. Baucus stated, "There are strong feelings all the way around. Because of the strong feelings, I just don't know [whether a compromise is possible at this time]". The July 4 Congressional recess is nearing and it seems likely that any estate tax compromise will be deferred until after the recess. Since tax laws must start in the House, a compromise bill would be introduced and passed in the House of Representatives first. Then it would be sent to the Senate. Given the procedural requirements of the Senate, the estate tax compromise could very possibly be delayed until the fall.
6/16/06 GiftLaw

UPDATE:
House Ways and Means Chairman Bill Thomas of California introduced legislation 6/19 that would reduce the number of Americans subject to the estate tax by raising the per-person threshold for the tax to estates valued at more than $5 million beginning in 2010. Mr. Thomas would set the tax rate for estates valued at less than $25 million to the capital-gains rate, currently 15%. The value of estates above $25 million would be taxed at a rate equal to twice the capital-gains rate. The new legislation would retain the "step up" in basis and would unify the estate, gift and generation-skipping transfer taxes.
6/20/06 Wall Street Journal

UPDATE:
The House passed on 6/22 the Permanent Estate Tax Relief Act of 2006 to provide permanent estate tax relief with a $5 million exemption and a rate pegged to the capital gains tax rate (twice the capital gains rate on estates over $25 million) and to reunify estate, gift, and generation-skipping transfer taxes. The Permanent Estate Tax Relief Act of 2006 would:

reunify the estate, gift and generation-skipping transfer taxes -- giving individuals greater flexibility to make estate planning decisions during life. A non-unified estate and gift tax provides less favorable tax treatment for gifts made during lifetime than gifts made (through a will) at death.
increase the exemption amount to $5 million per person effective January 1, 2010.
reduce the rate of tax on estates up to $25 million to the capital gains tax rate (currently 15 percent, set to increase to 20 percent in 2011 unless extended). The bill would reduce the rate of tax on estates of $25 million or more to twice the capital gains rate (currently 30 percent, set to increase to 40 percent in 2011 unless extended).
simplify estate tax planning by allowing married couples to take full advantage of the $5 million exemption by carrying over any unused exemption to the surviving spouse.
6/20/06 Planned Giving Design Center and subsequent

U.S. to Grow 'Moderate' 3% for Rest of Year, Treasury Says - 7/31/06 MarketWatch
The U.S. economy has moderated somewhat, but the labor market remains healthy and core inflation remains under control, the Treasury Department's top economist, Robert Stein, told the borrowing advisory committee from the Bond Market Association on Monday. "Despite recent ups and downs, the overall economy appears to be in a good position to continue growing at a moderate pace - around 3% -- for the remaining quarters of the year," said Stein, the deputy assistant secretary for macroeconomics. Stein said part of the recent uptick in core inflation was due to "statistical quirks" relating to the treatment of rents in the government's price indexes.

Housing Slows, Taking Big Toll on the Economy - 7/29/06 NY Times
The housing industry - which largely carried the American economy through the tribulations of the 2000 stock-market crash, a recession and climbing oil prices - has lost its vigor in recent months and now has begun to bog down the broader economy, which slowed to a modest 2.5 percent growth rate this spring. That was a sharp comedown from the 5.6 percent growth rate of the first quarter, caused in part by the third consecutive quarterly decline in spending on houses and apartment buildings after several years of rapid growth. Still, the government also reported brisk inflation in the quarter, underscoring that slower growth has not yet put a check on rising prices. The housing slowdown is perhaps the clearest effect of the Federal Reserve's two-year campaign of raising interest rates in a bid to tap the brakes on the economy and reduce inflation. That campaign has been largely successful, with the decline happening gradually while other parts of the economy, mainly the corporate sector, pick up much of the slack. The biggest risk, economists say, is that the optimism that fed the real-estate boom will reverse dramatically. The number of homes for sale has surged in recent months, particularly in once-hot markets, like the Northeast, Florida, California and parts of the Southwest. As builders delay land acquisition and construction it could reduce employment and spending in the coming months.

U.S. Economic Growth Slowed Significantly in 2nd Quarter - 7/28/06 NY Times
Economic growth slowed significantly in the second quarter, settling down to a rate that economists regard as more sustainable and orderly than the torrid pace reported last quarter. Gross domestic product, the sum of the nation's output of goods and services, grew at an annual rate of 2.5 percent in the three months ended June 30. While that is considered a healthy growth rate, it is well below the figure of 3 percent that many economists forecast. Just how rapidly the economy is growing is closely watched by the Federal Reserve and, in turn, by investors, who will price the stock market accordingly. Slowing growth would seem to give the Fed a reason to stop raising interest rates - something many investors would like to see. But the report also contained some signs of relatively high inflation, which could point instead to further interest-rate increases. One closely watched broad measure of inflation, known as the core index of personal consumption, rose at a 2.9 percent annual rate in the second quarter, the fastest pace reported since 1994. The index rose at a 2.1 percent annual rate last quarter. Consumers did not keep pace with the economy, increasing their spending by only a 2 percent annual rate in the second quarter; the figure grew at a 5.3 percent annual rate the quarter before.

New homes fall 3% to 1.13 million in June - 7/27/06 MarketWatch
Revisions show housing market softer than previously thought. June's sales were below the market estimate of 1.16 milion. Revisions to previous months' sales show a softer market than previously reported, adding to the weight of evidence that the housing market is sinking after being the major engine of U.S. economic growth for four years. May's sales pace was revised down to a 1.17 million pace from 1.23 million reported last month. And sales in the first six months of the year were down 11.9% to 598,000 from the 679,000 in the first six months of 2005. Sales are down about 18% from the peak last summer. The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions, as in May, are common. The standard error is so high, in fact, that the government cannot be sure sales decreased at all in June. The 3% decline for June is, in other words, statistically meaningless.

Durable-goods orders rise 3.1% in June - 7/27/06 MarketWatch
Transportation orders rise 8.6% on aircraft and ships. Demand for U.S.-made durable goods rose 3.1% in June, led by a surge in demand for transportation goods, the Commerce Department said Thursday. Excluding the 8.6% rise in transportation orders, orders for durable goods increased 1%, the government said. New orders were stronger than the 2% expected by economists surveyed by MarketWatch. May's orders were revised higher to show a 0.3% gain instead of the 0.2% loss previously reported. Durable-goods orders have risen in four of the past five months, helped by steady export demand for aircraft. Orders for durable goods are up 9% year-to-date.

Homes for sale rise to 9-year high - 7/25/06 MarketWatch
The worsening correction in the housing market continued in June, with inventories rising to a nine-year high while price appreciation slowed to the weakest pace in 11 years. Sales of existing homes fell 1.3% in June to a seasonally adjusted annualized rate of 6.62 million, the private real estate industry group said. The decline was close to expectations. Even as sales softened, more houses came on the market. The inventory of unsold homes rose to 3.725 million, a 6.8-month supply at the June sales rate, the largest supply in relation to sales since July 1997. Inventories are up 39% in the past year.

U.S. consumer confidence moves higher in July - 7/25/06 MarketWatch
U.S. consumer confidence strengthened a bit in July, the Conference Board said Tuesday. The consumer confidence index rose to 106.5 in July from a revised 105.4 in June. The gain was unexpected. Economists forecast the index to slip to 103.9 in July from the initial June estimate of 105.7. The present situation index rose to 133.0 from 132.2, while the expectations index edged up to 88.8 from 87.5. Expectations of inflation one year in the future held steady in July.

Index points to slowing economy - 7/20/06 CNN Money
A key gauge of future U.S. economic growth rose slightly in June, suggesting the economy will cool further in the second half of 2006. The U.S. Index of Leading Indicators rose 0.1 percent in June to 138.1, just below market expectations for a 0.2 percent rise, the Conference Board said. June's increase follows two straight months of declines. An increase of 0.1% suggests growth will slow in second half of 2006; Philly Fed also sees slowing activity. The leading index measures a basket of economic indicators ranging from unemployment benefit claims to building permits which is supposed to forecast economic trends up to six months ahead.

U.S. June core CPI up 0.3% on rising rents - 7/19/06 MarketWatch
U.S. consumer prices increased a moderate 0.2% in June, the smallest gain in four months, but core inflation rose 0.3% for the fourth straight month, putting pressure on the Federal Reserve to raise interest rates again. The Labor Department said the consumer price index increased 0.2% in June after rising 0.4% in May. Energy prices fell 0.9%, while food prices rose 0.3%. The CPI is up 4.3% in the past 12 months. The core CPI is up 2.6% in the past year, a bit more than the Fed would like. Economists were expecting 0.2% gains in both the headline CPI and the core CPI, which excludes food and energy costs.

Wholesale Prices Jump in June - 7/17/06 NY Times
The wholesale prices that businesses charge one another jumped more than expected in June, driven in part by rising costs for food and energy. The Labor Department said today that the producer price index rose 0.5 percent in June, following a 0.2 percent increase in May. The consensus forecast among economists had been for a 0.3 percent increase in June. A separate calculation of producer prices excluding the food and energy categories, which are subject to volatile monthly swings, showed more modest increases. That figure, known as the core index, rose 0.2 percent in June, in line with economists' expectations; it rose 0.3 percent in May. Upward momentum of prices at both the wholesale and retail levels has taken on added significance lately, as investors wonder about the Federal Reserve's policy on interest rates. Policymakers at the Fed have repeatedly said that fighting inflation is a top concern. The Fed raised its benchmark short-term rates late last month for the 17th straight time, disappointing some investors who had hoped the central bank would pause.

Retail sales fall 0.1% in June - 7/13/06 MarketWatch
U.S. consumers cut back in June, sending retail sales down 0.1% for the month. It was the second straight month of tepid retail sales. Sales rose 0.1% in May. Consumer spending slowed sharply in the second quarter. Retail sales were up 0.9% in the second quarter compared with the first quarter. Retail sales are up 5.9% in the past year. The figures are not adjusted for price changes. Economists were forecasting stronger sales in June, with the consensus expectation of 0.4% for total sales and for sales excluding autos.

Trade Deficit Widens to $63.8 Billion - Record petroleum imports offset record exports of U.S. goods - 7/12/06 MarketWatch
The U.S. trade deficit widened by 0.8% in May to $63.8 billion as both imports and exports set monthly records, the Commerce Department said Wednesday. Reflecting a growing global economy, exports increased 2.4% to $118.7 billion, the biggest percentage gain since December 2004. Record petroleum imports -- due to record prices and the biggest quantity in 18 months -- helped to push up imports by 1.8% to $182.5 billion. The non-petroleum deficit fell to $43.2 billion, its lowest level in nine months. Economists expected the May trade deficit to widen to about $64.7 billion, according to a survey conducted by MarketWatch. The deficit in April was revised insignificantly to $63.3 billion.

U.S. Crude Supplies Drop 6 Million Barrels - 7/12/06 MarketWatch
Energy Dept. The Energy Department said crude supplies fell 6 million barrels for the week ended July 7 to total 335.3 million -- around triple the decline expected by some analysts. Motor gasoline inventories stocks were down 400,000 barrels to total 212.7 million barrels. Distillate supplies rose 2.6 million barrels to 129.9 million. August crude rose 59 cents to $74.75 a barrel after trading as high as $74.90. August unleaded gas added 2.75 cents to $2.22 a gallon and August heating oil was at $2.015 a gallon, up 0.44 cent.

US mortgage Demand Rises Despite Fed Rate Hike - 7/7/06 Reuters
U.S. mortgage applications rose for the first time in three weeks last week as interest rates on home loans fell from a four-year high during a week when the Federal Reserve raised borrowing costs, an industry trade group said on Thursday. Douglas Duncan, chief economist at the Mortgage Bankers Association, attributed the rise to last week's Fed meeting. "It was surely a reaction to the Fed change in rates, which is not unusual," he said. "Even though typically the market already has what the Fed is going to do factored into it, people still react that way."

U.S. Wages on the Rise - 7/7/06 MarketWatch
Treasury Average weekly earnings through June increased 4.5% over the last year, slightly higher than inflation, which increased 4.2% through May, a Treasury official said today in Washington as the government released the June employment report. The U.S. is experiencing "a very nice increase" in wages, which is what should be expected at this point in the economic recovery following the recession of the last couple of years, Treasury Assistant Secretary Mark Warshawsky told reporters at a press briefing on the state of the U.S. economy.

Jobs Data Indicates Economy Is Slowing - 7/7/06 NY Times
Employers added only 121,000 jobs in June, the government reported yesterday, indicating that the economy was slowing under the combined weight of high energy prices and rising interest rates. But the government also reported that hourly wages rose at their fastest pace in five years, while the unemployment rate remained at 4.6 percent. This suggests that the labor market remains tight and may yet spur higher inflation. The disparate data underscored the uncertain economic situation facing the Federal Reserve as it ponders whether to continue raising interest rates over the summer to cool the economy further or whether it is time to pause. Over the last two years, the Fed has steadily increased the benchmark federal funds rate from 1 percent to 5.25 percent

Related Article - 7/7/06 MarketWatch
The U.S. labor market was stronger in June than indicated by the tepid 121,000 growth in nonfarm payrolls. The data from the Labor Department released Friday paint a muddled picture. While job growth of 121,000 was less than the 175,000 expected by economists and far less than the 390,000 projected by the ADP index, other aspects of the report show a healthier labor market. In contrast to the weak payroll survey, the household survey showed robust job growth of 387,000 in June, keeping the unemployment rate at a very low 4.6%, in line with forecasts. The number of hours worked rose smartly, and average pay increased. Average hourly earnings increased 8 cents, or 0.5% to $16.70. Economists had been expecting a 0.3% gain. Earnings are up 3.9% in the past year. The number of people who've been out of work longer than six months dropped by 217,000 to 1.1 million. The labor force participation rate rose by a tenth of a percentage point to 66.2%. Irwin Kellner, chief economist for MarketWatch and chief economist for North Fork Bank, told MarketWatch that he now expects an increase in August.

Jobless Claims Fall Slightly - 7/6/06 NY Times
The number of Americans filing new claims for unemployment benefits declined slightly last week, indicating continued strength in the labor market despite a spring slowdown in the economy. The Labor Department said Thursday that applications for jobless benefits totaled 313,000 last week, a drop of 2,000 from the previous week. That was a slightly better performance than economists had been expecting. They had forecast that jobless claims would rise by 2,000. In other economic news, the nation's retailers reported that sales stalled in June as shoppers curbed their spending on other items because of soaring gasoline prices.

Construction Spending Dropped in May - 7/3/06 MarketWatch
Spending on U.S. construction projects fell 0.4% in May to an annual rate of $1.21 trillion, the Commerce Department said Monday. This is the biggest drop in construction outlays since September 2004 and the first two-month decline since February and March 2003. Economists had anticipated an increase of 0.2% in May, according to a survey conducted by MarketWatch. Outlays in April were revised lower to a 0.2% decline from 0.1% previously.

U.S. manufacturing sector grows slower in June - 7/3/06 MarketWatch
The U.S. manufacturing sector grew at a slower than expected pace in June, the Institute for Supply Management reported Monday. The ISM index fell to 53.8% from 54.4% in May. Economists expected an increase to 54.9%. Readings over 50% indicate expansion in the factory sector. The new orders index rose to 57.9% in June from 53.7% in May. The prices paid index slid to 76.5% from 77.0%. "Although the rate of growth slowed slightly, renewed strength in June's New Orders Index provides encouragement for the third quarter," said Norbert Ore, head of the ISM's survey committee.

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