Thursday, December 23, 2010

Tax Refunds not countable for Public Assistance

Little known provision is part of new Tax Relief Act

By Jeffrey A. Marshall, CELA*

The Tax Relief Act of 2010 includes a provision that requires that tax refunds received in 2011 and 2012 are to be disregarded for 12 months for purposes of determining eligibility for federally funded assistance programs like Medicaid or SSI.  

This important new provision is found in Section 728 of the Tax Relief Act.  It reads:  

(a) In General- Subchapter A of chapter 65 is amended by adding at the end the following new section:
`(a) In General- Notwithstanding any other provision of law, any refund (or advance payment with respect to a refundable credit) made to any individual under this title shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds.
`(b) Termination- Subsection (a) shall not apply to any amount received after December 31, 2012.'.
(b) Clerical Amendment- The table of sections for such subchapter is amended by adding at the end the following new item:
`Sec. 6409. Refunds disregarded in the administration of Federal programs and federally assisted programs.'.
(c) Effective Date- The amendments made by this section shall apply to amounts received after December 31, 2009.

The Congressional Joint Committee on Taxation’s explanation of this provision is as follows:

“Under this provision, any tax refund (or advance payment with respect to a refundable credit) received by an individual after December 31, 2009 begins a period of 12 months during which such refund may not be taken into account as a resource for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds. The provision terminates on December 31, 2012.”

Thanks to New York attorney Steve Silverberg for initially pointing out this interesting aspect of the new tax law. 

Update: On February 2, 2011, CMS published an informational bulletin as guidance to state Medicaid agencies on how to administer Section 728's requirement to disregard federal tax refunds or advance payments.

Sunday, December 19, 2010

Portability Provision of Estate Tax law may be "Wolf in Sheep's Clothing"

The New Estate Tax Law May Create Complications for Middle Class Married Couples 

By Jeffrey A. Marshall, CELA*

The recently enacted Tax Relief Act of 2010 brings back the federal estate tax with a whimper not a bang. But one provision, intended to help married couples, may result in new tax complexities and expense for those of even very modest wealth.

Under the new rules, individuals who die in 2011 or 2012 will have an exemption amount of $5 million dollars (reduced if they made large gifts during lifetime). If their taxable estate does not consume the entire $5 million exemption, the unused portion can be passed on to their surviving spouse. However, the unused exemption amount is available to the surviving spouse only if an election is made and the amount is calculated on a timely filed estate tax return of the deceased spouse. This estate tax return must be filed to pass on the unused exemption even if no return is otherwise required.  

In its December 10th technical explanation of the provisions of the law, the Congressional Joint Committee on Taxation gives the following example of how this “portability” provision will work:  
“Example 1.−Assume that Husband 1 dies in 2011, having made taxable transfers of $3 million and having no taxable estate. An election is made on Husband 1's estate tax return to permit Wife to use Husband 1's deceased spousal unused exclusion amount. As of Husband 1's death, Wife has made no taxable gifts. Thereafter, Wife's applicable exclusion amount is $7 million (her $5 million basic exclusion amount plus $2 million deceased spousal unused exclusion amount from Husband 1), which she may use for lifetime gifts or for transfers at death.”

In the Joint Committee example, it is pretty obvious that the relatively wealthy surviving spouse should hire a lawyer to prepare a federal estate tax return for her deceased husband. At a 35% tax rate, the unused $2 million dollar exemption could someday be worth $700,000 to her heirs.

But doesn’t this same logic hold true in the situation of a married couple with a much more modest net worth? Who knows what the future holds for the surviving spouse.

Assume that you are the lawyer meeting with a surviving spouse soon after the death of her husband.  The deceased had an “I love you” estate plan which leaves everything to his wife.  The value of his estate, for federal estate tax purposes, is $400,000. There is no federal (or state) tax and there is no requirement that a federal estate tax return be filed.  

But there is a $5 million dollar unused exemption that can be passed on to the surviving spouse – IF your client is willing to go to the hassle and expense of having an estate tax return prepared and filed. As the lawyer, how can you not suggest the filing of estate return to calculate the unused exclusion and elect to pass it on? How can you guarantee that the unused exclusion will not someday be incredibly valuable to your client’s children or other heirs?   At a 35% tax rate, an unused $5 million exclusion could someday be worth as much as $1.75 million dollars.

Note that the more modest the estate of the deceased spouse, the more potentially valuable the unused exemption. 

In my area of Pennsylvania, new technology has recently allowed for development of the gas resources of the Marcellus Shale. Mountain land that would have sold for under $1,000 an acre 10 years ago is now worth ten to twenty times as much.  A small farm or hunting land worth much less than $1 million 10 years ago may now be worth $10 million or more. The lesson is clear: surviving spouses can acquire unanticipated wealth.  

As a lawyer, I don’t want to find myself sitting across the table from my client’s children someday trying to explain why a million dollars in avoidable federal estate taxes is due because mom didn’t file an estate tax return when dad died. I’m not sure I would feel that much better even if I had some kind of a waiver signed by mom.

So, it seems to me that the portability provision in Title III of the new Tax Relief Act may be the proverbial wolf in sheep’s clothing.  It may create a lot of additional work for lawyers, and expense for our widowed estate administration clients of only modest net worth. 

Update: In September 2011, the IRS issued Notice 2011-82 Guidance on Electing Portability of Deceased Spousal Unused Exclusion Amount.

See also:

IRS publishes new Estate Tax Return Form (706) and Instructions.

Estate and Gift Tax Portability Law Creates some Unconventional Planning Opportunities 

*Certified as an Elder Law Attorney by the National Elder Law Foundation under authorization of the Pennsylvania Supreme Court

Friday, December 17, 2010

Congress passes Tax Compromise Bill - including Temporary Estate Tax

 Late Thursday (December 16th), the US House passed the Obama/Republican Tax Compromise measure on a vote of 277 to 148. 112 Democrats and 36 Republicans voted "no." The bill passed after an effort by House liberals to modify the estate tax provisions failed by a vote of 194 to 233. The Senate had overwhelmingly approved the bill earlier in the week by a vote of 81 to 19.

President Obama signed the legislation on December 17, 2010. The bill (H.R.4583) has now become law the "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" Hopefully, we will end up calling it something simpler, like the "Tax Relief Act of 2010" (TRA 2010).

The generous (but temporary) new federal estate rules are retroactive to January 1, 2010, at the option of the taxpayer. The gift tax rules are effective January 1, 2011. The Act also includes an extension of the Bush era income tax rates and numerous other provisions desired by progressives and/or intended to stimulate the economy. The cost is estimated at $858 billion.

For more information see the Washington Post article "Congress passes extension of Bush-era tax cuts."

The law as enacted in available on the website of the Government Printing Office:

The text of the law, including hyperlinks to sections is available through Thomas:


Thursday, December 16, 2010

Senate approves estate tax provisions for 2011 and 2012

On December 15th, the US Senate passed Senate Amendment 4753 to H.R. 4853, “The Middle Class Tax Relief Act of 2010.”  The vote was 81-19.

You can read the full text of the legislation here: Title III of the bill deals with the temporary increase in the exemption amounts for federal estate, gift and generation skipping taxes. House approval is expected and the bill could be on the President's desk before Christmas.

Thanks to Brian Lindberg and Fay Gordon or NAELA for this upated information. See also, "Senate Overwhelmingly Approves Tax Cut Deal," Washington Post, December 16, 2010. 

Saturday, December 11, 2010

Senate Bill lays out rules for Estate Taxes in 2011 and 2012

Senate Majority Leader Harry Reid has introduced legislation to enact the Obama/Republican tax cut compromise. Entitled the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” the provisions of the legislation can be reviewed through the Senate Democrats website at  

Section 3.02 of the Reid bill lays out the proposed estate, gift and generation skipping tax rules for 2011 and 2012. These include:
  • ·       $5 million dollar exemption per individual
  • ·       35% top tax rate
  • ·       Portability of the exemption for married couples. (The unused portion of an individual’s $5 million exemption can pass on to the estate of their surviving spouse.)  
  • ·       Unified Estate, Gift and Generation Skipping taxation at the $5 million level. For example, if you make a “taxable” gift $4 million dollars during your lifetime, you will have no immediate tax to pay and will still have $1 million remaining to use to offset estate taxes at your death.  (There is no change in the annual exclusion for gifts, which is currently set at $13,000 a year per done.)
  • ·       The $5 million dollar exemption is indexed for inflation, which suggests a possible extension of the rules for 2013 and later years according to an article in the Wall Street Journal.  However, the past has taught us how difficult it is to predict the future of the estate tax.   

The $5 million dollar exemptions and 35% rate will sunset at the end of 2012. Cautious individuals and couples may view the next two years as a golden opportunity to transfer wealth to future generations at very low cost.

The Reid bill is structured as an amendment of the current law that was enacted as the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) in 2001.  (Title V, Sections 501 et. Seq. of EGTRRA dealt with estate, gift, and generation skipping taxes). So, to make sense of the provisions in the current proposal, you may need to refer back to the 2001 law. Here is a link to EGTRRA You will also want to have the Internal Revenue Code handy – it’s available online at this link:

According to the Wall Street Journal article, the Senate plans to vote on the bill on Monday.  

The bill also extends for two years all of the Bush era tax cuts for all taxpayers including current lowered rates on capital gains and dividends. It also extends unemployment benefits, grants a one-year payroll tax cut of 2% for nearly all workers, reduces the alternative minimum tax, and provides various tax credits. 

A Senate Finance Committee summary of the bill is available here

Monday, December 6, 2010

A scary thought. Your Income may need to increase a LOT during your retirement.

By Jeffrey A. Marshall

The 2010 Deficit Commission Report was politically dead on arrival at Congress.  The report (entitled “The Moment of Truth”) had the audacity to suggest that Americans need to engage in shared sacrifice through both cuts in spending and tax increases. 

Of course, the more liberal politicians in Washington are unlikely to ever accept spending cuts in programs like Social Security, and conservative politicians appear to be unable to accept tax increases of any sort.  Why embrace cutting benefits and subsidies and raising taxes if your polestar is getting re-elected in two years.  So, it looks like the “looming fiscal crisis” predicted by the Deficit Report will most likely come to pass.

“Spending is rising and revenues are falling short, requiring the government to borrow huge sums each year to make up the difference. We face staggering deficits. In 2010, federal spending was nearly 24 percent of Gross Domestic Product (GDP), the value of all goods and services produced in the economy. Only during World War II was federal spending a larger part of the economy. Tax revenues stood at 15 percent of GDP this year, the lowest level since 1950. The gap between spending and revenue – the budget deficit – was just under nine percent of GDP.

The common belief in Washington is that deficit reduction gridlock will result in our passing a financial doomsday on to our children and grandchildren.  As stated by the Deficit Commission: “America’s long-term fiscal gap is unsustainable and, if left unchecked, will see our children and grandchildren living in a poorer, weaker nation. In the words of Senator Tom Coburn, ‘We keep kicking the can down the road, and splashing the soup all over our grandchildren.’ Every modest sacrifice we refuse to make today only forces far greater sacrifices of hope and opportunity upon the next generation.”

But if you are a younger retiree, around age 65 like me, I think we are not just bequeathing financial crisis to our children – we are likely to live long enough to “enjoy” the doomsday ourselves during our remaining lifetimes.

We know that our overspending and under-taxing will ultimately translate into growing inflation. And inflation devastates retirees and others on fixed incomes.  If you are a younger retiree it is going high inflation is going to impact you.

In November 2010 the magazine Money published a short but scary article on the impact of even modest inflation on retirees. The article was written to answer a reader’s question – “what are the biggest issues new retirees tend to underestimate.”

Let’s say that you are age 65 and you just retired.  Perhaps you are proud to be living within your means – spending no more than your income. (If only the government could do that). It looks at first glance like you are on course to have your income and savings last your lifetime. The problem is, the cost of the things you need to buy will be rising over the next 20 years.  And, rising dramatically as government deficits grow and inflation accelerates.  Your income is going to have to go up as well. 

How much will your retirement income have to increase when inflation hits the things you buy?  The handy chart in the Money article gives you an idea. 


So, if you are age 65 like me, and inflation averages 5% over the next twenty years your income at age 85 will need to be 265% of your current income just to keep you even with inflation. Imagine how much your income will need to rise if the inflation rate exceeds 5%.

So, it seems to me that this deficit reduction business is not just a question of the morality of passing a lot of debt on to our children and grandchildren. New retirees - to paraphrase John Donne: Do not send to know whom the deficit bell tolls, it tolls for thee.

Thursday, November 25, 2010

Pennsylvania to Create Alert System for Missing Persons at Special Risk

On November 23rd Governor Rendell signed Senate Bill 976 into law (Act 126 of 2010). The new law will establish a “Missing Endangered Person Advisory System” (MEPAS) to provide notification and enlist public and law enforcement help in locating missing persons who are at special risk because of age, illness or disability.The law requires the State Police to establish and maintain the system.
This brings Pennsylvania into alignment with the growing number of states that have enacted so-called “Silver Alert” programs to broadcast information about missing persons - especially seniors with Alzheimer's Disease, dementia or other mental disabilities – and to assist in their return. Pennsylvania’s existing “Amber Alert” system seeks to find abducted children. The MEPAS system, which was passed as an amendment to the Amber Alert law, will apply to seniors with Alzheimer’s and any other “missing persons who are at special risk of harm or injury.”
SB 976 was initially introduced by State Senator Michael O’Pake of Reading who said proposal came about because the success of the Amber Alert system for missing children showed the need for having similar programs for other vulnerable groups. See: “Bill to locate missing, endangered persons passes.”
The Alzheimer’s Association reports that 6 in 10 dementia sufferers wander at some point during their illness. If not found within 24 hours, up to half of wandering seniors with dementia suffer serious injury or death. But, searching for them can raise complications unlike those encountered with a lost or abducted child since an individual with dementia may be paranoid and actively seek to avoid detection. Thus, the MEPAS system will be a separate system distinct from Amber Alerts.  
While the implementation of a Silver Alert system in Pennsylvania will seem like a “no-brainer” to most, there are critics who raise concerns about both cost and the dilutive effect of adding to the number of alerts.  In New York, Governor George Paraki vetoes Silver Alert legislation in 2003  because he felt it would weaken the Amber Alert system by making alerts too common. Nevertheless, a number of cities in New York State reacted to the Governor’s veto by enacting their own systems.

For tips on coping with wandering and other safety issues related to dementia and Alzheimer's readers can visit the Alzheimer's Association Safety Center or call the Association's 24 hour Helpline at 1.800.272.3900.

You might also be interested in the New York Times article "More with Dementia Wander from Home."

*Certified as an Elder Law Attorney by the National Elder Law Foundation

Tuesday, November 23, 2010

Pennsylvania Acts on Patient Safety in Nursing Homes

Preventable Medical Errors may be the sixth biggest killer in America. In a landmark 1999 report, The Institute of Medicine (IOM) estimated that medical errors were responsible for: 44,000 to 98,000 deaths each year and  total national costs of $17 billion to $29 billion. The Congressional Budget Office found that there were 181,000 severe injuries attributable to medical negligence in 2003. The Institute for Healthcare Improvement estimates that 40,000 instances of medical harm occur in the healthcare delivery system daily. The 2010 Health Grades Study suggests that Medicare patients who experienced a patient-safety incident have a one-in-five chance of dying as a result. 

As a result of these reports, the federal government and many states have initiated programs requiring health providers to report on preventable adverse medical events.  Medicare and a number of commercial insurance companies and even some employers have set up programs to address medical errors. Medicare no longer reimburses hospitals for the care of hospital-acquired conditions (e.g. certain infections, advanced bed sores, or fractures) and other preventable medical errors such as performing surgery on the wrong body part. 

Over the past few years, the Pennsylvania Legislature has enacted several laws which seek to use market forces to address the issue of Preventable Serious Adverse Events in the private health care industry. In 2007, Pennsylvania enacted Act 52 dealing with Hospital Acquired Infections Control. Using the carrot approach, Act 52 provides for quality incentive payments to facilities that show a reduction in infections.  In 2009, Pennsylvania applied the stick. Act 1, The Preventable Serious Adverse Events Act (codified at, 35 P. S. §§ 449.91—449.97).

Act 1 prohibits health care providers, including nursing facilities, from knowingly seeking payment from a health payor or patient (1) for a preventable serious adverse event (''PSAE''); or (2) for any services required to correct or treat the problem created by a PSAE. In addition, Act 1 also requires a health care provider that unknowingly receives payment for services associated with a PSAE or for the services to correct the PSAE to immediately notify the health payor or patient and refund the payment within 30 days of discovery or receipt of payment, whichever is later.

Act 1 defines a PSAE as ''[a]n event that occurs in a health care facility that is within the health care provider's control to avoid, but that occurs because of an error or other system failure and results in a patient's death, loss of body part, disfigurement, disability or loss of bodily function lasting more than seven days or still present at the time of discharge from a health care facility.''
Act 1 directed the Pennsylvania welfare agency (''DPW”) to issue a PSAE bulletin for nursing facilities, and specifies that ''[f]or a nursing facility, preventable serious adverse events shall be those listed in [the] bulletin.'' On October 16th, DPW published its bulletin listing the events and setting forth the criteria that must be satisfied in order for an event to be classified as a PSAE. 

The events listed in the bulletin qualify as a PSAE if all of the following criteria are satisfied:

1. The event was preventable. To be preventable, the event could have been anticipated and prepared for, but, nonetheless, occurred because of an error or other system failure; and
2. The event was serious. The event is serious if the event subsequently results in death or loss of body part, disfigurement, disability or loss of bodily function lasting more than seven days or still present at the time of discharge from a nursing facility; and
3. The event was within the control of the nursing facility. Control means that the nursing facility had the power to avoid the error or other system failure; and
4. The event occurred as a result of an error or other system failure within the nursing facility.

The Pennsylvania Medicaid approach is similar to, but not identical with, Medicare initiatives.  Pennsylvania’s MA program has a more extensive list of preventable events. And while, Medicare prospectively denies payments up front, Pennsylvania will adjust or reclaim a payment after review. DPW will seek Identify potential adverse events through claims review. 

The 2011 Pennsylvania legislative session will likely see the introduction of additional legislation intended to expand the Medicaid PSAE programs to additional health care providers.   

“First do no harm” is a fundamental directive for health care providers.  Surely we can do better at following it. Using market forces (denying payment) is one approach, though insufficient by itself. For more information on how you can help, check out the Institute for Healthcare Improvement’s  5 Million Lives campaign  at

Sunday, November 21, 2010

Agency home care aides must be paid overtime in Pennsylvania.

Agency home care aides must be paid overtime in Pennsylvania. 
Is a home health aide entitled to overtime pay for working in excess of 40 hours a week? In Pennsylvania, the answer depends on who is the employer.

Home care agencies are a growing industry, expected to employ nearly two million aides by 2014. They are a key support in the bridge the government is trying to build to transition the infirm from institutional to home based long term care.

Pennsylvania’s Minimum Wage law requires that employees who work in excess of 40 hours in a workweek be paid overtime at the rate of 1½ times the worker’s regular rate of pay. However, the law exempts ““[d]omestic services in or about the private home of the employer” from the minimum wage and overtime requirements.

In a recent case the Pennsylvania Supreme Court held that a home health agency cannot take advantage of this “domestic services” exemption to avoid paying overtime to its home health aides. Bayada Nurses, Inc v. Department of Labor and Industry (decided November 17, 2010).

Bayada Nurses, Inc. employs over 1,000 workers from its more than 30 offices in Pennsylvania. It offers a range of home care services including aides who assist infirm individuals perform activities associated with daily living and who provide general companionship. Bayada’s householder clients are billed for each hour of service provided by an aide. The rate includes the aide’s hourly rate of pay, and an additional amount to cover workers’ compensation, insurance, taxes, and Bayada’s overhead (including profit). Bayada, however, does not pay its aides overtime.

Bayada’s aides are exempt from the overtime pay requirements of federal wage law (the Fair Labor Standards Act). However, Pennsylvania has its own wage law. According to the PA Department of Labor and Industry, the Pennsylvania Minimum Wage Act exempts only the services of aides who are hired directly by the householder, but not the services of aides who work for a third party agency like Bayada.

In Bayada, the home health agency asked the Court to find that it was entitled to claim the domestic services exemption because the agency and the householder jointly employ the aides. In the alternative, Bayada asked the Court to find that Pennsylvania must comply with the more liberal overtime pay rules of the federal Fair Labor Standards Act (FSLA). The Supreme Court unanimously rejected all of Bayada’s arguments.

The decision means that, in Pennsylvania, home health agencies must now pay overtime to aides who work more than 40 hours in a workweek. To come within the domestic services exemption: (1) the worker must be providing domestic services in or about a private home; and (2) the employer must be of a particular capacity, i.e., an employer in whose home the work is being performed.

Public Policy Implications

The Bayada case is another interesting battle in the continuing public policy war over how we pay for long term care.  The decision serves the interests of home health aides, who now will receive extra compensation for overtime work. It may help promote this difficult occupation and draw needed workers to it. It does so, however, by raising the cost of home care services when provided by an agency. This may increase the incentive for care recipients to try to save money by hiring their aides directly. Direct hiring often involves “under the table” arrangements, without adequate background checks and supervision. From the government budget perspective, raising the cost of agency home care services is likely to result in faster spend down which may force the care recipient onto Medicaid sooner. There are no easy policy answers when it comes to long term care.     

Both sides pressed their public policy arguments on the Court. Bayada argued that requiring it to pay its aides overtime will increase the amount it must charge its home care clients and may make the use of aides cost prohibitive. An increase in costs due to paying overtime will “lead to less services being provided for Bayada’s clients in financial distress and, in some cases, could lead to institutional care.”

Bayada’s public policy concern was also raised in a recent U.S. Supreme Court case which upheld the federal regulations that exempt home care agencies from having to pay overtime, Long Island Care at Home, Ltd, v. Evelyn Coke, 551 U.S. 158 (2007). The Coke case involved a 1974 amendment to the FLSA in which Congress had extended overtime protection to domestic employees like maids and cooks, but specifically excluded baby sitters and “companions” for the old and infirm. The law did not mention aides employed by third parties. But the federal regulations promulgated in 1975 exempted aides "who are employed by an employer or agency other than the family or household using their services . . . [whether or not] such an employee [is assigned] to more than one household or family in the same workweek . . . ." 29 CFR § 552.109(a)). New York City submitted a friend-of-court brief In Coke which estimated that overtime payments to home aides would increase Medicaid costs by $250 million a year and warned of the possibility of big service cuts.

In Bayada Nurses an amicus brief filed by the Service Employees International Union, Pennsylvania AFL-CIO and AARP sets out the countervailing policy considerations. It argues that the failure to adequately compensate home health care workers will lead to an even greater shortage of these critical workers. The current shortage of such workers is in part due to the lack of competitive wages and the demanding nature of the work. If wages do not improve, patients will suffer the consequences of inadequate services, forcing some prematurely into institutional care. The brief also points out that home health aides working for agencies like Bayada in other states are already receiving overtime pay.

Thus, both sides suggested that a Court decision against them will lead to increased institutionalization which is contrary to current state and federal policies that home and community based services are a preferred and cost effective way to provide long term living services. Can they both be right?  Perhaps so, in this Catch-22 world of financing long term care.

In the future: The Pennsylvania legislature has the authority to change the minimum wage law and exempt agency employed home health aides from the overtime rules.  It is to the legislature that Bayada and other home health agencies must now turn to press their public policy arguments. It will be interesting to see if they find a sympathetic ear in 2011 with Pennsylvania’s new Republican Party controlled legislature and administration.  

Attorney Marshall is Certified as an Elder Law Attorney by the National Elder Law Foundation

Wednesday, November 17, 2010

Medicare Premiums for 2011 announced

The following listing of the Medicare premium, deductible, and coinsurance rates that will be in effect in 2011 was released by Medicare on November 5th:

Medicare Premiums for 2011:
Part A: (Hospital Insurance) Premium
  • Most people do not pay a monthly Part A premium because they or a spouse has 40 or more quarters of Medicare-covered employment.
  • The Part A premium is $248.00 per month for people having 30-39 quarters of Medicare-covered employment.
  • The Part A premium is $450.00 per month for people who are not otherwise eligible for premium-free hospital insurance and have less than 30 quarters of Medicare-covered employment.
Part B: (Medical Insurance) Premium
Most beneficiaries will continue to pay the same $96.40 or $110.50 premium amount in 2011.  Beneficiaries who currently have the Social Security Administration (SSA) withhold their Part B premium and have incomes of $85,000 or less (or $170,000 or less for joint filers) will not have an increase in their Part B premium in 2011.  For additional details, see our FAQ titled: "Will my Medicare Part B premium increase in 2011?"
For all others, the standard Medicare Part B monthly premium will be $115.40 in 2011, which is a 4.4% increase over the 2010 premium.  The Medicare Part B premium is increasing in 2011 due to possible increases in Part B costs.  If your income is above $85,000 (single) or $170,000 (married couple), then your Medicare Part B premium may be higher than $115.40 per month.  For additional details, see our FAQ titled: "2011 Part B Premium Amounts for Persons with Higher Income Levels".
Medicare Deductible and Coinsurance Amounts for 2010:
Part A: (pays for inpatient hospital, skilled nursing facility, and some home health care) For each benefit period Medicare pays all covered costs except the Medicare Part A deductible (2011 = $1,132) during the first 60 days and coinsurance amounts for hospital stays that last beyond 60 days and no more than 150 days.
For each benefit period you pay:
  • A total of $1,132 for a hospital stay of 1-60 days.
  • $283 per day for days 61-90 of a hospital stay.
  • $566 per day for days 91-150 of a hospital stay (Lifetime Reserve Days).
  • All costs for each day beyond 150 days
Skilled Nursing Facility Coinsurance
  • $141.50 per day for days 21 through 100 each benefit period.
Part B: (covers Medicare eligible physician services, outpatient hospital services, certain home health services, durable medical equipment)
  • $162.00 per year. (Note: You pay 20% of the Medicare-approved amount for services after you meet the $162.00 deductible.)

Monday, November 15, 2010

Clean and Green Law amended to protect Marcellus gas landowners

On October 27th Governor Rendell signed Act 88 of 2010 into law. Act 88 protects landowners who participate in Pennsylvania’s “Clean and Green” program from large roll-back taxes due to the development of a gas well or pipeline on their property. [Act 88 of 2010, amending 72 P.S. 5490.1 et seq. (October 27, 2010)]. 

The Clean and Green program was established in 1974 to encourage Pennsylvania landowners to preserve their agricultural and forest land. To achieve this goal the law provides an incentive and a disincentive: (1) qualifying landowners receive a preferential property tax assessment value which is based on the agricultural use of the land rather than its commercial fair market value; and, (2) landowners who convert or sell their land or any portion of their land for non-qualified purposes after it is enrolled in the program are required to pay seven years of roll-back taxes (plus interest) on the entire tract.  

Roll back taxes can be imposed when an enrolled tract of land is “split-off.” A split-off occurs when a property in Clean and Green is divided into two or more tracts one of which does not meet the program’s use requirements. When a split-off occurs, both the split-off tract and the remaining tract can be subject to roll back taxes.  Here is an example. 

Farmer Jones owns 400 acres of a tract of land which he has had enrolled in Clean and Green.  He sells 20 acres to a developer who builds townhouse residential units (a non-qualified use) on the split-off portion. As a result, Farmer Jones now owes roll-back taxes plus interest for the current year and the prior six years on the entire 400 acres

Due to the split-off rules, farmers and other landowners enrolled in Clean and Green have faced roll back taxes if a gas well was developed on their property.   The enactment of Act 88 of 2010 (also known as Senate Bill 298) fixes this problem.  Under Act 88, roll-back taxes are to be levied only on the portion of land which is incapable of being immediately reclaimed for qualified uses.

Here are the details.  Under Act 88: 
  • A roll-back tax can be levied only on the portion of land filed under the well restoration report and land which is incapable of being immediately used for agricultural use, agricultural reserve or forest reserve. 
  • Land devoted to subsurface transmission or gathering lines are exempt from a roll-back tax.
  • Act 88 also allows for the development and use of Tier I alternative energy on any land use category of Clean and Green to be kept under preferential assessment as long as more than half of the energy annually generated is used for agriculture. Examples of Tier I include: solar photovoltaic, solar thermal, wind power, low-impact hydropower, geothermal energy, biologically derived methane gas, fuel cells, biomass energy and coal mine methane.
  • The law allows for one permit for small non-coal surface mining on land enrolled in Clean and Green with the area in the permit subject to the roll-back tax.
  • Land can be voluntarily removed from preferential assessment upon payment of any due roll-back taxes.
According to Senator Gene Yaw (R-Lycoming), the prime sponsor of the legislation, the new law represents “an effort to encourage the development of the Marcellus Shale,” The legislation also “clarifies how farmland is assessed for alternative energies, such as:  wind solar and natural gas, by eliminating the inconsistent interpretation of the state’s Clean and Green law.”

Many of Pennsylvania’s now antiquated laws need to be reviewed and updated due to the unanticipated development of our shale gas. The Act 88 amendment of the Clean and Green program is an example of the kind of work needed to be done in the next legislative session. Pennsylvania’s Republican controlled House, Senate and the Corbett Administration will face a number of legislative issues of critical importance to landowners including:
  • gas severance taxes
  • eminent domain rights for pipeline right of ways
  • royalty income. (Royalty income issues include the need for laws requiring the calibration of gas meters; requiring more complete information on royalty checks such as API #, fractional interest, BTU value; and dealing with division orders).   
Over 950 wells were drilled in Pennsylvania from January 1, 2010 to September 1, 2010.  The sooner our laws are updated, the better.

Friday, November 12, 2010

Marcellus Shale Websites

I don't know who first said "education is power" but I have always believed it. I know that access to accurate fact-based information and advice is particularly valuable for those landowners of north central and northeastern Pennsylvania whose properties contain shale gas.  They are making life changing decisions now that will have a major impact on their future lives and those of their children and grandchildren. Mistakes can be irrevocable. To make good decisions, landowners need the best information, education and legal and financial advice available.

Over the past three years those of us here in Pennsylvania have all learned a lot about natural gas development.  Thanks to the efforts of organizations like Penn State Cooperative Extension and the National Association of Royalty Owners, and of individuals like Attorney Dale Tice, landowners have become much better equipped to make wise decisions as stewards of their family lands and minerals.

Today, the educational resource many people turn to first is the internet.  The internet is a vast library containing both accurate and inaccurate information. Though it must be used with caution, it is a phenomenal educational tool. Here are links to some of the websites I turn to in order to keep up with the past, present, and future of the development of the wealth trapped in our region's shale.

PA Department of Environmental Protection Oil & Gas pages