2009 First-Time Homebuyer Tax Credit

Although we still have a long way to go until we see our way through the recession, Reuters recently reported that home sales have risen for the past three straight months. As a result, it might be the right time for first-time homebuyers to dip their foot in the pool. And don't let a house like this discourage you because there is a major incentive to purchase a home this year: the first-time homebuyer tax credit (the "Credit").

The Credit generally allows qualifying first-time homebuyers to claim a federal income tax credit that is equal to the lesser of ten percent of the purchase price or $8,000 depending on your filing status. However, the purchase must occur before December 1, 2009. Unlike the 2008 version of the Credit, which was essentially a fifteen year interest-free loan, the 2009 Credit does not have to be repaid as long as the house is not resold for at least three years. The Credit does not apply to houses located outside of the United States.

Even if you don't think you are a "first-time homeowner", you may be for purposes of the Credit. A person is generally a qualified first-time homebuyer if they have not owned and used another personal residence at any time during the three years prior to the date of the purchase. Thus, if you previously owned a residence but sold it more than three years ago, you can qualify as a first-timer. Additionally, if you owned a home within the last three years but did not use it as your residence, you could still qualify. However, for married couples, both spouses must qualify regardless of their filing status.

Tax credits in general are preferable to deductions because they apply directly to your income taxes and do not merely reduce your taxable income. Additionally, even if you have no taxable income but otherwise qualify for the Credit, you will be able to file a return for the sole purpose of claiming the credit as your refund.

Domestic Issues for Business Owners, Part 2: Separation, Divorce and Equitable Distribution

In Part One of Domestic Issues for Business Owners, I discussed the definition and value of marital property. In this post I will be highlighting how separation, divorce and equitable distribution can affect your business.

Separation

Separation is an important aspect in valuation of marital property, including business interests, because the date of separation identifies the ending date for assets to be included in the marital estate.

Divorce

There are two types of divorce, fault and no-fault. Even if you have established grounds for divorce under the fault or no-fault provisions of the Divorce Code, a divorce will not be granted until all economic issues are resolved.

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Domestic Issues for Business Owners, Part 1: Marital Property

Starting and running a small business is tough enough. The domestic issue in the forefront of your mind is how the stress of running a business will affect the relationship of your marriage. However, you might want to consider how your marriage affects the assets of your business and understand how a divorce could affect the future of your business.

In this three part post, I highlight some of the issues that arise in a divorce which includes a business owned by one or both parties. Because of the complex nature of this type of divorce, it is difficult to cover all of the issues involved. However, these posts will help to provide some understanding of the basic considerations.

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PA Mini-COBRA Law Effective July 10, 2009

If you thought that no one in Harrisburg was doing anything but wringing their hands about the Pennsylvania state budget for the last 3 months, think again! The Pennsylvania Senate and House of Representatives got together and signed Act 2 of 2009 on June 10, mandating continuing health insurance for employees of employers with fewer than 20 employees, effective July 10, 2009.

Since 1985, the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) has required employers of 20 or more employees to provide its employees and eligible dependents continuing health insurance if they experience a qualifying event.

Under COBRA, employees or their dependents are required to pay the cost, up to 102% of the employer’s cost, to continue their health insurance. In February 2009, President Obama signed the American Recovery and Reinvestment Act providing for subsidized COBRA premiums for those employees who were involuntarily terminated after September 2008. Instead of 102%, the employees only pay 35%, and the employer fronts the remainder and receives a payroll tax credit for its payment. But this plan was available only to those who were subject to COBRA, not the smallest of employers. 

On July 10, 2009, when the Pennsylvania Mini-COBRA law becomes effective, the ARRA subsidy will apply to almost all employers in Pennsylvania. Currently, employers with fewer than 20 employees are not required to offer COBRA continuation coverage, leaving employees to shop for transitional policies which may not provide coverage for pre-existing conditions, prescriptions or maternity. Now employers who sponsor group medical insurance and have 2-19 employees will be required to offer employees and their dependents the opportunity to purchase up to nine months of continuation coverage on the employers group plan. 

While Pennsylvania’s Mini-COBRA is modeled after the federal COBRA law, there are some differences:

PA Mini-COBRA

Federal COBRA

Applies to employers with 2-19 employees

Applies to employers with 20 or more employees

Requires continuation coverage for up to nine months

Coverage is generally capped at 18 months, and may extend to 36 months

Applies only to insured group major medical, hospital or surgical policies. Also, Health Savings Accounts and other medical spending accounts are treated differently.

Applies to all ERISA group health plans

Applies only to insured arrangements, not self-insured programs

Covers both insured and self-insured

Permits an employer to charge up to 105% of group rate

Provides for a maximum charge of 102%

Coverage ends when a participant becomes eligible for other coverage, a group health plan or Medicare

Coverage ends when a participant enrolls in another group plan or Medicare

The insurer is given most of the burden of compliance with this Act

The employer is ultimately responsible for compliance, including providing proper notification to eligible individuals

Individuals must have 3 months of preceding coverage to be eligible

Eligible individuals need only one day of coverage before the qualifying event

Act 4 - Amendment to Insurance Company Law

On June 10, 2009 Governor Rendell signed Act 4 which amends the Insurance Company Law. Now insurers who provide coverage to children of employees must offer, at the policyholder's option and at the insured's expense, coverage for children up through and including the age of 29, provided that the child meets all of the following requirements:

    1.  Is not married.

    2.  Has no dependents.

3. Is a resident of Pennsylvania or is enrolled as a full time student at an   institution of higher education.

4.  Is not provided coverage under any other group or individual health insurance policy or entitled to benefits under any government health care benefits program, including under the Social Security Act.

This Act applies to new contracts and contract renewals occurring after December 7, 2009.  

The Pennsylvania Home Improvement Consumer Protection Act is Effective July 1

 July is probably my favorite month of the year for many reasons - lots of warm weather ahead, my birthday, my daughter's birthday and three whole weeks of the Tour de France. However, many home improvement contractors haven't been looking forward to the onset of July this year because the Pennsylvania Home Improvement Consumer Protection Act (the "Act") goes into effect today. I had previously written about whether a contracting business needs to register for the Act and how to ensure home improvement contracts are enforceable under the Act.

 In addition, this Act will have implications for how firms are rendering services. One of our clients took a proactive approach and sent emails to their entire customer base. This email explained that there was a provision in the Act stating that any contract subject to the Act (generally over $500) must include a provision that allows the homeowner to cancel the contract without penalty within three business days of signing. Essentially this provision could delay contractors from commencing home improvements for three days. Which could be problematic for customers looking for even a small project to be completed immediately.

However, this three day period is waived if the work requested falls into the emergency provisions of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. Those provisions allow the three day period to be waived by the customer if the home improvement services needed are " . . . a bona fide immediate personal emergency. . . ." In addition, the customer must provide a personal and signed statement in their own handwriting that describes the situation and acknowledges not only the need for an immediate remedy but also an express waiver of their right to cancel.

If a bona fide emergency does not exist, it is probably not a good idea to begin work until the three day period has run because the contractor runs the risk of the contract being cancelled during that time, which will likely prevent the contractor from being reimbursed for the work performed. It is also a good idea to contact the existing customer base and notify them of this new policy.