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2010 Issue 1
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Changes Coming for IRS Applications: Higher Fees and Cyber Assistant Married or Partnered Same-Sex Couples Gain Access to Health Care in DC IRS Announces Inflation-Adjusted Rates for 2010 COBRA Subsidy Extended Congress has passed and the President has signed the Fiscal Year 2010 Defense Appropriations Act, which includes a provision extending the health insurance premium subsidy previously enacted under the American Recovery and Reinvestment Act ("ARRA"). Under ARRA, any employee (and certain dependents) who had lost employer-provided group health insurance coverage as a result of the involuntary termination of employment between September 1, 2008 and December 31, 2009 was eligible for a federal subsidy of their COBRA premiums or on premiums paid under state health insurance continuation provisions. Under the new law, eligibility to receive the premium subsidy has been extended an additional two months. Individuals who are involuntarily terminated up through February 28, 2010 are now eligible to receive a subsidy of up to 65 percent of the cost of continuing their health insurance premium under Federal or state health insurance continuation laws. In addition, the maximum period for receiving the subsidy has been extended an additional six months, from nine to 15 months. This 15 month subsidy period will be available to employees involuntarily terminated from employers covered by the federal COBRA as well as those small employers covered by the D.C. health insurance continuation law. Individuals whose right to receive the premium subsidy had expired before the new legislation was enacted will have additional time to pay the reduced premiums allowed by the extension of the law. To continue their coverage they must pay their share of premium costs (35%) by the later of 60 days after the law's enactment or 30 days after notice of the extension is provided by their plan administrator. Those who paid the full insurance premium subsidy can receive a refund of that portion which is subsidized. Employers are also required to provide notice of the extension. The Department of Labor expects to update the guidance on its COBRA Web site in the near future. For further information, please contact Anne Spielberg or Ruth Eisenberg at (202) 328-3500. By Anne Spielberg and Ruth Eisenberg  Changes Coming for IRS Applications: Higher Fees and Cyber Assistant The IRS has announced an increase in the fees for organizations applying for recognition of their 501(c)(3) or other tax-exempt status (Forms 1023, 1024, and 1028) for all applications postmarked after January 3, 2010. The new rates are:
Additionally, the IRS promises to make a web-based program called Cyber Assistant, designed to help 501(c)(3) applicants prepare a complete and accurate Form 1023 application online, available at some point during 2010. Once Cyber Assistant becomes available, the user fees will change again:
If your organization has any questions on how these changes will affect the exemption process, please contact us here at the firm and we will be happy to assist you. By Deanna Markowitz Married or Partnered Same-Sex Couples Gain Access to Health Care in DC Two District of Columbia laws enacted last summer recognize the marriage of same-sex couples and grant these couples new rights and responsibilities, including health insurance coverage. The Jury and Marriage Amendment Act of 2009, which went into effect July 7, 2009, recognizes the marriages of most same-sex couples that were legally entered into in another jurisdiction. Consequently, assuming the marriage is legally recognized by the state in which the union occurred, insurance benefits that typically cover spouses of the policyholder shall now apply to spouses of policyholders who are in same-sex unions. The Domestic Partnership Judicial Determination of Parentage Amendment Act of 2009, which went into effect on July 18, 2009, legally recognizes domestic partnerships and "substantially similar" relationships (e.g. civil unions) established in other jurisdictions. Additionally, this law requires District government agencies to recognize domestic partnerships between same-sex couples and imbues all the rights and duties of marriage, notably including insurance coverage, regardless of the legal title (e.g. civil unions, domestic partnership, etc.). However, many insurance plans require notification within 30 days of the law's enactment or 30 days after the couple marries or enters in a domestic partnership; otherwise, individuals must wait until the next "open enrollment" period to add a spouse or partner to the employee's plan. For more information, please see the bulletin regarding the new laws from the DC government. In addition, on December 18, 2009, the Mayor of the District signed a law legalizing same sex marriage in the District. The law is now subject to a mandatory review period, and barring further developments is expected to become effective in February. We will provide additional details as they become available. If you have any questions about the impact of these new provisions, please contact Ruth Eisenberg or Anne Spielberg here at Harmon, Curran, and we will be happy to review your policies with you. By Deanna Markowitz IRS Announces Inflation-Adjusted Rates for 2010 Recently, the IRS announced new inflation-adjusted rates for 2010, which will be of interest to individuals and nonprofit corporations. Low Cost Article The unrelated business income of certain exempt organizations does not include proceeds from the distribution of "low cost articles" related to charitable solicitations (such as mugs or key chains imprinted with the organization's logo). For the 2010 tax year, the value of a "low cost article" is $9.60 or less. 2009: $9.50 2010: $9.60 Other Insubstantial Benefits In Revenue Procedure 90-12, the IRS provided guidelines for charitable organizations on the amount deductible from contributions made by contributors who receive something in return for their payments. The original guidelines stated that the value of benefits received by a donor in return for a fully deductible charitable contribution may be disregarded under one of two circumstances:
2009: $9.50/$47.50/$95 2010: $9.60/$48/$96 Mileage Effective January 1, 2010, the mileage rate for business use of a vehicle decreases to 50 cents per mile from the 55 cents mileage rate for 2009. The mileage rate for medical use of a vehicle also decreases: the new rate is 16.5 cents per mile, down from 24 cents per mile. The standard mileage deduction rate for volunteer or charitable use of a vehicle remains at 14 cents per mile, as set by Congress. 2009: 55 ¢/mile 2010: 50 ¢/mile Lobbying Expenditure Notice Exemption Internal Revenue Code section 6033(e) requires certain tax-exempt organizations that pay or incur non-deductible lobbying expenditures to provide their members and supporters, at the time dues (or other similar amounts) are assessed or paid, with a reasonable estimate of the portion that is allocable to such expenditures. In 1998, the IRS issued Revenue Procedure 98-19, which established that section 501(c)(4) social welfare organizations and 501(c)(5) agricultural and horticultural organizations are exempt from this notification requirement if more than 90 percent of all of their annual dues (or similar amounts) are received from persons, families, or entities who each pay $75 or less. This annual dues limitation is indexed for inflation and, for the 2010 tax year, remains unchanged from 2009 at $101 or less. 2009: $101 2010: $101 Agricultural Organization Member Dues For the 2010 tax year, dues paid by members to 501(c)(5) agricultural or horticultural organizations will not be subject to unrelated business income tax even if the organization provides benefits and privileges to its members, provided the dues are less than $146. 2009: $145 2010: $146 Annual Exclusion for Gifts The annual gift tax exclusion is unchanged. The first $13,000 of gifts to any person (other than gifts of future interests in property) will not be included in the total amount of taxable gifts made during calendar year 2010. 2009: $13,000 2010: $13,000 Income Threshold for Overall Limitation on Itemized Deductions Internal Revenue Code section 68 contains a formula for limiting the total amount of otherwise allowable itemized deductions that can be claimed by an individual whose gross adjusted income exceeds an inflation-indexed threshold known as the "applicable amount." (For the 2009 tax year, the "applicable amount" was $166,800 - or $83,400 for a separate return filed by a married individual.) But Congress passed a law in 2001 to gradually phase out this limitation starting with the 2006 tax year and ending with its complete removal in 2010. As a result of the law, there is no longer an overall cap on the amount of permissible itemized deductions an individual may claim on his or her return for the 2010 tax year. This tax benefit for higher-income individuals may be short-lived, however, because the 2001 law is set to expire after the end of this year. Without further action by Congress, the overall limitation on itemized deductions will return in 2011 and will be calculated using the pre-2006 formula found in section 68. 2009: $166,800 2010: Not Applicable Retirement Plan Limits In 2010, the maximum limit on the annual benefit under a defined benefit plan remains unchanged from 2009 at $195,000. Also unchanged is the maximum limit on the amount of annual contributions and other additions that may be made to a defined contribution plan: $49,000. The maximum amount of annual compensation of each employee that can be taken into account under a qualified pension, profit-sharing or stock bonus plan also remains unchanged in 2010 at $245,000. And, a "highly compensated employee" continues to be someone who is compensated $110,000 or more per year. Further, the maximum amount of elective contributions a person can make to their retirement plan continues to be $16,500. The maximum amount of "catch-up contributions" remains $5,500. By Deanna Markowitz This publication is designed to provide accurate and authoritative information about the subject matter covered. It is not distributed with the intent to render legal, accounting, or other professional advice. The services of a competent professional should be sought if legal advice or other expert assistance is required. Newsletter Home | HarmonCurran Home | |