Timothy J. Duckworth, Jr.

Pennsylvania Eliminates Inheritance Tax on Transfers of Family-Owned Small Businesses

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Pennsylvania remains as one of the few states to impose an inheritance, or so-called “death tax,” on the heirs of its deceased residents.

With a maximum rate of 15%, the inheritance tax was especially burdensome on family-owned businesses. Often, the surviving family members were forced to liquidate essential business resources to create enough cash to pay the tax bill. As a result, many of these businesses shut down.

Effective immediately, however, Pennsylvania’s inheritance tax no longer applies to family-owned small business interests.

Act 52 of 2013, signed into law by Governor Corbett on July 9, 2013, provides that a transfer of a qualified family-owned business interest to one or more qualified transferees is exempt from inheritance tax, if that interest: (i) continues to be owned by a qualified transferee for a minimum of 7 years after the decedent’s date of death; and (ii) is reported on a timely filed inheritance tax return.

What is a “Qualified Family-Owned Business Interest?

According to the Act, a “qualified family-owned business interest” means either:

An interest as a proprietorship in a trade or business carried on as a proprietorship, if the proprietorship has fewer than 50 full-time equivalent employees as of the decedent’s death, the proprietorship has a net book value of assets totaling less than $5 million as of the decedent’s death, and has been in existence for 5 years prior to the decedent’s death; or

An interest in an entity carrying on a trade or business, if:

  • The entity has fewer than 50 full-time equivalent employees as of the decedent’s death;
  • The entity has a net book value of assets of less than $5 million as of the decedent’s death;
  • The entity is wholly owned by the decedent or by the decedent and members of the decedent’s family that meet the definition of a qualified transferee, as of the decedent’s death;
  • The entity is engaged in a trade or business the principal purpose of which is not the management of investments or income-producing assets owned by the entity; and
  • The entity has been in existence for 5 years prior to the decedent’s death.

Who is a “Qualified Transferee?”

The Act specifies that a “qualified transferee” is a decedent’s: (i) husband or wife; (ii) lineal descendants; (iii) siblings and the sibling’s lineal descendants; and (iv) ancestors and the ancestor’s siblings.

Losing the Exemption:

If a qualified business interest that was exempt from inheritance tax under this provision is no longer owned by a qualified transferee at any time within 7 years after the decedent’s death, inheritance tax, plus interest, will be due at that time.

For each of the 7 years following the decedent’s death, the owners of business interests exempted by this provision must certify to the PA Department of Revenue that the interest continues to be owned by a qualified transferee.

The owners also have a duty to notify the Department within 30 days of any transaction or occurrence that would disqualify the business interest from the exemption.

The Department of Revenue will create forms for these purposes, and a failure to file the appropriate certification or notification form will result in a loss of the exemption.

This legislation offers welcome relief to Pennsylvania business owners and should go a long way toward keeping these enterprises in business for generations.

To speak with one of our experienced tax attorneys, fill out the form on the right.

Timothy J. Duckworth, Jr.

Affordable Care Act “Pay or Play” Provisions Delayed Until 2015

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On July 2nd, the Obama Administration announced, via posts on the Whitehouse Blog and the Department of Treasury’s Treasury Notes Blog, that implementation of the Affordable Care Act’s employer mandate provisions will be delayed until 2015.

Under the Affordable Care Act, “large employers,” defined as those employing 50 or more full-time employees, are required to offer affordable health insurance coverage to all full-time employees and their dependents or pay one of two “shared responsibility” penalties.

Some Important Things to Consider

If an employer subject to the “Pay or Play” provisions does not offer health insurance coverage to its full-time employees, it will be subject to a penalty equal to $2,000/year for each full-time employee it employs in excess of the first 30, if at least one full-time employee obtains subsidized coverage through an ACA Health Insurance Exchange.

Alternatively, if such an employer does offer health insurance coverage, but that coverage is not “affordable” or does not provide “minimum value,” it will be subject to a penalty equal to $3,000/year for each full-time employee who purchases subsidized coverage through an Exchange; limited, however, to the maximum penalty imposed for not offering coverage.

To ensure compliance with the “Pay or Play” provisions, the ACA requires certain information reporting by insurers, “large employers,” self-insuring employers, and other parties that provide health coverage. Since the enactment of the ACA, the business community has voiced concerns regarding the complexities and uncertainties of these requirements.

Why the Delay?

Thus, the delay in implementation – which is the Administration’s response to those concerns – is intended to accomplish two goals. First, it will give the implementing agencies additional time to consider methods to simplify the reporting requirements. Second, it will provide employers with time to adapt health coverage and reporting systems to comply with the law.

Because it would be impractical to determine which employers owe “shared responsibility” penalties without the required information reporting, the provisions imposing such penalties are delayed as well. The Administration has promised additional guidance regarding this delay in the near future.

What the Future Holds

Going forward, employers that may be subject to the ACA’s employer mandate provisions should continue to develop and test systems to establish which employees are required to be covered by the employer’s health plan under the law.

This includes electing and implementing the measurement, stability, and administrative periods for determining which employees the law deems as “full-time.”

Additionally, these employers should analyze whether the plan currently offered is “affordable” and provides “minimum value,” as those terms are defined by the ACA. And of course, such employers should continue to monitor the ongoing developments concerning the ACA’s implementation.

Have questions about the Affordable Care Act? The attorneys at MFD&D can help. Fill out the form on the right to contact us today.

Mosebach, Funt, Dayton & Duckworth, P.C. supports Allentown School District Foundation Gala

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The Lehigh Valley law firm of Mosebach, Funt, Dayton & Duckworth, P.C. was a table sponsor at the Allentown School District Foundation Gala held on March 23, 2013 at Symphony Hall, Allentown, Pennsylvania. Harold J. Funt, Esquire and William H. Dayton, Jr., Esquire, both shareholders of the law firm, attended the event with their respective spouses and guests, Bernadette Holland, CPA and Walter Finnegan, MD., J.D., and their respective spouses.

Mosebach, Funt, Dayton & Duckworth, P.C. maintains offices located in Bethlehem and Allentown and provides a full range of legal services including estate planning and administration, elder law, business law, divorce, general family law, civil litigation, adoptions, taxation, bankruptcy and real estate.

William H. Dayton, Jr. and Timothy J. Duckworth participate in Equi-librium, Inc. Charity Golf Outing

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William H. Dayton, Jr. and Timothy J. Duckworth, both partners/shareholders of the Lehigh Valley law firm of Mosebach, Funt, Dayton & Duckworth, P.C., which has offices located in Bethlehem and Allentown, participated in the 11th Annual Equi-librium Golf Classic at White Tail Golf Club on May 23, 2012 with guests Matthew B. Searles, CPA and Christopher Gray, Esquire. The group posted a 9 under score of 63 to be champions of the outing, in addition to supporting a worthy charitable endeavor.

Timothy J. Duckworth elected Vice President of Catholic Charities, Diocese of Allentown

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Timothy J. Duckworth, Esquire a partner/shareholder at the Lehigh Valley law firm of Mosebach, Funt, Dayton and Duckworth, P.C, which has offices located in Bethlehem and Allentown was recently elected Vice President of Catholic Charities, Diocese of Allentown.

Attorney Duckworth who has practiced law in the Lehigh Valley for more than twenty (20) years, concentrates his practice in the areas of estate planning, wills and trusts, elder law, business and corporations, and taxation. MFDD also provides services in the areas of divorce, custody, child and spousal support, alimony, adoption, employer/employee, civil litigation, personal injury and real estate.

Harold J. Funt, Esquire, Lehigh Valley divorce lawyer speaks at NBI Seminar

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Harold J. Funt, Esquire, who concentrates his practice in the areas of divorce, general family law, and civil litigation, and who is a shareholder in the Lehigh Valley law firm of Mosebach, Funt, Dayton & Duckworth, P.C., recently spoke at an NBI educational seminar on the topic of using accounting and financial records as evidence in divorce litigation and general civil litigation.

Attorney Funt has practiced divorce law in the Lehigh Valley for more than twenty-five (25) years and has been attorney of record in many divorce cases involving the equitable distribution of substantial marital assets. Mosebach, Funt, Dayton and Duckworth, P.C. maintains offices located in Bethlehem and Allentown and provides a full range of legal services including estate planning, elder law, business law, taxation, and real estate.