California politicians are imposing a new “flat fee” on your utility bill that you have to pay regardless of whether you use any energy that month and the rate will now be based on your income! Reform California opposes the charge and calls it an illegal tax and a violation of privacy.

According to the Illinois Policy Organization…

Gov. J.B. Pritzker promises his $3.7 billion “fair tax” would only hit those making over $250,000, but it also threatens to cost more than 3.2 million Illinois homeowners an average of $1,800 a year in home equity.

If voters approve the state income tax increase, it could eventually cause Illinois’ home price appreciation rate to fall by 34.8% (see Appendix), if the state has the same experience as the last state to enact a progressive income tax: Connecticut in 1996. If the median homeowner, with a home value of $203,400, were planning on selling their house in 10 years, a progressive income tax would cost them $17,937 in foregone equity. The average annual cost of the progressive tax for these homeowners would be nearly $1,800 in home equity.

INTRODUCTION

Lawmakers are asking voters to approve a $3.7 billion income tax increase on Nov. 3, promising the tax increase will only harm those making more than $250,000. However, the financial damage would also spread to Illinois’ 3.2 million homeowners. The 2011 state income tax hike previously reduced housing prices in Illinois, according to the Harvard Joint Center for Housing Studies, which added a caveat because housing prices were already declining prior to the tax hike. The same study found the 2007 Washington, D.C., income tax cuts led to a significant increase in housing prices.

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This coming Thursday, on May 16th at Noon CDT, please join Tax Forum for a Complimentary Webinar:

Avoiding Costly Mistakes: Four Essential Tax Concepts

 For the Business Attorney or CPA And EAs

• Register Now

Even smaller matters might have big traps and significant tax implications – leading to unexpected tax liabilities for your clients and potential malpractice claims for the professionals.

During this one-hour webinar, the Tax Forum team of Chuck Levun, Michael Cohen and Scott Miller will provide a top-level look at …

• Converting an existing S corporation to an LLC on a tax-free basis to obtain “charging order” protection
• Simple business structuring to circumvent the $10k deduction limitation for the portion of state and local income taxes attributable to partnership/LLC and S corporation income
• How not to cause your client to be one of the estimated 500k+ LLCs that incorrectly thought it was going to be taxed as an S corporation but, because of certain language contained in its operating agreement, is not an S corporation
• Personal goodwill and the C corporation business sale – identifying situations in which double tax can be avoided

Any one of these could make the difference between you being a hero or creating a significant problem for your clients.

This webinar is geared for business attorneys and CPAs who handle matters (even on a limited basis) involving closely held businesses and smaller mid-market companies.

Please bring your questions, as the presentation will include a live Q&A session.

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A recent Tax Court case illustrates the importance under current case law of thinking about the tax consequences of a potential verdict or settlement early on and attempting (if the facts allow) to establish a basis for exclusion from federal income tax throughout the course of litigation.

In Estate of Finnegan v. Comm’r, T.C. Memo. 2024-42, the question before the Tax Court was whether payments under a settlement of certain constitutional and civil rights claims were excluded from income under section 104 of the Internal Revenue Code.

The Indiana State Police (“ISP”) had investigated husband and wife taxpayers in Estate of Finnegan for medical neglect resulting in the death of their daughter at the age of fourteen. Criminal charges were filed against husband and wife taxpayers but later were dismissed.

Nevertheless, the Indiana Department of Child Services (“DCS”) removed the remaining children from husband and wife taxpayers’ home. While the children were eventually returned home, DCS continued its investigation.

Husband and wife taxpayers filed suit in state court against DCS to invalidate certain determinations that DCS had made against them, including  (1) that there was medical neglect in connection with their deceased daughter based on the postponement of a cardiology checkup; (2 that their daughter’s death was caused by physical abuse; and (3) that their remaining children were in a life/health endangering environment. The state court found in husband and wife taxpayers’ favor.

Husband and wife taxpayers along with their children sued various employees of the State of Indiana in federal court for their actions after their daughter’s and sister’s death. The suit was brought under 42 U.S.C. § 1983 for violation of their civil rights under state law, federal law, and the First, Fourth, Sixth, and Fourteenth Amendments to the U.S. Constitution. A jury awarded the taxpayers compensatory damages totaling $31.5 million, with amounts specifically awarded for violations of each taxpayer’s constitutional rights. Ultimately, the case was settled for $25 million.

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