Visiting the Committees
| Publication year | 2023 |
COMMENTARY AND UPDATES BY THE COMMITTEES
The Estate and Gift Tax Committee is comprised of attorneys throughout the State of California who devote a significant portion of their practice to understanding the evolving areas of estate and gift tax planning, drafting, compliance, and controversy work. One of the primary functions of the Committee is to provide valuable, informative, high quality continuing education programs on behalf of the Taxation Section.
If you are interested in becoming a member of the Estate and Gift Tax Committee or submitting a topic to speak or write on, please contact Eric A. Baggett at eric.baggett@bofa.com or (619) 515-5645.
On March 9th and 10th, the Estate and Gift Tax Committee hosted attorneys from across the State of California at the 2023 Estate and Gift Tax Conference held at UC College of Law, San Francisco. It was an excellent conference focusing on evolving areas of federal estate and gift taxation with many great speakers.
Throughout the year, the Estate and Gift Tax Committee hosts conference calls to organize committee activities. If you would like join the conference calls of if you are interested in joining the leadership of the Estate and Gift Tax Committee please contact Eric A. Baggett at eric.baggett@bofa.com or (619) 515-5645.
The Secure Act of 2022 seeks to increase the amounts that individuals save for retirement.
In order to accomplish this goal, the Secure Act 2.0 mandates that new 401(k) plans automatically enroll participants with a default contribution rate of at least 3% of their salary. This rate increases by 1% annually until it reaches at least 10% with an option to opt-out. (SECURE 2.0 Act of 2022, § 101).
The Secure Act 2.0 adjusts the age at which individuals must start taking RMDs from pre-tax retirement accounts. The age for starting RMDs is now 73 for those turning 72 after 2022, 74 for those turning 73 after 2030, and 75 for those turning 74 after 2034. (Id. at § 107).
Starting in 2025, workers aged 60 to 63 will have a new catch-up contribution limit of $10,000 or 150% of the standard catch-up contribution, whichever is greater, as indexed for inflation. (Id. at § 108 & § 109).
The Secure Act 2.0 allows certain penalty-free emergency distributions of up to $1,000 from 401(k) or pre-tax retirement accounts. Individuals have the option to make this distribution once per year and repay the distribution within three (3) years. Employers can also set up emergency savings accounts linked to retirement accounts, with automatic employee contributions of 3% or less. (Id. at § 115).
Under the Secure Act 2.0, individuals can convert up to $35,000 saved in a 529 education savings plan to a Roth IRA without penalties. This change offers flexibility to individuals who may not use all the funds for education-related expenses and provides an alternative for long-term financial planning. (Id. at § 126).
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These reforms aim to address the retirement crisis by providing better opportunities for individuals to save for retirement, increasing flexibility in accessing retirement funds, and promoting financial stability. Many clients may benefit from these changes and should be advised of ways to structure their planning in light of these provisions. Firms should also look at how these provisions could benefit the attorneys and staff in planning for their retirement..
—Katilyn Farrell, San Diego, CA
The International Tax Committee is an integral part of California's international tax practice, providing a unifying forum in which to address the tax considerations of individuals, trusts, and business enterprises, whose members and activities cross international borders. The Committee works with the AICPA foreign trust task force and international tax technical resource panel to liaise with the IRS for various projects, including comments for regulations, modifying tax forms and developing new forms, and easing administrative burden while increasing compliance.
The International Tax Committee generally holds meetings at least quarterly via video conference (i.e., Zoom, Microsoft Teams). We always welcome members to submit articles for Quick Points on international tax topics.
If you would like to participate in our quarterly conference calls, submit articles for a future Quick Points, or just want information on current committee activities, please contact the International Tax Committee Co-Chairs, Raul Villarreal Garza, at raul.villarrealgarza@procopio.com or (619) 525-3874 or Qiva Dinuri, at qdinuri@millerkaplan.com or (415) 434-5510.
The Supreme Court recently held that the $10,000 maximum penalty for non-willful failure to file a Foreign Bank and Financial Account Report ("FBAR") accrues on a per-FBAR report basis, not a per-account basis.
There was disagreement among the Circuit Courts, with the Ninth Circuit having held that the $10,000 non-willful failure to file an FBAR penalty applies per FBAR report, not per bank account in contrast to the Fifth Circuit, which had held that the penalty applies per bank account not reported.
From 1996 to 2011, while living in Romania, Alexandru Bittner, a Romanian American dual citizen, kept several foreign financial accounts whose aggregate high balance exceeded the $10,000 filing threshold. Bittner failed to file FBARs for any of those years until May 2012. The Internal Revenue Service ("IRS") assessed penalties totaling $2.72 million against Bittner for "non-willful" FBAR violations, one for each unreported account in each of the five years. Bittner contended that the maximum penalty under federal law is $50,000, or $10,000 per FBAR report in each of the five years.
The Supreme Court, in a 5-4 decision, agreed with Bittner that the IRS can only impose five $10,000 penalties, rather than 272 penalties. Justice Neil Gorsuch, writing for the court, found that "[b]est read, the [Bank Secrecy Act] treats the failure to file a legally compliant report as one violation carrying a maximum penalty of $10,000, not a cascade of such penalties calculated on a per-account basis."
Following this decision, practitioners are hopeful that the courts will further curb the IRS penalties in both willful and non-willful cases, as many have inquired whether large willful penalties violate the Eighth Amendment's prohibition against excessive fines.
—Qiva Dinuri, San Francisco, CA
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The Young Tax Lawyers San Diego Chapter ("SDYTL") continues to hold various educational and networking events throughout the year. On April 6th, SDYTL held an MCLE webinar with attorney Carlos Meza on Federal and California Payroll Tax Responsibilities of Employers. On April 27th, SDYTL hosted a networking happy hour following the 8th Annual YTL Conference. Thank you to all that were able to attend. On September 27th, SDYTL is hosting a tax law career panel with the USD Tax Law Society. If you wish to be added to the SDYTL email list or would like to propose a presenter or topic for an upcoming event, please contact Co-Chairs Katilyn...
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