Tag Archives: tax

Let’s Not Revisit the Tax on Legal Services

The new Tax Expenditure Commission, created by Outside Section 160 of the FY12 budget and chaired by Secretary of Administration and Finance Jay Gonzalez, will meet regularly over the next six months to study the Commonwealth’s $24 billion tax expenditure budget.  The process includes reviewing all tax breaks, tax credits, sales tax exemptions and corporate deductions in an effort to measure the effectiveness of these carve-outs.  The recommendations of the Tax Expenditure Commission are due by April 30, 2012.

In addition to reviewing the current tax expenditure budget, the Commission has been charged with issuing recommendations regarding any changes to the current tax expenditures and criteria for new tax expenditures.  Since there has been no increase in broad-based taxes since the sales tax hike in fiscal year 2009, this could potentially mean a renewed interest in adopting a tax on legal and other professional services.

This would not be the first time Massachusetts has experimented with the misguided idea of instituting a tax on legal services.  The idea of a services tax was first proposed in 1975 but ultimately not adopted by the legislature.  Soon after, a coalition in favor of the tax sought to have a referendum put on the ballot.  In conjunction with other professional groups, the BBA launched a campaign to educate the public about the economic effects of such a tax – that clients, rather than firms, would absorb the overwhelming majority of the burden.  A legal services tax would fall disproportionately on those least able to afford legal representation, thereby limiting access to justice.

In the early 1990’s the issue came to a head when a sales tax on legal services actually passed in the state legislature and was signed into law.  Amid revelations that this tax would apply not just to services  provided by attorneys, accountants and other professionals — but also to such services as lawn mowing and snow plowing — support for repealing the tax increased.  The BBA, joined by the MBA, mobilized its members and focused its efforts on informing the legislature and incoming Governor Weld of the economic and legal flaws in a services tax.  Groups representing other segments of the professional community worked on this too and, two days after the tax took effect, Governor Weld signed legislation repealing the services tax.

Of primary concern for the BBA is the constitutionality of such a proposal.  The right to obtain the services of an attorney is a natural right guaranteed by the United States Constitution and is immune from the imposition of an excise tax.

There are also other compelling arguments to be made against a legal services tax.  A sales tax would compromise the attorney-client relationship by requiring an attorney to act as a tax collector and submit sensitive client information to the Department of Revenue.   Rather than serving as an advocate in a confidential relationship, an attorney would be forced to share privileged information with third parties.

We’ll watch closely now as the Tax Expenditure Commission continues to meet.

-Kathleen Joyce
Government Relations Director
Boston Bar Association
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Patching the Estate Tax

Last night I was just about ready to turn Larry King off when I heard him ask Bill Gates Sr. his opinion of the federal estate tax.  As you may know, Bill Sr. has been campaigning to keep the federal estate tax and his son supports his efforts.  As Bill Sr. sees it, the estate tax provides a substantial revenue stream from those with the greatest capacity to pay.

As Congress considers what to do about the federal estate tax the BBA is about to file a bill in the state legislature that would “patch” the federal estate tax and generation skipping transfer tax (“GST” taxes) for one year – providing us with the same exclusions that we had in 2009.

Here’s why we need the “patch.” Today the federal estate tax is zero, the result of legislation passed by Congress in 2001. That being said, virtually every estate planner expected that Congress would enact some form of federal estate tax before its 2010 sunset. 

As 2010 approached, many lawyers in Massachusetts predicted that Congress would at the very least “patch” the transfer tax laws so that we’d have the same exclusions and tax rate we had in 2009.  The thought was that this “patch” or temporary solution would be in place until Congress decided what to do for the long term.  That didn’t happen, and this has led to complications in estate planning, as well as questions about whether or not estate plans will work as they were intended to work. 

Congress’s failure to act in this regard creates havoc with an unknown number of estates of Massachusetts residents whose estate planning was done on the presumption that there would be some sort of federal estate tax system in effect in 2010.  This could also lead to failed bequests or potential litigation.

The BBA’s proposes to address this problem by filing retroactive legislation that would:

  • provide a default but rebuttable presumption for tax formula clauses tied to the federal estate and GST taxes;
  • reduce the burden on the probate courts of hearing construction cases related to tax formulas and other provisions in wills and trusts where there is no ambiguity on the face of the document;    
  • relieve smaller estates from the expense and delay of asking a probate court to construe such formula tax clauses in each case;
  • in cases where the default presumption is not the intent of the testator or grantor, it will allow the probate courts to consider extrinsic evidence to determine grantor or testator intent even where the instrument is ambiguous; and,
  • exonerate any executor or trustee who makes funding or distribution decisions based upon the 2010 suspension.

It appears that Congress is not able to reach a consensus on what to do with this quirk in the law so it is even more imperative that Massachusetts act and act quickly.  The bill is expected to be filed this week.  Thanks to Chairman Eugene O’Flaherty for recognizing the importance of this issue and for taking the important step to do something in Massachusetts while the debate is still going on in DC.  Let’s hope we can get this important piece through the legislative process soon.

– Kathleen M. Joyce

Government Relations Director

Boston Bar Association

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CORI Reform Is Just a Start — Sentencing Reform Is a Must

The BBA retains a spirit of dogged optimism as we wait for sentencing reform.  With just three months left in this two year legislative session and the Senate preparing to release their budget in less than two weeks, the legislature is moving closer to meaningful sentencing reform.  There have been years of protests, legislative proposals and public hearings.  But the sad truth is that the current system makes it extremely difficult for former offenders to straighten out their lives. 

Publicly the Governor, Senate President and House Speaker have all expressed their support for some sort of Criminal Offender Record Information (CORI) reform.  The Senate did so most recently in December with the passage of a CORI bill that also included sentencing law changes for non-violent drug offenders.  The word is that the House will act within the next two weeks.  Let’s hope that their proposal doesn’t stop at CORI reform and includes meaningful sentencing reform.

For more than 20 years the BBA has been studying and advocating on these issues and strongly believes that it’s time to finally make these measured changes a reality.  We have sponsored and encouraged thoughtful study of our criminal justice system recommending changes — including repeal of most mandatory sentencing laws.   

In the present fiscal crisis, their adoption would have significantly positive economic and social impacts.  A combination of CORI and sentencing reform, plus post-release supervision, would accomplish cost-effective changes in our criminal justice system that enhance public safety, and facilitate offender re-entry and employment, while saving judicial and correctional resources for the most serious offenders. 

Employers often use CORI reports to help screen out prospective job applicants. On one side of the debate are supporters of the current CORI law who say access is needed to protect employers from hiring someone who might be a liability to their business. On the other side of the debate are the critics who contend that the widespread use of CORI reports often prevent ex-convicts from starting over and that an individual who has already paid his or her debt to society should be given a second chance and would be less likely to re-offend if they did not have to overcome barriers to employment, housing and other services.

The CORI law was created to control the release of information concerning an individual’s prior criminal history.  Initially limited to law enforcement officials, the law has been expanded to provide access to other organizations, particularly those that service children, the elderly and the disabled.  Maintaining accurate CORI information is important, as these reports can include not only an individual’s prior convictions, but also any pending charges as well as cases that ended without a conviction. This can include cases where the individual was found not guilty, or the charges were dismissed.  We need to find the balance between access and disclosure.

Ex-offenders, including those who have successfully completed a term of imprisonment, must be encouraged to obtain and retain productive employment.  Employed ex-offenders are able to support and house themselves, rather than remain an economic burden to the Commonwealth.  Right now, those with minor or long dormant criminal records confront complicated hurdles due to the way CORI records are handled when the ex-offenders seek employment or housing.  The current system is confusing and complicated and some employers have access to criminal information while others don’t. 

There seems to be support for some sort of CORI reform throughout the legislature. But CORI reform and sentencing reform must be viewed as interconnected parts of the solution.  CORI reform is not going to be as effective if inmates serve lengthy sentences that preclude access to re-entry opportunities.  Parole and work release eligibility for drug offenders would help transform appropriate candidates from expensive correctional burdens to contributing members of society. 

Sensible sentencing reform must include post-release supervision, and a system of presumptive post-release supervision for all offenders incarcerated in state prison. It’s intelligent and fiscally responsible and would avoid the current practice in which offenders often are released directly to the community after serving the maximum term of their sentence, without any transitional period.

The Commonwealth is now experiencing the most severe fiscal crisis in decades and this provides us with an opportunity to enact responsible sentencing and CORI reform.  Simply put, every offender who makes a successful return to the community as a result of these measures will be one less financial burden to the taxpayers of this state, and our communities will be made safer in the process.

-Kathleen Joyce

Government Relations Director

Boston Bar Association

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