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THE REVERE ADVOCATE – FRIDAY, MAY 7, 2021 BUDGET | FROM Page 11 STEP-UP IN BASIS PROPOSED TAX LAW CHANGE P resident Biden’s proposed repeal of the step-up in basis provisions of Internal Revenue Code Section 1014, if passed by Congress, will create a sweeping change in the tax code that will aff ect millions of American taxpayers. The step-up in tax basis provisions provide for the fair market value of all assets owned or constructively owned by the taxpayer at the time of his or her death to become the new “cost basis” going forward in the hands of the recipients of those assets (e.g. surviving spouse, children, relatives, etc.) pursuant to the terms of the Last Will and Testament transfer on death account, or a Living Trust, for example. As long as the assets are includible in the taxable estate of the decedent, regardless of whether or not a federal or Massachusetts estate tax has to be paid, the step-up in basis is achieved. This provision allows for a single-family home originally purchased for $75,000 to be left to one’s children at the time of death of a parent, while creating a new cost basis in the hands of the children equal to the fair market value at the time of death. If, for example, at the time of death, the fair market value of the home is $500,000, that will be the new cost basis. The children would be able to sell the home soon thereafter for $500,000 without having to pay any capital gains tax. One of the original purposes of the legislation was to avoid the unmanageable task of requiring the children to attempt to compute the cost basis of the home by going back 50 or more years to determine the original purchase price, capital improvements, closing costs, refi nance costs, etc. By establishing the fair market value as the starting point after the date of death, all of those issues are avoided. No need for canceled checks, settlement statements, credit card statements, invoices, etc. No need to defend oneself in an IRS audit that most likely could not be won. Therefore, in the above example, if the Biden administration proposal is passed, if one assumes there were $75,000 in improvements over increased federal reimbursement, and by leveraging funds from the state’s Stabilization Fund. The budget does not appropriate anticipated American Rescue Plan (ARP) funds. As the House Ways & Means and Federal Stimulus committees await the issuance of spending parameters by the federal government, they have begun a process to better understand the needs of Massachusetts communities and analyze past expenditures of federal funds, particularly those received from the CARES Act. “I want to commend Speaker the years, there would be a $350,000 capital gain. If there were two children, the federal capital gains tax would be approximately $26,250 each and the Massachusetts capital gains tax would be $8,750 each, for a total of $70,000. This is certainly an increase in taxes to be paid by a lot of middle-class taxpayers. Millions of middle-class American taxpayers currently do not have to be concerned about such a capital gains tax in these circumstances. If the tax law is changed, it will be unavoidable. What’s important is not so much whether or not you agree or disagree with abolishing the step-up in basis provisions of the tax code, but whether or not you realize this will aff ect just about everybody, not just the rich and famous. This will also affect appreciated stock that a mother or father may leave to his or her children. Even a $100,000 stock portfolio built up over years of investing may have a cost basis of only $25,000. Without the benefi t of the step-up in cost basis provisions, the children, upon a later sale of the stock, will realize a $75,000 capital gain and incur a $15,000 combined federal and Mass capital gains tax. The repeal of this long-standing provision will have profound implications for millions of taxpayers, not just the wealthy. Such a repeal would also create a disaster from a taxpayer compliance standpoint as well as from an IRS enforcement standpoint. Such a new tax law would amount to nothing less than a middle-class tax hike, and this would have nothing to do with the proposed increase in the capital gains tax rate for those who earn more than $400,000 per year.. Joseph D. Cataldo is an Estate Planning/Elder Law Attorney, Certifi ed Public Accountant, Certifi ed Financial Planner, AICPA Personal Financial Specialist and holds a Master’s Degree in Taxation. Mariano and Chairman Michlewitz on an impressive and comprehensive budget that addresses the needs of the Commonwealth at one of the most unpredictable times in the nation’s history,” said Representative AnnMargaret Ferrante, who is Vice Chair of House’s Ways & Means Committee. “The economic development measures and strong social service supports position Massachusetts to recover from the pandemic and continue growing.” The FY22 House budget refl ects the local aid commitment recently made by the House and Senate. It increases Unrestricted General Government Aid (UGGA) by $39.5 million (M) over FY21 for a total of $1.168B and Chapter 70 education funding by $219.6M over FY21 for a total of $5.503B, fully funding the fi rst year of a sixyear implementation plan of the Student Opportunity Act (SOA). The SOA was enacted in 2019 to support equitable funding for Massachusetts’s most vulnerable students, and the Legislature’s funding schedule ensures the SOA remains on track to be fully implemented over the course of seven years – contrary to the Governor’s budget proposal. The House’s FY22 budget also creates a $40M enrollment reserve fund to help school districts whose fall enrollment is negatively impacted because of the COVID-19 pandemic. To help students with the consequences of prolonged remote learning and address the full educational and social-emotional needs of students, the budget provides $15M for summer education and supportive services. Additional education funding allocations include: • $367M for Special Education Circuit Breaker • $154M for Charter School aid • $82M for regional transportation • $14M for homeless student transportation Continuing the House’s commitment to high-quality Early Education and Care (EEC), the FY22 budget includes a $20M investment in rate increases for child care providers across Massachusetts. Other early education and care funding initiatives include: Page 13 • $15M for Head Start grants • $12M for child care resource and referral agencies • $5M for EEC higher education provider opportunities • $2.5M for early childhood mental health grants Building on Speaker Mariano’s priority to ensure Massachusetts residents from diverse backgrounds have access to meaningful educational opportunities, the House budget invests in higher education, allocating $571M for the University of Massachusetts system, $315M for community colleges and $291M for state universities. The budget also includes a $10M increase in scholarship funding over the last fi scal year for a new total of $130M, and funds the Supporting Urgent Community College Equity through Student Services (SUCCESS) Fund at $10.5M and the STEM Starter Academy at $4.75M. The budget also includes large investments in labor and economic development, such as the creation of a trust fund dedicated to job training for the off shore wind industry to be administered by the Massachusetts Clean Energy Center. This budget makes an initial deposit into this fund of $10M to establish and grow technical training programs in our public higher education system and vocational-technical institutions. The fund will also prioritize grants and scholarships to adult learning providers, labor organizations and public educational institutions to provide workers with greater access to these trainings. Additional investments include: • $50M for adult education • $24M for Youthworks Summer Jobs • $5M for Small Business Technical Assistance • $5M for Community Action Agency Operating and Outreach Support • $5M investment in Local Tourism Recovery Marketing • $2.5M for Urban Agenda Grants • $2M investment in Massachusetts Manufacturing Extension Partnership The Commonwealth’s commitment to MassHealth remains one of the largest drivers of the budget. In FY22 the House provides $18.969B to fully fund its caseload, which has increased as more residents became eligible during the pandemic. The House’s FY22 budget accurately refl ects this enrollment growth, showing the necessary increase in spending beyond what was included in the Governor’s budget proposal while also factoring in the increased Federal Medical Assistance Percentage (FMAP) reimbursement levels. Many of the House FY22 budget’s most signifi cant increases represent essential services and programs that serve Massachusetts’s most vulnerable residents, including $771.1M for the Department of Transitional Assistance to maintain support to families, at-risk parents, victims of intergenerational trauma, seniors and persons with disabilities. Other notable health and human services investments include $30M for Emergency Food Assistance, $13M for the Healthy Incentives Program and $500,000 for a public awareness campaign on the contraceptive ACCESS Law. The House’s FY22 budget also includes funding for housing and homelessness prevention, investing $22M in direct appropriations for the Residential Assistance for Families in Transition (RAFT) Program to promote housing stability and combat the threat of evictions. The budget also includes $148M for the Massachusetts Rental Voucher Program (MRVP) and $84M for public housing subsidies. Additional investments for individuals include: • $56.4M for Homeless Individuals Shelters BUDGET | SEE Page 15 REVERE PUBLIC SCHOOLS Public Hearing Notice is hereby given in accordance with the provisions of Section 61 of Chapter 71 of the Massachusetts General Laws, that the Revere School Committee will conduct a public hearing on Tuesday, May 18, 2021, at 6:00 p.m. via Zoom meeting, for the purpose of discussing and voting the enrollment of non-resident students (also known as School Choice) in the Revere Public Schools. May 7, 14, 2021

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