Government funding and tax extenders legislation affects investors

After weeks of negotiations, Congress reached agreement on a bipartisan bill to fund the government through September 2016.  Following are provisions of particular interest to investors.

The legislation makes permanent (including retroactively for 2015) some provisions that previously had expired every few years:

  • IRA / charitable contribution provision for account holders over age 70-1/2
  • Tax credit for research and development expenditures
  • Enhanced write-off of small business capital expenses under section 179

The legislation extends (including retroactively for 2015) other provisions:

  • Extension and phase out of bonus depreciation through 2019

The legislation includes a number of new provisions:

  • Repeals the forty-year-old prohibition on exports of domestically produced crude oil
  • Expands 529 plan qualifying distributions to include student computers and technology

The legislation delays sources of funding and government reimbursements under the Affordable Care Act:

  • “Cadillac tax”(40%)  imposed on high cost employer health plans delayed until 2020; thereafter tax becomes deductible
  • Medical device tax delayed until 2018
  • Annual fee on health insurance provider premiums written (“belly button tax”) delayed until 2018
  • Government reimbursements for insurance company losses limited to amounts collected from profitable insurers (reimbursement fund must be revenue neutral)

Of interest to financial advisors, the legislation:

  • Does not prevent the Department of Labor from finalizing and implementing the proposed IRA account fiduciary rules
  • Does not make significant changes to Dodd-Frank


Andrew H. Friedman is the principal of The Washington Update LLC and a former senior partner in a Washington, D.C. law firm.  He and his colleague Jeff Bush speak regularly on legislative and regulatory developments and trends affecting investment, insurance, and retirement products.  They may be reached at

The authors of this paper are not providing legal or tax advice as to the matters discussed herein.  The discussion herein is general in nature and is provided for informational purposes only.  There is no guarantee as to its accuracy or completeness.  It is not intended as legal or tax advice and individuals may not rely upon it (including for purposes of avoiding tax penalties imposed by the IRS or state and local tax authorities).  Individuals should consult their own legal and tax counsel as to matters discussed herein and before entering into any estate planning, trust, investment, retirement, or insurance arrangement.

Copyright Andrew H. Friedman 2015.  Reprinted by permission.  All rights reserved.

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An International Perspective on Effective Leadership

It does not matter where in the world a family business is located, according to Deniel Banks of DW Banks Company, Inc, one thing all family business leaders have in common is that they want easy-to-use tools to help with succession planning.

As a result of seeing this trend around the world, Banks developed a checklist as a meaningful way to stimulate business leaders thinking and starting important conversations with family members.  He says the checklist has an international perspective integrated in.

“Ten Principles for Family-Owned Business”

  1. Make dreams a reality – What are your own dreams?  Your family’s dreams?  You customer’s dreams?  Answer these questions and align these dreams with business and family strategies.
  2. State principles and goals clearly and allow your children to develop their own goals for personal happiness and success regardless of whether they end up in the family business or not.
  3. Distribute leadership, empower others, and offer mentoring and coaching when necessary.
  4. Follow criticism with encouragement.  Be ready to apologize.
  5. Lead the family by example.  Apply some of what you do best at the office while at home.
  6. Know yourself.  Be clear on your leadership strengths, your beliefs, and your values.
  7. Encourage your next generation family members to take action and do what’s right.  Be persistent in communicating ideas and listening to theirs.
  8. Respect and honor differences.  Learn from other cultures and create an environment the embraces the diversity in people and ideas.
  9. Collaborate by moving from “position power” and hierarchy to building “relationship power” locally and globally.
  10. Foster a broad perspective and give something back.

Banks said he likes to ask his clients to circle three of the ten items that they want to focus on most in their own business to move towards 21st century leadership and a global perspective.

Insight into Surviving the Sale of a Family Business

Bruce Werner, currently managing director of Kona Advisors LLC, spent 12 years at the family busniess, Werner Holding Co., in a variety of senior positions before the family made the decision to sell.  Werner gave tips and insights from his own personal experience into how he survived the business sale and life afterward in an interview with Lauren Wolven, J.D., a partner at Horwood Marcus & Berk Chtd in Chicago, featured in the Estate Panning Journal.

Werner had eight main tips to offer:

  1. Be honest about priorities and values.
  2. Develop a personal strategic plan.
  3. Invest in friendships.
  4. Understand that wealth works in step functions.
  5. Realize how the family business experience situates oneself in the job market.
  6. If early retirement is chosen, consider the impact on family members.
  7. Get used to the everyday inconveniences.
  8. Enjoy the ride.

Werner said the decision of his family to sell the business evolved over three years and was not as difficult as it can be for some families because, although the company was private, in many aspects it was run like a public company.  After the sale, eight of the ten insiders, Werner included, continued to work for the company.  He said before they even got into sales negotiations, the insiders had discussed what would change about their positions and perks after the sale and had already come to agreements, making this part of the transition much easier as well.  He feels it is important for people to understand things will change if they stay with the company after the sale.

Werner’s first tip during a transition is to be honest about your own values and priorities.  He explained that it is important to really consider for yourself and your family that the trade-offs that come with a sale are made in the pursuit of happiness, family harmony, money, or whatever your priorities may be.  He said it is also crucial to have a long term plan personally after the business is sold.  Werner advised others to ask questions like: Do you really want to run another business?  Would you rather pursue a hobby or charity?  If you are entering young retirement, will it be fulfilling?  Make sure you have an idea of what to do now that you no longer have the business.

Werner said he feels cultivating outside friendships is important during a transition period like this because you need someone to help guide you and talk things through.  Also, work relationships are lost in a job transition, and other relationships can fill a void.

Finally, Werner also addressed the issue of what it is like to deal with a new liquid wealth and going back to work.  He said the initial step-up in lifestyle is easy, but for him there was never a question of whether he would go back to work.  Even during his time of sabbatical, he had an office outside the house so his children would have an example of good work ethic.  The family business experience proved to be an advantage and a disadvantage it certain situations.  Werner said some employers stay away from former business owners for fear that they will be too independent or difficult to manage.  In the end, Werner said he needed to figure out how his unique skills can apply in a different, changed market.  He recommended the help a career counselor to aid with this process and decision.

The Family Employment Policy

In any family business, conflicts and disagreements can erupt between family members for any number of reasons, or for no reason at all.  One of the most predictable reasons for conflict can come from the termination of a family member.

Many family business advisers spend their career helping families patch up their differences.  This reactive approach is needed unless family business leaders are able to place more emphasis on prevention.  Prevention tactics will not eliminate all conflict, as people will always disagrees and terminations can be hard on everyone, but it can help to keep the “family factor” more in check.

Creating and having a “Family Employment Policy” is one major step in the direction of conflict prevention.  The original reaction of many heads of a family business is say that the family employment policy is the same for all employees.  However, it is important to have a separate policy for family members because many times the only qualification someone has is a blood or marriage relation.  These employees can be unproductive, sometimes overcompensated, and bad for the company.  By having previously set conditions for family members, similar issues can be avoided from the start.

A written family employment policy lays out specific employment conditions for family members such as recruiting, hiring, promotion, qualifications, prior experience, compensation, and termination.  Not having a written document for family employment often leads to exception making and different interpretations of how family situations should be handled.  If it is stated in a previously agreed upon document exactly why a family member is being terminated, it can help avoid some of the tensions and conflict.

What goes into the development of a good family employment policy?  Number one, the input of family members.  People will tend to support what they helped create.  Also, creating a family employment policy can be a way to communicate to all the family the values and philosophies of the business.  For example, it may mandate that in order to remain at the company, family employees must maintain positive and respectful relationships will all other co-workers.  One important thing to communicate is that being a member 0f the business is a privilege, not a birth (or marriage) right.