This is not a political outlet.  So, I will confine my “political” comment to a single set of facts.  17 people killed yesterday. 32 school days so far this year.  Time Magazine reports 18 school shootings.  So a school shooting every other day.

The interviews I heard last night on television provided a haunting reminder of a conversation I had earlier that day with a colleague who treats families going through divorce.  We spoke about a common case.  The child we were discussing was enduring an acrimonious divorce.  The child is caught in the middle and is traumatized by the experience.  The therapist related to me that part of his concern was that the child we were discussing seemed to have no friends; no social connection of any substance.  The kid is in a lot of pain and his parents are so absorbed by their own suffering, they have little empathy to give.  So, the child spends hours of time alone in his home immersed in social media.

Last night I listened to coverage of the 19 year old shooter.  I heard interviews with his classmates.  The child was a loner with no identifiable friends despite efforts on his part to connect with peers directly and via social media.  Children in the high school who knew the shooter before he was expelled described him as strange and his efforts to connect with his fellow students were rejected because he was odd.  So, this child posted some very troubling things online and exercised his right under Florida laws to acquire an AR-15 automatic weapon shortly after attaining 18.  That gun fires more than 700 rounds per minute.

Last year Parkland was named Florida’s safest city.  The mayor described the community as “close knit.”  Like Columbine, Colorado, Sandy Hook, Connecticut and Nickel Mines, Pennsylvania, these are towns where mass shootings are not supposed to happen.  But, let us be plain, we are not a close knit society.  Our kids are more vulnerable to this kind of aberrant conduct than we would like to think.  If you watched the interviews with the affected children, you can tell they don’t even know what they have just lived through.  If anything, they are far too poised for people who have witnessed the death of mentors, classmates and come closer than they can consider, to being among those for whom there will never be another Valentine’s Day.

Eighty nine years ago yesterday, America learned of the brutal murder of seven men in a garage on North Clark Street in Chicago.  The killings became a part of American history.  Three months ago we watched 58 people killed and 851 wounded in Las Vegas.  Cellular phones and computers can make us more connected than we could have ever dreamed possible a generation ago.  But, we are less close knit and more disconnected than ever.  When will we realize that “connectivity” is not just a reality?  It is also a mirage.

President Trump has concluded that the nineteen year old shooter was mentally disturbed.  That should be self evident. But, a child like this lurks in just about every high school in America.  The question is, do we accept school shootings as part of the American way of life or are we going to do something to find these kids and give them help before more children die.

2017 was a remarkable year in many ways.  In late Spring we watched one of America’s favorite entertainers tried for sexual assault.  In October, prominent producer Harvey Weinstein  was accused of sexual assault by more than a dozen women.  The list of prominent men who have fallen from grace since the Weinstein story broke on October 5 would occupy a blog site of its own.  As this is written, a story has broken that a California legislator and leader of the #MeToo movement has found herself charged with sexual harassment by two people; a former staffer and a lobbyist.

While is it always tempting to write about those who are prominent, most of us who live in relative obscurity view them as “different.”   We like to think that perhaps the victims were complicit or at least indifferent to what occurred.   A common refrain I hear, even from women, is that the victim knew what she was getting into.  Others rally to the side of the victims, plainly asserting that the mere assertion of assault is prima facie evidence that it occurred.  I try to stay away from these stories because where wealth and power enter the equation, reality can become distorted.

That is what made my view of Anderson Cooper’s interview of Jennifer Willoughby so compelling.  Willoughby was not a public figure when she summoned the police to intervene in her domestic life in June, 2010.  She was just the bride of a 32 year old Senate staffer.  On paper, Rob Porter was everything a person would want in a spouse.  Harvard.  Mormon missionary work in London.  Harvard Law.  Rhodes Scholar at Oxford just like his father, the professor at Harvard.  But, in 2010 Ms. Willoughby reports that despite his polished and highly effective work in the United States Senate, their domestic life was overtaken by fear for her physical safety.

I would commend every parent with teenage children to make them watch the CNN interview with Willoughby.  The interview can be found at Daily Beast with reference to Jennifer Willoughby.   https://www.thedailybeast.com/rob-porters-ex-wife-warns-hope-hicks-hell-abuse-you-next  As I began to watch it I did so with some lawyerly skepticism, mainly because the story was old as was the divorce of the couple.  Many divorced couples love to dish on each other while millions watch.  Jerry Springer has made that model work for almost three decades.

But Willoughby was different.  She came straight out and explicitly said she had no agenda and wished her former spouse no harm.  I was still skeptical.  Until, in a very unscripted way, she began to ponder how what occurred arose from her choice of Rob Porter as her spouse.  Unlike many victims, she was not transferring blame to herself.  Not at all.  She was exploring how a relationship that once felt so right had traveled to such a bad place.  In 35 years of practicing law on behalf of victims and perpetrators, if I had a wish for all of them, it would be the self-conferred gift of introspection.  Whether knowingly or not, we have the ability to push the emotional buttons of those whom we profess to love. On July 28 Redbook published 50 phrases that we use everyday that push those anger buttons.  On November 21, 2017 Best Life published 20 Things No Husband Wants to Hear.  Most of these phrases would not be welcomed by any partner.  Any jurist who hears domestic violence cases will tell you that it is common to hear “Your honor, he punched me for no reason.”  Only psychotic people punch other humans “for no reason.”

If there was one area in the Willoughby interview where I think she strayed too far, it was her speculation about the woman her former husband is today dating.  Every relationship is different.  Ms. Willoughby may have incited violence without her even knowing how she did it.  She may have incited violence through conduct that even outsiders would not notice.  This is no justification for any violent conduct on the part of her then husband, but, rather than identify patterns of behavior that cause that domestic violence we rush to label people as “bad” or “good”.  What I found most instructive about the Jennifer Willoughby interview was that she made clear Rob Porter was not a “bad” man; he was a man who had issues with controlling his anger.  Thirty years ago, addiction was equated with moral failure.  We know better today and this writer submits that our views of anger and the violence it causes merit the same evolution in thinking that we have witnessed with substance abuse.  People afflicted with anger management problems do not benefit from ostracism; they require help.

Again, I commend every reader to give Jennifer Willoughby 26 minutes of time by listening to her tell her story.  Of course, there are two sides to every story.  But, no matter what the truth, Ms. Willoughby’s story is one every person can learn from.

A Superior Court decision last month by Judges Lazarus, Bowes and Ott reminds divorce practitioners that there are distinctions to be drawn between the rights of intestate surviving spouses and the rights of a surviving spouse to elect “against” the will of a decedent.

We start with some old news.  When the divorce code first came into effect in 1980 the rule was that the death of a spouse had the effect of abating any divorce action which had not been concluded by a final decree.  The 2005 Amendments to the law provided that once grounds for divorce had been established, the action could proceed with the decedent’s estate substituted as a party in the action.

Thomas Scarpaci died in 2013 while a divorce action was pending.  Wife had previously filed a Protection from Abuse Claim, but had withdrawn it.  The divorce action had been pending for almost six years when Thomas died intestate.

Widow Patricia filed for letters of administration.  In 2015 she circulated documents at first indicating that the estate would be divided among the decedent’s children and filed an inheritance tax return stating this was how the estate would be divided.  But, several months later her counsel issued a revised distribution statement indicating that she would be taking her share.  This distribution schedule was also not filed. When an audit status was called, the children of the decedent asked to strike the election and deny her the right to claim an intestate share.  After briefing, the Trial Court in Allegheny County sustained both arguments.  Wife appealed.

The Superior Court first looked at the issue of forfeiture of the right to take a share of decedent’s estate under 20 Pa.C.S. 2106.  The court notes that notwithstanding the length of the divorce, grounds had not been established as consents were not filed nor had either party perfected the existence of a two-year (now one-year) separation.  Thus the statute was inapplicable.

The second ground relied upon by the trial court was that the widow’s conduct warranted denial of her right to claim because she was guilty of non-support of her husband under Section 2106(a)(1).  The Superior Court held that the burden to prove non-support was upon the heirs advancing that claim.  The Court further notes that while alive, husband never prosecuted a claim for support and that the argument that wife should have supported him notwithstanding the absence of a claim was insufficient.  The object was made orally in the context of an audit proceeding.

In this case, the court never conducted a hearing or received evidence in any other form.  Curiously, the order deciding forfeiture was reversed without any remand for hearing.  The Court did note that many required pleadings, including an explicit request to declare wife’s interest forfeited, were not filed.

2017 Pa. Super. 393 (12/13/17)   http://www.pacourts.us/assets/opinions/Superior/out/Opinion%20%20Reversed%20%2010335312930622742.pdf

*A NOTE REGARDING OUR BLOG OF 1/3/18: We wrote on Passarelli Trust, a reported decision holding that failure to specifically disclose all assets placed in trust was not sufficient to dismantle the trust on the basis of fraud.  Earlier this month the Court withdrew this holding and ordered the matter argued en banc.

On August 7 of 2017, the Third Circuit Court of Appeals decided a case under the Hague Convention on the Civil Aspects of International Child Abduction.  Since we don’t see much child custody litigation in federal courts nor do we see many Hague cases, this one merits a closer look.

J[ay] Blackledge was born in the Ukraine in 2008 but is a United States citizen.  At the time this litigation was before the courts Mother, a Ukranian citizen, resided in Pittsburgh, Pennsylvania and Father, a U.S. citizen, resided in Germany.  After living in a variety of Eastern European nations, in 2011 Father secured his job in Munich, Germany and Mother became a graduate student in Pennsylvania.  The family continued to live on separate continents with the child being with Mother in Pennsylvania and Father in Germany.  Although Father indicated that the goal was reunification at some place that location was never really agreed upon.

In Summer, 2013 Jay needed surgery in Pittsburgh and Father returned to the U.S. for that event.  While here Father sought stateside employment.  He did not succeed and in August, 2013 Mother and child left for Germany based upon an understanding that she would join Father there unless a mutually beneficial opportunity arose.  This was the child’s first visit to Germany.

Having moved to Germany Mother enrolled the child in an international school and resumed her graduate program via electronic connection. By August, 2015 the marriage had soured and Mother wanted to return to Pennsylvania to complete her Ph. D.  There appears to have been agreement that a return to Pennsylvania until 2018 was the best for Jay.

The child returned to Pennsylvania, excelled at school during the 2015-16 academic year and otherwise integrated well into the community. This opinion from the Third Circuit Court of Appeals of the United States reads like a celebration of how seven year old J[ay] enjoyed everything from his love of Penguins hockey to the sylvan bliss of Frank Lloyd Wright’s masterpiece of architecture at Fallingwater.  While J[ay] was soaking up the culture and other benefits of life in Pennsylvania, his Father was writing from Germany that if he could not secure stateside employment, relocation of the family to another country might need to be considered.  Mother responded that she was not rejecting the idea but that J[ay] seemed well adjusted in Pittsburgh and that other homes might be disruptive or not consistent with what the seven year old “wanted.”  Father’s response is equally naive, suggesting that a child this young might benefit from a one year on/one year off arrangement on two different continents.  Father’s first proposal was that the next academic year be in Germany and he implied this was agreed in his pleadings.  Mother did not openly disagree with this “understanding.”  The couple seemed to clearly understand that living near each other and the child would be best.  But failing that, the proposed solutions ranged narrowly from alternating year to year or accepting Pittsburgh as the primary place of residence.

Mother filed a custody action in Allegheny County which was was granted and the Common Pleas Court held that summers and holidays would be with Father but the academic year would be in Allegheny County.  It is not clear what Father knew about that order a few days later when he proposed that J[ay] come to Germany for the summer and stay to attend school in Germany.  There is a suggestion in the Third Circuit opinion, presented without citation, that Father believed the Pennsylvania Court had no authority to make its interim order.  In early July, 2016 Father filed in the U.S. District Court asking for return of the child under the terms of the Hague Convention.  The Federal District Court held a two day trial in August.  This included an interview of the child and a variety of “best interest” witnesses.  The Trial Court concluded that Mother was the more credible witness.  It ruled against the Hague petition on August 19, 2016.  In so doing it decided that: (1) Pennsylvania was the habitual residence based upon the child’s testimony; and, (2) Mother’s retention was not wrongful.  Accordingly, Pennsylvania would continue to exercise jurisdiction.  Father’s appeal asked that he be awarded custody while proceedings take place in Germany, where he was residing.

The Circuit Court ruled that the issue of habitual residence was a mixed one of law and fact and that there are two sets of inquiries when addressing “habitual residence.” The first was shared parental intention and the second, the child’s acclimatization.  The Court noted that its role is to restore that status quo prior to any wrongful removal or retention.  The stated object is to prevent forum shopping.  Father, as Petitioner, had the burden of showing the child had been wrongfully taken or retained.  To secure relief, he had the burden to show each of these elements:

  • When the removal or retention took place
  • The child’s habitual residence immediately prior to retention/removal
  • Whether retention or removal breached petitioner’s custodial rights under the laws of The habitual residence
  • Whether the petitioner was exercising his custodial rights at time of removal or retention

Yang v. Tsui, 499 F.3d 259, 271 (3d Cir. 2007)  https://www.courtlistener.com/opinion/1362349/tsai-yi-yang-v-fu-chiang-tsui/

The Petitioner was exercising rights that he had under German law.  But, the Court decided that the hearing date was the retention date and that Pittsburgh was the habitual residence prior to that date.

The appeal challenged both the retention date and the finding of habitual residence.  Father suggested that the date was June 9, 2016 when he informed Mother he wanted J[ay] to be with him.  Mother suggested the trial date was the correct one.  The Third Circuit rejected both stating the retention date is the date beyond which the noncustodial parent no longer consents to the primary custody of the custodial parent. The retention date was deemed to be the date when Father filed his Hague action because the prior verbal exchanges between the parties were equivocal.

Hard facts do make for bad law and it would appear from the opinion of the three judge panel that little Jay’s parents never really formed a definitive plan for the child.  The purpose of a Hague Convention is to arrest the scourge of trial abduction where it is employed to secure a jurisdictional advantage.  Before Mother filed in Common Pleas the parties never committed to any form of writing that would set forth a plan for where Jay would spend the year following his sojourn to Pittsburgh.  It seems that Father hoped to find a job in the United States but, failing that, it was his “expectation” that if the family could not reunite under a single roof, he would have custody for the year following that in Pittsburgh.  It also seems that when she first left for Pittsburgh, Mother was not adverse to Jay’s return to live with Father.  But, once here, she thought less and less of sending her son back to Germany and when it finally came to decision time, she filed in Pennsylvania asserting this was the home state.  That prompted Father to remove the case to Federal Court and rely upon the Hague Convention to support his position.  Abduction is a serious word and the disagreement between these two parents scarcely merits such a strong term.  The Circuit decision notes that both Germany and the United States could claim status as this child’s habitual residence.  So, there would have been justification for the District Court to have abstained from this conflict, although that may have necessitated a look at German laws regulating custody jurisdiction.

As noted above, what is lamentable about the federal opinions and procedures on display in Blackledge is the unflinching chauvinism displayed by the presiding jurists.  The goal of the Hague and its federal analogue, the Parental Kidnapping Prevention Act “PKPA”, is to insure that local courts do not engage in “we are better” analyses in deciding custody jurisdiction.  Federal courts are supposed to leave family law matters to state courts.  PKPA and the Hague are there so that when state courts start to “homer” for the local parent, there is a forum intended to protect the parent who lives far away.

In Blackledge, the District Court conducted a two day trial. That, alone is no offense because issues of wrongful retention and habitual residence are certainly fact specific.  But when the evidence adduced includes teachers, coaches, neighbors and interview of the child, one questions whether the District Court had chosen to function as a best interests court instead as a jurisdictional court.  The Third Circuit discusses J.B.’s many friends, sleepovers and other outings as if these could not occur or in some way be equaled by residents of Germany.  J.B. “bonded” with Pittsburghers at dinners, attending university events and theater festivals. His coach opined as the quality of his breast stroke while swimming and his interest in diving.  All of us know just how much eight year olds enjoy dinner parties, theater festivals and “university events.”  The opinion also reminds us of the merits of Fallingwater and the Four Carnegie Museums.  You won’t find much said about the 36 museums, 61 theaters and four orchestras that are located in Munich.  Father had since moved on to Berlin, another city that could shame any cultural resources found in Pennsylvania.

The Hague Convention is testing habitual residence, not evaluating the cultural, economic or social merits of a community.  Had J.B.’s parents been living in Ghana before he moved with his Mother to Pittsburgh, the Convention would seem to imply that a child can be just as “habituated” to rural African villages that lack swimming coaches or a robotics club.

The Hague and PKPA are about an exercise to assure fairness and not an invitation for displays of chauvinism.  The Federal Courts missed that point.  The record was sufficient once it established that Jay lived in Pittsburgh and participated in local activities typical of a Pittsburgh resident during the time he was here.  Those are the jurisdictional facts.  To wax on about his excellent grades and the great fun he had visiting a local mattress factory denigrates what the Hague is about.  Once we ascertain that there was no wrongful retention, the question does not graduate to the merits of the residence but the reality of that residence.  Federal courts do not belong in the merits of a custody case and should not devote time to extolling the virtues of the Pittsburgh life, no matter how grand it may be.

Blackledge v. Blackledge, 16-3667 US. Third Circuit Court of Appeals (Aug. 3, 2017)  http://caselaw.findlaw.com/us-3rd-circuit/1869777.html

The recent changes in tax laws have grabbed the headlines but employees of the four branches of the military and the Coast Guard will become part of a new “blended” retirement system passed by Congress in 2016, but effective in 2018.

The 20 or nothing system by which those in service had to stay in service for a generation in order to get any retirement has been modified. The 20 year benefits are reduced by about 20% but that remains the “full retirement” option.  Being added is a defined contribution plan with a match and a continuation bonus after 12 years of service.  In a sense, the new system is more humane as 80% of those who opted for a career in the military did not reach the 20 year mark and then departed without any form of retirement.

Those who participate in the defined contribution plan the government will match 4% of contributions and contribute 1% directly to the account.  Participants vest after two years.

Current employees with 12 or more years can stay with the existing system or opt for the new defined contribution plan by which they will receive 40% of salary after completing 20 years.  If they do remain in the old system, they will receive 50% of final pay as a retirement but they will need to reach the 20 year mark to receive that amount.

The system was changed to reduce government pension obligations and recognize the fact that 4 out of 5 people in the military don’t ever qualify for retirement and some saw the absence of any retirement vehicle other than “20 or nothing” as a reason not to choose a military career in the first place.

Lots of electronic ink has been spilled this week on winners and losers coming out of the Tax Reform Act passed on December 20.  Much of this is fairly speculative but some is simply common sense.

If you are a homeowner, take a look at last year’s bill for real estate taxes, then calculate what the foreseen or unforeseen buyer of your house will pay as a mortgage if he or she finances at 4.0-4.5%.  Realize that, until today, real estate taxes and mortgage interest were entirely deductible subject to “phase out” as adjusted gross income grew higher and higher.  For your purposes, assume no phase out by your imaginary “buyer”.   Now take that number and cap it at $10,000, knowing that this is the maximum you can deduct for real estate taxes and state and local income taxes combined.  If you are looking to buy a home for $1,200,000 in Pennsylvania you have to be earning $250,000 a year and the state and local taxes on that income alone will consume your capped deduction of $10,000 for all forms of tax (again, income and property tax).  So your $15,000 a year in school and municipal taxes is effectively lost as a deduction.  Then we have a new cap on deductions for home mortgages.  That cap is $750,000.  If you put 20% down on your $1,200,000 mansion you will still have a $960,000 mortgage.  Only the interest on $750,000 is deductible.  Thus 22% of your mortgage interest payment will be non-deductible, i.e., paid with after tax income along with your real estate taxes.  If you borrowed at 4.5% your $43,000 in annual deductions for mortgage interest is now capped out at $33,700 and your $15,000 in school/municipal taxes was consumed by your deduction for state and local income taxes.  Surprise!  You have $24,000 in deductions lost to tax reform.  With the new rates this income is effectively taxed at 24% (the old rate was 28%).  The new house is about $500 a month more because of the new tax reform.

The fact is that smart buyers will look at this and conclude that what was once fully deductible is now mostly not.  Will they adjust their offer accordingly? $500 a month is not deal killing in its own right given the numbers we are using, but realize as well that big fancy homes are not selling like they used to because younger buyers have grown up in a world where houses are not appreciating by leaps and bounds.  So if you own a high end house, either in terms of what the mortgage debt will be or the real estate taxes will consume, realize that this tax package is making your house pricier than it was just a day ago.

This last year seemed to be the year for buyers in the $500,000 and lower sellers.  They sold homes quickly and often for premiums.  New home buyers seem scared by big debt and their credit histories often include lots of consumer and student debt.  So they often can’t afford the big house even though they might want to own it.  They also tend towards new construction because they perceive it as less problematic. Sellers may view the buyers as short sighted but they are sellers and not buyers.

Bottom line.  Big, expensive, older homes just took a hit.  They were already on the ropes because they were perceived to be high maintenance.  Now they have the added disadvantage of being more expensive because of the limits on deductions the new tax law provides. As we have said many times, real estate is not the investment we experienced in the 1960s, 1970s, 1980s or 1990s.  This is truly a new day.

As this is written, the House and Senate this week are scheduled to vote upon a conference report of both houses of Congress which will “reform” tax law in a major way for the first time since the Reagan administration.  In order to secure passage, Congress needed to find some revenue enhancements to offset the tax reductions allocated to corporate and estate tax payers.

As we predicted in November, alimony as a tax deduction to the payor and an element of income to the payee, appears to be one of the revenue enhancers Congress decided to keep in the final bill, with one twist.  The House version ended alimony as a deduction for any decree or agreement formed after December 31, 2017.  The Senate version of the reform bill did not change the rules relating to alimony.  Thus, we anxiously awaited what would come out of the conference report published on Friday, December 15, 2017.  The 1000 page report can be found at http://docs.house.gov/billsthisweek/20171218/CRPT-115HRPT-466.pdf . Make certain you have your tax code with you when you start to read as the conference report is only a description of the amendments without the Code.

We did this.  In a nutshell, the Conference Committee adopted the House version but delayed implementation for one year.  Therefore, if you are negotiating or litigating a divorce case and you conclude your matter by agreement or decree before December 31, 2018 (a year from now), the old alimony rules apply.  But, beginning with tax year 2019, any new decree or agreement providing for alimony will be tax free to the recipient and nondeductible by the payor.  As Steve Hurvitz, current head of the Pennsylvania Bar Association Family Law Section observed when he read the bill; “There will be a lot of deals made in 2018.”

The effect of this and other changes in the Tax Code “on the ground” in Courthouses across the state is going to be seismic.  The current support guidelines have deductibility “baked into” the formula.  So, Congress is ripping up those rules.  Other adjustments to gross income that are used to calculate net income for purposes of support are similarly affected.  Mortgage interest is capped at $750,000; state and local tax deductions (including real estate taxes) are also capped at $10,000 ($5,000 if filing separate).  Personal exemptions disappear.  Home equity loans are no longer deductible.  All miscellaneous deductions (e.g., accounting tax prep fees) are eliminated.

The standard deduction is now:

Individuals:  $24,000 if married joint

Heads of Household:  $18,000

Single and Married Separate filers:  $12,000

Indexing rates and other tax items (dependency exemption ) for inflation has been repealed.  The child tax credit is elevated to $2,000 per qualifying child and would not phase out until $200,000 for non-joint filers and $400,000 for joint filers.

One thing would seem to be clear.  If you have a visit to Domestic Relations or a court proceeding in support scheduled for early next year, none of the algorithms in the support calculating software are going to provide a reliable result.  Perhaps the largest adjustment relates to income paid through a qualified partnership, “S” corporation or sole proprietorship.  Twenty (20%) of that qualified income is deductible.  The practical effect of what is or is not deductible is going to be the subject of IRS created regulations.

We have still not seen a copy of the Senate bill although PBS Newshour reports that the final version adopted by the Senate was not circulated in the Senate until late Friday evening and about 5 hours before the vote.  However, it appears that the Senate bill does not change existing alimony rules.  As noted on Listserve last month, the House version does abandon alimony as a deduction effective January 1, 2018.  If you are negotiating an alimony provision you need to be carefully following this issue on behalf of clients.  The one thing which all reports appear to confirm is that tax reform is a freight train that will not be stopped.  The House is scheduled to go out of session on December 14.  The Senate one day later.  The House needs to pass a bill in that time and the Senate and House need to decide on a “common” bill for joint passage and transmission to the President.  The House is circulating a bill that would forestall next week’s government shutdown until December 22, 2017, which would signal that they plan to extend their session.  But, suffice to say, the next ten days should provide plenty of excitement.

Any American with a pulse knows that 2017 was to be the first overhaul of U.S. Tax Law since 1986.  Until this week, what was circulating through Washington was an 18 page executive summary.  That changed yesterday when the House Republican Tax Policy Committee circulated a draft bill that specified exactly what changes were being proposed.

The draft bill summary merits some review because parts of it will affect most of us.  But the divorce bar was shocked to see that among those tax “loopholes” on the chopping block is the alimony deduction.

Going back to the 16th Constitutional Amendment, which allowed a federal income tax, there has almost always been a deduction to the person paying alimony on the basis that the deduction would be a corresponding income item for the person receiving the payment.  This rule has been uniform.  But, it may be changing now.  Yesterday’s draft proposal has a Section 1309.  It repeals the alimony deduction for agreements and orders entered after December 31, 2017.  What could this mean for you?  You can still make your alimony deal now, but if this law passes and goes into effect, alimony after 2017 that comes out of new agreements or new court orders will not have any transferred tax effect.

Why would Congress care?  After all, payor’s deduction from income becomes payee’s reported income.  Revenue neutral right?  Well, not quite.  Most payors are in higher marginal tax brackets, 31%, 35% and 39.6%.  A dollar of alimony costs the payor 69 cents, 65 cents or 60.4 cents, depending on the bracket.  The payees are usually in 15% or 25% brackets, so the government loses revenue because the payee is reporting the same alimony but paying a lower rate than the payor.  The Republicans say this costs the Treasury about $830 million per annum.  Eliminate the deduction and reduce the deficit or at least help pay for other tax cuts.

In real world terms suppose I enter an agreement on December 31, 2017 and agree to pay $50,000 a year in alimony for five years.  If my tax bracket is 35%, it costs me $32,500.  If my ex-spouse is in a 25% bracket, she reports the $50,000 and gets to keep $37,500 after tax.  The government effectively subsidizes $5,000 of revenue it would otherwise get but for the present scheme.  Under the proposed bill if the agreement is signed on January 1, 2018, I have no deduction and my ex has no income to report.  The payee just got a 25% increase in support based upon the same facts.

Further complicating this is the fact that for more than twenty-five years the Pennsylvania support guidelines have “assumed” that spousal support and unallocated orders of spousal and child support are fully deductible.  The tax assumptions are said to be “cooked into” the guideline numbers themselves.  If the current bill passes, there is some uncooking that needs to be done because the assumptions have now been undone.

Why devote all of this energy to what is just a first draft bill?  After all, this will have to go through many iterations and may change or be eliminated.  True enough with one exception.  2018 is an election year.  Republicans in 2016 told the world that this Congress was going to reform health care and revise the tax laws.  So far, nothing has been accomplished and most legislators will not want to be campaigning this time next year on a “look what wasn’t accomplished” platform.  So, this bill has a good chance of moving very fast and a decade’s long tradition of alimony tax law may recede into the mists of time.  Stay tuned.

October is Domestic Violence Awareness month.  And, earlier this month the Administrative Office of the Pennsylvania Court (“AOPC”) issued its summary of statistics related to this form of action.

A note of history is in order.  Pennsylvania did not formally define “abuse” or provide a remedy for its commission until 1990.  Before that date, the only mechanism available to address it was in the criminal system, typically as an assault.  The statute has been amended several times and, at this writing, there are bills circulating in Harrisburg to expand the remedies even further.

It is a popular form of action.  In 2016, there were just over 39,000 requests for relief requested.  That is 100-150 per day depending on whether weekend days are counted.  Contrast this with 33,000 divorces in the same time period and 73,000 marriages.

Persons who seek protection under this statute need to allege facts that indicate they are in immediate danger of some physical form of harm from a household member, intimate partner or co-parent.  The Courts are charged with reviewing the allegations without a hearing and deciding whether immediate relief is to be granted before a hearing.  Because judges prefer to be safe rather than sorry eighty-eight percent (88%) of the actions filed resulted in a temporary order before a hearing took place.  These orders range from a prohibition against further abusive behavior to exclusive possession of a common residence.

The AOPC also looked at the ultimate disposition of these cases after a hearing was held.  These statistics are also somewhat harrowing.  Over a five year period twenty-nine percent (29%) of petitioners did not bother to show up for their hearings.  Another twenty percent (20%) withdrew their petition when the hearing was called into court.  There is the rub.  39,000 filings and yet only about half ever proceed.  Of those that do proceed 40% result in an agreement.  These agreements can also range from total exclusion from a common household to less restrictive stay away or minimal contact orders.  Thirty-two percent (32%) of the cases which actually are called for hearing result in the grant of an abuse order.  Eight percent (8%) proceed to trial and the court finds that relief is not merited and the case is dismissed.  The AOPC stats report that in nine percent (9%) of cases the temporary order granted before the hearing is dismissed.  This seems somewhat vague in that those cases either merited entry of a protection order or did not.  If dismissal of the temporary order equates with dismissal of the case, it means that for those cases that actually proceed to trial the odds are slightly better than fifty percent (50%) that a finding of abuse will be made and a remedy enforced.  http://www.pacourts.us/news-and-statistics/news?Article=950

The good news, if there can be any on this subject, is that the number of requests for relief has declined by seven percent (7%) over five years. This would tend to indicate that we have become less violent or that judges have started to ferret out spurious filings and the word has gotten out.  The bad news, more than 650 times each week Pennsylvanians are appearing at Courthouse doors with allegations that judges deem worthy of temporary emergent protection orders.