Three Steps to Moving a 401(k) Balance

picture from: yoursmartmoneymoves.com

When you change employers, or retire, you often have a retirement plan balance in a defined contribution plan, such as a 401(k) plan.  In this article, we will discuss the “how-to” aspects of moving your retirement plan balance from your 401(k) plan.  Note that, in almost all cases, your 401(k) plan balance is held with a financial institution that is either a bank, a brokerage firm, a mutual fund shop (asset manager), or insurance company.  In the 21^st century, there can be much overlap among these organizations. 

The questions you will need to ask and answer are 1) how much money can I move, 2) what forms do I need to sign, 3) where can I move the money, and 4) what are the tax implications?  Let’s look at each of these questions.

You can move 100% of your vested balance.  Your vested balance is listed on your 401(k) statement, which comes to you either by hard copy, or is electronically posted for your retrieval.  If electronically posted, you should get an email alert letting you know that statements are ready for review.  Any money that you add to the plan, from your own paycheck, referred to as your deferrals, is always 100% vested, meaning it always belongs to you.  You will typically vest in employer contributions over time. 

If you haven’t already done so, get a copy of your most recent quarterly statement.  If you don’t know which vendor holds the funds, call the HR or benefits department of your (previous) employer, and ask for the website or toll free number for this vendor.  When you call, you will need to have, at a minimum, your name, social, and date of birth available, for purposes of identification.

If you want to move the balance from your previous 401(k) plan, you will need to request what is referred to as an election package.  This has nothing to do with voting for candidates.  It’s a set of forms that allow you to elect what you would like to do with your plan balance.  Some vendors can send this electronically, though many still send this in hard copy format.

Within this package are several pages of required disclosures, most of them discussing tax consequences of your choices.  What you are looking for are the pages that allow you to move your money to an IRA, or take the money as a cash distribution, or move your money to a new employer’s 401(k) plan, which are the three most common choices.  When you find these pages, make your choice.

If you elect to move the money to a new employer’s plan, you will need to provide some information about the vendor of the current/new plan.  This typically includes the plan name, such as “Acme Manufacturing 401(k) Plan”, a service center mailing address, and your account number. 

If you choose to move the money to an IRA, you will need to provide some information about the financial institution who will custody (or take possession of) the IRA assets.  Almost every financial institution will be glad to hold your IRA money.  We have found that many IRA owners prefer organizations such as Vanguard, Fidelity, or Schwab.  Typically, you will need to provide your account number, a service center mailing address for the financial institution, and account titling.  Since all IRAs are individual (not joint) accounts, titling is typically something like “Fidelity Investments FBO John Smith IRA”.  FBO is an industry acronym for “For Benefit Of”.

If you choose to take your balance as a cash distribution, you simply check the appropriate box, and include your current address.  Note that this option has tax consequences, as noted below.

If you are married, your spouse will need to consent to moving the money from the old plan, with his or her signature.  This is required by all vendors of which we are aware, as current law gives spouses certain rights to employer sponsored plan benefits, which are waived if you move the funds.

If you move the money to an IRA or new employer plan, there are no tax consequences, as this is not a taxable event.  Typically though, you will receive a 1099 from the vendor of the old plan, since the previous vendor disbursed funds.  The distribution shown on this 1099 goes on line 15a of the 1040 (for the 2015 tax return), and is considered a non-taxable distribution.

If you take the money as a cash distribution, an activity we highly discourage, the distribution will be taxed as ordinary income, not as long term gain.  In addition, if you are under age 59.5, you will owe a 10% tax penalty on the distribution.  This means that, on a $50,000 distribution, you have added $50,000 in fully taxable income for the year, and you also get to pay a $5000 tax penalty for the privilege of having access to your money.  Most vendors withhold taxes, though a few give you the option of choosing not to have tax withholding on the distribution.

Once you have made your choices, completed the forms, had your spouse sign as appropriate, and resigned yourself to paying an enormous amount of taxes (if you elect to take cash), you will need to send this document package to the address referenced in the package.  Most of these packages will need to be returned to your previous employer, or their designated representative, as someone will need to sign off on this distribution, on behalf of your former employer.

A few final notes.  Some of the vendors will ask for a notarized signature, or a medallion stamp or signature.  If you need a medallion signature, your local bank may be able to help you with this, though fewer banks are offering this service than have in the past.  And of course, remember to make a copy of all the pages, before you mail or email any of this to any person or organization. 

Finally, remember the standard disclaimer.  What you have just read is general information.  None of it should be construed as personal legal, tax or financial advice.  Consult your own professionals to determine the best course of action for your personal situation.

Centurion Advisory Group was founded to offer clients a place to focus on the integration of life, money, and purpose.  Our focus is on offering advice, planning, and investment management services in a way that allows clients to feel as if they have mastered the use of money, have the freedom to enjoy life, and the desire to live with purpose.  As a professional services firm, we are paid solely by clients, and receive no compensation from product sales or product vendors.  The professionals who are part of the CAG team help families build, maintain, and transfer wealth, consistent with the family's goals.  For more information about the company and its services, go to www.centurionag.com, or email info@centurionag.com, or call 770.817.0525.

Affection

Alcoa kicked off the earnings season with an earnings surprise to the upside.  The company reported adjusted earnings of $0.15 per share on revenue of $5.3 billion, compared to analysts’ estimates of adjusted earnings of $0.09 per share on revenue of $5.2 billion.  Shares were up by as much as 5% in after-market trading, after the announcement.

Southern Company has announced that Atlanta Gas Light (AGL), will now be known as Southern Company Gas.  Delta reported net income of $1.54 billon, or $2.03 per share, in the second quarter, compared to $1.83 in per-share earnings in the year prior period.  Quarterly revenue was off 2% year over year, to $10.45 billion.

Gap shares are up nicely, after the company reported a same-store sales increase.  Barracuda Networks shares jumped 12% after the company reported both revenue and income which beat estimates.  Pepsico earnings beat forecasts, with revenue in line with expectations.  Shares were up.  Walgreens exceeded earnings expectations, while revenue missed.  You can read details on these, and many other companies, at http://www.marketwatch.com/news/markets/earningswatch.asp.

Steve Forbes offers his thought about the state of federal regulation, in a recent Forbes editor’s column.  He suggests that our acceptance of an ever more overbearing federal bureaucracy is much like the frog in the kettle, and one of the things our founding fathers warned against.  You can read his remarks at http://www.forbes.com/sites/steveforbes/2016/06/01/if-washington-wants-to-get-you-it-now-can-how-uncle-sam-became-uncle-tyrant/#20fc6c575c19.

Ford Fry, Atlanta restauranteur, has opened a second location of his Tex-Mex eatery Superica, in Chastain Park.  Speaking of restaurants, word on the street is that 101 Steak is now open in Vinings.  Hope to try it soon.  You can read more about it at http://atlanta.eater.com/2016/7/13/12173632/101-steak-lunch-menu-hours.

Pokemon Go is apparently all the rage, with the familiar name dating to its original form on the Nintendo Game Boy.  For me, studying the attraction of this game will be more of a social science experiment.

Deborah Blum, in her book “Love at Goon Park”, chronicles the trailblazing work and legacy of psychologist Harry Harlow.  In the first half of the 20^th century, the common thought among psychologists was that parents, and especially mothers, showing love and affection to their children would spoil them.  Harlow proved otherwise, confirming that love and affection were critical to the emotional, physical, and intellectual well-being of children.  You can read an interesting review of the work at https://www.brainpickings.org/2016/07/07/love-at-goon-park-harry-harlow-deborah-blum/.

Quote of the week:

“I am of a different time.  Today there is much more focus on our rights as citizens, and what we are owed; it is not often that one hears of our obligations or duties as citizens.”

                                                                                                                                                                Clarence Thomas

Mega

The June jobs report was all the news a few days ago, with the U.S. economy adding 287,000 new jobs, compared to economists’ expectations of 175,000 new non-farm jobs.  Markets around the world responded well to the news, and this news increases the likelihood of an interest rate increase by the Fed before the year is over.

The official unemployment rate stands at 4.9%, with 414,000 new entrants to the labor force in June.  The labor force participation rate rose a bit, to 62.7%.  Over the last 40 years, the labor force participation rate has ranged from a low of 61.3% in January 1976 to a high of 67.3% during the first quarter of 2000.

Average hourly wages in June were $25.61, and hourly pay has increased 2.6% during the 12 months to June 2016, exceeding inflation. 

One question that surfaces from time to time is how have wages and incomes grown over the last 40 years, compared to the net worth of those who own the companies that provide the jobs?  This question, like many, provides fodder for all sorts of commentary. 

My observation?  Any company which plans to be viable must make sure its products and services continually fill a need.  This typically requires a constant focus on product and service development and innovation.  It would be easy to make a list of companies which no longer exist, because their products or services became irrelevant.  And we can also make a list of companies who have been around for decades, who continually reinvent themselves.

In the same way, any employee who plans to be continually employable, and enjoy an ever larger payday, must also make sure they remain viable.  This often takes the form of learning new technical, people, organizational, or leadership skills.  Those who choose not to engage in continuing personal and professional development will find themselves either at the low end of the comp scale, or unemployed.  Again, personal decisions weigh more heavily on outcomes, than do larger economic trends.

UPS and Coke, among others, have chosen not to sponsor the Republican National Convention in Cleveland, citing budgetary constraints.  Houston-based energy company, Kinder Morgan, is selling a 50% stake in the Southern Natural Gas pipeline system to Atlanta based Southern Company for $1.47 billion.  Kinder Morgan will use the proceeds to pay down debt.

Ultimate Fight Club has been sold for $4 billion to sports talent giant IMG, backed by PE firms Silver Lake and KKR.  Brothers Frank and Lorenzo Fertitta bought UFC for $2 million in 2000.  Hats off to them for good timing on both entry and exit.  Here’s hoping the IRS at least sends them a thank you card, unless they happened to buy UFC through their IRA (not likely).

Megaship MOL Majesty has made it through the Panama Canal, and to the port of Miami, making it the first megaship to arrive at the port after transiting the newly expanded canal.  Prior to the expansion, the canal could handle ships of up to 5000 TEU’s (a TEU is a 20’ container equivalent).  The MOL Majesty carries 14,000 TEUs.

Here’s hoping you make it to the beach, or the mountains, or to spend time with extended family, before the fall season, and school, shows up in the next few weeks.

Quote of the week:

“The secret to successful hiring is this: look for the people who want to change the world.”

                                                                                                                                               

  Marc Benioff, CEO Salesforce

Passive or Active?

Once you have settled on an investment allocation that’s appropriate for you, how do you decide which funds to use?  According to Statista, there are more than 9200 funds in the U.S., and almost 80,000 mutual funds worldwide.  Mutual funds hold more than $31 trillion of assets, with more than $15 trillion of those assets in the U.S.

Our experience tells us that seven to eight funds in a portfolio is optimal.  Fewer than seven funds leads to concentration which can increase volatility.  More than eight funds dampens performance, and does nothing to protect the downside.

The primary debate within the fund community, and to some degree among investors, is whether to use actively managed or passive funds.  After a review of white papers and journal articles discussing all sides of the discussion, we have found that whether actively managed funds outperform their respective indices is a function of the ten year period being measured.

We have chosen to take a two-pronged, or core/satellite, approach to building portfolios, with a focus on passive, low-cost, investments.  Since we don’t know during which ten year rolling period actively managed funds will outperform, we find this approach makes sense for our clients. 

For short term bond, intermediate bond, and domestic large cap investment classes, we choose to use index ETFs, which is a passive, low cost, investment approach.  Index ETFs are attractive to us for three reasons.  First is their low cost, with most index ETFs available at annual operating costs of 0.10% or less.  Two of our favorite bond ETFs are BLV and BSV, both Vanguard products, each with operating expenses of 0.09%. 

Second, for taxable accounts, ETFs give us complete control over the timing of capital gains exposure, since they trade like stocks.  If you have $10,000 in a taxable open-end mutual fund, a 20% year-end distribution, common for open end mutual funds in very good years, is $2000.  This $2000 in taxable income, whether taxed at ordinary or capital gain rates, is unlikely to have a significant impact on your tax bill, cash position, or lifestyle. 

However, if you have $500,000 in the same fund, that 20% distribution represents $100,000 in additional taxable income.  Regardless of the size of your income, an additional $100,000 in taxable income will get your attention, come tax time.  And, this tax reduces your “after-tax” return.  Real return on your portfolio is measured net of taxes, fees, and inflation.  Using an ETF in the same scenario allows all gain to remain untaxed until such time as you, the investor, choose to sell or otherwise dispose of, the position.

The third benefit of using passive ETFs is simply that using a passive approach reinforces the long term nature of investing, and helps reduce the need or desire to search for the last, best, greatest fund.  This continual search for the investing Holy Grail, and its pursuit by continual changes, is harmful to portfolio value and long term wealth accumulation.  Please remember that money is like soap – the more you touch it, the smaller it gets.

Once we have the core of the portfolio built with passive ETFs, we will populate small percentages of a portfolio with actively managed specialty funds.  These might be specific to a sector, such as life sciences or biotech or energy, or specific to a region or country.  Regardless, these satellite funds rarely comprise more than 5% each of a portfolio,, with total allocation less than 20%.

From a tax management standpoint, we have found that clients are best served by holding actively managed funds, when we use them, in tax-deferred or tax-free accounts (IRAs and Roth IRAs).  This allows us to forego worry about the potential tax outcomes which are beyond our control, when holding actively managed funds.

While there are few perfect investment solutions, we have found that a focus on low-cost passive investing, always being careful of tax outcomes, and supplemented with minor positions in specialty sectors, seems to serve our clients well.

Northeast GMA - Leadership Roundtable - August

Looking forward to attending this event in late August and experiencing a manufacturing tour of Dinex Emission Inc. first hand. If you'd like to attend as well, simply click on the link below and you will be taken to the registration page. All companies are welcome to attend!

GMA Dinex Plant Tour

Three Things You Need to Know to Build Your Custom Portfolio

One of the big questions many investors have is how to invest their money well.  Most investors will choose to invest in cash, stocks, and/or bonds, or their packaged equivalents such as mutual funds.  In this column, we discuss the three criteria we have found, which matter most to our clients, when determining which of our nine model portfolios are appropriate for a given household.

Those three criteria are risk tolerance, margin, and time frame.  Here’s more.

By risk tolerance, we specifically mean your emotional tolerance and ability to sustain the up, and especially down movements, of the stock market.  By margin, we mean the amount of discretionary cash flow or assets available to you.  By time frame, we mean how many years remain until you need to achieve certain goals.

We measure risk tolerance using a risk profile questionnaire.  While the questionnaire itself is simple, much thought has been given to the questions, so the individual and composite answers give a meaningful picture of how much volatility one individual is prepared to experience, without bailing out of a long term investment plan.  If you would like to complete this questionnaire, and get a copy of the results, please email info@centurionag.com, and you will receive a link to the questionnaire.  The higher the risk tolerance score, the higher the allocation to stocks or equities.

Margin speaks to how well a household handles available cash flow.  Uses of cash flow include core living expenses, debt service, taxes, charitable giving, allocated savings, perhaps travel and other discretionary spending, and long term wealth accumulation.  Core living expenses, such as housing, food, and transportation, as well as taxes and debt service, are the fixed expenses.   Margin is the difference between gross available incoming cash flow, and fixed expenses.  Margin is created by the discipline of expense control and delayed gratification, and the preparation of the members of the household to engage in profitable enterprise to generate cash flow.  The greater your margin is, the higher the allocation to stocks or equities.  If you would like a monthly expense worksheet, email info@centurionag.com, and one will be sent to you.

Time frame is the number of years which remain before you reach the goal for which the funds are being set aside.  For most investors, this time frame is the number of years remaining before they want to, or can, retire.  The longer your time frame is, the higher the allocation to stocks and equities.

This article isn’t the place for a discourse on the minutiae of how we determine the appropriate model for a household.  A summary though, is that the risk profile questionnaire, which scores from 0 to 100, gives us a score which we assign to a model.  If there is very little or no cash flow margin, we will generally make the portfolio more conservative by one model.  If there is significant margin, we will make the portfolio more aggressive by one model.  If the time frame is greater than five years, we can also make the portfolio more aggressive by one model.  If the time frame is less than three years, we typically make the portfolio more conservative by one model.

As you evaluate your own situation, good questions can be “What is my actual ability to tolerate the ups and downs of the market?”, “Taking all spending into account, what is our household margin?”, and “When, based on our existing assets and dollars we consistently invest, can we reasonably expect to retire?”.

Controlled

One of the more interesting aspects of being fully immersed in business, and especially in the financial space, is to observe the sheer volume of words offered about what may or may not happen in the future.  I have no idea what’s going to happen tomorrow, so I’ll save you any prognostications I may have about it.  In fact, neither of us has any guarantee that we will wake up tomorrow morning.  My hope is that you are at peace about that potential outcome.

From a business perspective, it seems that what we are left with is the opportunity to evaluate the results of our past decisions.  If there are results we really enjoy, which have delivered value to others, it would seem a good decision to engage in more of the behaviours that led to these results.  If there are results that are less than stellar, the opportunity is first to be comfortable enough with ourselves to admit such, and then to make whatever changes are necessary.  It’s not too complicated.

I’m reminded of a James Stockdale quote from one of Jim Collins’ books.  Stockdale, who did a tour of duty in Viet Nam, and who along with John McCain was a guest in the Hanoi Hilton (look it up if you are unfamiliar), said that the first thing we must do, in order to move forward in life, is to be brutally honest with ourselves about where we are.  Only then are we able to begin to develop meaningful next steps which help us move forward.

Warren Buffett has taken a similar approach.  At the moment, I’m reading through a compilation of his shareholder letters written between 1965 and 2014.  He consistently refuses to speculate on the future, other than to say that the following years won’t be as good as the previous years.  And, in his evaluation of past performance, Buffett is generous with his praise, regarding the managers of their various business interests.  He is also more than willing to point out poor decisions he and Charlie Munger have made, and to suggest that shareholders be cautious with their ongoing expectations.

Kevin Plank, founder and CEO of Under Armour, has been interviewed numerous times, and is a sought after speaker, as a result of the company’s (and his) success.  He has offered any number of insights on what and how.  In a recent interview with Fortune, Kevin said that there is no substitute for action.  In the same interview, he also said the key to explosive growth was finding team members who shared his vision.  This reminds me of something John Maxwell said, in his “21 Irrefutable Laws of Leadership”.  “The leader finds the vision, and then the people.  The people find the leader, and then the vision.”

Danone, the French dairy company, with brands such as Activa, Oikos, and Dannon yogurt, announced last Thursday that it will buy WhiteWave Foods, makers of Silk Soy Milk.  The deal is worth $10 billion, with Danone offering $56.25 per share, a 24% premium to WhiteWave’s average closing price over the last 30 days.  The deal is expected to close by the end of the year, and will be debt financed.

The U.S. government, led by the White House, is proposing that airlines begin service to Havana Cuba as early as this fall.  We would suggest that these decisions are best left to the airlines, without any “assistance” from the federal government.  There are many decisions which are best left to private enterprise, without any meddling or interference from the feds. 

What we will never know is how much larger our economy would be, and how much higher wages would be, if not for continuous meddling by the government, attempting to fix things that aren’t actually broken.  What resources could have been otherwise deployed, what ideas developed, what entrepreneurs funded, if not for the unnecessary extraction, by the government, of time, energy, and money, from the private sector? 

At the end of the day though, those questions don’t matter.  We cannot go back, and change what has happened.  What we can do is either work to change what is, or work within the established framework.  Opportunity remains, and in fact abounds.  Choose to pursue and desire.

Quote of the week:

“When buying and selling is controlled by legislation, the first things to be bought and sold will be legislators.”

                                                                                                                                                                P.J. O’Rourke

Imagination

Imagination

July 5, 2016

The search for yield was the lead story in the public markets during the first half of 2016.  The broad indices were up slightly, with the S&P 500 up 2.7% during the first six months, the DJIA up 2.9%, and Wilshire 5000 up 2.6%.  The NASDAQ Composite is off 3.3% for the first half of the year.

If it feels as if you’ve made no progress over the last couple of years, it’s for good reason.  Since the end of 2014, the DJIA is up roughly 3.5%, or 2% annually, including dividends, the S&P 500 is up 4.5% including dividends, or about 2.5% annually, and the NASDAQ Composite is down 2.2%.  The Wilshire 5000 is also down over the last eighteen months.

The international markets have been more volatile, with the German and London markets off 10% through the first half of the year, and off roughly 2% over the last eighteen months.  Asian markets have fared worse, with the Sensex off 4%, the Hang Seng off 5%, and the Nikkei off 18% through the first half of 2016.  The last eighteen months for the Asian markets have been a bit kinder, but almost all the international indices are off over that time period.

Intermediate term and high yield bonds, along with dividend paying stocks, have been the “go-to” securities so far in 2016.  The volatility early in the year, the uncertainty caused by the British vote, and the continuing terrorist attacks around the world, have many investors wondering what’s next.  Telecomm and utilities stocks, both of which typically pay solid dividends, have done well so far in 2016, with most up in double digits.

On the economic front, GDP was up an annualized 1.1% during the first quarter, with consumer spending up 1.02%.  Business spending is flat, with nonresidential investment down by 0.58% during Q1.  Some observers (and we agree) suggest that business spending will increase once we get through the current election cycle, and there is clarity regarding tax and regulatory policy.  The uncertainty around both has hampered the economic recovery over the last several years.

At the macro level, there is good news, in that corporate profits were up 1.84% in the first quarter, after several quarters of slowing growth.  At the micro level, many of us around the world, and most of us in the States, have a quality of life unimagined in past centuries, or even as recently as 100 to 150 years ago.  And the future looks even brighter.

Here are some current and future opportunities that confirm this wonderful life.  Advanced genomics will allow us to be more alert, and more active, at increasingly older ages.  New materials will reduce the cost of jet engines, fuel consumption, and pressurized cabins in a way that puts jet ownership in the hands of more people.  Fracking has increased the available supply of oil and gas, reducing the cost of fuel at the pump.  Fuel cost, as a function of household income, is at its lowest level in decades.

Solar energy cost-efficiency is improving.  Many expect it to be price competitive at the retail level within ten years.  R&D in robotics will ultimately result in many mundane, repetitive, or boring tasks being handled by robots.  And I could go on.  Yes, much of this is disruptive.  We can resist change, or we can embrace such technological change, and even profit from it, if we choose.

Last Monday, we celebrated Independence Day, that day on which we celebrate our independence from the British Empire.  Our national anthem, the “Star-Spangled Banner”, has an interesting backstory.  You may know it was written by Francis Scott Key, an attorney from Baltimore.  You can find one telling of the rest of the story at https://youtu.be/bC18F9mOhsY.  And, for one of the best renditions of the song I’ve heard, check this a cappella version https://youtu.be/Vwxv-EZpb7U. 

Quote of the week:

“America was not built on fear.  America was built on courage, on imagination, and an unbeatable determination to do the job at hand.”

                                                                                                                                                                Harry S. Truman

Conservation and Tax Summary

Land Conservation and Personal Tax Planning

We are in an economic and cultural environment that we believe includes an ever-increasing tax burden.   Going forward, we believe this tax burden will fall disproportionately on those who have applied themselves, and thereby developed significant income and assets.  With this increasing income comes not only an increasing tax burden, but also significant opportunities to effectively mitigate federal and state income taxes.  This is the case whether income is deemed ordinary income or long-term capital gain income.  One meaningful way of reducing the income tax burden is by participating in real estate opportunities that can have substantial benefits related to preserving and protecting meaningful land for future generations.

Landowners have multiple options in their land ownership, including development and simply holding for the long term.  A conservation strategy can make the most sense for a number of potential reasons, and can contribute significant economic value as well, by preserving these lands for the enjoyment of future generations.

In simple terms, a conservation strategy involves the grant of a conservation easement to restrict forever the future development of portions or all of the property. This easement would extinguish certain development or other rights in perpetuity, restricting future use to agricultural endeavors, passive recreation and certain other reserved rights defined within the Conservation Easement. A proposed easement is typically donated to a qualified land trust, which will regularly monitor the property to enforce the easement if it is executed. 

By doing so, the taxpayer (landowner, often times a partnership entity such as an LLC) is entitled to deduct a qualified conservation contribution for the value of the easement, in the tax year in which it is donated.  If the land owner is an LLC, then the tax benefits will specifically be allocated to members of the LLC in accordance with its operating agreement.  This deduction functions as a non-cash charitable deduction, as further described below.

Conservation Strategy Member Benefits

By choosing to transfer certain rights to a land trust, this transfer and conservation strategy, upon approval by the members and as implemented by the Managing Member, will give members the right to receive allocated tax benefits in proportion to their respective ownership interests, as established by its operating agreement, and for the tax year in which such easement is granted.

These tax benefits will be proportionately allocated to the members of the LLC via a Form 1065 Schedule K-1 as a Charitable Non-Cash Contribution to a Qualified IRS Organization.

U.S. Federal Income Tax Benefits

The available charitable contribution deduction for calendar year 2016 relating to conservation easements can be used to reduce AGI by up to 50% for individuals or 10% for corporations for such year.  Any excess deductions can be carried forward for up to an additional fifteen years for individuals and five years for C-corporations. 

Note: The Protecting Americans from Tax Hikes Act of 2015 was passed in December 2015.  In this legislation, both chambers of Congress demonstrated strong support for, renewed, and made permanent important tax incentives, including land conservation, through the charitable deduction of contributions of real property for conservation purposes.

State Income Tax Benefits

In many states, a state taxpaying member can receive additional tax benefit deductions or credits based on the associated income tax regulations of the state thus creating even a greater total economic benefit.

Conservation Opportunities and Annual Tax Planning

We have found that those with AGI’s of about $225,000 and greater can benefit from using such conservation deduction benefits, with the greater the AGI, the greater the benefit.  This is the case whether income is derived from W2’s, or other sources. With good planning early enough in the year, the possibility exists of reducing federal withholding or estimated tax payments, given the reduced liability, thereby increasing current cash flow.

In any form, meaningful lands are preserved and protected, and members receive the associated benefit of partnering in these conservation efforts.

Georgia Manufacturing Day

On June 22, 2016, I spent the day at the Georgia State Capital with great people from Georgia's manufacturing community. Pictures can be found by clicking on the link above which will direct you to CAG's Facebook page. Enjoy!