David L. Montgomery, MSF

A recently attended a webinar sponsored by "Tax Talk Today" an IRS public service forum targeting tax practitioners. The topic of the webinar was: ARRA 2009: What You Should Know.

The American Recovery and Reinvestment Act of 2009, abbreviated ARRA (Pub.L. 111-5), is an economic stimulus package enacted by the 111th United States Congress in February 2009. The Act of Congress was based largely on proposals made by President Barack Obama and was intended to provide a stimulus to the U.S. economy in the wake of the economic downturn. The measures are nominally worth $787 billion. The Act includes federal tax cuts, expansion of unemployment benefits and other social welfare provisions, and domestic spending in education, health care, and infrastructure, including the energy sector. The Act also includes numerous non-economic recovery related items that were either part of longer-term plans (e.g. a study of the effectiveness of medical treatments) or desired by Congress (e.g. a limitation on executive compensation in federally aided banks added by Senator Dodd and Rep. Frank). The government action is much larger than the Economic Stimulus Act of 2008, which consisted primarily of tax rebate checks.

No Republicans in the House and only three Republican Senators voted for the bill.^[1][2][3]The bill was signed into law on February 17 by President Obama at an economic forum he was hosting in Denver, Colorado.^[4] (Source: Wikipedia - http://tinyurl.com/dzsmpq)

The webinar provided some valuable links to information regarding the Act, changes to and features. Of particular note is the information and forms pertaining to the First-Time Homebuyer Credit. For your information I have provided those links below:

ARRA Information Center (HTML link)
ARRA: News Releases, Multimedia and Legal Guidance (HTML link)
First-Time Homebuyer Credit (HTML link)
Making Work Pay Credit (HTML link)
Making Work Pay Questions and Answers (HTML link)
Unemployment Compensation (HTML link)
Economic Recovery Payment (HTML link)
ARRA and the Earned Income Tax Credit (HTML link)
ARRA and the Additional Child Tax Credit (HTML link)
Energy Incentives for Individuals in the American Recovery and Reinvestment Act (HTML link)
American Opportunity Credit (HTML link)
Sales Tax Deduction for Motor Vehicles (HTML link)
Qualified Transportation Fringe Benefits under ARRA (HTML link)
Qualified Tuition Plans (HTML link)
Draft Tax Forms (HTML link)

Disclaimer: This article is for informational purposes only and does not intend to provide tax advice. The writer advises that you seek the guidance of a trusted tax accountant or attorney for your specific situation.

It is estimated that between 1-2 per 1,000 persons have autism and 6 per 1,000 has some form of autism spectrum disorder (ASD). Many programs are based in local school districts. But what continued support is available after the school day or more importantly, when the child becomes a young adult? (Source: Centers for Disease Control http://www.cdc.gov/ncbddd/autism/addm.htm and University of Michigan http://www.med.umich.edu/yourchild/topics/autism.htm )

Classic Smiles is one of your options. I met Ernest Berry, founder and president of Classic Smiles on its 26th day of operation. Classic Smiles is located in the Fountain Plaza - 4160 Elizabeth Lake Road, Waterford Michigan. Its hours of operation are 8:00am to 7:00pm, Monday through Saturday.

Mr. Berry started the company after working 24 years in the Pontiac School system. The entire 24 years was spent he says "in the autism room". While in the school system he developed innovative programs and approaches to aid the students with the disorder. He knows the disorder and its manifestations. Mr. Berry incorporated on June 23, 2009 and the company is based on a business plan he developed five years earlier. Mr. Berry says he recognized a need for continuing support and socialization/real life skills for the autistic and other developmentally challenged young adults.

The mission of Classic Smiles is a simple one: "To provide a safe social learning environment for all developmentally challenged young adults". To accomplish its mission the center employs five professionals who have experience with autism and ASD. The center also employs a secretary to assist in the day-to-day administrative functions.

The center is designed for the young adult (18 years and older) and seeks to strengthen and provide continued support of real life skills through recreational activities and work programs. The center maintains progress reports on its members noting strengths, weaknesses and opportunities for improvement. "Give a man a fish and he'll eat for a day -- teach him how to fish and he'll eat forever." is the goal of the socialization and work programs at the center.

Classic Smiles has applied for its 501(c)3 status and expects to receive the IRS status letter shortly. "When I get the not-for-profit status letter I can start applying for grants for my programs and can move from a fee based center to a grant based center." Mr. Berry said about the future of the center. Currently the center's fees are $180 per week; $40 per day and $25 per half day. Once again the center's hours of operation are Monday through Saturday from 8:00 am to 7:00 pm.

You see the center is more to me than just this blog. In the picture above, Mr. Berry is the guy in the dreadlocks; the young adult he is assisting is my son who is autistic. My wife and I have worked with Mr. Berry for the benefit of our son for as long as he has been at the Kennedy Center in the Pontiac School system. Ernest cares.

For more information you can call Classic Smiles at (248) 461-7272 or email them at classicsmiles@att.net

Short sales have taken off and if you're listing them no doubt you have been questioned about the tax impact of the short sale -- "How will this short sale affect my taxes?". As professionals and specialists we refer our customers to their tax advisor and/or attorney.

I'm not an accountant or attorney but I found a swell piece on this subject at the IRS website. It is from a March 2009 IRS National Phone Forum on the "Tax Consequences of Canceled Debt". The forum transcript is in audio and hard copy. You can access either, or both by clicking on the links below:

For the text transcript:

http://www.irs.gov/businesses/small/article/0,,id=207042,00.html

For the audio reinactment:

http://www.tax.gov/sbv_canceleddebt/0512.mp3

While the information won't make you an expert it will provide some insight to the taxable impact of debt cancellation for your customers. Hope it helps.

Well it's happened. The Senate has sidetracked the $15 billion rescue package for GM and Chrysler. As you may remember this is nothing new for Chrysler. They negotiated a short term loan of $750 million back in 1979 and paid it back before it was due. Now both GM and Chrysler (with Ford in the wings) are asking for an injection to save them from bankruptcy.

The Senators aren't buying it. Whether the need is real or manufactured the industry is on its ear. However, the impact of an automotive industry crash or even a significant slow-down has far reaching effects.

The automotive services sector employs over 140 million employees (Bureau of Labor Statistics) that would be adversely affected by a slow-down or failure. Starting with a slow-down many suppliers would be forced out of business. Scratch some automotive service sector jobs.

For example when I was a commercial lender for a Detroit area bank, some of our largest customers, besides the "Big Three" were automotive suppliers. It was good business because the GM mantra was "string out your payables and collect your receivables" you know B-school cash management principles. The suppliers would come to us and we would extend working capital loans to tide them through until they were paid. With a dramatically reduced level of production there would be no need for as many lenders tending to the ever shrinking supplier base. There won't be the payday rush to cash checks and make house, car, boat etc. payments. Scratch some banking sector jobs on top of those being eliminated even as you read this blog.

There won't be as many units for sale (if any) so scratch dealerships and those jobs. There won't be as many employees going to work and stopping at the neighborhood diner in the morning, at lunch or stopping to get that wind-down beer or cocktail after work. Scratch some hospitality secror jobs.

There won't be as many employees needing uniforms, or suits to go to work. Scratch some clothing sector jobs. Conference centers, hotels, entertainment...the list goes on for those that will be affected by a failure. Certainly everyone in the various sectors won't lose their job but many will. And the impact is not limited to the Midwest. The GM tentacles extend to all corners of the North American continent.

The full effect of a failure can't be fully realized until it happens. But consumer confidence, the driving force of the American economy, is waining in the face of Senate resistance and sales projections are already affecting production plans.

What does this mean for real estate? I really don't think I have to explain but in the end there will be fewer of us because there will be fewer buyers and sellers when all the numbers are added up.

In the face of the "blank check" written to bailout Wall Street, can America afford not to help the automotive sector?

Last Monday (12-1-2008) the National Bureau of Economic Research (NBER) after their Business Cycle Dating Committee meeting November 28th announced that the country is "officially" in recession...as of December 2007. As defined by the NBER:

"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough."

The committee said that they would have made the declaration earlier but the economy experienced some gains in first and second quarter 2008. What do you know; this pesky economy just won't go quietly!

But we didn't need to hear it from the experts, did we. As a Realtor I've known for quite some time, well at least before December, 2007 that something was wrong. The buying and selling public was frustrated. Sellers for not being able to get out whole and buyers continuing to wait until the prices bottomed out. Lay-offs, business closings, rising unemployment and escalating foreclosures. The public knew, you knew...as Seinfield would say "What's up with that?".

The NBER has been doing Business Cycle dating since 1929 when they published their first report. The reports come with a Q&A section as well. Wanna know how bad it is; one of the questions asked if the committee identified depressions as well. They don't. Before you ask they don't do projections either, or at least they don't publish them.

While the report might do well to promote academic discourse, the general public should view it like being told your car just went off a cliff as you're being pulled out of the burning wreckage.

To view this and other reports: http://www.nber.org/cycles.html