IRS recently issued proposed regs which implement a new Federal law authorizing states to offer tax efficient “ABLE” accounts to folks with disabilities who became disabled before age 26.

The Achieving a Better Life Experience (ABLE) account provision was designed to enable people with disabilities and their families to save for and pay for disability-related expenses.

Contributions in a total amount up the annual gift tax exclusion can be deposited to an ABLE account annually, and distributions are tax free if used to pay qualified disability expenses.

Check out IRC Section 529A for the details.

In Child Abuse Case, Supreme Court Narrows Right to Confront Witnesses

iStock_000042944894_SmallIn the preschool lunchroom, a teacher notices that a three-year-old pupil has an eye that looks bloodshot. She asks him what happened; he says nothing, then claims that he fell. Shortly after, in a better-lit classroom, the teacher notices a series of marks on the boy. She gets other teachers involved, and they discover even more injuries. They ask the boy who hurt him. He mentions his mother’s boyfriend. The teachers, legally obligated to report suspected abuse, notify the authorities.

The boy cannot testify at the boyfriend’s trial for felony child abuse because of a state law about children younger than ten taking the stand. But state law allows prosecutors to introduce reliable hearsay by child abuse victims. The question is whether, despite the hearsay law, a teacher testifying to what the boy said violates the defendant’s right to confront the witnesses against him.

On June 18, in a case involving essentially the facts above, the U.S. Supreme Court answered this query in the negative. The Ohio v. Clark majority held that this kind of hearsay evidence doesn’t violate the Sixth Amendment’s Confrontation Clause. (576 U. S. ____ (2015).)

The Confrontation Right

In a 2004 decision, Crawford v. Washington, the U.S. Supreme Court limited the opportunities for prosecutors to use out-of-court statements to get convictions. (541 U. S. 36 (2004).) That case rested on the Confrontation Clause, which says, “In all criminal prosecutions, the accused shall enjoy the right . . . to be confronted with the witnesses against him.”

Specifically, Crawford established that prosecutors can’t introduce a witness’s “testimonial” out-of-court statements unless:

  • the witness isn’t available to testify and
  • the defendant had an earlier chance to cross-examine the witness.

The Court explained that a statement gets the “testimonial” tag if the main purpose of the conversation that produced it was to create evidence that could be used in lieu of the witness testifying at trial. Think of a police officer interviewing a witness at the stationhouse.

Not Testimony, but “Testimonial”?

In the Clark case, like so many others involving Crawford issues, the defendant hadn’t had a prior opportunity to cross-examine the now-unavailable witness. So, the admissibility of the child’s statements turned on whether they were testimonial.

The Clark Court decided that they weren’t, that their primary purpose wasn’t to create evidence to use against the defendant. The majority reasoned that the statements came about because of an “ongoing emergency” of potential child abuse. The teachers’ questions and the boy’s answers “were primarily aimed at identifying and ending the threat.”

The Court also cited the fact that:

  • the teachers didn’t tell the boy that his answers would be used to either arrest or prosecute the defendant
  • the boy never indicated that he intended for police or prosecutors to use his statements
  • the conversation was “informal and spontaneous,” and
  • the teachers asked about the injuries as soon as they discovered them, in an informal school setting (rather than, for instance, the setting of a police station).

The Court additionally noted the relevance of the boy’s youth: Because they don’t “understand the details of our criminal justice system,” very young children will “rarely, if ever” give “testimonial” statements. They simply don’t know enough to form intent that their statements be used as substitutes for trial testimony.

Another key point of the Clark decision was the role of the teachers—not police officers—as interviewers. The Court didn’t go as far as saying that statements to people other than law enforcement officers are never testimonial. But it came close: “Statements made to someone who is not principally charged with uncovering and prosecuting criminal behavior are significantly less likely to be testimonial than statements given to law enforcement officers.”

The Downside of Watching Your House Rise in Value: Capital Gains Tax

buying-home-selling-your-house“Did you hear how much that house down the street just sold far?!” If you live in a place like the Bay Area of California, that’s a sentence you’ll hear repeated at every neighborhood gathering — usually followed by details about what a fixer-upper the place was, how many offers came in, and how many tens of thousands over asking price it actually sold for.

Then everyone goes a bit quiet, secretly calculating, “If that dump went for over a million, then my place must be worth . . . WOW!”

Yes, it’s fun to be back in a time of home appreciation. Such rises in value haven’t happened in every part of the U.S., but in the places where they are happening — such as in the cities of New York, Los Angeles, San Francisco, Boston, and San Diego — the numbers are truly eye-popping.

As soon as your home appreciation goes over $250,000 (for individual homeowners) or $500,000 (for married homeowners filing jointly), however, the fun is tempered by a look down the road, as you remember capital gains taxes. Real estate gains like these catapult you right over the IRS exclusion, into a world where you might actually owe a chunk of change when you sell.

This issue was recently pointed out by Ron Lieber of The New York Times, in an article whose title offers the best advice around: “House Value Jumping? Save Your Home Improvement Receipts.” According to Lieber’s research, 3.8% of single homeowners and 1.2% of married homeowners already need to worry about paying capital gains tax upon sale, based on their home’s appreciation since they purchased.

But, as Lieber also reminds us, home appreciation isn’t as simple as merely subtracting your purchase price from your sale price. You can reduce your “profit” by factoring in (among other things) the money you poured into improving your home along the way. As Nolo’s Stephen Fishman further explains, “The cost of home improvements are added to the tax basis of your home. “Basis” means the amount of your investment in your home for tax purposes. The greater your basis, the less profit you’ll receive when you sell your home.”

But you’ve got to be able to prove the amount you spent on improvements. The IRS auditor isn’t going to be impressed by you pointing to your lovely new kitchen countertops if you don’t have the receipts to back it up. See “Tax Reasons to Keep Good Records of Home Improvements” for details on what records to keep.


Taxpayer situations change from year to year for a variety of reasons – new job, house purchase, additional dependent(s), windfall income and/or changed deductions. Depending on your situation, this might mean you should consider a change in your withholding so you hit the necessary target of required annual pay-as-you-go payments, without allowing your employer to overwithhold, which will result in your achieving nothing more than making an interest free loan to Uncle Sam until you later file and collect your refund.

Thus, if this is you, check out Form W-4 and give an updated version of the form to your employer. Check out Publication 505 and also consider going to where you will find a handy withholding calculator which may be of help.

Employer May Not Refuse to Hire Applicant Based on Suspicion of Need For Religious Accommodation

Epic2arly last week, the U.S. Supreme Court handed down its decision in EEOC v. Abercrombie & Fitch Stores, Inc. In that case, a young Muslim woman who wore a hijab (a religious headscarf) to her interview was denied employment because the headscarf violated Abercrombie’s “look policy,” which did not allow head wear of any kind. Without discussing the policy with the applicant, Abercrombie simply denied her employment.  (For more about the facts of this case, see our previous post, How Explicit Must a Request for Religious Accommodation Be?)

The Supreme Court ultimately held that Abercrombie engaged in religious discrimination by refusing to hire the applicant, Samantha Elauf. In doing so, the court rejected Abercrombie’s argument that it didn’t actually know that Elauf wore the headscarf for religious reasons. The Court held that actual knowledge is not a requirement for religious discrimination under Title VII. It was enough that Abercrombie suspected that Elauf would need an accommodation and that this was the motivation behind its refusal to hire her.

The Court’s holding suggests that Abercrombie should have notified Elauf about the “look policy” during the application process and explored possible accommodations with her. The result makes practical sense. How would Elauf have known that she needed an accommodation if she wasn’t aware of the company’s “look policy”?

The takeaway from this decision is that employers need to consider offering religious accommodation to employees, even if the employees don’t specifically request it. When an employer has reason to suspect that an employee may need an accommodation, it should broach the topic with the employee. However, employers acting on such suspicions must be careful not to engage in stereotyping that could lead to discrimination claims.

The best approach is to stick to objective facts and company policy. For example, it could lead to trouble to ask an applicant, “Do you wear a headscarf because you are Muslim?” Instead, simply inform the applicant of the company’s established policy that head wear of any kind is not allowed, and then ask if that would present any issues for the applicant. This puts the ball in the employee’s court and gives her the opportunity to request a religious accommodation if she needs one. (For more information on religious accommodation, see our Religious Discrimination page.)