Steelers and Estate Tax

With the Super Bowl scheduled to be played on Sunday evening, February 1, 2009, sports fans worldwide will focus on the Arizona Cardinals and the PITTSBURGH STEELERS -- you know, that football team from PENNSYLVANIA.

Both teams are family-controlled. Owners in both families face a significant hurdle: Payment of Federal Estate Tax. Complex estate planning is in order so that the games can go on.

According to Wikipedia, "the Arizona Cardinals, founded in 1898, hold the distinction of being the oldest continuously run professional American football club in the United States." The team's history divides into the Chicago years (1898–1959), the St. Louis years (1960–1987), and the Arizona years (1988–Present). The Cardinals' current coach, Ken Whisenhunt, was hired away from the Pittsburgh Steelers -- where he served as offensive coordinator -- on January 14, 2007.

Also according to Wikipedia, "[f]ounded in 1933, the Steelers are the oldest and most championed franchise in the AFC [American Football Conference]."

The team will appear in its seventh Super Bowl on February 1st 2009 and is one of three teams to have won the Super Bowl five times.

No team has played more conference championship games and Pittsburgh has hosted more conference championship games than any other NFL franchise.

From 1974 to 1979 the franchise became the first NFL franchise to win four Super Bowl titles in six seasons, a feat which is yet to be matched.

The 2005 team was the first sixth-seeded team in NFL history to advance to a conference championship game; they went on to win the game, followed by their latest Super Bowl victory on February 5, 2006. * * *

When these two powerhouse teams meet on Sunday evening, will you be thinking about estate planning, among the many other aspects of the game? There would be reasons.

On July 11, 2008, the Pittsburgh Tribune Review published an article entitled "Estate tax threatens NFL's old guard of owners" by Kevin Gorman & Mike Prisuta, who mentioned both teams when reporting about the concentrated family ownership of the Pittsburgh Steelers that will present problems one day when subject to federal estate tax:

There have been a dozen changes of NFL ownership since 1994, with three involving family estates.

With four of the five Rooney brothers -- Art Jr., Timothy, Patrick and John -- seeking to divest their combined 64 percent interest in the club (Steelers president Dan Rooney also owns a 16-percent share), the estate-tax issue could play a prominent role in any decision. * * *

It's an issue that many longtime NFL owners will eventually have to address. The Bidwill family has owned the Cardinals as long as the Rooneys have owned the Steelers, since 1933.

The key is for family-owned teams to find loopholes in the transference of NFL ownership, which has allowed the Mara and Tisch families to maintain control of the New York Giants, and the Chicago Bears to remain in the Halas/McCaskey families. * * *

Estate planning and family cooperation were concerns of "the Chief," Art Rooney, when he wrote a letter dated March 18, 1987, to his five sons. According to a New York Times "Freakonomics" blog posting entitled "Art Rooney Saw the Steelers’ Future" by Stephen J. Dubner, the Chief (as "Dad") wrote:

Time is starting to run out on me. I am concerned, just as you are, about my Will, particularly my Stock in the football club. I would like to reach some kind of an understanding so that there will be no questions or complications regarding my estate. * * *

Matters of ownership, cooperation, and estate planning came to a head in 2008 for the Steelers, as noted in a blog posting entitled "Death, Taxes and NFL Football (Go Steelers!)" by Julie Garber posted Wednesday August 6, 2008 by About.com:

Having grown up in Pittsburgh, the recent news that my beloved Pittsburgh Steelers are on the verge of being sold to an outside third party did not sit well with me.

This fifth oldest NFL franchise was purchased by Arthur Joseph Rooney in 1933 for a mere $2,500 and is still controlled today by a majority of Rooney family members.

According to a 2007 Forbes.com article, the fair market value of the team is now estimated at well over $900,000,000 and this has put the five sons of Arthur Joseph Rooney at odds over the future of the team. It seems that one son, Daniel, wants to keep the team, but the other four sons want to cash out and focus on other businesses.

Recently stepping into the middle of this family feud is a potential buyer named Stanley Druckenmiller, a billionaire Pittsburgh businessman with very deep pockets. * * *

The death tax threat to the Steelers football franchise was discounted, however, in an article entitled "Estate taxes pose little threat to Steelers ownership" (08/10/08) by Mark Roth, published in the Pittsburgh Post-Gazette.

As the Rooney family prepares to meet with NFL Commissioner Roger Goodell to discuss a possible ownership change in the Steelers, the federal estate tax may turn out to be the least important factor affecting the team's future, tax experts and some family members say.

On the surface, the estate tax seems daunting -- 45 percent on all estates above $2 million in value. With the Rooneys' 80 percent share of the franchise being valued at $800 million or more on the open market, that would seem to make the family liable for hundreds of millions of dollars in tax liabilities.

In reality, though, few estates pay the full estate tax rate, and there is almost no evidence that any family-owned enterprises have had to dissolve or sell out because of the federal tax, said Ben Harris, a senior research associate at the Tax Policy Center in Washington, D.C., a joint operation of the Brookings Institution and Urban Institute. * * *

Before the general election in November, 2008, levy of a succession tax on National Football League team franchises had become a "political football" kicked by the candidates, according to "NFL owners have rooting interest in election --McCain estate-tax plan would save some owners millions" by David Sweet, posted on MSNBC.

Democrat Barack Obama and Republican John McCain may obfuscate on some issues, but they are clear where they stand on the estate tax, which is levied on well-off citizens after they die.

Obama favors a 45 percent top rate after a $3.5 million exemption, while McCain embraces a 15 percent top rate and a $5 million exemption.

As the value of NFL franchises continues to soar — thanks to new stadiums, labor peace, billion-dollar television contracts and other factors — the estate tax has become a primary concern, especially as owners enter their 70s and 80s.* * *

At least for the Steelers, by early December 2008, the ownership and transfer issues appear to have been resolved, according to a posting on Sports Business Daily, "NFL Franchise Notes: Steelers Ownership Deal Nearly Finished" (12/02/08) citing a KDKA report:

CBS' Andy Sheehan cited sources as saying that details surrounding the Steelers ownership transition "should be settled by this weekend."

The sources indicated that Steelers investors Tim, Art Jr., Patrick and John Rooney, each of whom is selling all or part of his 16% ownership stake in the franchise, and their brother, Steelers Chair Dan Rooney, will stay in Pittsburgh following Sunday's Cowboys-Steelers game for a Monday board meeting, at which they "plan to ratify the deal."

Sources indicated that the deal "affixes a value to the team" of between $750-800M. In compliance with NFL rules, Tim and Patrick Rooney will "completely divest themselves of the team," as they both operate race tracks, while Art Jr. and John Rooney also will "sell shares to Dan but retain a smaller stake."

In order to purchase the shares, PNC is "loaning Dan Rooney an undisclosed sum".

With that now resolved, you can focus on Super Bowl XLIII game-play.

Go Steelers!!!

“Estate taxes make every one of us nervous.
If there’s an owner who isn’t, he has his head in the sand.”

-- Dan Rooney, quoted by Bloomberg News (2000)

Update: 02/01/09 @ 10:30 pm:

In a nerve-shattering, topsy-turvy, "incredible game" that demonstrated the tenacity, skill, focus, and passion of the titans on both teams, the Pittsburgh Steelers won the Super Bowl, 27-23.

The game will be remembered not only as the Steelers' sixth Super Bowl victory (a record), but also for the plays at the ends of the first half and the second half, which likely made football history.

Post-game, the Vince Lombardi Trophy was presented by Pennsylvania native, Pro Football Hall of Famer Joe Namath, to Club representative Dan Rooney, in the presence of transfixed fans.

"Both teams, when they were down,
kept fightin' and comin' back."
-- John Madden
ESPN TV sports commentator, immediately post-game

"Anything's possible."
-- Ben Roethlisberger
Quarterback for the Pittsburgh Steelers, interviewed post-game

"If you believe together you can accomplish things, you can be successful."
--Ken Whisenhunt
Head Coach of the Phoenix Cardinals, interviewed post-game

Extensions, Envelopes & Electricity

The deadline to file a PA Inheritance Tax Return for a Resident Decedent 

(PDF) is nine months after the date of death. What if a PIT Return cannot be filed by that deadline?

Answer: Request an extension to file.

In accordance with Section 2136 (d) of the Inheritance and Estate Tax Act of 1995, the time for filing the return is extended for an additional period of six months. That Section provides:

The returns required by subsection (a) shall be filed within nine months after the death of the decedent.

At any time prior to the expiration of the nine-month period, the department, in its discretion, may grant an extension of the time for filing a return for an additional period of six months.

Grant of an extension by the Department is routinely issued upon timely request, which will avoid the imposition of a penalty for failure to file a return by its deadline.

However, grant of an extension does not prevent interest from accruing on any tax remaining unpaid after the original deadline.

But, if you still cannot meet that extended deadline, then the return must enter a delinquent status with the Department:

Because Section 2136 (d) of the 1995 Act allows for only one extra period of six (6) months, no additional extension(s) will be granted that would exceed the maximum time permitted.

In the past, a request for extension was initiated by a signed letter sent to the PA Department of Revenue, Inheritance Tax Division, prior to the filing deadline. There was no standard form for use.

There still is no standard request form. But there is a new method for requesting such an extension.

Recently, Jack Meck, Esq., of Pittsburgh, PA, State Chair of the Pennsylvania Fellows of the American College of Trust & Estate Counsel, made available portions of a letter that he recently received from the PA DOR in response to one of his requests for extension.

A Supervisor for the Division's Document Processing Unit revealed a new method for requesting an extension to file a PIT Return:

We now offer you the option to request your extension request via e-mail.

Please use the following e-mail address: RA-InheritanceTaxExt@state.pa.us.

The letter requesting an extension may now become an email message, or an attachment to an email message.

The necessary information (decedent's name, Department file number, date of death, personal representative's name & contact data or counsel's name & contact data, and filing deadline), the reason for extension, and the request for extension should be set forth, just as before.

However, now it can be sent by electricity, not in an envelope.

That can save some time. But don't use that as an excuse for approaching a deadline even closer.


Update: 2012-07-02:

In requesting such an extension today, I noted a Q&A on this topic posted by the PA Department of Revenue (most recently updated on June 22, 2012), entitled What form do I file to get an extension of time for filing an inheritance tax return?.

The Department responded to the inquiry as follows: 

All that is needed is a letter to the Inheritance Tax Division prior to the due date of the return, identifying the decedent's name, date of death, and county file number and providing a brief explanation of the reason for the request.

The Q&A does not mention the email address previously identified (which I used today, along with a simultaneous fax to the number listed below).  The answer recommends delivery of the request letter by postal mail or by fax, as follows:

Department Of Revenue
Bureau of Individual Taxes
Inheritance Tax Division
P.O. Box 280601
Harrisburg PA 17128-0601

Fax number: 717-772-0412

Federal Estate Tax: Get Ready to Rumble!

On January 27, 2009, the Center on Budget and Policy Proposals posted an article entitled "Congress Should Not Weaken Estate Tax Beyond 2009 Parameters", by Chye-Ching Huang, who reported:

Senate Finance Committee Chairman Max Baucus reportedly plans to unveil a proposal in coming weeks to make permanent key features of the estate tax that are in place in 2009.

This will launch a major congressional debate. * * *

Reform of the federal estate, gift, and generation-skipping tax system have been debated routinely since the last enactment in 2001. In October, 2007, CBPP prepared its "Issues Surrounding the Federal Estate Tax" slide show presentation (11 slides), which summarized its concerns long-term.

The current article notes that, "[i]n his campaign, President Obama called for addressing this matter by making the 2009 estate-tax parameters permanent."

Consistent with its prior presentations, CCPP argues forcefully -- using updated data and projections, and considering six legislative scenarios -- against reducing rates and thresholds below those now applicable in 2009.

These are the summarized reasons advocated by CCPP:

• Making the 2009 parameters permanent would be very expensive, costing $609 billion over the first decade in which its effects would be fully felt (2012-2021). Going further would not be fiscally responsible.

• Under the 2009 parameters, the estates of fewer than three of every 1,000 people who die will owe any estate tax whatsoever; there is no need to shrink this tiny fraction further.

• While going beyond the 2009 rules would benefit only a very small number of wealthy individuals, millions of middle- and low-income Americans likely would eventually bear a significant share of the costs, in the form of higher taxes and lower government benefits. Millions of ordinary Americans could end up with a lower standard of living so that some of the nation’s wealthiest individuals could escape much or all of the estate tax.

• The few estates that are taxable under the 2009 rules would be taxed much more lightly than is commonly understood. In 2011, taxable estates would owe less than one-fifth of their value in tax, on average.

• Under the 2009 estate tax parameters, almost no small business and farm estates would owe any estate tax — just 140 such estates in the entire nation would be taxable in 2011, for example. Moreover, it is extremely unlikely that any taxable estates would have to be liquidated to pay the tax under the 2009 estate tax parameters.

• A meaningful estate tax is an important incentive for charitable giving. Shrinking the tax beyond its 2009 level would weaken this incentive, likely producing a drop in donations.

Read the article for the detailed analysis under each scenario.

The article's conclusion recognizes that maintenance of the 2009 status quo into the future would represent a compromise already:

Estate-tax legislation is necessary and is likely to be considered in 2009.

Repeal of the estate tax would be fiscally irresponsible, costing $1.3 trillion over the decade from 2012 through 2021.

Making the 2009 estate tax parameters permanent would be very costly itself but would be a much more responsible approach. Under it, the estates of 997 of every 1,000 Americans who die would be entirely tax free in 2011; for 99.7 percent of Americans who die, there would be no estate tax at all.

Going farther than this, especially in the face of the grave long-term fiscal problems the nation faces and the array of significant unmet needs, would be exceedingly difficult to justify.

Congressional debate and some enactment is crucial to avoid the "mayhem" anticipated by The Tax Foundation in its posting on December 31, 2008, entitled "365 Days until Estate Tax Mayhem Begins" by Gerald Prante:

Beginning [January 1, 2009], the federal estate tax will have a rate of 45 percent combined with a generous exemption level of $3.5 million. That's until Dec. 31, 2009.

On Jan. 1, 2010, the federal estate tax rate is scheduled to be zero. That's until Dec. 31, 2010.

On Jan. 1, 2011, the federal estate tax rate is scheduled to be 55 percent with an exemption level of only $1 million. * * *

The Tax Foundation views the FET system far less favorably, stating: "Studies routinely find that estate taxes discourage entrepreneurship and lead to large tax compliance costs." Its prior postings under the heading Estate and Gift Taxes stretch back to 1969.

These two organizations are among perhaps thousands that have taken a position on reform of the FET system. This is the year when those divergent viewpoints will be resolved in Congress in the political process and then enacted long-term.

To examine proposals pending before Congress, see: "Four Pending Federal Estate Tax Bills" (01/16/09) posted by Greg Herman-Giddens on the North Carolina Estate Planning Blog. For background regarding prior proposals, read past postings on this PA EE&F Law Blog under the heading "Federal Estate Tax."

"Let's get ready to rumble!"

-- Trademarked catchphrase owned & used by
American boxing & Professional Wrestling announcer Michael Buffer.

Judges and Life-Ending Decisions

On January 23, 2009, an article entitled "Judge May Make Life or Death Decision on Infant" posted by MSNBC, reported that a Texas court "may decide Tuesday whether to end life support for a 6-month-old Dallas baby who has suffered severe brain damage, dozens of bone fractures and numerous scars."

Such decisions regarding elderly persons are less publicized, but more frequent.

In the current Texas case, child abuse is alleged by authorities as the source of the infant patient's dire physical condition:

A court-appointed guardian for the boy has filed a motion in Dallas County juvenile court asking that doctors at Children's Medical Center of Dallas be permitted to remove the boy from life support.

The motion says the parents have not consented to withdrawing the support, but it argues that the move is in his best interests.

His parents * * * were arrested Dec. 23 on charges of injury to a child. Bail was set at $500,000 each and they remain in jail.

"Both parents are responsible for long-term, extensive physical abuse to their only infant son," a Child Protective Services report alleged. * * *

Landmark cases involved previously healthy, younger adults, who suffered an incident that resulted in an irreversible coma, such as Karen Ann Quinlan (1975), Nancy Cruzan (1983), and Terry Schiavo (1990).

Their cases, applicable principles, and legislative developments are carefully considered on the website Court and the End of Life.

Traditionally, death was defined as the total cessation of circulatory and respiratory functions.

In 1968 the Ad Hoc Committee of the Harvard Medical School defined irreversible coma, or brain death, as a new criterion for death.

As medical technology has become increasingly able to maintain patients who would otherwise die from severe injuries or illnesses, the debate about defining death, and about whether patients have the right to choose to die, has intensified.

See also: Advance Directives - A Brief History Of Advance Directives, Living Wills, Importance Of Communication, Additional Instructions In Advance Directives.

The far more frequent and common setting for end-of-life decision making involves terminally-ill or comatose patients who are elderly. In counties with large medical centers, the local courts may, by a review of a surrogate's proposed end-of-life decision, become the decision-maker of last resort for some elderly folks.

On January 26, 2009, The Morning Call (Allentown, PA) published an article by Veronica Torrejón, entitled "Lehigh County judge's panel wrestles with end-of-life decisions" which examined end-of-life decision reviews presented to an Orphan's Court Judge sitting in Lehigh County, Pennsylvania.

Everyone dies, but how and under what circumstances are matters Lehigh County Judge Edward Reibman often finds himself pondering.

Not because he's a particularly morbid man. He has the awesome responsibility of making decisions when a person is incapacitated and there's a dispute over who makes end-of-life choices.

In the absence of a living will, Reibman can decide whether someone lives on a respirator in a hospital room or dies at home with friends.

He wrestles with his decisions, wondering if his rulings reflect his own end-of-life preferences or the little he knows about the wishes of the person he's charged with deciding for.

''I'm sitting there on the bench, I'm supposed to make this decision based on the law, a sound rational decision,'' he said. ''How do I make sure that my own biases don't dictate that decision?'' * * *

To receive general input on end-of-life issues, but not specific cases, the Judge sought out experts and divergent viewpoints.

His search for answers led him to convene a panel earlier this month, a talk that those who attended said probably will be the first of many.

Reibman called together doctors, lawyers, religious leaders and court-appointed guardians, all charged with helping make decisions for others.

They all agreed on one thing -- the right choices are seldom clear.

''The reasonable person standard sounds great, until the rubber hits the road,'' Reibman told more than two dozen assembled at Lehigh Valley Hospital-Cedar Crest to discuss what has become an increasingly complex issue. * * *

The article points out that the number of guardianship cases in Lehigh County is increasing, and that "advancing medical technology and shifting social realities" make end-of-life situations more complex. The conjunction of these two factors in a surrogate decision making setting often places a court in the role of reviewer in individual cases.

Medical prognoses remain crucial evidence in such cases:

Medical advances in just one lifetime have been tremendous, said Dr. Lou Lukas, who heads a program at Lehigh Valley Health Network for managing serious illness. What used to be impossible medically has become the norm and patients are now faced with making decisions about how they will die.

''At almost any time there is something we can do,'' she said. ''Death now results from conscious decisions.'' * * *

Although medical diagnoses are important, so are the personal beliefs once expressed by the patient.

''There are many sources of inspiration that we all turn to,'' Reibman told the panel. For some it is the Torah, others the Bible, the Quran, medical texts or a ''combination of science and scripture.''

The panel's conversation often veered into the personal, with guardians sharing times they wrestled with their conscience on issues such as whether to force a feeding tube on someone who is mentally retarded. * * *

Pennsylvania law, in Chapter 54 of Title 20 ("Health Care") of the Probate, Estates & Fiduciaries Code, effective January, 2007, provides a means whereby any individual can express their wishes as to medical care in advance of a disability, and how decisions should be made by a designated or appointed representative when a patient's capability to make a decision becomes impaired.

For guidance, see: PA HealthCare DecisionMaking website. See also: Decide for Yourself—A Guide to Advance Health Care Directives (PDF), a 12-page brochure posted by the Pennsylvania Medical Society that answers patients' frequently asked questions about end-of-life and other health care planning.

End of life decisions are never easy. But the process can embody respect and the outcome reflect individual preferences if a patient's wishes have been previously-expressed, deliberately.

It is best to do so, while deliberate expression remains a possibility.

“In the long run, we shape our lives, and we shape ourselves.
The process never ends until we die.
And the choices we make are ultimately our own responsibility.”

-- Eleanor Roosevelt, quoted on ThinkExist

In PA, Bingo's Gamblin', Poker Ain't

Gambling by seniors is a concern, not only in Pennsylvania, but nationwide, because involvement in games of chance can become additive, and the financial consequences can become dire.

Bingo is a game of chance, seniors know. But seniors who play poker in PA can be relieved: Playin' Texas Hold 'em ain't gambling.

The Senior Journal noted on November 12, 2008, in a brief posting online that "Senior Gambling [is] Getting Attention":

Gambling addiction is a significant problem in the United States impacting adults of all ages and their families.

Older adults are, perhaps, more vulnerable than other age groups given their greater dependence on fixed incomes and more limited ability to recover to secure debt or recover from gambling losses. * * *

The traditional game of chance for seniors is bingo, a pastime that serves as a recreational event in many communities.

The growth of riverboat and Indian casinos, state and national lotteries, and Internet access to off-shore sports and parlor betting, has dramatically increased access for all adults including seniors. * * *

An Associated Press article, dated April 2, 2001, entitled "Wagering: boon or blight of retirement?" reposted by Today's Senior Network, is representative of reports noting that "[a]s the number of older gamblers surges, experts worry that seniors are more vulnerable to financial ruin." See also: "Are seniors gambling away their retirement?" by Liz Weston, posted on MSN-Money, who noted that "[c]asinos, slot machines and poker parlors on seemingly every corner present high-rolling seniors a growing opportunity to lose their nest eggs."

I noted the debate in Pennsylvania in a prior posting, "Gambling, "Gray Lives" & Grief" (11/02/06); and that debate continued as licensed casinos began operation in the Commonwealth statewide.

On January 15, 2009, The Philadelphia Inquirer published a commentary by Daniel R. Reynolds, entitled "Gaming law has been a bust." He asserted that, "[a]s Pa. officials tout a rise in revenue, they overlook the cost, and an unfair tax system."

This year will mark the fifth anniversary of Pennsylvania's gaming law, originally conceived as a way of protecting the state's horse-racing industry. Neighboring states such as Delaware and West Virginia had instituted slot-machine gaming to boost purses at their racetracks.

But the bill's initial intent got hijacked at some point. Signed by Gov. Rendell in July 2004, the bill was sold not as horse-racing protectionism, but as a tax-relief vehicle. Revenue from gaming, it was said, could be used to trim property taxes.

Written by the office of now-indicted former State Sen. Vincent Fumo, the bill expanded gaming way beyond the imagination of the framers of the horse-racing protection bill, who merely envisioned slot machines at the state's four racetracks. As it turns out, when slots casinos become operational in Philadelphia and Pittsburgh, Pennsylvania will have 61,000 slot machines - more than any other state except Nevada.

State officials say they are cutting taxes with gaming revenue. In fact, they are subjecting Pennsylvanians to higher taxes.

The government says nearly $1 billion in gaming revenue has been made available to trim property taxes, but it isn't fluttering down from heaven or being printed by the Federal Reserve. It's coming out of the pockets of Pennsylvanians who are walking into casinos, putting it into slot machines, and not getting it back.

Expanding gaming in Pennsylvania is simply an additional de facto tax -- on top of the state lottery implemented many years ago. * * *

In response, some organizations have addressed "compulsive gambling" by education of consumers and training of professionals.

For example, the Council on Compulsive Gambling of Pennsylvania is a nonprofit organization affiliated with the National Council on Problem Gambling.

Its purpose is to educate and disseminate information on compulsive gambling and to facilitate referrals.

The Pennsylvania Council provides speakers, workshops, seminars, and information on this public health problem to business, industry and labor groups, schools and colleges, health care and treatment facilities, and to community and religious organizations.

In 2008, CCGP held a 2008 Statewide Conference on Problem Gambling. Its website lists weekly Gamblers Anonymous local meetings at statewide locations. Its next training sessions, "Advanced Gambling Treatment Seminars - Level II," will be offered this month and beyond by that organization "Courtesy Of The Sands Casino Resort Bethlehem." [Links added.]

But, at least in Columbia County, Pennsylvania, such outreach efforts need not be directed towards poker players. Because they are not "gamblers."

It has been judicially determined, in that county at least, that participation in a game of Texas Hold 'em, even with bets, is not gambling, since it is a game of skill.

The ruling by the Court of Common Pleas of Columbia County, PA was reported on January 24, 2009, in an article entitled "A Crazy Game of Poker; Judge Rules Poker is a Game of Skill in Gambling Case" by Eric Bower, posted by BloomUToday.

Last week Columbia County Judge Thomas A. James Jr. ruled that Texas Hold’em poker is a game of skill and therefore not gambling under Pennsylvania law.

The ruling stems from gambling charges filed against Walter “Buzz” Watkins and his girlfriend Diane Dent in September.

Watkins is a manager at the Good Old Days Bar in Bloomsburg and also runs the poker tournaments held there.

In addition to hosting poker at Good Old days, Watkins also hosted cash poker games in a garage at his residence in Bloomsburg. The legality of those games soon came into question after State Police received complaints about the poker games and began an undercover investigation. * * *

The game being played at the garage was $1-$2 No Limit Texas Hold’em poker.

The undercover officer indicated that Dent was the dealer when he played. The officer reported that Dent or Watkins would exchange player’s cash for playing chips when they entered the game. Dent and Watkins would also exchange chips for cash when a player left.

No fee was taken by Watkins or Dent to play[. I]nstead, players were encouraged to tip Dent at the end of every hand based on the pot’s size, just as they would in conventional casinos. * * *

Police filed 20 charges each against Watkins and Dent on September 19th. Watkins said that around 15 officers raided his garage while poker was being played when he was arrested. Watkins also said that Dent was asleep in the residence that was also raided by police when she was arrested. * * * [Link added.]

The judge's opinion resolved the case in favor of Watkins and Dent, according to the article.

All charges in the case were dropped last week after Columbia County Judge Thomas A. James issued a 16 page opinion on the case.

The basic question, according to Judge James’ ruling, is whether poker is dominated by chance or skill.

James wrote is his opinion “Simply, if chance predominates, Texas Hold’em is gambling. If skill predominates, it is not gambling.”

In Pennsylvania, video poker machines are not allowed because their outcomes are primarily due to chance, not skill.

In the case of Texas Hold’em, however, Judge James explained that extensive literature exists that describes winning strategies to play the game.

James quoted several books on the matter including Mike Caro’s “Secrets of Winning Poker”. In an excerpt from the book James used, [the author said] “the money flows from the bad players to the strong players.” * * *

The decision issued by Judge Thomas A. James, Jr. on January 14, 2009, in the matters of Commonwealth of Pennsylvania v. Watkin and Dent (PDF; 14 pages, plus Order) is fascinating reading.

I recommend it to poker players of all ages.

* * *

You got to know when to hold 'em, know when to fold 'em,
Know when to walk away and know when to run.
You never count your money when you're sittin' at the table.
There'll be time enough for countin' when the dealin's done.

-- "The Gambler"
sung by Kenny Rogers

Update: 01/29/09:

The American Bar Association Journal's "Law News Now" posted an article on January 29, 2009, entitled "Is Poker a Game of Skill that is Legal? S.C. Judge Will Decide" by Debra Cassens Weiss, on this topic.

Five college buddies nabbed in a poker bust are asking a South Carolina judge to decide whether Texas Hold 'em is an illegal game of chance or a permissible game of skill.

A South Carolina law bans ''any game with cards or dice'' but state Attorney General Henry McMaster says his office interprets the statute to ban games that rely more on chance than skill, the Associated Press reports. And for years, the office has viewed Texas Hold ’em as an illegal game of chance.

Thirty-eight other states have laws that also bar games of chance, according to Colorado lawyer Chuck Humphrey.

Some poker players are beginning to claim — with some success — that the laws don’t apply to them. A Pennsylvania judge ruled Texas Hold ’em is a game of skill and acquitted a man who held poker games in his garage, according to CardPlayer.

And a Colorado jury acquitted the organizer of a poker league after a University of Denver statistics professor testified poker is a game of skill, according to a press release by the Poker Players Alliance. * * *

A "Perfect Storm" Affects Medicaid Funding

On January 22, 2009, the non-profit Center on Budget and Policy Priorities posted a "Preliminary Analysis of Medicaid Assistance For States in the House Economic Recovery Package", including state-by-state data.

The authors (Iris J. Lav, Edwin Park, Jason Levitis, and Matthew Broaddus) summarized their analysis and article:

The House economic recovery package includes an approximately $88 billion temporary increase in the share of the Medicaid program paid by the federal government over nine calendar quarters.

The states urgently need this type of assistance; states on their own are not able to provide critically needed health insurance under Medicaid as need swells in a recession and in its immediate aftermath.

This analysis features state-by-state estimates of assistance and a detailed technical explanation of the Medicaid provision.

The analysis notes factors that have conjoined to create a short-term crisis, and alludes to the dismal long-term prognosis.

• Medicaid rolls are soaring, as they have in previous recessions. As people lose their jobs and their incomes, they often also lose their health insurance and qualify for Medicaid. As employers try to cut costs, they drop health coverage. And people who are still working but with reduced hours or income and who lack health insurance may newly qualify for Medicaid. All of these factors drive up enrollment.

• State revenues are dropping. As unemployment rises and consumption declines, state income and sales taxes dwindle. States are projected to face deficits of $350 billion over the next 30 months. Since almost all states have to balance their budgets, most cannot afford to maintain their existing Medicaid programs, and certainly cannot afford to accommodate a large influx of new enrollees resulting from the recession.

• The gap between the need for Medicaid and states' ability to meet that need is large. In a recent Kaiser Foundation report, the Urban Institute estimates that the gap over the next two and a half years between Medicaid costs and states’ ability to meet those costs — considering both enrollment increases and revenue losses — would be approximately $100 billion if unemployment averages 9 percent. However, that was calculated as the estimated sum of the “exact” amount each state would need to meet its Medicaid costs. Since it is not practically possible to craft legislation that would give each state exactly what it needs, total federal assistance would need to be significantly more than $100 billion to keep the program whole.

The analysis described the three forms of interim relief proposed for the states, noting that "[t]his fiscal assistance for states would be effective for the period October 1, 2008, through December 31, 2010."

The full analysis (7 pages) is available online in either HTM or PDF formats on the CBPP website.

This debate for a short-term "bailout" of the states' Medicaid programs is introduced into Congress even while past debates on the scope of funding for Medicaid remain unresolved.

In "Medicaid funding cuts unresolved as new administration takes office" by Doug Trapp, posted January 12, 2009, by the American Medical Association's AMNews, the issues debated during the Bush Administration were analyzed.

Three Bush administration rules limiting federal Medicaid spending will go into effect on April 1 without action by Congress and the Obama administration, but three others could be rescinded by the new administration alone -- including a rule ending federal funding for graduate medical education.

The six rules are part of a Bush administration effort to scale back the federal government's Medicaid obligations so the program covers only what President Bush contends is required by law. The new policies would reduce federal spending by at least $12.4 billion over five years.

Health care organizations affected by the reductions have argued that the White House and the Centers for Medicare & Medicaid Services are overstepping their authority. * * *

Newspaper reports in early January, 2009, demonstrate how the previous cuts in federal funding for Medicaid have created problems for many states:

• "Florida's Medicaid funding faces major cuts" (01/09/09) by Aaron Deslatte & Josh Hafenbrack, posted by the Sun Sentinel (Tallahassee, FL).

• "Medicaid: The 'Never Ending' tale of funding" (01/04/09) by Sid Salter, posted by the Clarion Ledger (Mississippi).

• "Alabama's Medicaid war rages on" (01/15/09) posted by The Birmingham News.

How about Pennsylvania's Medicaid situation?

The Commonwealth was in a Medicaid crisis back in 2005, as noted in "Medical Assistance in Pennsylvania: A 600-Pound gorilla in the state budget" (Feb., 2005) posted by IssuesPA (an initiative of the Pennsylvania Economy League).

That article noted that "Pennsylvania's Medical Assistance program is attracting lots of attention," with costs on the rise and more Pennsylvanians qualifying for the program.

One of the biggest stories in Governor Ed Rendell’s proposed state budget for the 2005-06 fiscal year is Medical Assistance, Pennsylvania’s version of Medicaid.

It’s the 600-pound gorilla in the state budget proposal.

In Pennsylvania, as in other states, the cost of the state’s share of health care coverage for low-income residents has been rising much faster than revenue receipts and consuming ever-larger pieces of the state budget.

Medical Assistance now consumes 19% of Pennsylvania’s General Fund Budget -- up from just over 16% five years ago. * * *

The article then noted Governor Rendell's first-term plan of response:

The Governor has proposed this five-fold strategy to deal with the rapidly escalating costs of medical assistance.

• Increase revenues. The program will require consumers to share in the cost of services through a series of co-payments and premium payments;
  
• Limit services. Specific services such as the number of prescriptions filled, visits to doctors, outpatient clinics and hospitals, ambulance rides, and medical equipment would be capped;
  
• Revise payments to providers. State reimbursement of certain providers of health care services to medical assistance recipients would be increased 2%;
• Lower prescription costs. The Department of Public Welfare would implement a preferred drug list;
• Increase community-based care. The Community Choice program would be expanded to increase the ability to serve older patients at home or a community-based setting rather than in a facility.

The Governor made a conscious decision not to reduce the number of people eligible for benefits -- at least for now.

Other states have reduced or are considering reducing the number of people eligible in order to save money. * * *

Nevertheless, still, in 2009, the crisis swells, according to AARP's preliminary identification of Pennsylvania State Issues:

Current revenue projections show that Pennsylvania may be looking at a $2 [billion] deficit in the 2008/09 state budget.

Such a deficit could have a severe impact on a number of important state programs, particularly Medicaid assistance for long-term care.

The gloomy economic forecast will impact virtually every issue AARP will be concerned about in the 2009 session of the General Assembly. * * *

AARP notes that the state budget issue will interface with the four other key issues affecting seniors -- Health Care Reform, Utilities, Long-Term Care, and Property Taxes.

In early 2009, a short-term federal bailout of Medicaid appears most pressing, according to a Press Release issued on January 16, 2009, by Pennsylvania's Senator Robert P. Casey, Jr., entitled "Casey Calls for Critical Medicaid Help for States in Stimulus."

He warned that "[f]unding should reach $100 billion threshold to avoid service cuts."

Faced with data showing increased demand for Medicaid and state children’s health insurance as more laid-off Americans lose their health insurance, U.S. Senator Bob Casey (D-PA) urged President-Elect Barack Obama to support a minimum of $100 billion in additional Medicaid assistance to the states in the stimulus.

“A perfect storm of state budget shortfalls and job loss is threatening health care for millions of Americans,” said Senator Casey.

“If the federal government does not provide critical Medicaid funding to the states, more states could be forced to cut vital services to the neediest Americans.” * * *

Whether or not the situation should be described as "a perfect storm," there is a present crisis, no doubt, with severe longer-term challenges to follow.

* * *

The phrase perfect storm originates from the 1997 book The Perfect Storm which refers to the simultaneous occurrence of weather events which, taken individually, would be far less powerful than the storm resulting of their chance combination. * * *

Since the 2000 movie by the same name, the phrase has gained popularity and grown to mean any event where a combination of circumstances will aggravate a situation drastically. * * *

The phrase was awarded the top prize by Lake Superior State University in their 2007 list of words that deserve to be banned for overuse.

-- Wikipedia on "The Perfect Storm"

2008 Changes to IRA Rules

On January 21, 2009, MarketWatch posted an excellent article by Robert Powell, entitled Keep Track of Your IRA, about the many significant rule changes made in 2008 affecting individual retirement accounts.

There were many new laws, court decisions, IRS notices and other rule changes affecting the retirement plan of choice for millions of Americans, according to Ed Slott, the nation's preeminent IRA expert. * * *

The article was also posted by Fox Business under the title "Don't Miss The Many New Rules Governing IRAs" (01/21/09).

The general features of an IRA are well-summarized on the AARP website.

The article first discussed the most significant changes in 2008, which were made by federal legislation:

By far, the biggest changes came as part of the Worker, Retiree, and Employer Recovery Act of 2008, or WRERA (which might be an acronym for "we're in big trouble").

Under that law, required minimum distributions for IRA owners, plan participants and beneficiaries are waived for 2009. Of note, you are still required to take your RMD if you turned 701/2 in 2008 but decided to wait until this year to take that distribution.

Another provision of WRERA: Starting in 2010, non-spouse beneficiaries aren't allowed to leave retirement plans with the former IRA owner's employer. They will have to transfer those plans to an IRA at a bank, brokerage or mutual-fund firm.

Under the Emergency Economic Stabilization Act of 2008, sometimes called the bailout bill, IRA owners who are 701/2 can transfer up to $100,000 to a charity in 2009 without having the amount included in their gross income.* * * [Links added.]

The article then highlighted, under headings, additional changes regarding IRAs, from which I derive a bullet-point Tip:

• Court decisions -- Tip: "According to Goldberg, the lesson learned is this: Don't designate a revocable trust as the IRA beneficiary. Instead, name an irrevocable discretionary trust with spendthrift language as the beneficiary, he said."

• IRS takes note of Roth conversions -- Tip: Starting in 2010, plans must allow . . . a non-spouse beneficiary of a qualified retirement plan to transfer the account to an inherited Roth IRA so long as the transfer is allowed by the plan and the beneficiary meets the Roth conversion eligibility requirements.

• Saving the 'stretch' IRA -- Tip: The IRS ruled in two cases that, where the custodian was at fault in failing to make a required annual distribution and then did a make-up distribution, the IRA owner didn't have to pay the 10% penalty on the early distributions.

• Identifying the beneficiary -- Tip: "Make sure your beneficiary or beneficiaries are 'readily identifiable.'"

• Rules on disclaimers -- Tip: "Suffice to say: If you plan to disclaim IRAs, make sure you talk to a qualified professional."

• IRA trust rulings -- Tip: "If you have a beneficiary who's a minor, it's best to designate 'a custodian or a trust to hold an inherited IRA for the minor' rather than have to ask for a ruling later."

• What the future holds -- Tip: "The only certainty is that that there will be a list next year, too."
  

The article did not mention another development in 2008 that could affect self-trusteed IRAs held with one particular custodian, as described in a New York Daily News article posted November 16, 2008, entitled "Accessing your IRA is easy with new Entrust Group debit card" by Phyllis Furman.

Tapping into your retirement savings is just one swipe away.

You may have heard of the 401(k) card, the debit card that makes borrowing from your 401(k) plan as easy as heading to an ATM. Now its cousin is coming to the market: the IRA Card.

This latest piece of plastic offering quickie access to your retirement funds is from the Entrust Group, an administrator of self-directed Individual Retirement Accounts.

The card, which launches Monday, lets you draw from your IRA savings and do other things like change investment allocations within your account, in a flash.

To get started, you set up an IRA checking account with a minimum deposit of $1,000. You can then tap into those funds with the IRA Debit card - which is co-branded with Visa - or with IRA Card checks. * * *

The article mentions one criticism of the new access card:

But critics of products like the IRA Card and 401(k) cards warn they can be dangerous because they allow you to quickly tap into funds that should be locked away and growing for your retirement. * * *

Remember too, the IRS will evaluate any distributions made under such an IRA access card, whether casual or intentional, under its very strict taxation rules.

Laughing through Cancer

On Friday, January 16, 2009, in the afternoon, the National Public Radio show Fresh Air from WHYY will reprise nationwide an interview first aired on March 12, 2008, entitled For Comedian, Humor Eases 'Toughest Journey' that considers humor as a weapon or a palliative against cancer.

The interview of comedian Robert Schimmel covers extreme topics -- from fun to funerals -- as experienced by "one of Comedy Central's 100 Greatest Comics, [who] had his own stand up specials on HBO and Showtime, and has appeared regularly on Howard Stern and Conan O'Brien."

The circumstances of comedian Robert Schimmel's life are grim: He lost his son to leukemia, married and divorced the same woman three times, and battled cancer.

But throughout it all, Schimmel managed to find strength in humor.

His recent memoir is Cancer on $5 a Day: How Humor Got Me Through the Toughest Journey of My Life.

The book by Robert Schimmel, published February 2008 by Da Capo Lifelong Books (hardcover, 240 pages), is available online at Amazon, Barnes & Noble, and other outlets.

The Cleveland Plain Dealer's review was quoted in Amazon's online review:

A remarkable and riveting account [in which] Schimmel is fiercely candid and direct.

This could be the most profanely adult book of inspiration you'll find.

But inspiring it is, and moving, without being mawkish or phony. Schimmel is simply too laugh-out-loud funny, and his storytelling too compelling. * * *

Another book review posted on Curled Up With a Good Book, by staff writer Barbara Bamberger Scott, described the experiences and attitudes related by the author:

The comic leaves his "audience" howling.

"They need this. They need the distraction, the change of pace, the release." Coaxing laughter out of his medical team and his chemo companions is one side of the story.

But Schimmel still has to walk that lonesome valley by himself. He tries pot, Reiki, and crystal therapy. He talks to a rabbi AND a chaplain. * * *

He has seven sessions of chemo, the last one sufficient to teach him "I'm human," as his immune system crashes.

He has to decide he wants to survive, "which is not easy with cancer-killing poison coursing through my body, my face eternally hovering an inch above the toilet bowl, and my body feeling either as cold as Antarctica or as hot as the surface of the sun."

Visions of his children and his father inspire him. He holds on.

When he's told he's finally in remission, he says to his doctor, "I'm trying to cry but you've been beating the shit out of me for six months and I got no crying left."

Cancer is mean. It requires strong medicine and a strong will. Schimmel got both.

But he also stepped outside the bounds of his own suffering to make others laugh. To make me laugh. And you. * * *

BlogTalk Radio maintains a support group online, Laugh at Cancer Support Community Information, described as "a radio show for those families touched by cancer in any way."

ReachMD, in association with XMRadio, offers commercial educational programs intended for physicians. A few presentations in 2008 relate to the role of humor in the comprehensive setting of cancer treatment.

• Cancer on $5 a Day (Chemo Not Included) - 06/30/2008
• Robert Schimmel on Humor in Surviving Cancer
- 04/28/2008
• The Power of Humor - 04/21/2008
• Eight Chemo Sessions & Life Lessons - 04/07/2008

In addition to the reprised interview of Robert Schimmel on Fresh Air, NPR offers links to prior past discussions, free online, including:

• April 15, 2003 -- Humor Therapy
• Feb. 17, 2000 -- Fighting Breast Cancer With Humor

For those who wish to hear Schimmel's interview [32 min 44 sec], click here, then click the Listen Now icon.

"Attitude is a little thing that makes a big difference."

~Winston Churchill
per Quotations for Cancer Patients, Survivors, and Loved Ones