October 20, 2017

Archives for April 4, 2013

The American Taxpayer Relief Act of 2012: Bidding Adieu to the Sunset (Part 2)

Editor’s Note: This is Part 2 of a 3-Part series. Click here for Part 1.

By Merry H. Balson and Laurie A. Hunter

How does the 2012 Tax Act affect estate planning?

Lifetime Gifts. Many clients who were concerned that sunset would cause the estate tax exemption to decrease from $5 million to $1 million made gifts before the end of 2012 to use all or part of the $5 million exemption. Those who did not make end of year gifts in 2012 (and those who did but did not fully use their exemption equivalent) are given another chance to make such gifts because the historically high exemptions are still in effect. Completed irrevocable gifts can remove future appreciation from the donors’ estates, as well as give trust beneficiaries other benefits of irrevocable trusts generally, such as creditor protection and protection from claims of divorcing spouses (in certain circumstances). In addition, if only one spouse made a gift to an irrevocable trust for the benefit of the other spouse, but because of the “reciprocal trust rule” the other spouse did not make a similar gift, that spouse may now wish to consider, after the passage of time, making a gift of their own.

Keep in mind that the downside of making gifts still applies: no stepped up basis on death. Instead, the gifted assets have a “carryover basis” from the donor.

Continued Use of Family or Credit Shelter Trusts. There are a number of reasons an estate planner should continue to discuss the use of family trusts or credit shelter trusts in estate plans instead of relying solely on portability of the first spouse’s unused exemption. First, future appreciation of assets in the family trust will pass estate tax free. Second, income from the family trust can accumulate outside the surviving spouse’s estate. Third, the family trust can be designed to provide creditor protection for the surviving spouse. Fourth, assets in the family trust can avoid claims of a new spouse to the trust assets either at the surviving spouse’s death or divorce. Finally, the family trust can provide a vehicle for an independent trustee to administer the assets, especially in the case of a blended family.

Addressing Portability Election in Planning Documents. With the permanence of portability, practitioners who are not already doing so should consider the extent to which the portability election should be addressed in wills and trusts. The documents could require the personal representative to elect portability on a timely filed estate tax return or could merely authorize the personal representative to do so. Additionally, consider addressing who should bear the cost of the estate return preparation, particularly where the return is being filed solely to elect portability. Furthermore, issues relating to the portability election may also be a subject for negotiation in premarital or postmaritial agreements.

Income Tax Changes in the 2012 Tax Act. In addition to the estate and gift tax provisions, there are numerous income tax provisions in the 2012 Tax Act. The following is a summary of some of those provisions affecting individuals:

  • Tax rates stay the same for most taxpayers. Individuals will have an increased tax rate (back to Clinton-era rates) if they have taxable income over $400,000, and married filing jointly taxable income is over $450,000. The top tax rate will be 39.6%.[1]
  • Payroll tax rate returns to 2010 level. The 2% reduction in the social security payroll tax has expired.[2] Withholding will increase for all taxpayers back to the 2010 level.
  • Long-Term Capital Gains rates stay at 0% (for 10% and 15% rate taxpayers) and 15% (for up to 35% rate taxpayers). For those in the new 39.6% rate, the capital gain rate will be 20%.[3] Qualified dividend rates stay at the same rates as long-term capital gains.[4]
  • Alternative Minimum Tax changes are made “permanent” so that the income levels are $50,600 for single taxpayers and $78,750 for married filing jointly, and these levels are indexed for inflation.[5] Previously, these changes had to be adopted every year.
  • Personal exemptions will be reduced because the suspended phaseout is again in effect. For $250,000 single taxpayers or for $300,000 for married filing jointly, the personal exemption will be reduced by 2% for each $2,500 over the threshold.[6] These levels will be adjusted for inflation.
  • The limits on itemized deductions that had been suspended will again apply so that for the same threshold for the personal exemption levels discussed above, the total amount of itemized deductions will be reduced by 3% of the amount by which the taxpayer’s income exceeds the threshold, but not more than 80%.[7]
  • Trusts and Estates reach the highest tax rate (now 39.6%) at roughly $12,000 in taxable income, so trusts in particular may be subject to the higher income tax rate, the higher capital gains rate and the new 3.8% surtax on investment income mentioned below.[8]

To be continued…

Merry H. Balson is Of Counsel at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, estate and trust administration and forming and advising exempt organizations. She can be reached at mbalson@wadeash.com or 303-329-2215.

Laurie A. Hunter is a Shareholder at Wade Ash Woods Hill & Farley, P.C., where her practice emphasizes estate planning, probate and trust administration. She can be reached at lhunter@wadeash.com or 303-329-2227.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

 


[1] Rev. Proc. 2013-15, Sec. 1.01, 2013-5 IRS 444 (January 11, 2013).

[2] Pub.L. 112-240, Sec. 101 (a-b), H.R. 8, 126 Stat. 2313 (2013).

[3] Pub.L. 112-240, Sec. 102(b), H.R. 8, 126 Stat. 2313 (2013).

[4] Pub.L. 112-240, Sec. 102(a), H.R. 8, 126 Stat. 2313 (2013).

[5] Pub.L. 112-240, Sec. 104, H.R. 8, 126 Stat. 2313 (2013).

[6] Pub.L. 112-240, Sec. 101(b), H.R. 8, 126 Stat. 2313 (2013).

[7] Id.

[8] Id.

Colorado Court of Appeals: City’s Arguments for Taxation Engendered Reasonable Doubts and Must Be Resolved in City’s Favor

The Colorado Court of Appeals issued its opinion in City of Golden v. Aramark Educational Services, LLC on Thursday, March 28, 2013.

Sales Tax Assessment—Summary Judgment.

Plaintiffs, the City of Golden (Golden) and Jeff Hansen, in his official capacity as Golden’s Finance Director, appealed the district court’s summary judgment in favor of defendant, Aramark Education Services, LLC (Aramark). The summary judgment was reversed and the case was remanded to the district court to reinstate the assessment.

The Colorado School of Mines (CSM) and Aramark entered into a Food Services Management Agreement (FSMA) in which they agreed that Aramark would be the exclusive operator of the food service facilities in the CSM Student Center, including the residential dining hall and the Food Court, the I-Club, and other facilities. Aramark operated the Slate Café, the I-Club, the Food Court, Java City, Mines Park Convenience Store, and CSM concessions.

No CSM representative ever handles or takes possession of food either before or after it reaches those facilities. Aramark provided food that generally fell into one of six categories for purposes of this case. Golden levies a sales tax on all sales of tangible property that occur in Golden, including food, unless specifically exempted under the Golden Municipal Code (GMC). Aramark only collects and remits sales tax on CSM campus food sales made with cash, checks, credit, or debit cards. Aramark argued that other sales (as parts of meal plans or added to ID cards) were exempt under the GMC for (1) wholesale sales and (2) direct sales to state institutions “in their governmental capacities only.” Golden disagreed that these were exempt and assessed sales tax.

Aramark protested and received a hearing before Golden’s Finance Director, who upheld the assessment. Aramark appealed to the Colorado Department of Revenue, which reversed. Golden appealed to the Denver District Court and on cross-motions for summary judgment, the district court entered summary judgment in Aramark’s favor. Golden appealed.

The Court of Appeals began by noting the presumption that taxation is the rule and exemption from taxation is the rare exception. All reasonable doubts are resolved against the exemption.

Golden argued that Aramark’s food sales on the CSM campus are wholesale sales. Aramark countered that it sells the food to CSM on a wholesale basis and CSM resells the food to its students, faculty, staff, and guests. The Court held that when individuals purchase food from Aramark-operated food service facilities on CSM’s campus, Aramark is making retail sales to the customers, which are subject to Golden’s sales tax. However, on the issue of when the food is provided as part of a CSM meal plan, a summer conference or summer camp meal plan, or using “Munch Money,” the issue is much closer. However, because Golden’s arguments have sufficient merit to engender reasonable doubts, the issue was resolved in Golden’s favor.

Golden also argued that it was error to conclude that Aramark was exempt from Golden’s sales tax under the GMC’s “governmental capacity” exemption. Such a sale must be a “direct sale” to a department or institution of the State of Colorado. CSM is an institution of the State of Colorado, but it is less clear whether Aramark directly sells its food to CSM. Regardless, the Court concluded that the sales do not qualify because they were not made to CSM in its “governmental capacity only.” CSM has the power to rent, lease, maintain, operate, and purchase buildings and facilities for dining. Aramark does not sell food to CSM in its capacity of doing those things.

The Court additionally found that the sales were made to CSM in both its governmental and proprietary capacities. It was purchasing food in its governmental capacity of educating students, as well as for the private advantage of the faculty and for itself as a legal entity. The summary judgment was reversed and the case was remanded with instructions to reinstate the tax assessment.

Summary and full case available here.

Colorado Court of Appeals: State Agency Cannot Require Submission of Records Containing Protected Information Without Records Retention and Destruction Policy in Place

The Colorado Court of Appeals issued its opinion in Adolescent and Family Institute of Colorado, Inc. v. Colorado Department of Human Services, Division of Behavioral Health on Thursday, March 28, 2013.

Declaratory Judgment—Confidential Patient Information in Drug Alcohol Coordinated Data System.

Plaintiff, Adolescent and Family Institute of Colorado, Inc., appealed from the district court’s declaratory judgment in favor of defendant, Colorado Department of Human Services, Division of Behavioral Health, Alcohol and Drug Abuse Division (ADAD). The judgment was affirmed.

The Colorado Department of Human Services is responsible for the administration of human services programs in the state, including drug and alcohol abuse treatment programs. ADAD is responsible for formulating and administering a comprehensive state plan for alcohol and drug abuse programs. To do so, defendant is authorized to “establish standards for approved treatment facilities that receive public funds or that dispense controlled substances or both.” Such a facility must be licensed by defendant to operate in Colorado.

Plaintiff is a private, for-profit facility that provides treatment for patients with substance abuse and mental health disorders. Plaintiff does not dispense controlled substances and the record did not disclose that it received public funds. Nonetheless, it had been licensed by defendant since 1984 and sought to maintain that status.

All licensees are responsible for accurate and timely submission of required data to defendant, including Drug Alcohol Coordinated Data System (DACODS) client treatment admission and discharge records. The DACODS form contains a patient’s first and last name, date of birth, social security number, zip code, and other demographic information.

Defendant did not require private treatment facilities to comply with the DACODS submission requirement until 2005. Plaintiff sought a waiver of the requirement to ensure it did not violate state and federal laws protecting the confidentiality of patient records. The request was denied, and defendant initiated administrative license revocation proceedings, which were dismissed with prejudice. Plaintiff then initiated proceedings in district court, seeking a declaratory judgment to determine whether the DACODS submission requirement was preempted by state and federal laws because the regulation and laws conflicted. The trial court ruled that the submission requirement was not preempted because it was not covered by the statutory psychotherapist–patient privilege and fell within certain statutory exceptions to the general prohibition against disclosures. Plaintiff asked the court to stay any licensure action by defendant against it pending appeal; the stay was granted.

Plaintiff first argued it was error to find that the DACODS submission requirement does not violate CRS § 13-90-107(1)(g). The Court of Appeals disagreed. The plain language of the statute refers to a “witness” and is located in Title 13, “Courts and Court Procedure.” The section protects people listed from being questioned in a manner that will result in their disclosures being used at any stage in litigation. It is a “testimonial” privilege. It therefore does not apply to the DACODS submission requirement.

Plaintiff then argued it was error to conclude that the DACODS submission requirement does not violate 42 USC § 290dd-2 and its implementing regulations. The trial court had ruled that defendant could require that plaintiff submit the information on the DACODS forms, but because defendant did not have a data retention and destruction policy, defendant could not enforce the requirement until such a policy had been enacted. The Court found no error.

The district court found that the federal statute did not apply because defendant is the “administrative agency that has direct control” over plaintiff and therefore is exempt under the terms of the statute. The Court found no case law or definition of what “direct administrative control” means in this context. However, it found persuasive the definition used by the Social Security Administration (SSA) to determine whether an institution is public or private for SSA purposes. Using that as guidance, the Court held the district court erred in finding that defendant had direct administrative control over plaintiff.

The Court then examined whether defendant’s collection activities fell within the audit or evaluation exception. It found that although the DACODS information may be used in the aggregate for multiple submissions required to be made under the statute, each such submission was a separate audit or evaluation within the exception, and therefore it did not apply.

The Court turned to whether defendant’s collection of DACODS information complied with the statutory requirements regarding how confidential information must be collected, stored, and destroyed. Defendant had no such policy. The Court agreed with plaintiff that in the absence of such a policy, gathering the DACODS information is a violation of 42 CFR Part 2.

Finally, the Court concluded that the district court erred by issuing the stay order because there had been no exhaustion of administrative remedies and the order was overbroad in staying the agency from taking any action against plaintiff. However, in vacating the post-judgment stay and affirming the declaratory judgment, the Court noted that defendant cannot require DACODS submission compliance until it has a data retention and destruction policy.

Summary and full case available here.

Tenth Circuit: Possession of Child Pornography is a Lesser Included Offense of Receipt

The Tenth Circuit published its opinion in United States v. Benoit Tuesday, April 2, 2013.

Joseph Benoit was convicted of receipt of child pornography in violation of 18 U.S.C. § 2252(a)(2) and (b)(1), and possession of child pornography in violation of 18 U.S.C. § 2252(a)(4)(B) and (b)(2). He was sentenced to concurrent terms of 125 and 120 months’ imprisonment and ordered to pay $11,466 in restitution.

Benoit argued that the district court erred in denying his motion to suppress evidence obtained from a search of his computer. The Tenth Circuit rejected this claim. Law enforcement officials seized Benoit’s computer after his girlfriend discovered child pornography on it and called police. The officer did not search the computer within the meaning of the Fourth Amendment, he merely witnessed what a private individual showed him. The court held the seizure of the computer was also proper once the officer had seen the incriminating evidence of a child pornography video.

Benoit also challenged his convictions for both receipt and possession of child pornography under the Double Jeopardy Clause. Because possession is a lesser included offense of receipt in cases in which the same child pornography forms the basis of each charge, both convictions could not stand. The court remanded for the district court to vacate one of the convictions and sentences.

Benoit argued that the district court’s restitution order was improper. The Tenth Circuit agreed with the majority of circuits to have considered the issue that 18 U.S.C. § 2259 requires a showing that a victim’s losses are proximately caused by the defendant’s conduct. Because the district court did not explain whether specific losses suffered by the victim were proximately caused by Benoit’s actions, the court remanded for a redetermination of the portion of damages allocable to Benoit.

The court rejected the remainder of Benoit’s claims.

Tenth Circuit: Unpublished Opinions, 4/3/13

On Wednesday, April 3, 2013, the Tenth Circuit Court of Appeals issued no published opinion and six unpublished opinions.

Evans v. Astrue

Gatewood v. Veterans Affairs

Collvins v. Hackford

Hunsaker v. Alexander

Christopher v. United States

Portenier v. United States

No case summaries are provided for unpublished opinions. However, published opinions are summarized and provided by Legal Connection.

HB 13-1240: Imposing Strict Penalties for “Persistent Drunk Drivers”

On February 25, 2013, Rep. Dave Young introduced HB 13-1240 – Concerning Penalties for Persistent Drunk Drivers. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

In current law, the definition of “persistent drunk driver” includes a person who drives a motor vehicle with a BAC of 0.17 or more. The bill lowers this threshold to 0.15 or more. The bill also amends the definition of “persistent drunk driver” to include a person who refuses to take or complete, or to cooperate in the completing of, a test of his or her blood, breath, saliva, or urine as required by law.

In current law, if a person is designated a persistent drunk driver, the state department of revenue (department) requires the person to complete a level II alcohol and drug education and treatment program.

Under the bill, the department shall also require the person to hold a restricted license requiring the use of an ignition interlock device upon the restoration of his or her driving privileges.

In current law, a person whose privilege to drive was revoked for one year or more because of a second or subsequent DUI, DUI per se, or DWAI conviction; for excess blood alcohol content (BAC); or for refusal may apply for an early reinstatement with an interlock-restricted license after the person’s privilege to drive has been revoked for one year. The bill reduces this one-year waiting period to one month for persons 21 years of age or older at the time of the offense; except that, for a person 21 years of age or older at the time of the offense whose privilege to drive was revoked because of a refusal, the waiting period is reduced to two months.

The bill amends the purposes of the first time drunk driving offender account in the highway users tax fund to include appropriations to the department to pay:

  • A portion of the costs for an ignition interlock device for a persistent drunk driver who is unable to pay the costs of the device and who installs the ignition interlock device on his or her vehicle on or after Jan. 1, 2014; and
  • The department’s costs associated with the implementation of the bill.

In current law, with certain exceptions, a license revocation must run consecutively and not concurrently with any other revocation. The bill provides that, for an offense committed on or after Jan. 1, 2014, with certain exceptions, a license revocation can run concurrently with any other revocation.

In current law, if a license is revoked for refusal, the revocation may not run concurrently, in whole or in part, with any previous or subsequent suspensions, revocations, or denials that may be provided for by law. The bill provides that, for a refusal committed on or after Jan. 1, 2014, with certain exceptions, a license revocation can run concurrently with any other revocation.

On March 27 the Transportation & Energy Committee amended the bill and sent it to the Appropriations Committee for consideration of the fiscal impact to the state.

 

HB 13-1230: Creation of a Compensation Program for Persons Exonerated of Felony Crimes After Period of Incarceration

On February 13, 2013, Rep. Angela Williams and Sen. Lucia Guzman introduced HB 13-1320 – Concerning Compensation for Persons who are Exonerated of their Crimes After a Period of Incarceration. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

With certain limitations, the state shall compensate a person, or the immediate family members of a person, who has been:

  • Wrongly convicted of a felony, or wrongly adjudicated a juvenile delinquent for the commission of an offense that would be a felony if committed by a person 18 years of age or older;
  • Incarcerated; and
  • Exonerated and found to be actually innocent (an exonerated person).

The bill sets forth a judicial procedure whereby a person who is eligible to seek compensation from the state as an exonerated person, or the immediate family members of such a person, may petition a district court for an order declaring the person to be actually innocent and eligible to receive an order of compensation. Upon receipt of a petition, the attorney general and the district attorney shall each have 60 days to file a response in the district court. The response shall contain a statement that either:

  • The petitioner is eligible to seek compensation; or
  • The responding party contests the nature, significance, or effect of the evidence of actual innocence, the facts related to the petitioner’s alleged wrongful conviction, or whether the petitioner is eligible to seek compensation.

If the responding party contests the actual innocence of the petitioner, the district court shall set the matter for a trial, at which trial the burden shall be on the petitioner to show by a preponderance of the evidence that he or she is actually innocent of all crimes that are the subject of the petition and that he or she is eligible to receive compensation.

An exonerated person shall be compensated by the state in the form of:

  • Monetary compensation;
  • Tuition waivers at state institutions of higher education;
  • Compensation for child support payments owed by the exonerated person that became due during his or her incarceration, and interest on child support arrearages that accrued during his or her incarceration but which have not been paid;
  • Reasonable attorneys’ fees; and
  • The amount of any fine, penalty, court costs, or restitution imposed upon and paid by the exonerated person as a result of his or her wrongful conviction or adjudication.

An exonerated person shall receive monetary compensation in an amount of $70,000 for each year that he or she was incarcerated for the crime of which he or she has been exonerated. In addition to this amount, an exonerated person shall receive compensation in an amount of:

  • $50,000 for each year that he or she was incarcerated and awaiting execution; and
  • $25,000 for each year that he or she served on parole, on probation, or as a registered sex offender as a result of the criminal offense of which he or she has been exonerated. For a partial year of incarceration, an exonerated person shall receive a prorated amount that is based on the length of time that he or she was incarcerated.

The district court shall not issue to any person an order of compensation that includes any compensation for any period of incarceration during which the person was concurrently serving a sentence for an offense of which he or she has not been exonerated.

The district court shall reduce an exonerated person’s award of monetary compensation if, prior to the issuance of such award:

  • The exonerated person prevails in or settles a civil action against the state or against any other government body;
  • The judgment rendered in the civil action or the settlement of the civil action includes an award of monetary damages to the exonerated person; and
  • The award of monetary damages is intended to compensate the person for a period of incarceration that resulted from the person’s wrongful conviction or adjudication of a crime.

Under such circumstances, the district court shall reduce the award by an amount that is equal to the amount of monetary damages that the person is awarded and collects in the civil action; except that, a district court shall not offset any amount exceeding the total amount of monetary compensation awarded to the exonerated person.

The state controller or his or her designee shall issue an annual payment to an exonerated person within 14 days after receiving an order of compensation from a district court and annually thereafter until the state’s obligation is satisfied. An annual payment shall be $100,000; except that, if the remaining amount owed to the exonerated person is less than $100,000, then the annual payment shall be the remaining amount.

The state controller shall issue annual payments from the compensation for exonerated persons fund, which fund is created in the bill.

After the state controller issues an initial annual payment to an exonerated person, the exonerated person must complete a personal financial management instruction course before the state controller may issue to the person another annual payment.

A district court that issues an order of compensation to the state controller on behalf of a person, or on behalf of the immediate family members of a person, shall order that all records relating to the person’s wrongful conviction or adjudication shall be expunged as if such events had never taken place and such records had never existed. The district court shall direct such an expungement order to every person or agency that may have custody of any part of any records relating to the person’s wrongful conviction or adjudication.

If a district court issues an expungement order, a court, law enforcement agency, or other state agency that maintains records relating to the person’s wrongful conviction or adjudication shall physically seal such records and thereafter treat the records as confidential. Records that have been sealed shall be made available to a court or a law enforcement agency, including but not limited to a district attorney’s office or the attorney general, upon a showing of good cause.

On or before Sept. 1, 2013, the Colorado commission on higher education shall implement a policy whereby each institution of higher education in the state shall waive tuition costs for an exonerated person, and for any child or custodial child of an exonerated person who was conceived or legally adopted before the exonerated person was incarcerated, who satisfies the admission requirements of the institution and who remains in satisfactory academic standing in accordance with the academic policies of the institution. To receive a tuition waiver, an exonerated person or child or custodial child of an exonerated person must apply to the institution and request such waiver in writing not later than two years after the later of the following dates:

  • The date upon which a district court issued an order of compensation on behalf of the exonerated person; or
  • In the case of a child or custodial child of an exonerated person, the date upon which the child or custodial child graduated from high school.

Neither an exonerated person nor a child or custodial child of an exonerated person shall be eligible for a tuition waiver unless the exonerated person was wrongfully incarcerated for at least three years. On March 7, the Judiciary Committee amended the bill and sent it to the Appropriations Committee for consideration of the fiscal impact to the state.

Since this summary, the bill was amended in Appropriations and referred to the Senate Committee of the whole. It was laid over for Second Reading on April 2.

HB 13-1225: Creating the “Homeowner’s Insurance Reform Act of 2013” and Changing Regulations Regarding Homeowner’s Insurance

On February 7, 2013, Rep. Claire Levy and Sen. John Kefalas introduced HB 13-1225 – Concerning Additional Protections for Homeowner’s Insurance Policyholders in Colorado, and, in Connection Therewith, Enacting the “Homeowner’s Insurance Reform Act of 2013.” This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill makes the following changes to the laws regulating homeowner’s insurance for owner-occupied single-family homes other than mobile homes, condominiums, and manufactured homes:

  • Requires insurers to offer extended replacement cost coverage and law and ordinance coverage, with an explanation of the terms of this coverage;
  • Requires insurers to include at least one year of additional living expense coverage and to offer a total of 24 months of additional living expense coverage, with an explanation of the terms of this coverage;
  • Requires homeowner’s insurance policies, endorsements, and summary disclosure forms be written in plain language and revised by Jan. 1, 2015, to comply with this requirement;
  • Requires an insurer to consider an estimate from a licensed contractor or licensed architect submitted by the policyholder as the basis for establishing the replacement cost;
  • Specifies that policyholders have the right to a written notification, at renewal, describing changes in their insurance contract language that are applicable to the renewal period;
  • Requires insurers to provide an electronic or paper copy, as specified by the policyholder, of the policyholder’s insurance policy, including the declaration page and endorsements, within three business days after a request from an insured;

With respect to contents coverage in total loss claims, requires insurers to:

  • Offer to pay 30 percent of contents coverage reflected in the policy declaration, subject to policy limitations, without requiring a contents inventory;
  • Provide the basis for depreciation when applicable; and
  • Allow the policyholder up to 180 days after a total loss claim to submit an inventory of lost or damaged property, or 270 days if the Governor declares a disaster that results in the total loss of multiple dwellings; and
  • Allow a policyholder up to 180 days after expiration of alternative living expense coverage to replace property and receive recoverable depreciation on that property.

Requires a summary disclosure to be given to policyholders annually, including statements that:

  • The policyholder is responsible for selecting the amount of coverage;
  • The policyholder is responsible for assessing improvements to the home and notifying the insurer;
  • The policyholder may purchase additional coverage with appropriate documentation; and
  • The policyholder should update the inventory of contents regularly and store the inventory off-site.

Implements a continuing education requirement for insurance producers offering homeowner’s insurance policies to take at least three hours of continuing education on homeowner coverages during a two-year period.

Prohibits the enforcement of terms in homeowner’s insurance policies that require policyholders to sue insurers in cases of disputes within a shorter period of time than allowed for by the applicable statute of limitations.

The bill passed out of the House on March 18 and is assigned to the Local Government Committee in the Senate.

Since this summary, the Senate Committee on Local Government heard testimony and had committee discussion.