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AMERICAN TAXPAYER RELIEF ACT OF 2012

Posted by on Mar 2, 2013 in Uncategorized | 0 comments

Texas Capital Building

“THE LEGAL CORNER”

By Sam A. Moak

AMERICAN TAXPAYER RELIEF ACT

 The information in this column is not intended as legal advice but to provide a general understanding of the law.  Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.

At the eleventh hour, Congress averted the tax side of the ominous “Fiscal Cliff” that it faced as 2012 drew to a close. The end result of the intense negotiations was the American Taxpayer Relief Act of 2012 (ATRA).

 The most publicized part of ATRA prevented scheduled federal tax rate hikes from going into effect for most taxpayers in 2013, while raising taxes on America’s highest earners. ATRA also keeps in place many expiring income tax breaks and revives some tax increases that had expired over the past several years.

 Individual Tax Rates

For tax years beginning after 2012, ATRA makes permanent almost all of the federal income tax rates first put into place in 2001. Those rates otherwise would have increased in 2013. For high-income taxpayers, a new top tax rate of 39.6%, as opposed to the previous 35%, applies beginning for tax years after 2012.

 The new 39.6% rate applies to taxable income above a specified threshold (subject to future adjustments for inflation): $450,000 for married taxpayers filing jointly, $425,000 for heads of households, $400,000 for single taxpayers, and $225,000 for married taxpayers filing separately. The rate schedule is graduated, so taxpayers whose income falls within the 39.6% rate bracket still benefit from the extension of the Bush-era rates in the lower rate brackets.

 Capital Gains and Dividends

In recent years, individual and other noncorporate taxpayers have benefited from a maximum rate of 15% on net capital gains (net long-term capital gains minus net short-term capital losses). To the extent the net capital gains would have been taxed at the 10% or 15% tax rate if they had been ordinary income like wages, the net capital gains tax rate has been 0%.

 These net capital gains rates for noncorporate taxpayers had been scheduled to be replaced after 2012 by rates up to 20%. ATRA operates to make the 2012 net capital gains rates of 0% and 15% permanent for most taxpayers. A new 20% maximum net capital gains rate applies to taxpayers whose income exceeds the levels mentioned above concerning the 39.6% income tax rate.

 In 2012, qualified dividends from domestic corporations and certain foreign corporations were subject to the same maximum rates as net capital gains in 2012 (15% for most taxpayers, 0% if the income would otherwise be taxed in the 10% or 15% income tax brackets). These dividends were to have been taxed as ordinary income starting in 2013, resulting in substantially higher taxes, but ATRA intervened to retain the 2012 dividend rates of 15% and 0% for most taxpayers. As with capital gains, higher income taxpayers whose income exceeds the thresholds set for the 39.6% income tax rate now have a maximum rate of 20% on qualified dividends.

 Personal Exemption Phaseout and Limitation of Itemized Deductions

Before 2010, the personal exemptions available to higher income taxpayers were gradually reduced when their adjusted gross income (AGI) exceeded a specific threshold amount. Those higher income individuals also had their allowable itemized tax deductions for the year reduced by up to 80%. By law, the personal exemption phaseout and itemized deduction limitation were gradually reduced, until they were completely removed in 2010. The exemption phaseout and deduction limitation were set to return in 2013. ATRA revives them, at higher threshold levels than had been in place. The end result is that the personal exemption phaseout and itemized deduction limitation will likely affect many more people than just those in the new 39.6% top tax bracket.

 ATRA also includes extensions of a variety of individual tax benefits that either expired at the end of 2011, or would have at the end of 2012. Just a few examples of these many benefits are the Child Tax Credit, the State and Local Sales Tax Deduction, the Earned Income Credit, the Coverdell Education Savings Accounts, IRA Distributions to Charities (by persons age 701/2 or older), and the Energy Credit.

 Estate and Gift Tax

For 2012, the maximum federal estate-tax rate was 35%, with an exclusion amount of $5.12 million ($5 million indexed for inflation) that shelters an aggregate amount of transfers at death and lifetime gifts from estate and gift tax. But for ATRA, this top rate and exclusion amount were set to expire after 2012, resulting in a highest tax rate of 55% and an exclusion amount of only $1 million (not indexed for inflation).

 ATRA permanently sets the top federal estate tax and gift tax at 40% with an exclusion of $5 million (inflation adjusted) for decedents dying and gifts made after 2012. ATRA also permanently allows “portability” of a decedent’s unused exclusion between spouses.

 Included among the other parts of ATRA are provisions that extend the estate-tax deduction for state estate taxes, qualified conservation easements, and the installment payment of estate tax on closely held businesses. ATRA repeals the 5% surtax on estates larger than $10 million.

 This article merely to update you on the recent changes in our Federal Tax Code.  Estate planning techniques and tax laws are complex.  You should always consult with a qualified attorney to assist you in such matters.

 Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C.  He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.

www.moakandmoak.com

 

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ESTATE PLANNING WITH PRIVATE REVERSE MORTGAGES

Posted by on Feb 26, 2012 in Uncategorized | 0 comments

“THE LEGAL CORNER”

By Sam A. Moak

ESTATE PLANNING WITH PRIVATE REVERSE MORTGAGES

The information in this column is not intended as legal advice but to provide a general understanding of the law.  Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstance.

I have never been a fan of Reverse Mortgages.  Reverse mortgages, usually obtained from financial institutions, allow people who are at least 62 years of age to convert their home equity into cash, which is received by the homeowner either as a lump sum, a line of credit, or monthly payments.  The loan becomes due, with interest, when the borrower dies, moves out of the home, sells it, or fails to pay property taxes or homeowners insurance.  The end result is often that heirs of the owner sell the house, pay off the loan, and keep the difference.

Since an institution involved in a reverse mortgage is advancing money without knowing for sure when it will be repaid, there are high up-front costs for commercial reverse mortgages.  Fees can be as much as 5% of a home’s value, and required mortgage insurance premiums can range from 0.1% for loans with a low payout to 2% for those with a higher payout.

As an alternative to commercial lenders, some families set up private reverse mortgages.  A private reverse mortgage is basically a private loan to the homeowner, usually from a family member, that is secured by a mortgage on the senior’s house.

For the senior homeowner, a private reverse mortgage can have these advantages:

The costs of having an attorney set up the mortgage should be reasonable and a lot less than the costs of a conventional reverse mortgage with a bank, and there are no ongoing mortgage insurance costs.  Also, the interest rate, set each month by the IRS, should be less than the rate on a commercial mortgage.

Since there is no limit on the percentage of the home equity that can be borrowed, the owner can tap into more of that equity and put farther off the day when he or she has to move for financial reasons.

A private reverse mortgage need not be paid back until the house is sold, leaving open the option of the owner’s moving to a nursing home but keeping the house.

The owner can continue to receive payments on the mortgage if needed to maintain the house or to pay for extra care at a nursing home.

For the lending family members, the arrangement can have these advantages over a reverse mortgage with a financial institution:

The financial benefits for the senior family member carry forward to the whole family, because savings on mortgage costs should translate into a bigger estate ultimately passing on to surviving family members.

The flexibility to tap into more equity in the home could give family members the option to hire more paid caregivers or even to pay themselves for providing such care.

Even though interest rates for private reverse mortgages set by the IRS are pretty low, they still return more than can be earned in money market accounts or certificates of deposit. In other words, it beats having money just sitting in a bank.

There are some cautionary aspects to private reverse mortgages. Lending family members need to anticipate that the money they advance may not come back to them for a long time. It is also prudent to consider that there is some risk that the entire loan may not be paid back, if the ultimate proceeds from the sale of the home are insufficient to pay off the loan, with interest. Of course, these and any other concerns should be fully aired and taken into account when the private reverse mortgage is being contemplated in the first place and when its terms are set.  Certain family dynamics may not allow a private reverse mortgage to work either.

If you are thinking of a reverse mortgage as a way to obtain cash or looking for ways to transfer assets in your estate,  you should sit down with an attorney familiar with real estate and estate planning to find out what will work best for you.

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C.  He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.

www.moakandmoak.com

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THE NIGHT BEFORE CHRISTMAS, LEGALLY SPEAKING

Posted by on Dec 24, 2011 in Uncategorized | 0 comments

“THE LEGAL CORNER”

By Sam A. Moak

THE NIGHT BEFORE CHRISTMAS, LEGALLY SPEAKING

The information in this column is not intended as legal advice but to provide a smile during this holiday season.  Any readers with a legal problem should lighten up this week, life is precious, so enjoy your family and friends now and join the real world after January 2, 2012.

It is time again for another great Christmas tradition. So, gather your parties around the fire (or simulated fireplace built by the Amish), whether plaintiff or defendant, ad litem, guardian or children (natural born and adopted), to hear The Night Before Christmas, Legally Speaking.

Whereas, on or about the night prior to Christmas, there did occur at a certain improved piece of real property (hereinafter “the House”), a general lack of stirring by all creatures therein, including, but not limited to, a mouse.

A variety of foot apparel, e.g. stockings, socks, etc., had been affixed by and around the chimney in said House in the hope and/or belief that St. Nick a/k/a St. Nicholas a/k/a Santa Claus (hereinafter “Claus”) would arrive sometime thereafter.

The minor residents, i.e. the children, of the aforementioned House were located in their individual beds and were engaged in nocturnal hallucinations, i.e. dreams, wherein visions of confectionery treats, including, but not limited to, candies, nuts and/or sugar plums, did dance, cavort and otherwise appear in said dreams.

Whereupon the party of the first part (sometimes hereinafter referred to as “I”), being the joint-owner in fee simple of the House with the party of the second part (hereinafter “Mamma”), and said Mamma had retired for a sustained period of sleep.  (At such time, the parties were clad in various forms of headgear, e.g. kerchief and cap.)

Suddenly, and without prior notice and warning, there did occur upon the unimproved real property adjacent and appurtenant to said House, i.e. the lawn, a certain disruption of unknown nature, cause and/or circumstance.  The party of the first part did immediately rush to a window in the House to investigate the cause of such disturbance.

At that time, the party of the first part did  observe, with some degree of wonder and/or disbelief, a miniature sleigh (hereinafter “the Vehicle”), being pulled and/or drawn very rapidly through the air by approximately eight (8) reindeer.  The driver of the Vehicle appeared to be and in fact was, the previously referenced Claus.

Said Claus was providing specific direction, instruction and guidance to the approximately eight (8) reindeer and specifically identified the animal co-conspirators by name: Dasher, Dancer, Prancer, Vixen, Comet, Cupid, Donner and Blitzen (hereinafter “the Deer”).  (Upon information and belief, it is further asserted that an additional co-conspirator named “Rudolph” may have been involved.)

The party of the first part witnessed Claus, the Vehicle and the Deer intentionally and willfully trespass upon the roofs of several residences located adjacent to and in the vicinity of the House, and noted that the Vehicle was heavily laden with packages, toys and other items of unknown origin or nature.

Suddenly, without prior invitation or permission, either express or implied, the Vehicle arrived at the House, and Claus entered said House via the chimney.

Said Claus was clad in a red fur suit, which was partially covered with residue from the chimney, and he carried a large  sack containing a portion of the aforementioned packages, toys, and other unknown items.  He was smoking what appeared to be tobacco in a small pipe in blatant violation of local ordinances and health regulations.

Claus did not speak, but immediately began to fill the stockings of the minor children, which hung adjacent to the chimney, with toys and other small gifts (Said items did not, however, constitute “gifts” to said minors pursuant to the applicable provisions of the Internal Revenue Code (“I.R.C.”)

Upon completion of such task, Claus touched the side of his nose and flew, rose and/or ascended up the chimney of the House to the roof where the Vehicle and Deer waited and/or served as “lookouts.”

Claus immediately departed for an unknown destination.  However, prior to the departure of the Vehicle, Deer and Claus from said House, the party of the first part did hear Claus state and/or exclaim:

“Merry Christmas to all and to all a good night!”

Or words to that effect.

Respectfully Submitted,

The Grinch, Esquire

I wish I could give the original author credit but he is unknown (although a certain family member has always tried to take credit). MERRY CHRISTmas EVERYBODY!!!

Sam A. Moak is and attorney with the Huntsville law firm of Moak & Moak, P.C.  He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.

www.moakandmoak.com

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Sad, Sad Day in Happy Valley

Posted by on Nov 17, 2011 in Real Estate, Uncategorized | 0 comments

“THE LEGAL CORNER”

By Sam A. Moak

Sad, Sad Day in Happy Valley

The information in this column is not intended as legal advice but to provide a general understanding of the law.  Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstance.

Most of you are aware of the very sad situation in Happy Valley, Pennsylvania.  However, perhaps some of you have not read the paper, seen the 6 or 10 o’clock news, read the social media posts or have simply been under a rock, so this may be your first knowledge of the events.  Gerald “Jerry” Sandusky, a former assistant coach at Penn State University, was indicted for sexually abusing young boys.  As a result of the indictment, the university has dismissed its president, Graham Spainer, head coach, Joe Paterno, and athletic director, Tim Curley.

 Most disturbing about this entire tragedy is that 8 young boys are the victims.  However, because of the pedestal Joe Paterno was placed on by Penn State fans, the fact that he has been fired garnered the most reaction.

 Sandusky created a charity, The Second Mile, as a group foster home for underprivileged children.  It now appears Sandusky used this charity to gain access to young boys.  While his acts with these victims are terrible, it is equally horrifying that a graduate assistant at Penn State University actually witnessed one “incident” in the Penn State athletic showers in 2002. The assistant reported it to his athletic director (Curley) and coach (Paterno).  However, only now 9 years later, has Sandusky been indicted.  Yet the assistant is now the wide receiver coach at Penn State University.  By all appearances it seems the reputation of Penn State University’s football program and head coach out weighed the crime committed against this poor young victim.

 Unfortunately, those adults who should have risen up to protect this young victim failed to do so.  Sexual abuse is a terrible crime that unfortunately is part of our society.  I am not familiar with Pennsylvania law, but really don’t need to be.  I know that if I witnessed a child being sexually abused, I have a duty to report that.  I can not imagine stopping my outcry until something was done to protect that child.

 Anyone having cause to believe that a child’s physical or mental health or welfare has been or may be adversely affected by abuse or neglect MUST report the case immediately to a state or local law enforcement agency or the Texas Department of Family and Protective Services.  Additionally, Texas Law requires that professionals such as teachers, doctors, nurses, or child daycare workers must make a verbal report within 48 hours.  Failure to report suspected child abuse or neglect is a misdemeanor punishable by imprisonment of up to 180 days and/or a fine up to $2,000.  Reporting suspected child abuse to your principal, school counselor or superintendent will NOT satisfy your obligation under this law.  Local school district policy cannot conflict with or supercede the state law requiring you to report child abuse to a law enforcement agency.

 I hope that you are never a witness to such a horrible crime, but if you find yourself in that position, or even if you suspect abuse or neglect, you must take action.  I read in an article earlier this week, “bad things happen when good men fail to take action.”  Failing to act, failing to protect those who cannot protect themselves is a furtherance of the crime.

 If you can, go to http://www.wltx.com/news/pdf/Sandusky-Grand-Jury-Presentment.pdf for a copy of the full indictment.  I will warn you the acts are egregious and described in detail. It is not for the faint of heart.  Gerald “Jerry ” Sandusky will answer for his crimes.  It is only fitting those who failed to act should pay for their inaction, no matter who they are or what the program.

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.

www.moakandmoak.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Texas’ Constitutional Amendment Election

Posted by on Nov 1, 2011 in Articles, Uncategorized | 0 comments

Texas’ Constitutional Amendment Election

“THE LEGAL CORNER”

By Sam A. Moak

TEXAS’ CONSTITUTIONAL AMENDMENT ELECTION

 The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.

Click here to learn more

A couple of years ago, October 2009, I wrote an article on some proposed amendments to the Texas Constitution. It was well received and we have ten (10) proposed amendments this year, so I am writing it again.

 As a bit of history, the current constitution took effect on February 15, 1876. It is the seventh constitution we Texans have had dating back to the Constitution of the Republic of Texas in 1836.

 Our current constitution is one of the longest in the United States. Additionally, it has been amended 467 (as of November, 2009) with another 176 proposed amendments rejected. The primary reason for the number of amendments is the Texas Constitution does not have a Necessary and Proper Clause and thus the State only has those power explicitly stated in the constitution.

Enough history, the purpose of this article is just to help the citizens of Walker County be prepared to cast informed votes on November 8, 2011 (or in the early voting through November 4, 2011). Therefore, I will state the Official Ballot Language and common arguments for and against each proposition.

 I will not try to take sides or persuade anyone, other than my Mother (at her request), one way or the other.

 PROPOSITION 1

 The constitutional amendment authorizing the legislature to provide for an exemption from ad valorem taxation of all or part of the market value of the residence homestead of the surviving spouse of a 100 percent or totally disabled veteran.

 Description

 In 2007, Texans amended the constitution to provide an exemption to property (ad valorem) taxes on disabled veteran’s homestead.

 The amendment would allow a surviving spouse of a disabled veteran to maintain that exemption.

 Arguments For

 * Currently, when the disabled veteran passes, the surviving spouse is required to resume paying property taxes. However, this may force the surviving spouse to sell the home. This amendment recognizes the sacrifices made by military families and helps to prevent this situation..

 Arguments Against

 * The state should not continue to grant additional tax exemptions because this would decrease the amount of tax revenues for funding schools, health care and other essential services. Additionally, in order to make up for the foregone tax revenues, the proposed amendment could result in local governments increasing property tax rates on other homeowners.

 PROPOSITION 2

 The constitutional amendment providing for the issuance of additional general obligation bonds by the Texas Water Development Board in an amount not to exceed $6 billion at any time outstanding.

 Description

Would amend the constitution to authorize the Texas Water Development Board to issue additional general obligation bonds on a continuing basis (Evergreen) for one or more accounts of the Texas Water Development Fund II, with the restriction that the total amount of bonds outstanding at any time does not exceed $6 billion.

Arguments For

 * This program has been successful, and is largely self-supporting through loan repayments. Without additional bond authority, TWDB will run out of elgible funds to provide financial assistance to political subdivisions to meet water and wastewater infrastructure needs.

 * Authorizing going “evergreen” bond authority would allow TWDB to continuously fulfill its constitutional mission as well as simplify its bond authorization process. The risk of default is low.

 Arguments Against

* Although the TWDB bonds could be considered largely self-supporting because the loans are repaid by political subdivisions, and the risk of default is low, the issued bonds are general obligation bonds (GO bonds) and any default would become an obligation of the state.

 * This proposed constitutional amendment would provide for perpetual bond issuances and would break from traditional deliberative practice of requiring the legislature and voters to approve new bond issuances.

 * If this amendment is approved and fully utilized, total outstanding GO bonds at the TWDB could increase by as much as $6 billion, and total state GO Bonds outstanding could increase above the approximately $14 billion currently outstanding, which is an excessive amount of debt.

 PROPOSITION 3

 The constitutional amendment providing for the issuance of general obligation bonds of the State of Texas to finance educational loans to students.

 Description

Would amend the constitution to authorize the Texas Higher Education Coordinating Board (HECB) or its successors to issue and sell general obligation bonds on a continuing basis for the purpose of financing educational loans for students, subject to certain constitutional restrictions, including a restriction as to the maximum principal amount of bonds outstanding at any one time.

 Argument For

 * The program has been successful and is self-supporting through student loan repayments that cover the principal and interest on the bonds. Without additional bond authority, the HECB will run out of eligible funds to provide financial aid.

 * Authorizing this amendment would provide the HECB continued and uninterrupted authority to provide students with low-interest, stable-rate educational loans.

 Argument Against

 * Although the risk of default is extremely low, and the HECB bonds are considered self-supporting because the students must repay the loans, the issued bonds are general obligation bonds (GO bonds) and a sudden increase in defaulted student loans beyond what the loan program could cover with reserves would become an obligation of the state.

 * If this amendment is approved and fully utilized, total outstanding GO bonds at the HECB could increase by as much as $1.06 billion, and total state GO Bonds outstanding could increase above the approximately $14 billion currently outstanding, which is an excessive amount of debt.

 PROPOSITION 4

 The constitutional amendment authorizing the legislature to permit a county to issue bonds or notes to finance the development or redevelopment of an unproductive, underdeveloped, or blighted area and to pledge for repayment of the bonds or notes increases in ad valorem taxes imposed by the county on property in the area. The amendment does not provide authority for increasing ad valorem taxes.

 Description

Would amend the constitution to authorize the legislature to permit a county to issue bonds or notes to finance the development or redevelopment of an unproductive, underdeveloped, or blighted area within the county, and to pledge increases in ad valorem tax revenues imposed on property in the area by the county for repayment of such bonds or notes. The amendment does not provide independent authority for increasing ad valorem tax rates.

 Arguments For

 * Using increases in ad valorem tax revenues resulting from improvements to an area is a reasonable way to finance the development or redevelopment of the area with out raising tax rates.

 * Towns and cities already have this ability and the amendment would simply extend this authority to counties.

 Arguments Against

 * If the finance zone is unsuccessful and increased property tax revenues are insufficient to cover the debt service on the bonds, the taxpayers of the county would be responsible for covering this shortfall should the bonds have to be refinanced and secured by other county tax revenues.

 PROPOSITION 5

 The constitutional amendment authorizing the legislature authorizing the legislature to allow cities or counties to enter into interlocal contracts with other cities or counties without the imposition of a tax or the provision of a sinking fund.

 Description

Would amend the constitution to authorize the legislature to allow cities and counties to enter into interlocal contracts with other cities and counties without having to assess an ad valorem tax and set aside a specified amount of funds for the payment of costs under the interlocal contract.

Arguments For

 * Allowing cities and counties to enter into interlocal contracts to consolidate and share services is an effective and efficient use of public funds and could result in cost savings to taxpayers. This is not really “debt” in accordance with the general public’s understanding of the term.

 Arguments Against

 * Savings to taxpayers are not guaranteed by the use of interlocal agreements, and multi-year interlocal contracts have the potential to obligate future local governments with financial obligations that must be paid for with local tax revenues. The current law concerning multi-year contracts, taxes, and a sinking fund is meant to limit the number and scope of interlocal contracts and deliberately discourages governments from hastily entering into obligations that last beyond the terms of the elected officials agreeing to them.

 * On a local note, we have all seen how well this has worked here.

PROPOSITION 6

The constitutional amendment clarifying references to the permanent school fund, allowing the General Land Office (GLO) to distribute revenue from permanent school fund land or other properties to the available school fund to provide additional funding for public education, and providing for an increase in the market value of the permanent school fund for the purpose of allowing increased distributions from the available school fund.

Description

Would amend the constitution to increase the amount of principal that is available for withdrawal from the permanent school fund each year and would also clarify certain references to that fund in the constitution. Increased access to the principal of the state public education trust fund would be based upon the amendment granting the authority to consider alternative market calculations when determining the amount of principal that is available for distribution to the available school fund. The proposed amendment would also provide authority to distribute to the available school fund annual revenue from school fund land or other properties up to $300 million per year.

Arguments For

* Including real assets, investments and cash in the state treasury derived from property managed by the GLO in the total asset base used for calculating fund distributions will more accurately reflect the full value of the Permanent School Fund (PSF) and increase the amount of funds available for distribution from the Available School Fund (ASF).

 * The amendment would specifically authorize the GLO to distribute a limited amount of revenue earned on management of PSF properties directly into the ASF, providing a much-needed additional infusion of up to $300 million per year into the ASF for distribution to the state’s public schools.

Arguments Against

 * Diverting to the ASF any revenue that otherwise would go into the PSF and increasing the corpus would be shortsighted and would violate the principle that all revenues from state lands are reinvested by the School Land Board (SLB) or State Board of Education (SBOE). Only a portion of the interest and earnings from these investments are meant to be distributed to the school children of Texas.

 * Diverting up to $300 million per year in revenue that might otherwise go into the PSF and become part of the corpus would be tantamount to liquidating a permanent asset to satisfy a short-term need and would defeat the purpose of the investment fund.

PROPOSITION 7

The constitutional amendment authorizing the legislature to permit conservation and reclamation districts in El Paso County to issue bonds supported by ad valorem taxes to fund the development and maintenance of parks and recreational facilities.

Description

Would amend the constitution by adding El Paso County to the list of counties authorized to create conservation and reclamation districts to develop parks and recreational facilities financed by taxes.

 Arguments For

* This amendment would give the districts in El Paso County additional flexibility in the financing of certain public projects deemed appropriate by local elected officials and voters.

 Arguments Against

 * Debt backed by property taxes should not be incurred for non-essential purposes like parks and recreation facilities.

PROPOSITION 8

The constitutional amendment providing for the appraisal for ad valorem tax purposes of open-space land devoted to water-stewardship purposes on the basis of its productive capacity.

Description

Would amend the constitution by requiring the legislature to provide for taxation of open space land devoted to water stewardship purposes on the basis of its productive capacity.

 Arguments For

 * Landowners would have an incentive to partner with the state to protect water quality and increase conservation efforts, while receiving a lowered property tax appraisal.

 * The state’s overall goal to address water conservation and protect open space and water quality in rivers, streams and aquifers without resorting to taxing and spending.

Arguments Against

 * While open space and water conservation are laudable goals, it would be more accurate to reduce the taxable value of the land based on the actual value of the water conservation efforts.

 * The state should not continue to expand eligibility for tax breaks that ultimately decrease the amount of tax revenue available for schools, health care, and other services, and may result in increased taxes for those who do not receive the tax break.

PROPOSITION 9

The constitutional amendment authorizing the governor to grant a pardon to a person who successfully completes a term of deferred adjudication community supervision.

Description

Would amend the constitution to authorize the governor, on the written recommendation and advice of the Board of Pardons and Paroles, to grant a pardon, reprieve, or commutation of punishment to a person who successfully completes a term of deferred adjudication community supervision.

 Arguments For

 * A person who is actually convicted of certain crimes may seek the benefit of a pardon and a person who is not convicted because the person successfully completes the terms of deferred adjudication should have the same opportunity.

 Arguments Against

 * This amendment may deny to the public, press, potential employers, and others relevant information when checking the background of a person who was charged with a crime.

 * Crimes punishable by deferred adjudication represent a level of crime while warranting the ability to avoid a permanent conviction, at the same time being of such nature they are never forgiven. If you have lost someone due to a Driving While Intoxicated (DWI) or theft/embezzlement crime, then you can appreciate that these crimes should not be forgotten.

PROPOSITION 10

The constitutional amendment to change the length of the unexpired term that causes the automatic resignation of certain elected county or district officeholders if they become candidates for another office.

Description

Would amend the constitution by extending the length of the unexpired term that causes the automatic resignation of certain local elected officeholders if they announce candidacy or become candidates for another office from one year to one year and 30 days.

Arguments For

* This amendment is needed to reconcile the resign-to-run provision with the new filing deadline for candidates that has been moved up due to the state’s compliance with the federal Military and Overseas Voter Empowerment Act.

 Arguments Against

 * Elected officials should not be distracted by or neglect their current duties because of aspirations for higher office and should resign if they choose to pursue other offices at any time during their unexpired terms. Instead of relaxing this requirement, Texans should expand the resign-to-run provision to cover all elected officials.

 I hope you find this information helpful. Tuesday November 8th, take advantage of your right to vote. No matter what your personal choice is, the key is that you exercise this right paid for so dearly by our ancestors and solders today. The fact is, those who care about their cause (right or wrong; normal or crazy) will show up to vote. It is the apathetic 70 to 75% who will not get off their couch to vote, that sway an election. So, be a part of history, VOTE!

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.

www.moakandmoak.com

 

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SEEK ADVICE BEFORE SIGNING OIL & GAS LEASES

Posted by on Oct 1, 2011 in Uncategorized | 0 comments

“THE LEGAL CORNER”

By Sam A. Moak

Seek Advice Before Signing Oil & Gas Leases

 The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstances.

 

 The Huntsville-Walker County Chamber of Commerce and the Texas Agrilife Extension Service in Walker County sponsored a very good presentation last week on oil and gas leases. Judon Fambrough, a professor with Texas A&M University, gave the presentation.  I estimate over 100 people and myself were in attendance.  While it was a subject I am very familiar with, it was eye opening for most in attendance.  Therefore, I thought it would be a good subject for this week’s column.

If you own real estate, you may own mineral rights as well.  I say may because it is not a given fact that you own the mineral rights to your property.  It is possible that the mineral interest were sold previously.  This is an important consideration because if you enter an oil and gas lease and later it is learned you have been overpaid, then depending on the oil and gas lease you signed, the producer can demand you repay the overpayment years later.  Just saying you spent the money will not stop them from filing suit.

 Most oil and gas leases presented to mineral owners are known as the Producers 88.  These leases can be easily identified because in the upper lefthand corner will be printed PROD 88. The problem with the Producers 88 is not what it contains, but what it is vague about.  It was written for the oil and gas industry and is very well written in THEIR favor.

 One matter that is not vague is a statement that you the lessor are warranting the title to the mineral interest.  This simply means you guarantee you own all the mineral interest. However, it is the Landman who is presenting you the lease that has done the research.  He works for the lessee or oil and gas company, not you.  He is paid by the oil and gas company, not you.  If his research is wrong guess who is liable, you.  This is just a small example of why you need to be very careful when signing an oil and gas lease.

 I have long been taught, and through personal experience have learned, the best thing to sign is anything but a Producers 88 lease.

 Too many people are drawn into signing bad leases because the Landman has waived a Bonus Check in front of them.  A Bonus Check is payment just for signing the oil and gas lease. While this money can be tempting, it is carefully derived to entice you to sign without thinking about what you are signing and what rights you are giving up.  Additionally, many signed leases are simply then sold to another party for more money.  Meaning you left money on the table.

 Each mineral owner has five (5) basic rights as follows:

1) The right to sign a lease

2) The right to explore for minerals

3) The right to receive a bonus for signing

4) The right to receive delay rentals

5) The right to receive a percentage of the production.

 Within these rights are many considerations.  For example, with the advent of new drilling technology companies now are able to drill deeper, into formations they have not been able to before and horizontally.  If you sign a Producers 88 lease, the oil and gas company has the right to drill to the center of the earth.  However, you could negociate a different payment based on depth and formation.  You could even negociate a minimum royalty payment.

 If you are also the surface owner, then you have many additional rights as well.  These include how your surface is used, where access is located, the type of access, where the drill site is located and who may enter your property and what they may bring.  Any guess as to who has the advantage on all these points in the Producers 88? Would you want a well site right up against your home or barn?  How about an employee of the oil and gas company shooting that prize deer you have been watching?

 As with any written document, the devil is in the details.  There is not enough room for me to go over all of the details that should be considered and addressed when negotiating with an oil and gas company.  Suffice to say, the lease document I draft and recommend is 50 plus pages and addresses not only your mineral rights, but your surface rights as well.  The producers 88 is usually 2 pages.

When dealing with mineral interest and oil and gas leases the terminology used is often foreign to most individuals and the cards are stacked against you.  Therefore, if you are approached by a Landman wanting to give you a “bonus” to sign a lease, do not feel alone.  Contact me and I will sit down with you to explain all your rights and how to negociate the best lease.

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.

www.moakandmoak.com

 

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