Estimate of Tax Savings Exhibit D The estimate of federal income tax savings to be derived by the A/E profession from the professional liability proposal was made on the basis of the survey results, published statistics of income, and other data and assumptions provided by The AIA and The ACEC. An The survey responses were used to determine the percentage of firms that can be expected to utilize a professional liability trust and the amount they can be expected to contribute to such a trust. These data were stratified by firm size and projected to the entire population of A/E firms eligible to establish a professional liability trust. adjustment was made for the large number of firms with income below the level at which it is expected trusts will be established. Another adjustment was made for firms that would derive minimum tax deferral because of the limitation on their deduction and the significance and frequency of their claims history. Marginal tax rates were assigned by size of firms on the basis of average billings and assumed deductions. These tax rates were applied to the amount that is expected to be contributed to professional liability trusts to arrive at an estimate of tax savings. Historical data reported on claims experience and legal fees were correlated to amounts responding firms indicated they would contribute to the trust. The claims experience and legal fees of these firmis were used to estimate the amount that would be includable in income as funds are withdrawn from the trusts to pay claims and legal fees over a five-year period. |