Author: National Law Forum

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EPA Proposes Changes to Underground Storage Tank Regulations

Posted in the National Law Review an article by attorneys Julie A. Fournier, Michael J. Hughes and Lisa S. Zebovitz of Neal, Gerber & Eisenberg LLP about the EPA’s porposed changes to the underground storage tanks:

 

For the first time since federal regulations regarding underground storage tanks (USTs) were first promulgated in 1988, the United States Environmental Protection Agency (EPA) is proposing significant changes and additions to these regulations. The proposed rulemaking, found at 76 FR 71708, includes new requirements for USTs primarily focusing on proper operation and maintenance and spill prevention. EPA asserts that the revisions will improve the detection and prevention of UST releases leading to increased protection of human health and the environment.

Newly added requirements include secondary containment for new and replaced USTs, operator training programs, and periodic operation and maintenance requirements for UST systems, such as monthly inspections of spill prevention and release detection equipment, yearly testing of spill prevention equipment, and the testing of overfill prevention and certain secondary containment equipment every three years. In addition, deferrals for certain types of tanks will be eliminated. These requirements are intended to reflect significant technological advances made in the last two decades.

The proposed changes may be significant to the commercial and manufacturing sectors if they become effective. From a practical standpoint, owners and operators of tanks in the vast majority of states with approved UST programs may ultimately see changes in state regulations. States currently operating under an approved UST program will have three years to submit a revised program approval package to conform to the new regulations. Therefore, if the proposed regulations become effective, owners and operators of USTs should monitor changes to state programs closely. Owners and operators located in one of the few remaining states that do not have an approved UST program may be required under the new regulations to notify EPA when bringing a UST system into use or following a change in ownership.

Documents related to the proposed changes identified above, including a comparison of the current and proposed regulations and a Regulatory Impact Analysis, are available on EPA’s Web site. Comments to the proposed rule must be received by EPA on or before Feb. 16, 2012.

© 2011 Neal, Gerber & Eisenberg LLP.

Physician Separation Issues

Posted in the National Law Review an article by attorney David Schick of Baker Hostetler physician Separation Agreements:

Physician Separation Issues are best dealt with upfront in the documents the physician enters into with the practice, when the physician joins the practice as an employee and/or when the physician becomes an owner of the practice.  Obtaining a Separation Agreement at the time a physician departs, while ideal, is often not possible, especially if the departure is not amicable; which is generally the case when the practice has terminated the physician’s employment.  The best way to avoid costly and time consuming litigation at the time of separation is to have carefully drafted documents prepared up front.  Think of these documents as a prenuptial agreement of sorts designed to govern post practice relationship issues, rather than post marital relationship issues.

For example, a well drafted Employment Agreement will specify the manner in which the physician’s employment may be terminated whether for cause (i.e. a specific set of reasons the practice may terminate the physician’s employment immediately); or for no cause (i.e. by the practice or by the physician voluntarily with a required period of notice).  This Agreement also will specify the parties’ rights and obligations to each other following termination.  These rights and/or obligations can vary depending upon whether the physician terminated his employment, whether the practice terminated the physician’s employment for cause, or whether the practice terminated the physician’s employment without cause.

For example, the practice usually will pay for the physician’s malpractice insurance during the physician’s employment.  However, the physician is usually responsible for the cost of “tail” coverage upon termination of employment, which can be very expensive. A common compromise, however, is for the physician to be responsible for the cost of “tail” coverage if the physician terminates his own employment (i.e. quits), or if the practice terminates the physician’s employment for cause (i.e. because the physician committed one of the wrongful acts specified in the Employment Agreement); however, the practice may be obligated to purchase the “tail” coverage if the practice terminates the physician’s employment without cause.

The well drafted Employment Agreement also will specify that all patients treated by the physician are the practice’s patients, not the physician’s patients; and upon termination, the patients’ medical records remain the property of the practice.  However, the Employment Agreement should grant the physician the right to make copies of such records for any legitimate (non-competitive) purpose including defense of a malpractice action or a third party audit at the physician’s expense.

These Employment Agreements also will specify the parties’ obligations to each other regarding the non-disclosure of confidential information, the non-solicitation of the practice’s patients and employees, and non-competition, both during employment and following termination.  The non-competition provisions will typically specify a certain geographic service area within (and a time period during which) the physician may not practice or establish an office.  These provisions are of particular importance to both the physician and the practice; and if not properly drafted can be rendered unenforceable.  A non-competition provision that turns out to be unenforceable will come as a pleasant surprise for the departing physician and as a bitter pill for the practice to swallow.  This area of the law is currently in a state of flux, and legal expertise is critical to draft critical to draft contractual language that stands the best chance of meeting the parties’ expectations during and following the parties’ relationship with each other.

Carefully drafted buy in and entity governing documents also are necessary to deal with the issues pertaining to the practice’s and the physician’s relationship with each other during the period of ownership, and upon termination of such ownership.  The physician owner’s Employment Agreement will not only deal with the issues described above, but also will deal with the payment of any earned, but unpaid compensation payable upon the physician’s termination of employment.  This earned, but unpaid compensation typically represents the physician’s share of the practice’s accounts receivables based on a formula set forth in the Employment Agreement.  The amount payable can sometimes vary depending upon whether the practice terminated the physician’s employment for cause or without cause; or whether the physician terminated his employment.

The buy-in documents (i.e. shareholder buy-sell, operating and/or partnership agreements) depending on the nature of the entity involved, also will deal with the amount of money, if any, the physician is entitled to be paid for the physician’s ownership interest in the practice.  These Agreements, if properly drafted, spell out how the value of such ownership interest will be determined, and the manner in which payment for such interest will be made (i.e. immediately, via insurance proceeds in the event of death, and/or via a promissory note over time).  Once again, the purchase price and/or the manner of payment can vary depending upon the reason for the separation and/or on whether the physician’s separation occurs close to (or coincidently with) another owner’s separation.  Simultaneous withdrawal provisions are critical to prevent the practice from having to pay out multiple physicians at the same time, when those physicians leave together or within a relatively short period of time of each other.  Otherwise, these “simultaneous” withdrawals can create a financial burden on the practice (or a “run on the bank”) that the practice may not be able to satisfy; a disappointing result for both the practice and the departing physician.

Similar documents govern the parties’ relationship with each other, during (and upon termination of) the parties’ relationship with each other, in connection with other business entities connected with the practice.  Typically, the practice owners also own interests in the building within which the practice is located; as well as other joint ventures or entities such as ambulatory surgical or imaging centers.  Properly draft shareholder buy-sell, operating and/or partnership agreements governing these ancillary entities, also will define the parties’ rights, duties and obligations to each other in the event the physician’s relationship with the practice is terminated, and will dictate whether the departing physician also is to be bought out or otherwise removed from these entities.

In summary, not all physician departures are amicable; and in fact, many are not.  Further, the practice might not even be dealing with the physician at the time of separation; which is the case in the event of a physician’s death.  Emotions typically run high at this juncture, and carefully drafted documents will give the parties’ the security of knowing what will be expected of them at the time of separation.  The time and expense spent up front also will be significantly less than the time and expense associated with the litigation that is almost certain to ensue in the absence of pre-existing definitive agreements that govern the separation.

© 2011 Baker & Hostetler LLP

Ford Motor Credit Company v. Chesterfield County: Reading Constitutional Fairness And Supply Side Economics Into The Virginia Tax Code

Recently posted in the National Law Review, Winner of the Winter 2011 Student Legal Writing Contest, Adam Blander of Brooklyn Law School wrote an article regarding the recent decision of Ford Motor Credit Company v. Chesterfield County:

In the recent decision of Ford Motor Credit Company v. Chesterfield County,[1] the Virginia Supreme Court held that the gross receipts of a taxpayer’s local business branch reflected activity generated outside of the branch itself, and was therefore not taxable to Chesterfield County as a licensing privilege. This Note argues that despite the rather case-specific and constrictive holding of the decision (which was decided on state-statutory grounds), the facts of the case actually confronted the Court with a much broader, yet more delicate constitutional and public policy determination — what constitutes “fair” tax apportionment of large multi-state businesses?

I. Background: Constitutional Boundaries of State Tax Apportionments

Tax apportionment is the attempt by a governing body to levy taxes based on a corporation’s earned income in that jurisdiction.[2] Almost by definition, “[a]ny state tax apportionment formula will be inaccurate – either overstating or understating the portion of a corporation’s income that should be subject to tax.”[3] Consequently, any formula, at some level, is unfair. In Complete Auto Transit, Inc. v. Brady, the Supreme Court held that the U.S. Constitution required all state taxes affecting multi-state businesses to be, among other things, “fairly apportioned.”[4] In Container Corp. of America v. Franchise Tax Board, the Court explained that a “fairly apportioned” tax must be both “internally” and “externally consistent.”[5] Container directed courts to test for “internal inconsistency” through engaging in a hypothetical exercise: if more than 100 percent of the business’s income would be taxed if every jurisdiction applied the challenged apportionment formula, then formula was internally inconsistent.[6]Internal inconsistency is a facial challenge – the taxpayer need only prove that he faces a “theoretical risk of multiple taxation.”[7] The more elusive element of externalinconsistency, on the other hand, requires the challenged formula to “actually reflect a reasonable sense of how income is generated.”[8]  As such, the taxpayer must show by “clear and cogent evidence that the income attributed to the State is in fact out of all appropriate proportions to the business transacted in that State” or that it “has led to a grossly distorted result.”[9] In Goldberg v. Sweet, the Court clarified that that “[t]he external consistency test asks whether the State has taxed only that portion of the revenues from the interstate activity which reasonably reflects the in-state component of the activity being taxed.”[10]

The practical effect of these Supreme Court decisions is that state courts have been entrusted with the daunting task of determining what constitutes “fair apportionment.” State courts have analyzed challenges to tax schemes utilizing these Supreme Court directives, but have also taken cues from their state’s common law tradition, the state’s own statutory code, and, when possible, the legislative intent of the state’s taxing body. Patrolling for constitutional defects presents an interpretative and political challenge to any court adjudicating tax disputes- how should it reconcile a taxpayer’s right to be free from unfairly apportioned taxes (even if the “unfairness” is entirely theoretical), while at the same time, faithfully interpret the tax systems passed by the legislative body, whose purpose is to collect vital revenue from all taxpayers in its jurisdiction?  This dilemma becomes all the more problematic when the taxpayer is a complex interstate business, which may organize its corporate make-up or accounting scheme in an attempt to avoid payingthese taxes. The Virginia Supreme Court faced such a dilemma in Ford Motor Credit Company.

II. Ford Motor Credit Company v. Chesterfield County: The Facts

In February 2007, Ford Motor Credit Company (FMCC), filed in Virginia circuit court an “Application for Correction of Erroneous Assessment of Business, Profession and Occupation License [“BPOL”] Tax,”[11] claiming it had mistakenly overpaid Chesterfield County, Virginia for the tax years of 2001, 2002, 2003, and 2004. FMCC asserted that its BPOL payments to Chesterfield County, which was based on “the entire gross receipts of loans related to its Richmond branch,”[12] did not actually “reflect the limited contribution of the Richmond Branch to [its] nationwide business.”[13] As such, FMCC sought a refund of $1,515,935.05.[14]

FMCC, a subsidiary of Ford Motor Company, is a “financial services provider, primarily to the automobile purchase or loan lessee environment,” headquartered in Dearborn, Michigan, with hundreds of sales branches throughout the Country, the Richmond branch being one of them.[15] The FMCC headquarters provided the Richmond branch with the capital needed to provide loans, and dictated to the branch “the policies and criteria governing loan approval, contract terms, and other management issues.”[16]

Roughly 75 percent of the branch’s revenue came from “retail and lease contracts,” in which the branch would provide financing to customers wishing to purchase or lease a vehicle from a Ford Motor Company dealership. While the Richmond branch provided the administrative duties necessary to effectuate a loan, such as reviewing the loan application, collecting paperwork and forwarding account information, [17] it generally “did not process funds, receive payments, engage in collection or other customer service activities, or handle delinquent debts.”[18] Upon approval of the loan, the paperwork was forwarded to a service center, in charge of taking title to the vehicle,[19] and the “branch had no further involvement in the loans.”[20] FMCC would then record these loans as receivables in its internal “management, analysis and performance system” (“MAPS”).[21] FMCC would also “book” as revenue any payments due to FMCC. In the event of default on a loan, FMCC would record revenue once the “principle was satisfied on the note.”[22] FMCC paid BPOL taxes based on the gross receipts that MAPS attributed to the Richmond Branch.

FMCC argued that MAPS, in fact, was not an “an activity based system,” but merely a “contract revenue-based system.”[23] In other words, MAPS tracked revenue via the branch in which the loan was originally processed, but was unable to verify which office was actually responsiblefor the specific revenue-generating activities.[24] An FMCC accounting expert testified that it would be “very difficult” to design a system which actually “attribute[d] revenue based on where services are performed.”[25]Accordingly, the BPOL tax assessment, which was based on the gross receipts of “all loans originating in the Richmond Branch” failed to consider the role of other offices in the administering of these loans, including, in particular, the Dearborn headquarters. Because reliance on the gross receipts did not actually reflect revenue collected based on the Richmond branch’s activities, FMCC argued that the BPOL tax, as administered, violated the “fair apportionment prong” for local taxation set forth in Brady.[26] The expert proposed that a BPOL tax based on payroll apportionment would more accurately reflect “all the activities [of the Richmond branch] thatgeneratedrevenues” which, incidentally, would entitle FMCC to a sizable refund.[27]

Unmoved, the circuit court dismissed FMCC’s application with prejudice, finding that the “MAPS figures accurately reflect the gross receipts generated as [a] result of the distinct efforts of the Richmond Branch” and consequently, was not “‘out of all appropriate proportion’ to the business transacted in the locality,” thus satisfyingBrady’s fair apportionment requirement.[28]

III. Ford Motor Credit Company: The Decision

On appeal, the Supreme Court of Virginia reversed the circuit court’s decision, and found for FMCC. Writing for the majority, Chief Justice Cynthia D. Kinser declined to directly address the constitutional challenges under Brady, and instead held that the assessment contravened the Virginia Taxation Code. Nonethless, this Note contends that the decision was not an exercise in “constitutional avoidance”: while the Court did not state so explicitly, it read into the state Tax Code its own value-laden interpretation of what constitutes “fair apportionment,” regardless of whether such an interpretation was a faithful interpretation of the actual legislation.  In so doing, the Court hinted that any alternate interpretation of the Code faced the risk of being challenged on constitutional grounds as well.

The Virginia Tax Code allows the “governing body of any county” to collect “liscence taxes” (BPOL taxes) upon any person, firm, or corporation “engaged” in any business or trade “within the county.”[29] The question, therefore, was whether “gross receipts [] falls within a locality’s statutory power to tax.”[30] Citing a prior Virginia case, City of Winchester v. American Woodmark (Woodmark I), the Court noted that additional tax burdens “are not to be extended by implication beyond the clear import of the language used. Whenever there is just doubt, that doubt should absolve the taxpayer.”[31] The Code provides that local BPOL taxes may only tax “those gross receipts attributed to the exercise of a privilege subject to licensure at a definite place of business within this jurisdiction.”[32] With regards to service businesses in particular, gross receipts should be “attributed to the definite place of business at which the service is performed…directed, or controlled.”[33] Nonetheless, if the licensee  “has more than one definite place of business and it is impractical or impossible to determine to which definite place of business gross receipts should be attributed under the general rule,” then gross receipts are to be “apportioned based on payroll.”[34]

The Court, relying upon its prior holding in City of Winschester v. American Woodmark Corp. (Woodmark II), which itself relied upon the language of the Supreme Court decision, Goldberg v. Sweet, concluded that the gross receipts werenotattributable solely to FMCC services rendered in the County.[35]Woodmark II held that a BPOL tax may be levied “only to the portion of the revenues from the interstate activity which reasonably reflects the in-state component of the activity being taxed.”[36] In Woodmark II, American Woodmark, a furniture manufacturer with 24 facilities in different states, alleged that city’s imposition of BPOL taxes on 100% of its revenue constituted “unfair apportionment” because only its corporate headquarters were located in Winchester. Woodmark argued that an assessment of the gross receipts was not “attributable to [its] business activities within the city.”[37] The Court determined it a matter of “common sense” that the value by the headquarters alone could “not possibly produce 100% of the revenues.”[38] It thus held that American Woodmark had presented “clear and cogent evidence” that the “assessments attributed to operations conducted in Winchester [were] out of all appropriate proportions to…the business transacted in Winchester.”[39]

The FMCCcourt noted that “[a]lthough a statutory challenge was not presented inWoodmark II” the case nonetheless stood for the proposition that a locality, under the Code, may only tax the gross receipts “attributed to the exercise of a privilege subject to licensure at a definite place of business.”[40] Regarding the facts of this case, the court observed that service centers outside the County had refinanced loans (initially contracted into at the Richmond branch), assisted customers with administration changes, titled vehicle, and tracked the progress of loan payments. The court also recognized that FMCC headquarters directly provided the Richmond branch with capital. In light of these realities, the court held that FMCC had demonstrated “by clear and cogent evidence” that the gross receipts attributed to the Richmond Brach, were in fact, the product of “financial services provided in other jurisdictions.”[41] “In other words, the operation of the Richmond Branch did not produce 100 percent of the gross receipts that the County taxed.”[42] Therefore, a tax assessment based on these gross receipts was invalid. Finally, because MAPS only tracked revenues by contract, the Court determined it would be “impossible, or, at least, impractical” for FMCC to track the actual services performed over the lives of the approximately 20,000 loans which originated in the Richmond Branch. As such, the court concluded that the “BPOL tax assessment must be calculated using payroll apportionment.”[43]

IV. Possible Consequences

FMCC received a significant windfall from the ruling, which, as the dissent observed, was now entitled to recover approximately 93% of its past payments.[44] Still, the Court’s uncritical acceptance of FMCC’s contention that it would be “very difficult” to design an alternative accounting system may spawn unanticipated mischief in the near future. Without judicial incentives (punitive or otherwise), a complex interstate business, well aware of the financial stakes, will simply fail to create an accounting system which records revenue generated by each definite places of business. At that stage, the business will self-servingly insist to the taxing authority that redesigning the system would be “very difficult,” entitling itself to the more attractive BPOL based on payroll. In effect, a company may fleece itself from paying higher taxes simply through its own negligence, willful blindness, or lack of innovative impetus.

Perhaps more significantly, the court’s reliance on Woodmark II,  which was decided on non-statutory based grounds,  in interpreting the BPOL statutory provisions seems to be an effort by the court to inject constitutional principles of “fair apportionment” into the Tax Code itself. The FMCC court could have determined the extent of Chesterfield County’s authority to tax through utilizing the traditional maxims of statutory interpretation, in which the provisions dealing with the BPOL tax were analyzed within the context to the Code as a whole. Instead, the FMCC court relied onWoodmark II’s broad “reasonableness” standard of external inconsistency, set forth by the Supreme Court in Goldberg v. Sweet. Apparently, the court signaled that it would interpret the Code itselfto mandate that all assessments reasonably reflect the in-state component of the taxed activity in accordance with Goldberg. The Virginia Supreme Court, moreover, has set a considerably higher external inconsistency standard than Goldberg’s – Both Woodmark II and FMCC held that an assessment which taxed anythingmore than revenue attributed to that definite place of business constituted clear and cogent evidence that the assessments were out of all appropriate proportion. Proportionality was measured, not through any mathematical ratio or formula, but rather through an appeal to “common sense” (Woodmark II), or through realization that the revenue could not be quantified (FMCC). Both decisions’ reference to an opaque “100% of revenue” hypothetical exercise indicates that the Court has attempted to articulate a “reasonableness” standard which (rather coarsely) incorporates both internal and external consistency models.

V. Trending Towards a More Business-Friendly Virginia

To appreciate how far-reaching the FMCC decision is, it is crucial to highlight the actual holding in WoodmarkI, approvingly cited in FMCC. Woodmark Iheld that office equipment located at a manufacturer’s headquarters was sufficiently “used in manufacturing” under the Virginia Tax Code, thus exempting it from local property taxes.[45] The Virginia legislature thereafter amended the Code to codifyWoodmark’s broad interpretation of “manufacturing.”[46] The practical consequence of these actions was that anybusiness involved in manufacturing, however tangentially, could now claim exemptions for its personal property.[47] FollowingWoodmark I, the Virginia courts further broadened these exceptions to include, among other things, vending machines and advertising scoreboards used by a manufacturer, and even raises questions of whether the exemption may extend to property leased to a manufacturer which is owned by a non-manufacturer.[48] One scholar opined that Woodmark I’s interpretation of the Virginia Codeare  “convoluted” and “not easily categorized by [ ] theoretical rationales.”[49] She concluded that “on a more practical level, Virginia…seems willing to enlarge the tax breaks offered to manufacturing businesses.”[50]

FMCC’s reference to Woodmark I, regardless of its actual relevance to the facts of the case, evinces how broad Woodmark I’s holding has become. Instead of being constrained only to the manufacturing realm, Woodmark Iapparently has evolved into a judicial mandate to create additional tax breaks for interstate companies, even those engaged in distinctly non-manufacturing enterprises, such as financing loans. Seen in this light, Ford Motor Credit Company, inspired by Woodmark I (and to a degree, Woodmark II) is the latest incident of a growing trend in Virginia to resolve discrepancies in the tax code in favor of big business. The creation of these corporate “tax-loopholes,” either through judicial fiat or legislative codification, is likely an attempt to lure large businesses, particularly manufacturers, into locating or expanding their operations inside Virginia. As the Circuit Court in Woodmark I put it, “the term manufacturing is to be construed liberally because ‘the public policy of Virginia is to encourage manufacturing in the Commonwealth.’”[51]

Virginia, in essence, has endorsed a localized version of “supply side economics,” predicting that the lowering of taxes on the production of both goods (e.g., furniture, as in Woodmark I) and services (e.g., financing, as in FMCC)[52] will, in turn, spur economic growth in Virginia, particularly in the form of job creation. As a result, Virginia localities, faced with a subtle yet significant decrease in millions of dollars of property tax and BPOL tax revenue, may be compelled to shift this burden directly onto consumers, whom, incidentally, are less capable lobbyists than large corporations.[53] If the courts succeed in incentivizing large employers to make Virginia their home, it may come at the cost of overtaxing less lucky Virginians.

[1] Ford Motor Credit Company v. Chesterfield County, 2011 WL 744985 (Va. 2011).

[[2] David Shipley, The Limits of Fair Apportionment: How Fair is Fair Enough?, 93 St. & Loc. Tax Law 34, 34 (2007).

[3] Id.

[4] 430 U.S. 274 (1977).

[5] 463 U.S. 159, 169.

[6] Id.

[7] Shipley, at 34.

[8] Container,463 U.S. at 169 (emphasis added).

[9] Id.at 170.

[10]  488 U.S. 252, 262  (emphasis added).

[11] Ford Motor Credit Company, at *3.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id. at *4.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Id.

[24] Id. at *5

[25] Id.

[26] Id. at *6

[27] Id. at *5 (emphasis added).

[28]  Id. at *6.

[29] Idat *7.

[30] Id.

[31] Id. The Court also ruled that a “tax assessment made by the proper authorities isprima facie correct and valid, and the burden is no the taxpayer to show that such assessment is erroneous.” Id.

[32] Id. (emphasis added).

[33] Id. at*8.

[34] Id.

[35] Id. at *9.

[36] Id (emphasis added).

[37] Id.

[38] Id. 

[39] Id.

[40] Id. (emphasis added).

[41] Id. at *10.

[42] Id. at *11.

[43] Id.

[44] Id. at *13.

[45]  American Woodmark Corp. v. City of Winchester, 464 S.E.2d 148 (Va. 1995).See generally, Stacey Wilson, Good Intentions, But Unintended Consequences: Expanding Virginia’s Manufacturing Tax Exemption Under City of Winchester v. American WoodmarkCorp, 41 WM & MARY L. REVIEW 67 (2000)

[46] Virginia Code § 58.1-1101(A)(2), cited in Wilson at 69.

[47] Wilsonat 73.

[48] Id.

[49] Id.

[50] Id.

[51] 34 Va. Cir. 421, 434 (1994) (citing County of Chesterfield v. BBC Brown Boveri, Inc., 380 S.E.2d 890, 893 (Va. 1989)), cited by Wilson at 84.

[52] Ford Motor Company, at *8. (“Neither party contests that FMCC was a service business for purposes of Code § 58.1–3703.1(A)(3)(a)(4).”)

[53] Wilson, at 73.

Adam Blander © Copyright 2011

Future of Tribal Internet Gaming Subject of Oversight Hearing

 
 
 
On November 17, 2011, the Senate Committee on Indian Affairs is conducting an oversight hearing to discuss the future of tribal Internet gaming. There are several witnesses from government regulatory agencies, tribal governments and gaming associations, and the gaming industry who will offer testimony regarding the use of the Internet to serve tribal gaming operations in the future. The Internet is a largely unregulated medium which has seen increased use by commercial interests to conduct business operations and exchanges. Recently, in the case of Comcast v. FCC, the federal Court has held that the FCC lacks the ability under the FCC’s ancillary authority in the Communications Act,to regulate Internet Service Providers like Comcast. In the Comcast case, the FCC attempted to prevent Comcast from using network management operations which allegedly excluded non-Comcast applications from its Internet network. Comcast challenged the assertion of FCC authority in regard to regulating the Internet under the Communications Act. Prior to this case, the FCC classified the Internet as an informational service as opposed to a common carrier like a traditional telephone company. Under the Communications Act and FCC regulations, a common carrier is subject to a wider range of FCC regulation than is an informational service. The decision by the Court in Comcast upheld the classification of the Internet as an informational service and as a result, the Court determined that the FCC had no authority to regulate the Internet, such that it could impose punitive action against an Internet Service Provider such as Comcast.On a similar front, states are generally allowed a minimal role in regulation of the Internet. States are permitted to regulate the Internet only so far as the action to be regulated occurs entirely within the state and the action does not involve interstate commerce. Thus, many tribes are not subject to state regulatory jurisdiction when it comes to the Internet. A question which may be raised as a part of the discussion about to occur in the Senate this week should involve the ability of the states to regulate gaming if it occurs over the Internet on an Indian Reservation or gaming facility. The push to regulate Internet gaming may also raise questions about the Communications Act and whether it will have to be amended to allow federal agencies an expanded role in regulating the Internet. There are no Internet Service Providers who appear to be testifying at the upcoming Senate hearing and it would likely be prudent at some point to include them in future discussions. After all, it is the Internet Service Providers who will provide gaming operations with the connectivity to the Internet, service the Internet connections to ensure reliability and speed, and most importantly, provide the necessary Internet security to prevent cyber attacks or the loss of customer personally identifiable information.

© 2002-2011 by Williams Kastner ALL RIGHTS RESERVED

NLR 2011 Law Student Writing Competition

The National Law Review would like to remind you of the Winter Law Student Writing Contest deadline is November 21st!

The National Law Review (NLR) consolidates practice-oriented legal analysis from a variety of sources for easy access by lawyers, paralegals, law students, business executives, insurance professionals, accountants, compliance officers, human resource managers, and other professionals who wish to better understand specific legal issues relevant to their work.

The NLR Law Student Writing Competition offers law students the opportunity to submit articles for publication consideration on the NLR Web site.  No entry fee is required. Applicants can submit an unlimited number of entries each month.

  • Winning submissions will initially be published online in November and December 2011.
  • In each of these months, entries will be judged and the top two to four articles chosen will be featured on the NLR homepage for a month.  Up to 5 runner-up entries will also be posted in the NLR searchable database each month.
  • Each winning article will be displayed accompanied by the student’s photo, biography, contact information, law school logo, and any copyright disclosure.
  • All winning articles will remain in the NLR database for two years (subject to earlier removal upon request of the law school).

In addition, the NLR sends links to targeted articles to specific professional groups via e-mail. The NLR also posts links to selected articles on the “Legal Issues” or “Research” sections of various professional organizations’ Web sites. (NLR, at its sole discretion, maydistribute any winning entry in such a manner, but does not make any such guarantees nor does NLR represent that this is part of the prize package.)

Why Students Should Submit Articles:

  • Students have the opportunity to publicly display their legal knowledge and skills.
  • The student’s photo, biography, and contact information will be posted with each article, allowing for professional recognition and exposure.
  • Winning articles are published alongside those written by respected attorneys from Am Law 200 and other prominent firms as well as from other respected professional associations.
  • Now more than ever, business development skills are expected from law firm associates earlier in their careers. NLR wants to give law students valuable experience generating consumer-friendly legal content of the sort which is included for publication in law firm client newsletters, law firm blogs, bar association journals and trade association publications.
  • Student postings will remain in the NLR online database for up to two years, easily accessed by potential employers.
  • For an example of  a contest winning student written article from Northwestern University, please click here or please review the winning submissions from Spring 2011.

Content Guidelines and Deadlines

Content Guidelines must be followed by all entrants to qualify. It is recommended that articles address the following monthly topic areas:

Articles covering current issues related to other areas of the law may also be submitted. Entries must be submitted via email to lawschools@natlawreview.com by 5:00 pm Central Standard Time on the dates indicated above.

Articles will be judged by NLR staff members on the basis of readability, clarity, organization, and timeliness. Tone should be authoritative, but not overly formal. Ideally, articles should be straightforward and practical, containing useful information of interest to legal and business professionals. Judges reserve the right not to award any prizes if it is determined that no entries merit selection for publication by NLR. All judges’ decisions are final. All submissions are subject to the NLR’s Terms of Use.

Students are not required to transfer copyright ownership of their winning articles to the NLR. However, all articles submitted must be clearly identified with any applicable copyright or other proprietary notices. The NLR will accept articles previously published by another publication, provided the author has the authority to grant the right to publish it on the NLR site. Do not submit any material that infringes upon the intellectual property or privacy rights of any third party, including a third party’s unlicensed copyrighted work.

Manuscript Requirements

  • Format – HTML (preferred) or Microsoft® Word
  • Length – Articles should be no more than 5,500 words, including endnotes.
  • Endnotes and citations – Any citations should be in endnote form and listed at the end of the article. Unreported cases should include docket number and court. Authors are responsible for the accuracy and proper format of related cites. In general, follow the Bluebook. Limit the number of endnotes to only those most essential. Authors are responsible for accuracy of all quoted material.
  • Author Biography/Law School Information –Please submit the following:
    1. Full name of author (First Middle Last)
    2. Contact information for author, including e-mail address and phone number
    3. Author photo (recommended but optional) in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 150 x 200 pixels.
    4. A brief professional biography of the author, running approximately 100 words or 1,200 characters including spaces.
    5. The law school’s logo in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 300 pixels high or 300 pixels wide.
    6. The law school mailing address, main phone number, contact e-mail address, school Web site address, and a brief description of the law school, running no more than 125 words or 2,100 characters including spaces.

To enter, an applicant and any co-authors must be enrolled in an accredited law school within the fifty United States. Employees of The National Law Review are not eligible. Entries must include ALL information listed above to be considered and must be submitted to the National Law Review at lawschools@natlawreview.com. 

Any entry which does not meet the requirements and deadlines outlined herein will be disqualified from the competition. Winners will be notified via e-mail and/or telephone call at least one day prior to publication. Winners will be publicly announced on the NLR home page and via other media.  All prizes are contingent on recipient signing an Affidavit of Eligibility, Publicity Release and Liability Waiver. The National Law Review 2011 Law Student Writing Competition is sponsored by The National Law Forum, LLC, d/b/a The National Law Review, 4700 Gilbert, Suite 47 (#230), Western Springs, IL 60558, 708-357-3317. This contest is void where prohibited by law. All entries must be submitted in accordance with The National Law Review Contributor Guidelines per the terms of the contest rules. A list of winners may be obtained by writing to the address listed above. There is no fee to enter this contest.

Congratulations to our Spring 2011 Law Student Writing Contest Winners!

Spring 2011:

U.S. Department of State to Delay Decision on Keystone XL Pipeline in Order to Assess Different Pathway Through Nebraska

Recently published in the National Law Review an article by attorney Ivan T. Sumner of Greenberg Traurig, LLP regarding an update on the Keystone XL oil pipeline:  

 

GT Law

 

 

On November 10, 2011, the U.S. State Department announced during a press briefing that it was delaying its decision on the proposed Keystone XL oil pipeline in order to assess other pathways through Nebraska. The 1700 mile crude oil pipeline which would run from the Alberta Oil Sands region in Canada and ultimately terminate at refineries along the Texas Gulf Coast would also traverse over the shallow water Ogallala aquifer in Nebraska’s Sand Hills region.

While the State Department released the final Environmental Impact Statement for the proposed oil pipeline on August 26, 2011, since that time opposition to the proposed route has expanded including Nebraska Governor Dave Heineman (R) due to the proposed route over the Ogallala aquifer. The Nebraska Governor had already called a special session of the Nebraska legislature for the crafting of pipeline siting/approval legislation that will be further vetted during the week of November 14th. The State Department is now to be looking at alternative routes of the Keystone pipeline that would avoid or minimize impacts to the Nebraska Sand Hills region. The alternative pipeline route review will be conducted as a supplemental environmental impact statement and the State Department’s final decision on the proposed pipeline is estimated to conclude sometime following the 2012 presidential election.

©2011 Greenberg Traurig, LLP. All rights reserved.

Government Coercion As A Vehicle To Alter Healthcare

Posted on November 14, 2011 in the National Law Review an article by attorney Frank R. Ciesla of Giordano, Halleran & Ciesla, P.C.  regarding  the Massachusetts Legislature, which previously mandates health insurance for all, has now moved into its next stage of attempting to contain the cost of healthcare:

 

The front page of the New York Times on Tuesday, October 18, 2011 stated that the Massachusetts Legislature, which previously mandates health insurance for all, has now moved into its next stage of attempting to contain the cost of healthcare.  One way of containing the cost that has been applied around the globe is to regulate the rates charged by insurers, which forces insurers to regulate the rates paid to providers.  Another way is to set an overall budget for healthcare as is done in Canada or certain European countries.  As the Times describes the Massachusetts plan, the approach being considered there is a flat “global payment” to networks of providers for keeping patients well.   All of these approaches alter the way providers are paid and attempt to shift the risks to the insurance companies or the providers.  In my opinion, each of these approaches illustrates the use of the governmental power of coercion to alter the healthcare field.

This use of coercion is shown in various ways in the Affordable Care Act (ACA), by penalizing employers for not providing healthcare insurance so that employer provided healthcare is no longer “voluntary,” by penalizing individuals who do not obtain healthcare insurance, and by requiring the expansion by the states of the State Medicaid programs to cover a larger portion of the population.

Coercion is not new to the healthcare field.  The federal government has long used its power of coercion to compel individuals and employers to pay the Medicare tax, and while Medicare Part B is voluntary, higher income individuals who select Part B are required to pay a higher premium than the vast majority of individuals participating in Part B.  The Medicare and Medicaid programs, while “voluntary” for physicians but not for hospitals in New Jersey, sets the rates they pay.

One of the new approaches to cost control under the ACA is the creation of Accountable Care Organizations (ACO) in which some of the risk of patient outcomes is shifted to the providers.

What is missing so far in the discussion of ACOs and in the Massachusetts debate, is a general obligation on the part of the beneficiaries as to their compliance with medical instructions, as well as their election to live a healthy lifestyle.  The government has exercised some coercion in this area, for instance, with significantly higher taxes on cigarettes as well as the numerous bans on smoking in various places.  Society’s experience with Prohibition has made it clear that that is not the approach to take again, in the area of cigarettes, or quite frankly, in any other area.  It should be noted that we are seeing calls for the legalization of marijuana and the taxation of marijuana rather than continuation of the current prohibition against the use of marijuana.  A similar approach is being taken in the area of alcohol with higher taxes on alcohol.

Whether or not this coercive tool, taxation or in the case of smoking, prohibition in certain areas, will be extended to other activities or circumstances, such as obesity, which result in additional healthcare costs is yet to be seen.  However, the changing of the paradigm in the healthcare delivery system, from payment to providers for the care they render to patients (whether or not the party is compliant with medical directions or the patients choose an unhealthy lifestyle) to shifting the risk resulting from bad patient conduct to the providers, is a giant step into the unknown.  One question that will need to be addressed is what authority will providers have in this new paradigm to require patient compliance with both medical directives and with lifestyle changes.

© 2011 Giordano, Halleran & Ciesla, P.C. All Rights Reserved

Is the $5 Million Gift Tax Exempt Amount About to End?

Recently posted in the National Law Review an article by Elyse G. Kirschner and Carlyn S. McCaffrey  of McDermott Will & Emery regarding the The Tax Relief Act of 2010 made significant changes to the gift, estate and generation-skipping, however, not permanent:

 

 

 

The Tax Relief Act of 2010 made significant changes to the gift, estate and generation-skipping transfer tax regimes by increasing the amount each individual can give without incurring tax from $1 million to $5 million.  The increase was not permanent however, and rumor has it that it may be in jeopardy.  To avoid any risk, those who have decided to use their full exemptions should do so no later than December 31, 2011, and, if feasible, November 22.

The Rumors

The Tax Relief Act of 2010 made significant beneficial changes to the gift, estate and generation-skipping transfer tax regimes.  Most important, it increased the amount each individual can give without incurring gift tax and generation-skipping transfer tax to $5 million from $1 million.  For married individuals, the combined exemptions can be as high as $10 million.  The 2010 increase was not a permanent one.  Congress scheduled the exemption to return to $1 million after the end of 2012.

Rumors circulating recently within the financial and estate-planning communities have suggested the $5 million exemptions may be in immediate jeopardy.  Democratic staff on the U.S. House Committee on Ways and Means recently proposed decreasing the $5 million gift, generation-skipping transfer tax and estate tax exemptions to $3.5 million, effective January 1, 2012.  There also are rumors the Joint Select Committee on Deficit Reduction (the Super Committee) may recommend a drop down in the gift tax exemption to $1 million, effective at year end, or possibly as early as November 23, 2011, when its recommendations are scheduled to be released, though there is no confirmation this rumor is true.

What Should You Do?

Although it seems unlikely that Congress will focus on changes to the transfer tax system before year end, congressional action in the transfer tax area has been notoriously difficult to predict.  Congress’ decision in December 2010 to reinstate the estate tax retroactively, to permit the estates of 2010 decedents to opt out of paying estate tax and to reduce the generation-skipping transfer tax rate to zero, was a noteworthy example of congressional action that took the entire estate-planning community by surprise.  A congressional decision to reverse the 2010 transfer tax reductions would be more surprising because it would immediately strip from taxpayers a benefit that was clearly agreed to last December.  However, Congress is unpredictable.

In view of the uncertain availability of the $5 million exemption, those who have decided to use their full exemptions may want to do so quickly, rather than run the risk of losing them.  To avoid any risk, your deadline should be no later than December 31, 2011, and, if feasible, November 22.  The choices to be made include identifying the property to be transferred, selecting the individual recipients and determining the manner in which the recipients should receive their gifts.

Selection of Assets to Give

Assets to be transferred to the trust should be those that are likely to appreciate over time.  The transfer of appreciating assets will help leverage the initial gift.  Investments that are temporarily depressed as a result of recent market conditions, for example, could prove to be successful gifts. Remainder interests in residences in today’s depressed housing markets may also be attractive gifts.  Marketable securities, interests in hedge funds or other investment partnerships and real estate are all good possibilities.  High-basis assets typically are a good choice, but assets that are valued today at less than their basis are not usually the best choice.

If non-marketable assets are given, an appraisal of those assets is needed to properly value and report the gift, but the appraisal can be completed after the gift is made.  In most instances, a formal appraisal of non-marketable assets will take into account certain valuation discounts (for example, lack of marketability and minority interest discounts).  The effect of these valuation discounts will be to further leverage the gift tax credit.

Selecting Recipients

The logical recipients of gifts will be those family members who will receive the estate.  Because tax-free gifts can be made to a spouse and charity, gifts to them do not need to be accelerated to take advantage of the gift tax exemption.  In some cases, clients may plan to use their increased exemptions to forgive debts previously made to friends and family members with financial needs, or to meet the living expenses of adult children.

Making Gifts in Trust

Outright gifts are a simple way to use the gift and generation-skipping transfer tax exemptions, but gifts in trust offer many more advantages.  For example, transferring assets to a trust for the benefit of children can protect those assets from the claims of their creditors or spouses.  In addition, with a trust the trustees of the trust can control the timing and manner of distributions to children.

Furthermore, if portions of the remaining $5 million generation-skipping transfer tax exemption are allocated to the trust, future distributions to grandchildren and more remote issue can be made free of the generation-skipping transfer tax.  Finally, if the trust that is established is a so-called “grantor trust” for income tax purposes, you, and not the trust, will pay the income tax on the income generated inside the trust.  When the gift-giver pays the income tax on the income of the trust, the size of the estate is reduced without having to make additional taxable gifts to the trust.

An Existing Trust or a New Trust?

Once the decision is made to make a gift in trust, the next question is whether to make the gift to an existing trust or to a new one.  Whether an existing trust or a new trust is selected is a function of a number of considerations, such as whether the trusts that are already created have the appropriate beneficiaries, whether a spouse also plans to make a gift in trust and whether certain provisions should be in the trust to address uncertainties at this time.

© 2011 McDermott Will & Emery

2011 Wisconsin Act 49: Wisconsin Tax Law Amended to Conform with Federal Adult Child Coverage Requirements

Posted in the National Law Review an article by Alyssa D. Dowse and Timothy C. McDonald of von Briesen & Roper, S.C.  regarding Wisconsin’s state income tax law for health coverage provided to an employee’s adult child to the exclusion provided for that coverage under federal income tax law.

As expected, Governor Scott Walker has signed legislation to conform the exclusion under Wisconsin state income tax law for health coverage provided to an employee’s adult child to the exclusion provided for that coverage under federal income tax law. If an employer’s health plan extends coverage to an employee’s adult child, then, through the end of the tax year in which the child attains age 26, the employee will not be subject to either federal or Wisconsin state income tax on the value of that coverage. This is the case regardless of whether the child otherwise qualifies as the employee’s tax dependent. This change in Wisconsin law is effective for tax years beginning on or after January 1, 2011.

If employer health plan coverage is provided to an employee’s adult child after the tax year in which the child attains age 26, then, as under current law, the employee will be subject to federal and Wisconsin state income tax on the value of that coverage unless the child qualifies as the employee’s tax dependent for health plan purposes.

Governor Walker signed 2011 Wisconsin Act 49 (the “Act”), which amends Wisconsin tax law to conform the state income tax exclusion for coverage provided to an employee’s adult child to the federal income tax exclusion, on November 4, 2011.

©2011 von Briesen & Roper, s.c

NLR 2011 Law Student Writing Competition

The National Law Review would like to remind you of the Winter Law Student Writing Contest deadline is November 21st!

The National Law Review (NLR) consolidates practice-oriented legal analysis from a variety of sources for easy access by lawyers, paralegals, law students, business executives, insurance professionals, accountants, compliance officers, human resource managers, and other professionals who wish to better understand specific legal issues relevant to their work.

The NLR Law Student Writing Competition offers law students the opportunity to submit articles for publication consideration on the NLR Web site.  No entry fee is required. Applicants can submit an unlimited number of entries each month.

  • Winning submissions will initially be published online in November and December 2011.
  • In each of these months, entries will be judged and the top two to four articles chosen will be featured on the NLR homepage for a month.  Up to 5 runner-up entries will also be posted in the NLR searchable database each month.
  • Each winning article will be displayed accompanied by the student’s photo, biography, contact information, law school logo, and any copyright disclosure.
  • All winning articles will remain in the NLR database for two years (subject to earlier removal upon request of the law school).

In addition, the NLR sends links to targeted articles to specific professional groups via e-mail. The NLR also posts links to selected articles on the “Legal Issues” or “Research” sections of various professional organizations’ Web sites. (NLR, at its sole discretion, maydistribute any winning entry in such a manner, but does not make any such guarantees nor does NLR represent that this is part of the prize package.)

Why Students Should Submit Articles:

  • Students have the opportunity to publicly display their legal knowledge and skills.
  • The student’s photo, biography, and contact information will be posted with each article, allowing for professional recognition and exposure.
  • Winning articles are published alongside those written by respected attorneys from Am Law 200 and other prominent firms as well as from other respected professional associations.
  • Now more than ever, business development skills are expected from law firm associates earlier in their careers. NLR wants to give law students valuable experience generating consumer-friendly legal content of the sort which is included for publication in law firm client newsletters, law firm blogs, bar association journals and trade association publications.
  • Student postings will remain in the NLR online database for up to two years, easily accessed by potential employers.
  • For an example of  a contest winning student written article from Northwestern University, please click here or please review the winning submissions from Spring 2011.

Content Guidelines and Deadlines

Content Guidelines must be followed by all entrants to qualify. It is recommended that articles address the following monthly topic areas:

Articles covering current issues related to other areas of the law may also be submitted. Entries must be submitted via email to lawschools@natlawreview.com by 5:00 pm Central Standard Time on the dates indicated above.

Articles will be judged by NLR staff members on the basis of readability, clarity, organization, and timeliness. Tone should be authoritative, but not overly formal. Ideally, articles should be straightforward and practical, containing useful information of interest to legal and business professionals. Judges reserve the right not to award any prizes if it is determined that no entries merit selection for publication by NLR. All judges’ decisions are final. All submissions are subject to the NLR’s Terms of Use.

Students are not required to transfer copyright ownership of their winning articles to the NLR. However, all articles submitted must be clearly identified with any applicable copyright or other proprietary notices. The NLR will accept articles previously published by another publication, provided the author has the authority to grant the right to publish it on the NLR site. Do not submit any material that infringes upon the intellectual property or privacy rights of any third party, including a third party’s unlicensed copyrighted work.

Manuscript Requirements

  • Format – HTML (preferred) or Microsoft® Word
  • Length – Articles should be no more than 5,500 words, including endnotes.
  • Endnotes and citations – Any citations should be in endnote form and listed at the end of the article. Unreported cases should include docket number and court. Authors are responsible for the accuracy and proper format of related cites. In general, follow the Bluebook. Limit the number of endnotes to only those most essential. Authors are responsible for accuracy of all quoted material.
  • Author Biography/Law School Information –Please submit the following:
    1. Full name of author (First Middle Last)
    2. Contact information for author, including e-mail address and phone number
    3. Author photo (recommended but optional) in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 150 x 200 pixels.
    4. A brief professional biography of the author, running approximately 100 words or 1,200 characters including spaces.
    5. The law school’s logo in JPEG format with a maximum file size of 1 MB and in RGB color format. Image size must be at least 300 pixels high or 300 pixels wide.
    6. The law school mailing address, main phone number, contact e-mail address, school Web site address, and a brief description of the law school, running no more than 125 words or 2,100 characters including spaces.

To enter, an applicant and any co-authors must be enrolled in an accredited law school within the fifty United States. Employees of The National Law Review are not eligible. Entries must include ALL information listed above to be considered and must be submitted to the National Law Review at lawschools@natlawreview.com. 

Any entry which does not meet the requirements and deadlines outlined herein will be disqualified from the competition. Winners will be notified via e-mail and/or telephone call at least one day prior to publication. Winners will be publicly announced on the NLR home page and via other media.  All prizes are contingent on recipient signing an Affidavit of Eligibility, Publicity Release and Liability Waiver. The National Law Review 2011 Law Student Writing Competition is sponsored by The National Law Forum, LLC, d/b/a The National Law Review, 4700 Gilbert, Suite 47 (#230), Western Springs, IL 60558, 708-357-3317. This contest is void where prohibited by law. All entries must be submitted in accordance with The National Law Review Contributor Guidelines per the terms of the contest rules. A list of winners may be obtained by writing to the address listed above. There is no fee to enter this contest.

Congratulations to our Spring 2011 Law Student Writing Contest Winners!

Spring 2011: