Category: Uncategorized

Important Guidance for IRS Tax Filers

Due to the situation created by the coronavirus, we’ve been fielding questions from clients, co-workers and accountants about potential changes in the tax filing and tax payment deadlines, as well as other IRS administrative issues such as examinations, collection actions and payment plans.

Because the president declared a national emergency, the IRS has broad powers under statute to extend certain deadlines. The IRS also has broad administrative authority. As of the date and time of this email, there has been no official guidance issued on extending the April 15 deadline for the filing of income tax returns. However, statements made on March 17, 2020 by Secretary of Treasury Mnuchin suggest that the government will allow a 90-day deferral of tax payments to the IRS.

Under this program, individuals can defer up to $1 million of tax payments, and corporations can defer up to $10 million, with no penalties and interest for 90 days. This program does appear to require the filing of a tax return first in order to obtain the deferral. Many questions on this program remain, and Varnum’s tax team will provide updates as they evolve.

Out of an abundance of caution, individuals may want to file an extension (Form 4868) prior to the filing deadline. This is NOT an extension in time to pay. As such, the first quarter tax estimates are due April 15 as is any shortfall in the expected 2019 tax liability. Please note, with respect to the payment deferral program, the secretary has not clarified whether the extension form or the estimated tax payment voucher falls under the definition of “return” for the payment deferral program. Finally, there are some safe harbors for estimated tax payments that may apply. Check the IRS website or talk to a tax advisor.

Tax preparers should check with the IRS employee assigned to any matter for the case status, including document requests, etc. If your client is honoring an IRS levy on an employee at this time, those obligations are still in force unless notified otherwise by the IRS. Some deadlines such as filing a Tax Court Petition for relief are statutory in nature and still valid.

© 2020 Varnum LLP

More on tax laws or the coronavirus outbreak on the National Law Review.

Coronavirus and Law Firm Event Marketing: Cancelled, Postponed or Just Different?

Given the current circumstances associated with the coronavirus (COVID-19), a law firm has three choices when it comes to executing on their 2020 event calendar: cancel, postpone, or just change the format. My vote would be for you to change the format wherever you can to stay top of mind and relevant to your client base and referral sources while still practicing a responsible form of “social distancing.”

In-person business development and communication through event marketing involves creating an experience that attendees look forward to, get value from, and associate with your brand. Through hosting various types of business development activities, you can set your law firm up as a networking hub for diverse practices, become a thought leader in your legal niche, and establish a history of credentialing activities that will keep you top-of-mind in your legal community. Virtual events for law firms can, and will, do the same.

It is known that law firm marketing has evolved rapidly in the last decade. In a recent study, 67% of legal marketing professionals and 45% of attorneys listed firm-hosted events as one of the most effective ways to get new clients.  Even with all of the new marketing strategies and techniques, face-to-face connection remains one of the most effective ways to network and gain new clients. In the time of the coronavirus (COVID-19) pandemic that is requiring all industries, even the legal industry, to take a second look at how they will continue to operate effectively under quarantine conditions, law firms need to be flexible in how they market. Event marketing can still take place in the spring and summer of 2020, it will just look a little different than originally anticipated. Excluding large luncheons, parties, and galas, for the most part, technology can allow a law firm to move forward with most of their planned events.

Virtual Business Development Events for Law Firms

Every type of business development event attracts different stakeholders, networking opportunities, and ways to strengthen your law firm’s market dominance. Some types of business development activities for law firms that can be transformed into virtual events include the following:

  • Seminars. Conferences that provide training or updates on legal changes in your area of practice. Many seminars and conferences have scheduled downtime and social time, allowing attendees to network and nurture connections that may lead to future referrals. This networking aspect of a seminar can be done in a virtual manner through private chat rooms or even through a special area of your website that allows for “booths” to be created for information sharing.
  • Legal CLE events. Continuing legal education is an essential part of attorney growth, and since continuing legal education is required for lawyers in most parts of the United States, these events offer clear value to attendees. Speakers at continuing legal education events also have the opportunity to demonstrate their expertise, strengthen their image as an authority in their field, and connect with others in relevant areas of practice. CLEs have been webcasted and recorded for years and the coronavirus outbreak really should have no effect on your law firm’s CLEs schedule. All that is necessary to proceed is to tell your audience it will be a webcasted program rather than a live program, hire a professional videographer, and then add then video and handouts to your website.
  • General education events. These events strengthen a firm’s credibility within the community and demonstrate the firm’s expertise to its target client base. For example, an immigration attorney could host an online Q&A seminar through their Facebook page on recent changes to immigration laws and invite affected community members to attend through that medium. An estate planning attorney may host an informal brown bag luncheon that is webcasted on long-term care options to caretakers of aging family members.
  • Brown bag lunch and learns. Lunch and learn events take advantage of the fact that many attorneys have extremely busy schedules. These events last between 30 and 60 minutes and take place over the lunch hour, letting attorneys fit education or networking into their busy day. Brown bag lunches can also take place in a virtual environment. Attorneys can provide a memorable brown bag experience online through the sharing of relevant documents beforehand that they will go over and using screensharing to direct attention of attendees. Law firms will want to make sure that they pay special attention to small things such as consistency in their lawyer screen names and the background portrayed in their videoconference (i.e. what is behind you or what is around you that the other participants will see and does this portray your law firm in the best way possible).
  • Panels. Panel discussions let attendees learn from multiple experts simultaneously. Question-and-answer sessions provide additional value, allowing attendees to get answers to specific, relevant questions. Panels are easy to convert to a digital format. Be sure to have your moderator use the first name of the person that they are addressing when a question is asked as the conversation has to be directed a bit differently than it would in person when you can connect with body language and eye contact. Also, the audience should know beforehand how their questions can be posed and if they are required to have their computer on mute to control outside noise.
  • Collaborations. Collaborating with businesses relevant to your area of practice expands attorneys’ opportunities for networking. For example, an estate planning law firm may collaborate with a senior activity center to help attendees better understand the needs of aging clients, or an intellectual property law firm may run a seminar with a venture capital firm. These types of collaborations can be moved into a digital format by prerecording them for the audience. The business can easily gather questions that come up from attendees and send them to the attorney or law firm afterward so individual phone calls can be made to the guests as follow-up.

Rather than seeing the need to change the format of their existing events to be virtual as a problem, marketing savvy law firms are seeing this as an opportunity. They are utilizing their existing commitments to being modern law practices with functional, time saving technology to continue to connect with their audience. They are using videoconferencing, webcasting, and video recording to continue to host relevant programming for their community. The real challenge in pivoting an event marketing strategy to be entirely digital for the next 3-6 months will be working with the right type of marketing and videography professionals to engage the audience and drive attendance.

Preparation and Follow-Up

Event success, even for virtual events, is more than just choosing the event for your audience. It is critical to have a clear strategy about how to prepare for your event, execute a successful activity, and follow-up to ensure that it is doing the business development work you expect it to.

Know what success looks like. Prior to the event, you should know which benchmarks you want to reach and have ways to measure those. For example, you may want to hit a certain number of attendees, have representatives from a set number of firms, or yield a specific number of networking connections.

Promote your event strategically. Look into different ways to promote an event including traditional invitations through mail or email, social media, and broadcast or print advertising. Be sure to create a custom hashtag to encourage social media engagement before, during, and after the event.

Expect the unexpected. From technology glitches to presenter snafus, being underprepared can end up turning your potential networking opportunity into a PR nightmare. Make sure to give yourself time to work out all the kinks well in advance of your event date and hire a professional to guide you through the process.

Strategize follow-up activities. Following up with attendees after an event provides valuable information on how successful the event was and whether or not it is worth repeating. Some firms use automated email sequences to gauge the results of an event. Reviewing social media engagement, lead generation, attendance numbers, and other metrics provides valuable insight into the success of the event.

Conclusion

Event marketing in 2020 will need to look a little different for law firms but it still remains an effective tool for fostering professional networking and client connections. With the wide range of events to choose from and also the technology available to today’s law firms, there are many options to help firms continue with their previously planned activity calendar. In addition, when law firms are strategic about how they structure, prepare for, and follow up from their virtual business development event, it can be an incredibly powerful form of marketing that is inexpensive, engaging, and memorable.

© 2020 Denver Legal Marketing LLC

For more on managing events during the coronavirus situation, see the National Law Review Coronavirus News page.

Families First Coronavirus Response Act: Paid Leave now Required for Absences Related to the Coronavirus (COVID-19)

Early Saturday, March 14, 2020 the House of Representatives passed the Families First Coronavirus Response Act (the “Act”). The Senate is set to take this matter up on Monday, March 16, 2020 and President Trump stated that he will immediately sign the legislation. The Act has many facets to it including new temporary employer obligations relative to paid leaves of absence related to the Coronavirus (COVID-19) and expands employer obligations under the Federal Family and Medical Leave Law. Employers have time to prepare as the law will be effective 15 days after enactment (potentially as soon as March 31, 2020, if signed Monday). While there is much remaining to be analyzed under this new law, the following provides an initial overview so employers can begin preparations for compliance and education of the workforce.

Expansion of FMLA rights

First, the Act expands the pool of employees that qualify for federal FMLA leave. The Act will require employers with fewer than 500 employees1 (and all government employers) to provide employees who have been employed for at least 30 days with FMLA leave for Coronavirus reasons if:

  1. The employee is absent from work due to the employee’s physical presence jeopardizing the health of others due to exposure to the Coronavirus or due to the employee exhibiting symptoms of the virus;
  2. The employee will care for a family member who a health care provider or a public health authority determines has been exposed to the Coronavirus or who exhibits symptoms of the virus; or
  3. The employee is needed to care for a son or daughter under 18 because a school or a place of care (daycare) has been closed or the child care provider is not available.

The definition of “family” in the application of the above requirements is expanded to include family members who are senior citizens, grandparents, grandchildren, next of kin of the employee or is a son or daughter with special needs. The definition of “spouse” also includes domestic partners, as defined under the law.

The rights and remedies available to an employee under the federal FMLA remain the same. Therefore, we recommend that employers review existing procedures and forms utilized to determine FMLA eligibility and update those materials to recognize the Act’s broadened scope.2

Enhanced Right to Paid Time Off

The Act also mandates that employers provide “Emergency Paid Sick Leave.” This benefit is available to employees to:

  1. Self-isolate because of a Coronavirus diagnosis;
  2. Obtain medical diagnosis or care if the employee is experiencing the symptoms of the Coronavirus;
  3. Comply with an order of a public official or Health Care Provider that physical presence at work would jeopardize the health of others due to the employee’s exposure to the Coronavirus or because the employee is exhibiting symptoms of the illness;
  4. Care for a family member of the employee due to the family member’s self-quarantining based upon exposure to the virus or because the family member is exhibiting symptoms and requires medical diagnosis or care; or
  5. Care for a child of the employee if a school or place of care has been closed or the care provider for the child is unavailable.

If an employee meets one or more of these qualifications, the Act provides that the employee is entitled to Emergency Paid Sick Leave. Specifically, full-time employees will have 80 hours of sick leave available to them and part-time employees will have their average hours of work over a 2-week period available as Paid Sick Leave. If the employee has variable hours of work each week, the employee’s average hours of work over the preceding 6 months will be used to determine the employee’s average hours per week. The sick leave benefit will be paid at the employee’s regular rate of pay for any absence due to the employee’s own treatment or quarantine. The sick leave benefit will be paid at two-thirds of the employee’s regular rate of pay for any absence to care for a family member or to provide child care due to school or daycare closure.

If an employee needs leave beyond the 2-weeks for Emergency Paid Sick Leave and continues to meet the requirements associated with the Act’s mandate for paid leave under the FMLA, the employee will be paid not less than two-thirds of the employee’s regular rate of pay (or minimum wage, if greater) for the regular hours of work missed, to the extent of the employee’s already-existing available FMLA leave. The changes to the FMLA under the Act will expire on December 31, 2020.

Finally, for employee absences associated with non-FMLA qualifying reasons (e.g., an employer’s decision to send an employee home because the employee is exhibiting flu-like symptoms), the employee may be eligible for Unemployment Insurance benefits beginning in the first week of absence. This provision will expire on December 31, 2020.

It is important to understand that the Act entitlement represents the “floor” of entitlement. In other words, employers will not enjoy a reduced obligation to provide Paid Sick Leave if it already offers Paid Sick Leave to employees. The Paid Sick Leave under the Act is in addition to what the employee may already be entitled to in employment. However, there will not be any carryover right for unused Sick Leave granted under the Act.

Again, it is important that employers revisit their protocol for determining eligibility for paid sick leave and prepare to implement the new mandate. Likewise, employers providing Paid Sick Leave and absence benefits should carefully log the wages paid related to compliance. As of now, the Act anticipates a tax credit available for sick leave wages paid to employees, subject to caps established under the law.

1 Exemptions for small employers (fewer than 50 employees) and certain emergency and healthcare workers continue to be discussed.
2 The DOL will be issuing a Notice related to the new requirements that must be posted along with other employment related Notices to employees.

©2020 von Briesen & Roper, s.c
For more on the developing Coronavirus situation, see the National Law Review dedicated Coronavirus News page.

How to Get Loyal Clients

For the purpose of running a successful law practice, all clients are not created equal. As a lawyer, a critical element to running a fruitful practice is managing your time in an efficient manner. How and where you invest your time can make all the difference.

As a history buff, I love thinking about government, war, and political change what discussing topics that are relevant in business today. The Declaration of Independence states “all men are created equal.” While this may apply to how we treat others with respect and dignity, we can choose to be more selective with whom we invest our valuable time with.

Invest in Clients Who Have Already Invested in You

Imagine you’re standing in front of an apple tree teeming with fresh apples. Some of these apples are literally right in front of your face, while others are way up high in the tree. For the sake of efficiency, which apples would you select? The lower apples may seem like an obvious choice. And yet, many attorneys are still climbing ladders for those elevated apples. When discussing low hanging fruit with my attorney clients, I always start with a discussion of their existing clients. Our goal is to uncover opportunities, which will produce the highest possible value for the time invested.

As we all know, before you can begin selecting apples you must first plant the seeds and water the trees. As this relates to leveraging existing clients, there is a myth that must be eradicated first. The myth is simple; if you service your client properly, they will be loyal to you. If you believe this for even a moment, welcome back to the ‘80s!

Learn How to Develop Client Loyalty with Intent

Times have changed and so must you in the way you manage your client relationships. Statistically, it’s six times more work and energy to find a new client rather than to keep an existing one. That being said, we all have to step up our game to insure that client loyalty is developed with intent. One of the best ways to accomplish this is to develop a client retention and loyalty plan.

3 Steps to Plan for Client Retention and Loyalty

Before groaning at the idea of writing a plan, I assure you this shouldn’t take more than an hour to accomplish and can make the difference between success and failure in maintaining and building your law practice. Here are the three important elements of a client retention and loyalty plan:

Step 1: Rank Your Clients in a List

Develop a list of your key clients and rank them as an “A, B or C” client. As I stated earlier, all clients are not created equal, so be careful in how you rate these folks. I suggest three qualifiers for determining what makes up an “A, B or C” client.

Ask yourself the following questions about each client — and be honest.

  • How good is my relationship?
  • Can I develop and expand this relationship?
  • Are we friends socially or is our relationship more transactional in nature?
  • Does the client call me for general business advice or just about the deals?
  • Have I helped my client in ways beyond providing legal advice?

Next, try to determine how much opportunity the client has to grow or how connected this client may be.

  • Does the client have a solid network of decision makers that she can introduce me to?
  • Is the client’s company growing and expanding?
  • Are there opportunities to cross-market and share work with my partners?

The last factor in determining who to invest the most time with relates directly to the amount each client has invested with you and if you like or dislike this client.

  • Does this client invest a significant amount of dollars with you or did they invest almost nothing a few years ago?
  • Was this client a complete nightmare to deal with?
  • Did the client cost my firm money due to poor follow-through?
  • Did the client continually question and argue my rate?

Based on these three factors and any others that you believe to be important, invest 20 minutes to create a master list of your top A, B and C clients so that you can move on with step two of this plan.

Step 2: Use the Ranked List to Determine Which Clients to Invest In

Develop a list of contact and relationship building points to help ensure that we are investing the right amount of time with the right clients. Based on their ranking, you are going to do more for the higher-ranked clients and less for the lower-ranked clients. To be clear, if you have a “B” that you want to make an “A” then be sure to increase the amount of touch points with that specific client.

Here are a few examples of different touch points that you can use to develop stronger and stickier relationships:

  • Schedule a lunch or coffee meeting with your client.
  • Go out for drinks and get to know one another better.
  • Send a card on her birthday and for the holidays.
  • Take your client to a game or concert. (It’s important to know what she’s into.)
  • Call your client to see how you can help her business.
  • Email or call your client to congratulate her on something she’s accomplished professionally or personally.
  • Email your client with an article that is relevant to her business. (You can use RSS feeds for this.)
  • Invite your client to a firm event or another high level networking event.
  • Be a resource for your client. Find her a new vendor, strategic partner or an actual new client.

Use these ideas as a guideline to create your “A” column, where a number of these type activities would be used. The “B’s” would receive less contact and the “C’s” less again. For example, you might want to have lunch with your “A” clients four times a year, call each one monthly, email each one monthly and find a solid contact for her twice a year. Again, the “B” clients would get less of your attention and time, unless you want to make that client an “A-lister.”

These are just a few of the many things you can do to stay in constant contact and help ensure longevity with your clients. The side effect of this activity will be to open up more doors for additional business and much needed referrals. The stronger the relationship becomes, the less likely it is that a client will leave over price and the more open to referrals she will become.

Step 3: Make Time to Communicate with Your Clients

While it’s great to set up a plan like this, it’s not worth the paper it’s written on if you don’t implement it. My best suggestion here is to find 30 to 60 minutes a week and schedule time as “client loyalty and development time.” Without making the time and setting it aside, it will never happen for you.

There will always be work and distractions keeping you from this important task. Look at your calendar and find a spot weekly where you are least likely to be distracted or busy. You can even do some of this work on the train, in the evenings or on the weekends.

Develop Client Relationships to Retain Clients

What is a better use of your valuable time: choosing between retaining and developing relationships that already exist and have high potential for growth OR attending local networking events to essentially meet groups of strangers?

Though there is value in both activities, investing time with people who already know, like, and trust you bears fruit much more quickly.

© Copyright 2020 PracticePanther

ARTICLE BY Practice Panther.
For more on legal client management, see the Law Office Management section of the National Law Review.

Gin Manufacturer Bacardi Avoids Lawsuit for Its Use of “Grains of Paradise”

A federal judge in the Southern District of Florida recently dismissed an action alleging that Bacardi’s use of a botanical called “grains of paradise” in its gin was “harmful and illegal,” holding that the statute on which the lawsuit was based was preempted by federal law. Marrach v. Bacardi U.S.A, 19-cv-23856 (S.D. Fla. Jan. 28, 2020).

The complaint alleged a violation of the Florida Deceptive and Unfair Trade Practices Act. While Plaintiff himself suffered no harm from the drink, he cited a nineteenth-century provision forbidding the adulteration of alcoholic beverages with “grains of paradise” to support his claim that Bacardi’s use of the botanical was illegal. However, Bacardi argued in its motion to dismiss that the complaint was preempted because the Federal Food, Drug and Cosmetic Act (FDCA) permits the use of “grains of paradise.”

In an opinion that did not mince words, Judge Robert N. Scola granted the motion to dismiss, opening with the observation: “Numerous class actions have greatly benefited society such as Brown v. Board of Education, In re Exxon Valdez, and In re Agent Orange Product Liability Litigation. This is not one of those class actions.” He noted that the Food Additives Amendment of 1958 granted the FDA broad authority to monitor and control the introduction of food additives, signaling Congress’s intent to prevent rules unnecessarily prohibiting access to safe food additives. Judge Scola held that the Florida statute, which criminalizes adulterating liquor with grains of paradise, frustrated this purpose and was therefore preempted because it was in conflict with federal law.

Plaintiff attempted to counter this reasoning by arguing that the 21st Amendment gave states the right to regulate liquor, thereby overriding any argument that federal law governed in this matter. Judge Scola disagreed. As an initial matter, “the 21st Amendment does not in any way diminish the reach of the Supremacy Clause,” and therefore has neither the intent nor effect of undermining federal preemption of inconsistent state law. Moreover, Judge Scola noted that other courts have found similar state law prohibitions on food additives to be preempted by the FDCA.

Like previous cases we have covered on this blog, the decision underscores the FDA’s broad regulatory authority over food and beverage products which cannot be circumvented by plaintiffs simply by bringing claims under state law. In doing so, it provides important assurance to manufacturers of such products that their reliance on federal law will not be undercut by arcane state provisions.

© 2020 Proskauer Rose LLP.

For more on food & beverage authority, see the National Law Review Biotech Food & Drug section.

U.S. Health & Human Services – Office of Civil Rights Issued Guidance Regarding HIPAA Privacy and Novel Coronavirus

The Office of Civil Rights (OCR) last month provided guidance and a reminder to HIPAA covered entities and their business associates regarding the sharing of patient health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule during an outbreak or emergency situation such as what we are all facing right now with the Novel Coronavirus (2019-nCoV) outbreak.

The OCR guidance focused on sharing patient information in several areas, including: treatment, public health activities, disclosures to family, friends, and others involved in an individual’s care, and disclosures to prevent a serious and imminent threat.

The HIPAA Privacy Rule allows a covered entity to disclose PHI to the Center for Disease Control (CDC) or to state or local health departments that are authorized to collect or receive such information, for the purpose of preventing disease and protecting public health.  This would include disclosure to the CDC, and/or state or local health departments, of PHI as needed to report prospective cases of patients exposed to or suspected or confirmed to have Novel Coronavirus.

The OCR message in the guidance document is clear and it emphasized the balance between protecting the privacy of patient PHI and the appropriate uses and disclosures of such information to protect the public health. For more information and resources, see the HHS interactive decision tool which provides assistance to covered entities to determine how the Privacy Rule applies to disclosures of PHI in emergency situations.

Copyright © 2020 Robinson & Cole LLP. All rights reserved.

For more on HIPAA regulation, see the National Law Review Health Law & Managed Care section.

529 Plans: Estate Planning Magic

The most common way to reduce state and federal estate taxes is to make lifetime gifts to irrevocable trusts. However, in order for an irrevocable trust to escape estate taxation at the grantor’s death, the grantor may not retain the power to “designate the persons who shall possess or enjoy the property or the income therefrom.” (IRC § 2036(a)(2).) In other words, the grantor cannot change the beneficiaries of the trust.

This poses a problem. What if circumstances change? What if a grantor creates a trust for a child, but the child no longer needs the funds? What if the grantor ends up needing the funds themselves? A grantor can build flexibility into irrevocable trusts by granting powers of appointment to the beneficiaries or by appointing a trust protector, but these powers may not be held by the grantor. Thus, reluctance to give up control keeps many clients from making gifts to irrevocable trusts.

The general rule that a grantor must relinquish all control over gifted assets has been seared into the mind of every estate planning professional fearful of accidentally causing estate tax inclusion. But there is one exception: the humble 529 Plan.

Section 529 of the Code contains a shocking statement:

“No amount shall be includible in the gross estate of any individual for purpose of [the estate tax] by reason of an interest in a qualified tuition program.” (IRC § 529(c)(4)(A))

There are, of course, exceptions. 529 plans are (likely) includible in the estate of the beneficiary upon the beneficiary’s death. Also, if the grantor has made the election to “front load” five years of annual exclusion gifts to the 529 Plan (discussed further below) and dies before the five years expires, a portion of the gifted amount will be includible in the grantor’s estate.

Still, 529 Plans offer unparalleled flexibility in estate tax planning. A grantor can remain the “owner” of a 529 Plan and retain the power to change the beneficiary to a qualifying family member (which includes grandchildren, nieces and nephews, and others), while still removing the assets in the 529 Plan from his or her estate. This is in contrast with an irrevocable trust, in which the grantor cannot act as trustee and cannot retain the power to change the beneficiaries.

The other “magic” of 529 Plans is the ability to “front load” annual exclusion gifts. The annual exclusion from gift tax allows a grantor to transfer up to $15,000 per year, per person. But, if a grantor makes the proper election on a gift tax return, he or she can make five years of annual exclusion gifts in a single year and use no transfer tax exemption. If the grantor is married and elects “gift‑splitting,” the couple can transfer $150,000 to a 529 Plan in a single year and use no estate and gift tax exemption.

529 Plans are, of course, designed for education, and are not complete substitutes for irrevocable trusts. The “earnings portion” of non-qualified distributions (i.e., distributions not used for “qualified higher educational expenses”) from a 529 Plan are subject to ordinary income tax at the beneficiary’s tax rate plus a 10% penalty, and for this reason, care should be taken not to “overfund” a 529 Plan. However, 529 Plans can nevertheless serve as effective wealth transfer vehicles because of their income tax benefits and the high probability that a grantor will wish to make significant contributions to the education of at least some members of his or her family. Combined with their unparalleled estate tax features, this makes 529 Plans “estate planning magic.”

© 2020 Much Shelist, P.C.

For more Estate Planning, see the Estates & Trusts section of the National Law Review.

COVID-19: Navigating the Issues Faced by Employers

The ongoing COVID-19 outbreak has brought about a whole range of novel legal considerations for employers in Singapore.

Stay-home orders

There are mainly two types of “stay-home orders” which are currently being implemented in Singapore. They are the:

  • Quarantine Order (“QO”); and
  • Stay-Home Notice (“SHN”).

A QO is a directive issued to quarantine or isolate an individual who is, or is suspected to be, a carrier or contact of an infectious disease.

A SHN is a new measure that took effect on 18 February 2020, effectively replacing the then prevailing leave of absence (“LOA”) measure, which was less stringent. The SHN would be issued to individuals returning to Singapore from certain designated regions within the last 14 days from their date of return.

Obligation to pay employee salaries

QOs are served on individuals by the Ministry of Health (“MOH”). The period of absence from work necessitated by the QOs should be treated as paid hospitalization leave, as part of the employer’s hospitalization leave eligibility under their employment contracts, collective agreements, or under the Employment Act. For employees who have used up their paid hospitalization leave, employers are urged (but not statutorily mandated) to exercise compassion and flexibility by granting additional paid hospitalization leave.

During the SHN period, if remote working is not possible, employers are encouraged to provide additional paid leave on top of the employees’ annual leave entitlements for the SHN, especially if the reason for the employee being on SHN is that he had to undertake work-related travel. If that is not feasible, employers can consider the following options, or a combination of the options, for the employees on SHN:

  • Treat employees’ SHN as paid hospitalisation leave or paid outpatient sick leave;
  • Allow employees to apply for annual leave;
  • Allow employees to use advanced paid leave or apply for no pay leave, for employees who have used up their leave entitlements; or
  • Other mutually agreed arrangements between the employers and employees/unions.

The Ministry of Manpower (“MOM”) is providing support to help businesses who are affected by the SHNs in the form of a SHN Support Programme. The MOH has similarly put in place a Quarantine Order Allowance Scheme. Both of these are in place to mitigate the financial impact for employers of those who have been served QOs/SHNs, subject to the fulfilment of eligibility criteria.

Obligation to provide a safe work environment

Under the Workplace Safety and Health Act, employers in Singapore have a duty to take, as far as is reasonably practicable, such measures as are necessary to ensure the safety and health of its employees at work. Employers also have similar obligations under common law.

Data privacy issues arising from contact tracing

The Personal Data Protection Commission advisory provides that organisations may collect personal data of visitors to premises for purposes of contact tracing and other response measures in the event of an emergency, such as during the outbreak of COVID-19.

In the event of a COVID-19 case, relevant personal data can be collected, used, and disclosed without consent during this period to carry out contact tracing and other response measures, as this is necessary to respond to an emergency that threatens the life, health, or safety of other individuals.

Organisations that collect such personal data must comply with the data protection provisions of the Personal Data Protection Act 2012.

Temperature taking

Employers are encouraged to take the temperatures of employees and visitors, and record their names, NRIC/FIN/Passport numbers (for visitors), and temperatures during this period of time. It is also permitted and advisable to monitor employees and visitors for other respiratory symptoms such as coughing, runny nose, shortness of breath, and breathing difficulties.

Regulatory enforcement

The local regulators take contraventions of the COVID-19 measures very seriously, and have been actively enforcing these measures against employers and work-pass holders.

As of 24 February 2020, the MOM has punished a total of 10 work-pass holders and nine employers for flouting MOM’s LOA requirements.

Copyright 2020 K & L Gates

ARTICLE BY Christopher Tan and Mayumi Soh of K&L Gates.
For more on working from home, see the National Law Review Labor & Employment law page.

Tennessee-Based Health Services Company Settles FCA Case Alleging Medicaid Fraud For $9.5 Million

The Department of Justice (“DOJ”) announced another False Claims Act (“FCA”) settlement centered around a health services company’s practice of providing unnecessary therapy services to patients in order to receive the maximum amount of reimbursement under Medicare.  The $9.5 million settlement is with Diversicare Health Services Inc, a Tennessee-based company that provides nursing and rehabilitation services at 74 locations throughout the country.  Diversicare’s alleged violations are similar to those in a medicaid fraud case settled by the DOJ for $15.4 million two weeks earlier concerning fraudulent Medicare reimbursements for unnecessary rehabilitation services.

The settlement resolves two separate qui tam FCA lawsuits filed by whistleblowers Mary Haggard and Bryant Fitzmorris, both former Diversicare employees.  Ms. Haggard will receive a whistleblower award of roughly $1.4 million, and Mr. Fitzmorris will receive $145,350.  The FCA allows private citizens who possess inside information of fraudulently billing against the United States Government to initiate a lawsuit on the Government’s behalf to recover those funds.  The citizens, known as qui tam relators, are then entitled to receive a share of any damages that the Government ultimately recovers from the litigation.

The settlement concerned Diversicare corporate policies, in use from the beginning of 2010 through the end of 2015, that specifically instructed its employees to provide patients rehabilitation treatments to receive the highest level of Medicare reimbursement, regardless of the need for, the efficacy of, or risks associated with such treatment.  Specific allegations include “instances of improper co-treatment in order to achieve minute thresholds, repetitive and unskilled exercises that did not match plan of care goals to obtain additional minutes, engaging patients in activities contraindicated by underlying medical conditions, [and] extending patient lengths of stay beyond what was medically indicated.”  In addition to the allegations of improper therapy, it was alleged that Diversicare billed Medicare for therapy services that were never in fact provided.

Additional allegations highlight the fraudulent attempts to maximize Medicare revenue, claiming that Diversicare threatened to undertake, and in some instances took, adverse employment actions against employees who failed to meet set budgetary goals and quotas. Finally, the settlement also resolves allegations of FCA violations regarding Diversicare’s Medicaid billing practices, including its submission of “forged, photocopied, or pre-signed physician signatures” on certifications necessary for Medicaid reimbursement.

Federal regulations governing the disbursement of taxpayer dollars for Medicare and Medicaid exist to both protect the patients receiving treatment, as well as the taxpayers whose dollars fund the programs.  When companies intentionally circumnavigate these regulations in search of higher revenue, they not only rip off the taxpayers but also put vulnerable populations of patients at risk with unnecessary and often dangerous treatments.  In the fiscal year 2019, the United States Government reported that using the FCA, it recovered $2.6 billion of taxpayer dollars fraudulently paid out under health care programs, including for violations such as those alleged against Diversicare.  FCA relators and the Government should continue to utilize this powerful tool to protect Medicare and Medicaid patients, as well as every United States taxpayer.

Copyright Kohn, Kohn & Colapinto, LLP 2020. All Rights Reserved.

For more Medicaid False Claims Act settlements, see the National Law Review Health Law & Managed Care section.

Delaware Franchise Taxes Are Around the Corner

If you are a Delaware corporation, you likely received a notice from the Secretary of State of Delaware informing you that your company’s Annual Report and franchise tax payment are due by March 1, 2020. These notices are sent to the corporation’s registered agent. You are still required to file an Annual Report and pay the franchise tax even if your corporation never engaged in business or generated revenue. Delaware requires these to be submitted online.

There are two ways to calculate your Delaware franchise taxes (the Authorized Shares Method and the Assumed Par Value Capital Method). Delaware defaults to calculating its franchise taxes owed by using the Authorized Shares Method, which almost always results in a higher tax liability for startups with limited assets. However, by using the Assumed Par Capital Value Method, startups are often able to significantly lower their franchise tax burden.

For example, a typical early-stage startup corporation with: (i) 10 million authorized shares of stock; (ii) 9 million issued shares of stock; (iii) a par value of $0.0001; and (iv) gross assets of $100,000, would result in the following franchise tax obligations under the different methods:

  • $85,165 under the Authorized Shares Method

  • $400 under the Assumed Par Value Capital Method

    If you are incorporated in Delaware, but conducting business in another state, you must be qualified to do business in that state – meaning, you might be subject to that state’s franchise tax (if any) as well. For example, a Delaware corporation doing business in Texas must still register for a foreign qualification to conduct business in Texas ($750 filing fee), submit a Texas annual Franchise Tax Report (due by May 15 of each year), and pay the associated tax.

Texas franchise taxes are based on an entity’s margin (unless filing under an EZ computation),

and are calculated based on one of the following ways:

  • total revenue times 70 percent;

  • total revenue minus cost of goods sold (COGS);

  • total revenue minus compensation; or

  • total revenue minus $1 million (effective Jan. 1, 2014).

© 2020 Winstead PC.

For more on franchise taxation, see the National Law Review Tax Law section.