The National Law Forum

Budget Deal Alters Reimbursement to Off-Campus Hospital-Owned Facilities

detailed illustration of a compass with medicare text, eps10 vector

On November 2, 2015, President Obama signed into law H.R. 1314, the Bipartisan Budget Act of 2015 (the “Act”), which significantly changes Medicare reimbursement for off-campus hospital services. The Act, which Congress passed late last week, will alter Medicare reimbursement for new off-campus hospital-owned facilities that have heretofore been treated as “hospital-based.” Off-campus facilities for which a hospital was not billing as “hospital-based” as of the date of the enactment of the Act will not be treated as “hospital-based,” and the physician or other provider’s fee schedule rate, instead of the hospital outpatient rate, will apply.

Prior to the Act, covered out-patient department (“OPD”) services included services provided by facilities meeting the complex hospital-based rules, even if the facility was not physically-located on the campus of the hospital. Subject to the grandfather provision discussed below, the Act adds a specific exclusion to the definition of covered OPD services, making services furnished by an off-campus outpatient department of a hospital ineligible. The Act provides that a facility is “off-campus” if it is not within 250 yards of the hospital’s main buildings (including for this purpose, a “remote location of a hospital,” meaning a separate in-patient campus of the hospital, which is a helpful clarification in an otherwise problematic law). Facilities deemed “off-campus” are ineligible for Medicare reimbursement at the hospital outpatient rate.

The inclusion of a grandfather provision will mitigate some of the Act’s impact, as facilities currently treated as “hospital-based” will not be impacted by the change in law. Only facilities that are not billing as “hospital-based” as of the date of enactment will be ineligible for reimbursement at the hospital outpatient rate. It is unclear whether a conveyance of an off-campus grandfathered facility would eliminate the grandfathered status and the ability of the buyer to bill for the services as “hospital-based.” The Congressional Budget Office (“CBO”) forecasts that the government will reap significant cost savings from the lower rates that will apply; an October 28, 2015 analysis from the CBO projects that the change in reimbursement policy will provide $9.3 billion in relief by 2025.

Article By Edward S. Kornreich, Roger A. Cohen & Julia B Bienstock of Proskauer Rose LLP

‘Fight for $15’ Walk-Outs and Protests Continue; Are You Prepared for November 10?

national labor relations board Continuing its three-year campaign, “Fight for $15” on November 4, 2015, announced plans for worker strikes and protests at fast food restaurants in 270 U.S. cities on November 10. The protests, timed to occur one year prior to the 2016 presidential election, is calculated to send a message to voters and candidates. Protests will culminate with a march on the November 10 Republican presidential debate in Milwaukee.

While the fast food workers involved in the walk-outs are not represented for purposes of collective bargaining by a labor union, the walk-outs have largely been organized and funded by the Service Employees International Union (“SEIU”). Employers with union contracts who have lived with the possibility of strikes are generally more familiar with the rights and obligations of employees and employers under the labor law than their non-union counterparts. But now that walk-outs and work stoppages are becoming an accepted strategy in the non-union workforce, non-union employers need to know the rules, too. Indeed, over three years of protests, scores of unfair labor practice charges have been filed against non-union employers alleged to have interfered with employee participation in protected activity. Moreover, on November 4, 2015, the National Labor Relations Board (“NLRB”) upheld a decision finding that a St. Louis Chipotle Grill unlawfully discharged an employee because he engaged in fight-for-$15 protests.

“Protected, Concerted Activity”

Under the National Labor Relations Act, employees have the right to engage in group activity for the purposes of “mutual aid and protection.” Thus, whether a union is involved, if two or more employees acting in concert walk off the job to protest work conditions or enforce demands relating to the terms of their employment, the walk-out, or strike, generally is protected concerted activity under the National Labor Relations Act. (Quickie, intermittent work stoppages might not be.) Under these circumstances, it would be unlawful to discipline or discharge (or otherwise disadvantage) employees for walking off the job. It also means that unless the employees have been permanently replaced (discussed below), the strikers are entitled to be returned to their jobs when they make an unconditional offer to do so.

Lawful Employer Responses to Protected Concerted Activity

Employers are not without rights in dealing with protected concerted activity (“PCA”). First and foremost, employers have a right to continue business operations. This can be accomplished by assigning managers or hiring replacement workers to do the work of the employees who walked off the job. If the strike is not caused by an employer unfair labor practice, employers have the right to designate the replacement workers either as permanent or temporary. (If the strike is caused by an employer unfair labor practice, employers have the right to designate the replacement workers only as temporary.)

If replacement workers are designated as temporary, when the strikers offer to return to work, the employer is obligated to lay off the temporary workers and put the strikers back to work.

When the employer designates the replacements as permanent, when the strikers offer to return to work, they are placed on a preferential hiring list. In that situation, the employer is not obligated to lay off the replacements, but when positions open up through normal attrition, the employer first has to offer those openings to the former strikers who are on the preferential hiring list.

Walk-outs in the fast food industry have been short, however, typically rendering the hiring of replacement workers impractical. As a practical matter, employers may have to rely on managers or other employees who are not participating in the strike.

Violence and Other Picket Line Misconduct

Employees lose the protection of the NLRA if they engage in certain improper conduct. This includes intermittent or “quickie strikes.” Generally, strikers lose the protection of the NLRA when they engage in a pattern of striking for short periods, returning to work briefly, and then striking again. By engaging in this type of conduct, strikers effectively deny the employer the ability to run its business either by relying on its regular employees or by hiring replacements. The NLRA does not prevent the employer from issuing discipline or discharging employees who participate. However, before taking action, employers should consult counsel and be absolutely certain the particular job action is unprotected.

Other activities that are unprotected include stay-ins or sit-down strikes. A stay-in or sit-down strike occurs when employees refuse to work and also refuse to vacate the employer’s premises. Strikers seek to force the employer to accede to their demands by bringing operations to a halt, preventing the employer from operating. This type of trespasser activity generally is unprotected.

Slow-downs are another tactic sometimes used to impede production. Work is deliberately performed ever more slowly; the employer cannot conduct business and customers fume. Slow-downs are not protected and can be addressed by discipline or discharge.

Lawful Responses to Unprotected Activity

Strikers, of course, are allowed to picket on public property near their place of employment to publicize a labor dispute. They, however, are not privileged to engage in threats, physical assaults, trespass, or property destruction. When they do, employers have these remedies available:

1. Law Enforcement: The most immediate relief available is to call the police. Just because employees ostensibly are engaged in a strike does not immunize them from prosecution when they commit crimes.

2. State Court Injunction: Another remedy is to seek a state court injunction to prohibit violence. This is particularly helpful when there is mass picketing, obstruction of traffic, and blockages of entrances, and the police have difficulty controlling the situation. In these kinds of cases, employers seek court orders prohibiting further violence or destructive activities and limiting to a reasonable number the number of picketers at a particular location at any given time, so police can assure public order.

3. Employer Discipline and Discharge: If the threats, violence and property destruction are egregious enough, the employees involved lose the protection of the NLRA, which means they can be discharged or disciplined. (However, a full investigation should be conducted before the employer takes action to determine what the employee actually did or said. In addition, investigation of past discipline in similar situations not involving protected concerted activity is important because the rules (under the NLRA) prohibit discrimination against employees who engage in such activity. In other words, if, in the past, an employee who was not participating in protected concerted activity engaged in violence for which he was suspended, an employee who engages in similar violence while partaking in protected concerted activity generally also should be suspended, rather than discharged.) Employees should not suffer greater discipline for their misconduct because it occurs while they engage in activity the law protects.

While there is no bright line for evaluating when misconduct becomes unprotected, some general guides may be kept in mind. For example, simple name-calling, momentary blocking of ingress and egress at employer facilities, and simple trespass onto an employer’s property, without any accompanying destruction or violence, probably will not be sufficient to cause the employee to lose the protection of the NLRA. However, physical assaults, participating in extended blocking of ingress or egress, and property destruction are generally the types of conduct that will cause an employee to lose the protection of the NLRA.

Article By Jonathan J. Spitz, Philip B. Rosen, Timothy J. Ryan & Peter N. Moss of Jackson Lewis P.C.

Holiday Planning Should Include H-1B Cap Planning

While it may seem early, the holiday season is a good time for employers to start preparing for the H-1B Cap for Fiscal Year 2017, which begins October 1, 2016. Demand for the H-1B has steadily increased so that last year, only about 40% of the H-1B petitions were selected in the lottery. Employers should expect this trend to continue and be prepared to file their H-1B petitions on the earliest possible date, April 1, 2016.

Background:

By way of background, the H-1B is a very significant visa category as it allows qualified professionals to enter the U.S. Only a limited number may be granted each fiscal year (which runs from October 1st through September 30th). Under current immigration law, only 65,000 new H-1B petitions may be granted each fiscal year with an additional 20,000 available for those individuals with advanced degrees from a U.S. academic institution.

For Fiscal Year 2016, USCIS received nearly 233,000 H-1B petitions during the filing period. For the prior year, USCIS received approximately 172,500 H-1B petitions. It is anticipated that more cases will be filed this year.

Because of the large number of cases being filed, there is a significant chance that cases could miss the filing date due to delays, particularly at the Department of Labor (DOL). As part of the H-1B petition, employers must have a Labor Condition Application (LCA) certified by the DOL. No H-1B petition will be accepted by USCIS without a certified LCA. Normal processing of LCAs generally takes about 7 to 8 days. However, as volume increased in March of 2014, many LCAs took longer. Proskauer recommends filing as many LCAs in earlier months as possible to ensure that the H-1B petitions are ready for filing in anticipation of April 1.

Evaluating your Potential H-1B Population:

Due to the increased demand for the H-1B, it is important that employers evaluate their employee populations early to ensure that all petitions are submitted by the earliest possible date. We outline below some of the types of employees to review when making decisions whether to file an H-1B petition.

F-1 Students: Students, particularly those on F visas and currently working for you pursuant to approved Optional Practical Training (OPT) should be the first group of employees to consider for filing an H-1B petition on April 1st. The reason for this is simple. If you do not file H-1Bs for these employees, they will lose their employment authorization at the conclusion of their OPT (unless they are able to extend it in the limited circumstance described below).

Moreover, even when employees may extend their OPT it is advised to file an H-1B for Fiscal Year 2017. This gives the employees two opportunities to obtain the H-1B. If more applications are filed than visas available and these employees do not obtain the H-1B this year, then the OPT extension may serve as a backup and you can file for the H-1B again next year.

L-1Bs: In recent years the L-1B visa category has faced increased scrutiny. The L-1B is for intracompany transferees who are being relocated to the U.S. to serve in a specialized knowledge capacity after having been employed by the company abroad for one year in either a managerial or specialized knowledge role. The strict interpretation of what qualifies as specialized knowledge has resulted in denials of many L-1B petitions. Therefore, rather than file an L-1B extension many employers are opting to file H-1Bs.
Certain Green Card Cases: Certain applicants for green cards may run out of authorized time in the U.S. unless they are in H-1B status. We recommend you consult with counsel on such cases.

Employers and HR professionals should take time during the holiday season to evaluate their nonimmigrant population and determine which employees should apply for the FY 2017 H-1B Cap. It is not too soon to send H-1B cap cases to the lawyers!

We encourage employers to reach out to our Immigration & Nationality group if they have questions. We will continue working with our clients to ensure that H-1B petitions are prepared and ready for filing by April 1.

Article By David Grunblatt, Hallie A Cohen, Erica Loomba, Valarie H McPherson, Praveena N Swanson & Jennifer Wexler of Proskauer Rose LLP

Target Faces First Ever Union

The Wall Street Journal reports the NLRB has rejected an appeal from Target Corp. seeking to invalidate an employee vote in favor of unionization. In September, a “micro-unit” of about one dozen pharmacy workers in Brooklyn, NY voted in favor of unionization. The company appealed, but the NLRB affirmed the vote yesterday.

As reported in the article, “The group of less than a dozen employees in Brooklyn, N.Y., would be the first union among Target’s nearly 350,000 employees, marking a significant milestone for a company that has fought to keep unions out of its stores.” The complete article can be found here.

Article By John T.L. Koenig of Barnes & Thornburg LLP

Lawrence of Arabia Makes Surprise Contribution to UK Holiday Pay Debate

There is a line in, I think, Lawrence of Arabia where a terrified young soldier trapped under fire with a small group of his colleagues asks Peter O’Toole as Lawrence what they are going to do. “Nothing”, drawls O’Toole languidly, “After all, it’s generally best”.

And so by a tenuous little link to the question of amending your holiday pay calculations to reflect the new jurisprudence around including an allowance for overtime and/or commission. Have you been sitting in your office wondering why no one seems able to tell you exactly what you need to do? Have you been approached for a deal by your union on the basis that everyone else has sorted it out and only your company still has its head over the parapet?

You are not as alone as you may feel. A survey of over 1,000 companies of a wide variety of sizes, sectors and employee representation structures provides the answers and a number of interesting statistics:-

Of all respondents, a full 73% have yet to take any steps to amend their holiday pay calculations. Those union claims may perhaps be taken with a pinch of salt.
Of the 27% who have changed their holiday pay arrangements, only a small majority (less than 60%) have unionised workforces.
Where changes to holiday pay include use of a reference period, the period invariably picked has been twelve weeks. That is even though that period has yet to be enshrined in law and even though those responses came from sectors as diverse as construction, aviation, retail and banking. Employee numbers in those businesses ranged from less than 100 to over 45,000. It therefore appears that for all the uncertainties and injustices both ways which such a reference period can generate (and despite the enormous spread of overtime and commission schemes in use over that population) twelve weeks will likely be the default position for voluntary holiday pay agreements.
Where respondents have reached agreements with their workforces about alterations to holiday pay calculations, these have all been forward-looking. None of respondents refer to any accommodation being reached in relation to any notional arrears.
The principal factors leading to changes in those 27% of employers were (i) awareness of the case law (i.e. the perceived inevitability of having to do something at some stage) followed by (ii) union/employee pressure (though of the 73% who had made no change, only one admitted to receipt of a Tribunal claim), and (iii) brand/reputational factors.
Where changes have been made, half had applied them to the full UK 5.6 week holiday entitlement. About a quarter of respondents had limited the changes to the Working Time Directive four week minimum and a further quarter did not specify which.
Of those cases where changes had not been made, nearly 85% of employers had also taken no steps to amend their commission/overtime structures to minimise the scope for employee claims.

So in other words, whether or not it is generally best, doing nothing does seem thus far to be the principal employer response to the holiday pay question. There are good objective reasons to support such a stance at this point, including in particular the absence of Government guidance, the uncertain direction (in matters of detail, at any rate) of the case law, and the relatively limited number of unions willing to undertake the colossal logistical exercise of collective Tribunal claims. There is no reason to expect much change in the first two factors in the near future, but whether that last point will remain valid if employer indifference persists at such a high rate is an open question.

Article By David Whincup of Squire Patton Boggs (US) LLP

White House Announces Long-Awaited Trans-Pacific Partnership Agreement

The Obama administration released the full text of the Trans-Pacific Partnership (TPP) agreement, on November 5, kicking off a 90-day window for congressional review.

The TPP would arguably be the largest free trade agreement in history when considering the economies of the 12 Pacific Rim member countries, covering approximately 40% of the global economy. The agreement must now be individually approved by each of the 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam.

If ratified, the TPP will be one of President Obama’s crowning achievements. Obama has championed the landmark agreement as a vehicle for opening new markets to American products and establishing higher labor and environmental standards, while building an economic bloc in the Asia-Pacific region to compete with China. (See the White House Fact Sheet here.)

Obama now has an uphill climb as he launches a major public relations campaign to sell the agreement to the American public. The debate will be contentious, with a bitterly divided Congress voting on the final agreement in early 2016 – well into the election year as presidential primary elections are taking place.

Under pressure from labor unions to oppose the deal, Democrats have largely withheld support. In early October, former Secretary of State, and current presidential candidate, Hillary Clinton came out against the deal which she once called the “gold standard” of trade agreements. Last spring, Obama relied on Republicans in Congress to pass the underlying fast-track trade authority bill, with only 28 Democrats in the House voting in favor of passage. Under fast-track authority, Congress can approve or reject the agreement, but not amend it.

Note: The Office of the United States Trade Representative (USTR) posted the agreement in roughly two hundred separate PDF documents. The Washington Post promptly published a search function on their website for easier searching.

Article By Michelle A. Leeds of Foley & Lardner LLP

Department of State Issues Final Rule re: Procedures for Issuing Nonimmigrant Visas

The July 2015 Visa Bulletin Brings Little Change The Department of State (DOS) issued a final rule effective November 2, 2015 updating its regulations regarding the nonimmigrant visa format and record retention procedures found at 22 CFR §41.114, which currently provides for the placement of a nonimmigrant visa stamp in the foreign national’s passport.

The DOS has now amended the regulation to reflect the current practice of issuing machine-readable visas on adhesive foils that are affixed to passports. The updated regulation also allows for the planned future practice of issuing such visas as electronic visas that U.S. Customs and Border Protection officers will be able to access via an electronic database after scanning the machine readable are of the visa holder’s passport to verify the foreign national’s biometrics and identity. Finally, the regulation has been amended to remove DOS procedures regarding visa review and file retention instructions found in the Foreign Affairs Manual.

The DOS’ final rule, available at the Federal Register, is in compliance with regulatory requirements including the Administrative Procedure Act and the applicable Executive Orders. The amendment is issued as a final rule as it is not subject to notice-and-comment rulemaking. The Department of State has certified that the rule will not have a significant economic impact on a substantial number of small entities; rather, only individual foreign nationals seeking consideration for nonimmigrant visas and foreign officials regulating the relevant documentation will be affected. Additionally, DOS does not consider the rule to be an economically significant rulemaking action, and is not aware of any monetary effect (including any increase in costs or prices) due to the update.

The amendments to 22 CFR §41.114 account for useful updates in technology that affect nonimmigrant visa holders. It remains to be seen exactly how the information contained in the electronic visa database available to CBP now provided for in the regulation will be accessible to other stakeholders, including employers.

Article By Lauren A. Tetenbaum of Greenberg Traurig, LLP

EEOC Seeks to Clarify Application of GINA to Wellness Programs

Earlier this year, the Equal Employment Opportunity Commission (“EEOC”) published a proposed rule that would amend the agency’s regulations and interpretive guidance implementing Title I of the Americans with Disabilities Act (“ADA”) as they relate to employer wellness programs. Now, the EEOC has turned its attention to Title II of the Genetic Information Nondiscrimination Act of 2008 (“GINA”) as it relates to employer wellness programs that are part of group health plans.

On October 20, 2015, the EEOC issued a proposed rule, or Notice of Proposed Rulemaking (“NPRM”), to amend the regulations implementing Title II of GINA, together with a fact sheet and a series of questions and answers. The proposed rule, which is available in its entirety online, would allow employers that offer wellness programs as part of group health plans to provide limited financial and other incentives or “inducements” in exchange for an employee’s spouse providing information about his or her current or past health status.

Title II of GINA protects job applicants and current and former employees from employment discrimination based on their genetic information. As stated in the NPRM, Congress enacted GINA to address concerns prevalent at the time that individuals would not take advantage of the increasing number of genetic tests that could inform them as to whether they were at risk of developing specific diseases or disorders due to fear that genetic information would be used to deny health coverage or employment. Consequently, GINA expressly prohibits employers with 15 or more employees from using genetic information in making decisions about employment in all circumstances, without exceptions. It also restricts employers from requesting, requiring or purchasing genetic information. In addition, it strictly limits employers from disclosing genetic information. Genetic information includes, among other things, information about the manifestation of a disease or disorder in the family members of an individual. The term “family members” includes spouses.

There are only six very limited circumstances under GINA in which an employermay request, require, or purchase genetic information about an applicant or employee. One of the six exceptions applies when an employee voluntarily accepts health or genetic services offered by an employer, including such services offered as part of a wellness program. The proposed regulations are in response to the numerous inquiries received by the EEOC questioning whether an employer violates GINA by offering an employee an inducement if the employee’s spouse who is covered under the employer’s group health plancompletes a health risk assessment that seeks information about the spouse’s current or past health status, in connection with the spouse’s receipt of health or genetic services as part of an employer-sponsored wellness program.

The proposed regulations would clarify that GINA does not prohibit employers from offering limited inducements (whether in the form of rewards or penalties avoided) for the provision by spouses covered by the employer’s group health plan of information about their current or past health status as part of a health reimbursement account, which may include a medical questionnaire, a medical examination (e.g., to detect high blood pressure or high cholesterol), or both, as long as the provision of the information is voluntary and the individual from whom the information is being obtained provides prior, knowing, voluntary, and written authorization, which may include authorization in electronic format. The proposed regulations do not allow inducements in return for the spouse’s providing his or her own genetic information (including results of his or her genetic tests), for the current or past health status information of an employee’s children, or for the genetic information of an employee’s child.

The proposed regulations would include a requirement that any health or genetic services provided in connection with the requests for genetic information be reasonably designed to promote health or prevent disease, thereby aligning GINA’s regulations with those promulgated under the ADA as they relate to wellness programs. (The ADA permits employers to collect medical information as part of a wellness program only if the program and the disability-related inquiries and medical examinations that are part of the program are reasonably designed to promote health or prevent disease.) As discussed in the NPRM, collecting information on a health questionnaire without providing follow-up information or advice would not be reasonably designed to promote health or prevent disease. Additionally, a program would not be deemed reasonably designed to promote health or prevent disease if it imposes, as a condition of obtaining a reward, an overly burdensome amount of time for participation, requires unreasonably intrusive procedures, or places significant costs related to medical examinations on employees. A program is also not reasonably designed if it exists merely to shift costs from the employer to targeted employees based on their health.

The proposed regulations would limit the total inducements (both financial and in-kind inducements, such as time-off awards, prizes, or other items of value, in the form of either rewards or penalties) to the employee and spouse to participate in a wellness program that is part of a group health plan and collects information about current and past health status to not more than 30 percent of the total cost of the plan in which the employee and any dependants are enrolled. The maximum portion of an incentive that may be offered to an employee alone may not exceed 30 percent of the total cost of self-only coverage.

Finally, it is important to note that this proposal would not alter GINA’s absolute prohibition against the use of genetic information in making employment decisions.

The EEOC’s approach to wellness programs is still developing, and interested members of the public have until Tuesday, December 29, 2015, to submit comments on the NPRM to the EEOC in order to seek clarity or request changes and/or additions to the proposed rules.

Article By Mary Pat Gallagher of Gonzalez Saggio & Harlan LLP

Chicago Mayor’s Tax-Heavy Budget Passes: Lease and Amusement Tax Implications

Last week the Chicago City Council approved Mayor Rahm Emanuel’s 2016 revenue ordinance as part of his tax-laden budget proposal. The revenue ordinance included noteworthy changes to the personal property lease transaction tax (lease tax) and amusement tax, both of which we have covered in-depth since the Department of Finance (Department) issued two rulings over the summer officially extending a nine percent tax to most services provided online. The portions of the revenue ordinance related to the lease tax were drafted in response to the concerns raised by the startup community. As discussed in more detail below, the lease tax amendments provide little relief for the vast majority of businesses dreading the January 1st effective date of the ruling. The amendments to the amusement tax provide no relief whatsoever.

Chicago Lease Tax Amendment

The changes to the Lease Tax Ordinance include: (1) a narrowly defined exemption for small businesses; (2) a reduction of the rate for cloud-based services where the customer accesses its own data; and (3) codification of the applicability of the Illinois mobile telecom sourcing rules. The amendments were touted by the mayor as addressing many of the concerns expressed by small businesses after the Department administratively interpreted the nine percent lease transaction tax to apply to most cloud-based services in June. In response to an outcry from the startup community, the Department subsequently delayed the effective date of the ruling to January 1, 2016. Unfortunately the mayor’s solution falls short of providing any significant relief and will not alleviate the concerns of the vast majority of customers and providers affected by the ruling.

Effective immediately upon publication, the lease transaction amendments approved yesterday will:

Exempt “small new businesses” that are lessors or lessees of non-possessory computer leases from their respective lease transaction tax collection and payment obligations. For this purpose, “small new business” is a business that (1) holds a valid and current business license issued by the city or another jurisdiction; (2) during the most recent full calendar year prior to the annual tax year for which the exemption provided by this subsection is sought had under $25 million in gross receipts or sales, as the term “gross receipts or sales” is defined for federal income tax purposes; and (3) has been in operation for fewer than 60 months. For the purpose of calculating the $25 million limit, gross receipts or sales will be combined if they are received by members of a single unitary business group. This will exclude most subsidiaries from taking advantage of the “small new business” exemption.
Reduce the rate from nine percent to 5.25 percent of the lease or rental price in the case of the non-possessory lease of a computer primarily for the purpose of allowing the customer to use the provider’s computer and software to input, modify or retrieve data or information that is supplied by the customer.
Codify the use of the sourcing rules set forth in the Illinois Mobile Telecommunications Sourcing Conformity Act (35 ILCS 638, as amended) for the purpose of determining which customers and charges are subject to the lease transaction tax when the user accesses the provider’s computer via a mobile device. The lease transaction tax ruling issued in June prescribes the use of these rules, but the legislation adds clarity by codifying this regime. Generally these rules result in tax applying to Chicago residents and companies with primary business addresses in the city. Customers can provide evidence of complete or partial out-of-city use. If a provider has no information indicating Chicago use, it has no duty to collect tax. If the sourcing rules indicate that the tax applies, a taxable presumption is created unless the contrary is established by books, records or other documentary evidence.

The “relief” provided by the amendments is minimal as very few companies will qualify for the small business exemption and rate reduction. Because the amendments do not modify the actual imposition of the lease tax (instead they simply provide an exemption, reduce the rate for certain taxpayers and codify sourcing rules) the January 1, 2016, effective date of the lease tax ruling still appears to be in effect.

Chicago Amusement Tax Amendment

The changes to the Amusement Tax Ordinance merely codify the sourcing rules announced in the Department’s latest ruling. Specifically, the amendment provides that

“[i]n the case of amusements that are delivered electronically to mobile devices, as in the case of video streaming, audio streaming and on-line games, the rules set forth in the Illinois Mobile Telecommunications Sourcing Conformity Act, 35 ILCS 638, as amended, may be utilized for the purpose of determining which customers and charges are subject to the tax imposed by this chapter. If those rules indicate that the tax applies, it shall be presumed that the tax does apply unless the contrary is established by books, records or other documentary evidence.”

This change is significant because video streaming, audio streaming and on-line games were formerly not included in the imposition language of the Amusement Tax Ordinance. The amendment illustrates that the City Council is well aware of and approves the Department’s recent ruling that explicitly imposes the tax on charges for video streaming, audio streaming, computer game subscriptions, and other forms of online entertainment. The amusement tax ruling became effective September 1st and is currently being challenged in the Circuit Court of Cook County.

Article By Stephen P. Kranz, Catherine A. Battin & Eric Carstens of McDermott Will & Emery

Join LMA New England for their annual conference – November 12-13 in Boston

Please join the LMA New England Chapter next week at their 2015 Regional Conference, taking place on November 12 -13 at the Hyatt Regency in Boston. This year’s theme is “What’s Your WOW Factor?” Join attendees as they learn about the best tools and approaches to stand out among the competition, succeed at winning new business and become industry trendsetters. Don’t miss out on the chapter’s most important and popular event, one that saw record attendance last year!

When – November 12-13

Where – Hyatt Regency Boston

The National Law Forum

Budget Deal Alters Reimbursement to Off-Campus Hospital-Owned Facilities

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