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    • Structuring the Purchase of a Vessel Through a Corporate Entity for Tax Purposes Can Have Unintended Consequences By Sean T. McLaughlin It is a fairly common practice for individuals purchasing pleasure yachts to take calculated steps to minimize sales taxes on their purchases. In fact, a simple “Google” search on the subject reveals many websites offering free advice on this issue. One of the tactics suggested by several websites seems fairly simple: instead of the individual purchasing the yacht, the individual forms a corporation, and the corporation purchases the yacht.First and foremost, the author strongly recommends that any individuals considering purchasing a yacht seek the advice of legal counsel. The author specifically recommends seeking the advice of both a tax attorney and a litigation attorney. Why? A tax attorney can offer qualified legal advice concerning the sales tax issues surrounding the purchase. A litigation attorney can advise that structuring a purchase through a corporate entity can have significant non tax-related implications, including a complete bar ....
    • Supreme Court Clarifies Definition of a Corporation's "Principal Place of Business" By Bradley C. Myers   The United States Supreme Court recently resolved conflicts among the Circuit Courts about the citizenship of a corporation for determining diversity of citizenship jurisdiction (1). This will allow corporations to analyze with more predictable results whether to remove a case to federal court. In Hertz Corp. v. Friend, et al, No. 08-1107 (February 23, 2010) (a unanimous decision, which is unusual in and of itself), the Court decided that when determining a corporation’s citizenship for diversity of citizenship jurisdiction, the “principal place of business” of the corporation is “the place where the corporation’s high level officers direct, control, and coordinate the corporation’s activities”—something that courts have referred to as the “nerve center” of the corporation.Melinda Friend and John Nhieu sued Hertz Corporation in California state court alleging violations of California’s wage and ....
    • How to Sell Your Business Cordell and Brian Haymon are attorneys, which means the fine points of selling a business do not intimidate them. Yet when the time came to sell Petroleum Services Corporation, a firm their father started in 1952, they didn’t try to do all the work themselves. Instead, they hired Kean Miller's Blane Clark. As Mr. Clark explains, many business owners are far less comfortable with the process. Read the entire article.      ....
    • U.S. House of Representatives Approves Two Healthcare Reform Bills By Clay J. Countryman On March 21, 2010, the U.S. House of Representatives on almost a straight party-line vote passed two final healthcare reform bills late Sunday night. Initially, the House of Representatives passed H.R. 3950, the Patient Protection and Affordable Care Act, by a vote of 219 to 212. Following the passage of H.R. 3950, the House of Representatives passed H.R. 4872, the Health Care and Education Affordability Reconciliation Act of 2010, by a vote of 220 to 211. This second bill by the House modifies the Senate bill (H.R. 3590), and H.R. 4872 will serve as the foundation for any changes made by Congress to the current healthcare delivery, payment and insurance system. Some of the insurance-related changes that may have immediate impact include: lifetime caps on coverage end; children can stay on parents’ policies until age 26, and insurance companies can’t cancel coverage except in the case of fraud. A significant issue of addressing the Medicare physician ....
    • A Renewed Focus on Independent Contractor vs Employee Issues By Dean P. Cazenave As discussed in the recent New York Times article, federal and state officials, many facing record budget deficits, are starting to aggressively pursue companies that try to pass off regular employees as independent contractors. President Obama's 2010 budget assumes that the federal crackdown will yield at least $7 billion over 10 years.  More than two dozen states also have stepped up enforcement, often by enacting stricter penalties for misclassifying workers.  This effort is intended to reign in what regulators believe is a trend among companies to cut costs by classifying regular employees as independent contractors, though they often are given desks, phone lines and assignments just like regular employees. Moreover, the experts say, workers have become more reluctant to challenge such practices, given the tough job market. To determine if you or your company is complying with the rules and regulations as applicable to independent ....
    • Securities and Exchange Commission Issues Interpretive Guidance for Reporting Risks Due to Climate Change By Maureen Harbourt On January 27, 2010, the SEC voted 3-2 to issue an interpretive guidance “on existing SEC disclosure requirements as they apply to business or legal developments relating to the issue of climate change.” Chair Mary Shapiro emphasized that the interpretive release is not intended to create new legal requirements, but is to clarify the requirements already applicable for reporting material risks on public disclosure statements. She was careful to avoid arguments on the science, stating: “We are not opining on whether the world's climate is changing, at what pace it might be changing, or due to what causes. Nothing that the Commission does today should be construed as weighing in on those topics."The guidance, which will be posted “shortly” on the SEC website, provides examples of where climate change issues may require discussion in disclosure reports: Impact of Legislation and Regulation: When assessing potential disclosure ....
    • Cash Donations for Haiti Relief Made Before March 2010 May Be Deducted on 2009 Income Tax Returns By Kevin C. Curry On January 22, 2010, President Obama signed a law which allows taxpayers to claim a charitable deduction in the 2009 tax year for cash donations made through March 1, 2010 for the relief of victims in areas affected by the January 12, 2010 earthquake in Haiti. The IRS notice on this new law indicates that cash contributions eligible for the deduction against last years taxes include contributions made by text message, check, credit card or debit card. The law gives the taxpayer the option of deducting the cash contribution on his or her 2009 return or his or her 2010 return, but not both. The law does not change any of the other rules applicable to charitable donations such as the percentage limitations, the requirement that the charity be a qualified charity or the fact that the taxpayer must itemize in order to benefit from the deduction. Each taxpayer should look at his or her own individual situation to determine whether or not the deduction should be ....
    • Guidelines for Promoting Your Business Through Social Networking Websites By Tara Madison Social networks like Facebook, YouTube and Twitter are transforming the way companies communicate with consumers.  Facebook, YouTube and Twitter can be powerful business tools, but you must be mindful of certain legal limitations and guidelines. The words “Facebook,” “YouTube,” and “Twitter” are proprietary to the companies that own them.   “Facebook,” “YouTube,” and “Twitter” are all registered with the U.S. Patent & Trademark Office.  A trademark is distinctive word, logo or phrase that is used by an individual or business to identify a unique source of products or services.  Facebook, Inc., Twitter, Inc. and Google, Inc., the owner of YouTube, are entitled to prevent others from using their trademarks or something similar in a way that is misleading, deceptive or could cause confusion in the marketplace. You must first obtain permission before using another’s ....
    • Final Increase to Federal Minimum Wage in Effect Pursuant to the Fair Minimum Wage Act of 2007 By A. Edward Hardin, Jr. Effective July 24, 2009, the federal minimum wage increased from $6.55 per hour to $7.25 per hour for all non-exempt employees.  The 2009 increase in the federal minimum wage was the third and final increase to the federal minimum wage pursuant to Fair Minimum Wage Act of 2007.  Under the 2007 Act, the minimum wage established by the Fair Labor Standards Act increased in three steps from $5.85 per hour effective July 24, 2007, to $6.55 per hour effective July 24, 2008, and to $7.25 per hour effective July 24.The Fair Labor Standards Act is enforced by the U.S. Department of Labor’s Wage and Hour Division.  The first federal minimum wage, set October 29, 1938, was $.25 per hour. The federal minimum wage broke the $1.00 threshold effective March 1, 1956; $2.00 effective May 1, 1974; $3.10 effective January 1, 1980; $4.25 effective April 1, 1991; and $5.15 effective September 1, 1997. In addition to the establishment of the minimum wage, the ....
    • Patent Infringement Opinions Continue To Be Important By Pamela A.  Baxter Recent court decisions show that patent infringement opinions are still important for any person or entity that becomes aware of a United States patent that is similar to their products, methods or processes. Under federal patent law, anyone who either makes, uses, offers to sell, or sells any patented invention in the United States or actively induces another to do so is liable for patent infringement.  In addition to regular damages, courts may award up to three times the damages for willful infringement.  Under the 1983 Underwater Devices Inc. v. Morrison-Knudsen Co. opinion, if a party had actual notice of another person’s patent rights, then that party had an affirmative duty to exercise due care to determine whether that party was infringing those patent rights.  This affirmative duty included the duty to obtain patent infringement opinions prior to engaging in any potentially infringing activities.  In 2007, the United ....
    • Definition of Component Parts Clarified for Louisiana Sales and Use Tax Purposes By Christopher J. Dicharry and Jason R. Brown On July 7, 2009, Louisiana Governor Bobby Jindal signed Act 442 (SB 9) into law, preserving Louisiana’s long-standing law excluding purchases, rentals and repairs of component parts of immovable property from state and local sales/use tax. Under a law enacted in 2008, purchases of several items previously considered non-taxable component parts of buildings and other immovables (e.g., installed commercial refrigerators and other commercial and industrial fixtures) could have been subjected to state and local sales/use tax. Many taxpayer representatives questioned the constitutionality of the 2008 Act and legislators agreed that it was not their intention to increase sales/use taxes during the 2008 Legislative Session. Act 442 became effective when it was signed by the governor and applies retroactively to all transactions occurring after the July 1, 2008 effective date of the 2008 Act.Under Louisiana’s general tax law, ....
    • Quick Action by Registered Trademark Owners May Prevent Future Facebook Problems Beginning at 12:01 a.m. (Eastern Standard Time), on Saturday, June 13, 2009, members of the social networking website, Facebook, will be able to claim usernames to associate with their Facebook accounts and Facebook pages. This will allow Facebook pages to be accessed by using a url such as, http://www.facebook.com/unitedairlines, or something similar. Facebook is taking certain steps to prevent infringement of intellectual property through “name-squatting.” In connection with this, Facebook is allowing Federally registered trademark holders to prevent the registration of usernames that would infringe their intellectual property rights. There is a link to the form on Facebook’s Web site if you want to complete the form yourself. You will need the trademark registration number and the exact wording of the trademark as registered. For more information, or to protect your trademark, please contact Pamela Baxter at pamela.baxter@keanmiller.com (225.389.3761) or ....
    • Insurance and Hurricanes By Mark D. Mese June marks the beginning of Hurricane Season and should serve as a reminder to review your personal and business property insurance coverage. The effect of recent Hurricanes on the Gulf Coast generally and Louisiana specifically have been significant with respect to both damages and the insurance covering those damages.The one year anniversaries of the 2008 Hurricanes are rapidly approaching and disputes with insurers covering the 2008 losses which have not been resolved may be prejudiced if lawsuits are not filed before the one year anniversary of the losses. The losses caused by the 2008 Hurricanes in South Louisiana will make property insurance renewals more difficult and expensive. Coverage provided by many property carriers is expected to be narrowed and subjected to higher named storm deductibles. Beginning the renewal process on property coverage at least 120 days in advance of the renewal date is advised to ensure a fair opportunity to negotiate acceptable terms ....
    • 363 Sales of Assets in Bankruptcy - Chrysler and Beyond By Eric Lockridge The judge overseeing Chrysler LLC’s bankruptcy entered an order on June 1, 2009 approving Chrysler’s motion seeking permission to sell substantially all of its assets to a new company.  The procedure by which this sale was accomplished, and by which a similar sale in the GM bankruptcy will likely be accomplished, is known in the bankruptcy and finance worlds as a “363 Sale,” after the relevant provision of the U.S. Bankruptcy Code. (For those well-versed in 363 Sales, see Stephen Sather’s thoughtful post about practical and ethical concerns with the Chrysler sale here. )Section 363(b) of the Bankruptcy Code (11 U.S.C. § 363(b)) allows a company that files for bankruptcy (“the Debtor”) to sell some or all of its assets outside the ordinary course of its business, provided that the Debtor obtains court approval to do so. A 363 Sale can be a particularly attractive option for disposing of assets or business lines ....
    • Great Ideas by Employees - Who Owns Them? By Russel O. Primeaux As we continue our shift to a more knowledge-based economy, frequently the greatest assets of a company reside in the creativity of its employees. This is especially true for service companies in which the services can be repeated for multiple customers (example: software). Whether or not a company owns something that has been created by one of its employees will depend to a great extent on the category of intellectual property into which the creation is classified. Generally, the creations or discoveries of employees will fall into the intellectual property categories of copyright, patent, or trade secret.Copyright law states that an employer will own a work protected by copyright if the work was created within the employee’s “scope of employment.” In order to determine whether something is created within the scope of employment, one will look at the position description and the practical duties that the employee actually performed. For example, ....
    • Recent Case Illustrates Need for Advance Tax Planning When Selling a Business By Kevin C. Curry A recent court case illustrates the need for having advance tax planning when selling a business. In the case of Muskat v. U.S., No. 08-1513, 103 AFTR 2d _____, the taxpayer was majority shareholder in a corporation. He and the other shareholders sold all of the stock in the corporation to a third party interested in buying the business. The buyer also agreed to pay the taxpayer $1,000,000.00 for a non-compete agreement. The transaction was documented in this manner. After the fact, the taxpayer realized that the non-compete proceeds would be taxable as ordinary income to him. He attempted to re-characterize the $1,000,000.00 payment as the sale of his personal goodwill and claim capital gains treatment. The IRS denied his claim for a refund and the court agreed with the IRS. The court found that the taxpayer had a significant burden of proof to overcome the manner in which the transaction was documented. The taxpayer could not overcome his burden of proving that the ....
    • American Recovery and Reinvestment Act of 2009: New COBRA Rights and Obligations By A. Edward Hardin, Jr. On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “ARRA”), the comprehensive economic stimulus package. Among its other provisions, the ARRA includes an extension of the right to elect COBRA coverage, a reduction in COBRA premiums for eligible participants, and new notice obligations for employers.Extension of COBRA Election: Under the ARRA, employees who were involuntarily terminated between September 1, 2008 through February 16, 2009, and who do not have COBRA coverage because they either did not initially elect COBRA or elected COBRA, but are no longer covered, will have a second opportunity to elect COBRA coverage or to re-establish COBRA coverage. The new election period began on February 17 (the day the President signed ARRA into law) and ends 60 days after the required notice of the special election period is given. The second election period does not extend COBRA coverage beyond the ....
    • A Taxpayer's Post-Closing Remorse Relating to Tax Allocations by Dean P. Cazenave The federal First Circuit Court of Appeals recently rejected a taxpayer’s claim for a refund based on recharacterization of a payment for a non-competition agreement. Muskat v. United States, 2009 WL 211067 (1st Cir. 2009). In connection with the sale of a business structured as an asset sale, the Buyer and the CEO (who was also the largest shareholder of the Seller) agreed in definitive documents that $1.0 million of the retained CEO’s new compensation package would be allocated to his non-compete covenants. Although the CEO initially recorded that payout as ordinary income for his 1998 taxes, in 2002 he filed an amended return for 1998, recharacterizing the $1 million payment as consideration of his personal goodwill, which he argued entitled him to capital gain treatment (which would have entitled him to a refund of over $200,000). The IRS denied Muskat’s request so he brought an enforcement action against the IRS. The district court, too, ....
    • New Louisiana Regulation Creates Safe Harbor For Certain Equity-Based Compensatory Plans of Privately-Held Companies by Dean P. Cazenave Offers and sales of “securities” must be registered unless there is an applicable exemption from the federal and state securities laws. The most commonly known exemption is the private placement exemption set forth in Regulation D promulgated by the Securities and Exchange Commission under the Securities Act of 1933 (and corresponding private placement exemptions under applicable state “blue sky” laws). Regulation D was primarily designed to facilitate capital raising transactions, as opposed to employee stock option or stock purchase plans. Many people are unaware that when an employer (or controlling Shareholder) sells stock to an employee (even at a discount, or even if to an executive), such a sale is subject to the securities laws and applicable federal and state exemptions from registration must be found.  Federal Rule 701 In 1988, the SEC adopted Rule 701 which exempts from registration securities issued pursuant to a written ....
    • IRS Requires Employer Identification Numbers for Disregarded Entities Beginning in 2009 By Kevin C. Curry Historically, the IRS has said that a disregarded entity could (and maybe should) use the owner's taxpayer identification number for income and other tax purposes. For employment tax reporting, the IRS issued Notice 99-6, 1999-1 CB 321 , which said that employment taxes for employees of a disregarded entity could be reported by a disregarded entity in one of two ways: (1) Calculation, reporting, and payment of all employment tax obligations with respect to employees of a disregarded entity by its owner (as though the employees of the disregarded entity are employed directly by the owner) and under the owner's name and taxpayer identification number; or (2) Separate calculation, reporting, and payment of all employment tax obligations by each state law entity with respect to its employees under its own name and taxpayer identification number.Beginning next year, disregarded entities with employees must have their own employer identification numbers (EIN's) for ....