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Business Newsletter

This newsletter provides insight on recent developments in the law facing businesses today.

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2018

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November 2018

Lessons Learned from Tonawanda Coke Corporation

With the sources from which we receive information being so diverse and services purporting to handle your company’s research being so ubiquitous, it is important to know and understand the rules, regulations and statutes that govern your respective industry.  Western New York residents are familiar with the near decade long battle between the State and Federal Government (specifically the Environmental Protection Agency and the New York State Department of Environmental Conservation) and the Tonawanda Coke Corporation regarding violations of environmental regulations. 

The Tonawanda Coke Corporation, located along the Niagara River approximately a mile north of Buffalo, New York operates a foundry on a one hundred and eighty-eight acre site.  The foundry produces coke, a form of fuel with a high carbon content, which is created by heating coal to a high temperature without contact with oxygen until substantially all of the volatile elements within the coal have been removed.  Coke has a variety of purposes including heating homes and commercial buildings and even smelting iron ores.  However, as a result of the manufacturing process, smoke is produced which emits toxins, particularly benzene, which the CDC says can put those exposed to it at a greater risk of developing leukemia. 

In 2009, a study showed that the foundry at Tonawanda Coke was emitting benzene, among other contaminants, into the air at a much higher rate than the legal limit.  Subsequently, in 2013, Tonawanda Coke was found guilty of violating the Clean Air Act from 2005 through 2009.  This violation led to the Tonawanda Coke Corporation being placed on probation.  In 2016, another study was conducted by the New York State Department of Environmental Conservation, which concluded that although the amount of benzene being emitted was reduced by 92%, Tonawanda Coke was still emitting benzene above the legal limit.  In July of 2018, the New York State Department of Environmental Conservation issued a cease and desist order to Tonawanda Coke and an appeal ensued.  In September of 2018, U.S. District Court Judge William Skretny ruled that Tonawanda Coke violated its probation through emissions from its waste heat stack, and ruled that Tonawanda Coke can still operate, but modified and added additional conditions to the company's probation.

In October of 2018, New York State Department of Environmental Conservation was informed by the Tonawanda Coke Corporation that due to their financial inability to legally operate the plant, Tonawanda Coke Corporation intends to shut down the plant.  The shutdown is being monitored by the New York State Department of Environmental Conservation and the State Department of Labor dispatched a rapid response team to assist impacted workers with intensive job placement.

There are advocates on both sides of the aisle.  Local residents and leaders have been outspoken against Tonawanda Coke and many residents have complained of illness due to the emissions.  On the other end, supporters for the company have generally been workers in the industry and individuals that believe the industry is over regulated by over restrictive laws including the Clean Air Act.

Tonawanda Coke is an example of a worst case scenario situation where noncompliance with or failure to understand the regulations that govern the industry led to a tragic ending for the business.  One of the lessons learned is that it is not enough to just know the best business practices of an industry but one must consider how one’s business may overlap into other sectors and require knowledge of other laws and regulations.  It is important to be active in the professional community of your industry and also consult with attorneys regarding the legal implications of your business.  It is even more important to be proactive in managing one’s business by determining problems that may arise and facing them head on. 

Electronic Wills in the Digital Age?

As many of us have experienced, with every new convenience rendered by technology comes a plethora of complications, some of which lead to legal disputes.  With the promulgation and relative success of electronic filing, courts and legislators have been open to ideas that implement the use of technology to expedite the legal process in an increasingly litigious society.  Some believe that technology should and can be used in handling wills and other types of donative transfers.

A long held and closely guarded idea in American Law as it relates to donative transfers is the idea of freedom of disposition, or in other words, when making a donation one should have absolute control in determining what happens with the subject of that donation.  When most of us make a donation to a non-profit organization, we anticipate the funds will be used in furtherance of the goals of that organization and sometimes we even get to determine how those funds are used or which causes those funds will be directed to.  Similarly, with wills and estate planning, we get to determine who gets what and can even designate a purpose. 

In an effort to expedite the probate process, legal scholars and practitioners have suggested options to courts and legislators for accepting and managing electronic wills. 

As one can imagine, one of the most important factors about a will is its authenticity.  As wills are often contested, courts want to be sure that the testator’s wishes are being fulfilled.  Therefore, a will has certain formalities such as that it must be in writing, it must be signed the testator, and it must be witnessed by two individuals.  To ensure that a testator’s true intentions for his estate plan are given effect these formalities answer the questions of whether or not the decedent intended to make a will and if so, what are the terms of that will.  These formalities also assist the court in determining whether the purported will is authentic and the specific terms of the will.  Formalities act as an evidentiary tool to assist in performing the testator’s wishes without the testator being present to give testimony.  The formalities also have the effect of emphasizing the importance and significance of making a will to the testator (the cautionary function), protect the testator from manipulative imposition (the protective function), and the formalities standardizing the form of wills (the channeling function). 

An electronic will can mean a variety of things.  An electronic will could encompass a situation wherein the testator typed his will on a computer with a word processing program and stored it on the hard drive.  An electronic will could also mean a will signed by the testator using an authenticated digital signature, witnessed or notarized via webcam, and stored by a for profit company.  Scholars have organized the vast array of “electronic will” into three distinct categories including (1) offline electronic wills, (2) online electronic wills, and (3) qualified custodian electronic wills. 

Offline electronic wills are wills that can be typed or even hand written with a stylist onto an electronic device prepared by the testator himself, signed by way of the testator typing his or her name or putting another signatory mark into the electronic document, and stored on the electronic device’s local hard drive.  Generally, this will may remain electronic.  Online electronic wills are those that by their very nature require another private actor, typically a technology company, cell phone service provider, etc. and often times stored on an online server/cloud.  Online electronic wills would hypothetically permit a neutral third-party to provide objective evidence on critical questions such as when the document was created and its authenticity.  The third type of electronic will is the qualified custodian electronic will, which involves a company becoming a “qualified custodian” that would create, execute, and store the testator’s will as required by the rules and regulations of the respective state. 

Although New York State has not implemented a framework for dealing with electronic wills, other countries have started to do so.  It should be noted that even with technology to assist there will no doubt be cases where adding tech to this process will still fall short.  Much of the push for electronic processes within the legal industry is driven by the trend of increasing internet use.  But one thing is for sure, scholars agree that in order to properly implement electronic wills, a systematic approach from courts and legislators is imperative. 

Time to Pay: New York State Attorney General Barbara Underwood puts a Hold on New York State Debt Collection Group

The debt collection operation in Buffalo controlled by Robert Heidenreich including six firms is being sued by the NY Attorney General’s Office for alleged illegal debt collection practices.  The lawsuit claims that the collectors used “deceptive and abusive” tactics when contacting debtors for repayment of debts including allegedly demanding more money from consumers than what they owed and even pretending to be law enforcement or attorneys.  The complaint alleges that employees were instructed to use a variety of un-registered fictitious business names when interacting with consumers and threatened consumers with arrest unless they made payment and even falsely claimed that lawsuits have been filed against consumers. 

The practices of debt collectors are regulated under the Fair Debt Collection Practices Act (FDCPA), wherein debtors are protected from illegal collections made by debt collectors.  The Federal Trade Commission (FTC) has enforcement power over the FDCPA, and as an administrator agency, the FTC assures compliance and administrative enforcement.  Decisions of the FTC to investigate or prosecute alleged violations of the FDCPA are completely discretionary.  It should be noted that the FDCPA is specifically designed to permit states to regulate conduct of a debt collection practice so long as those laws are not inconsistent with the act, thus, the FDCPA serves as a baseline.  New York State allows the Attorney General or the District Attorney of a particular county to bring an action under General Business Law §600 against a debt collector for violations of New York’s Debt Collection Practice Statute therein.  However, unlike the FDCPA, the New York State statute does not afford an individual a private cause of action, but an individual may be entitled to assert a claim for deceptive practices under General Business Law §349.  The FDCPA has specific requirements for contacting debtors, including required information in initial collection letters, privacy requirements that prevent debt collection agencies from referring to themselves as debt collectors on their company envelopes that are mailed to consumers nor are they allowed to send post-cards to consumers alleging a debt.  In the United States, one cannot be arrested or sent to prison for not paying a consumer debt and threats of such action are illegal. 

Whether you have been contacted by a debt collector or you are seeking to collect a debt, it is prudent to consult an attorney to understand your rights as a consumer and/or to understand your options and follow the proper procedure if you are seeking to have a debt collected. 

Prepared by Jonathan A. Emdin, Esq.

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September 2018

Buying Followers? You May Want to Focus on Your Brand Instead

In this modern world of “influencers” and social media fame, it can be hard for brands and businesses to compete with those ranked in the top spots.  Recently, some brands are fighting back against those brands using tactics such as sneaky algorithms and buying followers to stay in the top spots.

In June 2018, Unilever announced it will no longer work with brands or influencers who buy followers and has made a promise to never buy followers, and prioritize those of its partners who increase their transparency and work to eradicate bad business practices throughout social media.  Further, L’Oreal, eBay, and Samsung were all in agreement, as this is something they have been trying to figure out their own solutions to.

The biggest issue is fake accounts set up for influencers to “buy,” thus boosting their social media presence and gaining new consumers.  However, this will prove to be a daunting task as estimates show as many as 15% of Twitter’s 'users' may be fake while up to 60 million Facebook accounts are bots.

Companies will shell out thousands to influencers who have a certain number of followers just for mentioning their brand or product in a post, and while the Association of National Advertisers found that 75% of marketers currently work with influencers, only 36% said they judged their influencer marketing efforts as effective. 

So what exactly is the problem?  On platforms such as Instagram, a single day’s worth of posts tagged using the recommended hashtags #sponsored or #ad were 50% fake engagements and over 40% of total comments were made by bots- not real consumers, not actual people interested in the brand or product.  Those fake engagements might be driving likes and views, but they are not driving the brand.

Unless the individual platforms step up, there is not much that can be done at the moment to decrease these sketchy practices.  However, on an industry wide-level, the Internet Advertising Bureau updated its Good Practice Guidance on Disclosure earlier this year to include influencer marketing to help both advertisers and influencers understand what the rules are and how to comply with them.

The ultimate goal with social media platforms should be rewards based on creativity and professionalism, not likes and followers.

The Arc of Erie County to pay $200,000 settlement with the state Attorney General

The agency, formerly known as Heritage Centers, which caters to children and adults with developmental disabilities, confirmed in March that it had notified families and federal regulatory officials about a coding issue on its website.  This issue exposed Social Security numbers and diagnosis codes of nearly 4,000 individuals.

Not only was personal information exposed in violation of HIPAA, but the information had been exposed for years.

The cyber breach was discovered February 2018, when the agency received a tip from the public that its clients’ personal information was on its website.  This information included full names, social security numbers, gender, race, diagnosis codes, IQs, insurance information, addresses, phone numbers, dates of birth and ages.

A subsequent report by a forensic investigator showed the information was publicly available from July 2015 to February 2018 and affected over 3,500 clients. This internal webpage was supposed to be protected by a log-in requirement. Additionally, the report found that unknown individuals outside the country accessed the information on many occasions.

The agreed to settlement requires The Arc to conduct an analysis of security risks and vulnerabilities of all electronic equipment and data systems, review its policies and procedures, and pay a $200,000 penalty.

Disney’s Summary Judgment Motion Shot Down

On August 10, 2018, a New York federal judge refused to grant summary judgment in favor of Disney in an ongoing case against Nick Sarelli, who has been accused of running a "knock-off business ... built upon the infringement of Plaintiffs' highly valuable intellectual property rights."

More specifically, District Court Judge Daniels threw out most of Disney's trademark claims against Sarelli.  Mr. Sarelli runs a business where he sends out individuals dressed as "The Princess" (i.e. Leia) or "Big Hairy Guy" (i.e. Chewbacca) for special events.  Most important, Judge Daniels recognized some similarity between the characters and the made up names, but does not agree with Disney that Sarelli competes in the same business, or that any customers of Sarelli would ever be confused that he is associated with Disney. 

Judge Daniels points to the glaring fact that it is adults who plan for this entertainment, and not the children.  Further, looking at customer reviews, none of them “suggest the slightest sign of confusion as to the origin, source, affiliation, or sponsorship […], likely to produce 'a diversion of sales, damage to goodwill, or loss of control over reputation.’”  Not surprisingly, the fact Sarelli has been providing these character-for-hire services since 2012 with no recorded instance of confusion, shows there is no likelihood of consumer confusion.

Judge Daniels ultimately granted a motion from Sarelli to reject claims of trademark infringement, unfair competition and false designation of origin, but he did note there may be an issue of dilution.  Daniels found a genuine issue of fact as to whether the use of Disney's marks in connection with a character-for-hire business tarnishes their marks.

What does this mean for similar character-for-hire businesses?  Right now you may defeat a summary judgment motion, but you will likely pay the price in settlement on dilution claims.  Disney Enterprises, Inc. et al v. Avi Lieberman et al, 1:16-cv-02340 (SDNY 2018).

Prepared by Sarah N. Rodman, Esq.

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May 2018

State Legislature Passes Budget

On March 30, 2018, the New York state legislature passed a $168.3 billion state budget for 2018, in what Governor Cuomo called the “most difficult budget we’ve ever done,” due to a $4.4 billion budget gap as well as "attacks" from Washington, in particular the reduction of the state and local tax deduction.

New York is a high-tax state, and recent changes to the federal tax code have prompted state legislators to take action in an attempt to offset the new cap on state and local tax deductions.

First, the budget creates two new state “charitable contribution funds” for health care and education.  In a workaround to lessen the impact of the federal tax law changes, taxpayers could divert some of what they owe to these state funds and claim a credit on their tax returns.  Local governments and school districts will be authorized to take the same steps.

Additionally, the budget authorizes an “alternative employer compensation expense program” to take advantage of the fact that businesses were not affected by the state and local tax deduction changes.  It gives employers the option of implementing a payroll tax for employees that would be offset by a state tax credit for workers.

"It moves from an income tax, primarily, to a payroll tax," Cuomo said.  "Property taxes move to a charitable donation tax.  Again, it's optional.  Some employers will do it, some local governments will do it, but it's our best attempt to avoid the federal assault.  The real answer is to repeal SALT."

Tax experts had viewed Mr. Cuomo’s proposed workarounds with skepticism, warning that many of the ideas were purely academic and had never been tried in practice.  Others worried that the payroll tax workaround would be unpopular with New Yorkers, as it would result in lower gross pay, even if their take-home pay would ultimately remain the same. 

Still, the new tax policies show concrete action being taken to soften the impact of the recent changes to the federal tax code.

Buffalo offered Amazon $500 million in Incentives in Headquarters Pitch

A regional incentive package with separate tax break packages from Buffalo and Rochester was crafted last fall as economic development leaders made an aggressive pitch to Amazon in an effort to bring the “HQ2” Amazon headquarters to Western New York.

Buffalo offered more than $500 million in tax breaks and incentives while Rochester's package included more than $700 million in incentives.  The regional pitch, however, was not enough to land on Amazon’s 20 city short list that includes Boston, Washington and Toronto.  Some 238 cities and regions made offers to Amazon.

Buffalo’s portion of the bid package focused on creating 8 million square feet of space, one of the main incentives Amazon was seeking.  The space included renovating existing structures such as the One Seneca Tower, the HSBC Atrium and portions of the Buffalo News building while also building new structures in Canalside and the Cobblestone District.

The construction would have been done in phases and done with incentives crafted by the Erie County Industrial Development Agency, Empire State Development, New York Power Authority and other public sector agencies.

For Buffalo and Rochester, the offer marked perhaps the most aggressive, collaborative pitch made by the two cities and may be a foundation for future efforts to land high-profile developments.

Tesla Begins Installing Solar Panels Manufactured in Buffalo on Homes

The first customers who ordered Tesla's 'solar roof' products are getting them installed on their houses, a sign that the company's energy strategy is picking up speed.

The solar panels which comprise the roofs are being made at the enormous factory on South Park Avenue in Buffalo, where Tesla and Panasonic are partnering to make the products.  The factory was built and outfitted with the support of $750 million in New York state incentives.  Panasonic also has a separate operation in the Buffalo factory that makes traditional solar panels, which Tesla continues to market and sell.

Tesla, which told analysts last year that its solar shingles were already sold out well into 2018, is delivering solar shingles produced in Buffalo in the order that placements are received.  The first orders were made in California, where the total price of the ‘solar roof,’ after federal incentives, is around $55,000, which includes the panels and batteries.

The facility provides ample capacity for 10,000 solar panels per day, equivalent to one gigawatt per year, providing a competitive edge to cheaper panel factories in Asia and operating as one of the largest facilities of its kind in the world.

Prepared by Eric W. Marriott, Esq.

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February 2018

IRS WARNS OF FORM W-2 PHISHING SCAMS

The IRS has issued a warning to employers to be cautious of a Form W-2 phishing scam. This scam seeks copies of the Form W-2s for employees. The scammers pose as company officials who send emails to their payroll personnel requesting informational copies of all employees’ W-2s. The initial email is conversational and then the follow up emails request the W-2s. The IRS also reported requests for wire transfers once the W-2s have been obtained.

W-2s contain sensitive information including names, addresses, social security numbers and income information. Scammers can use this information to file fraudulent tax returns or sell the vital information.

The IRS began alerting employees early this year in hopes of thwarting scammers’ efforts. Last year over 200 companies were affected, including large and small businesses. This translated into thousands of employees’ information being placed at risk.

The IRS suggests limiting the number of employees that have access to this information to lessen the chances that this data will be compromised. Additionally, employers can report Form W-2 data theft to dataloss@irs.gov. The IRS hopes to lessen the number affected by this scam by proactively informing employers of the potential scam.

CHANGES TO WITHHOLDINGS DUE TO TAX LAW CHANGE

The new rate for income-tax withholdings for 2018 was released via Notice 1036 by the IRS. This update includes the new rates for employers to use in 2018. These rates should be implemented as soon as possible, but no later than February 15, 2018. The new rate brackets were provided through multiple sources including www.forbes.com as shown below:

Individual Taxpayers

Married Filing Jointly

https://www.forbes.com/sites/kellyphillipserb/2016/10/25/irs-announces-2017-tax-rates-standard-deductions-exemption-amounts-and-more/#55bc9e515701

The withholding tables remain compatible with the Forms W-4 which are already utilized by employers and employees to select tax withholdings throughout the year. This will lessen the burden of conforming with the new rates and adjusted withholdings

However, a new W-4 will be offered. The new W-4 will help accurately withhold the correct amount from an employee’s income. This is designed to reduce the over- and under-withholding of taxes throughout the year.

The new tax rates reflect the changes in the tax law, including the increase in the standardized deduction, repeal of personal exemptions and changes to rates and brackets.

NATIONAL GRID RATES EXPECTED TO INCREASE

National Grid and State regulators are attempting to increase fees for residential consumers. The proposal is a three year plan that is anticipated to raise rates by 11 percent by the end of its term.

This plan is expected to increase rates over time in order to lessen the burden on consumers. The initial increase will be $2.22 per month. At the end of the three years, it is expected to be $8.50 per month, which is less than National Grid’s initial proposal that would have increased rates by $11 per month. The increase is anticipated to yield $102 per customer on a yearly basis.

This rate affects both homes and businesses but applies only to the delivery rates that National Grid charges its customers. The agreement also includes $76 million in savings for National Grid. This savings is anticipated due to the new corporate tax rate decrease from 35 percent to 21 percent. National Grid is also expected to invest in improvements to its electricity and national gas delivery networks.

Prepared by Rebecca R. Josefiak, Esq.

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November 2017

Clean Power Plan Dismantled by E.P.A.

The Environmental Protection Agency announced on October 10 that Scott Pruitt, the chief of the agency, had signed a measure to repeal President Barack Obama’s signature policy to curb greenhouse gas emissions from power plants known as the “Clean Power Plan.” 

The Clean Power Plan was first proposed by the E.P.A. in 2014, with the goal of reducing carbon dioxide emissions from electrical power generation by 32 percent by 2030, relative to 2005 levels.  The plan was focused on reducing emissions from coal-burning power plants, as well as increasing the use of renewable energy and energy conservation.  The plan had yet to be fully implemented at the time it was dismantled.

An E.P.A. statement said that the dismantling of the plan will help to “facilitate the development of U.S. energy resources and reduce unnecessary regulatory burdens associated with the development of those resources.”

Governor Cuomo released a statement saying, “The Trump Administration's move to dismantle the Clean Power Plan is a reckless decision that gives power plant operators free reign to do what they will without any concern for our climate. It rolls back the progress we have made to reduce carbon emissions and puts industry interests ahead of our ability to reduce damaging emissions. Climate change is a profound threat to our planet, and it cannot be wished away by denial.” 

"There is no denial here in New York.  While the Trump Administration takes a back a seat to the rest of the world, New York is on track to meet our ambitious target of achieving 50 percent of electricity from renewables by 2030, and we will continue to lead the fight to meet the standards set forth in both the Paris Accord and the Clean Power Plan." 

Mr. Pruitt’s proposal for repeal will now have to go through a formal public-comment period before being finalized, a process that could take months. Mr. Pruitt will also ask the public for comment on what a replacement rule should look like, but the E.P.A. has not offered a timeline. 

New York Attorney General Eric Schneiderman plans to sue the E.P.A. once the repeal is finalized.  In a statement, Mr. Schneiderman said, “Fuel-burning power plants are one of our nation’s largest sources of climate change pollution, and common-sense science — and the law — dictate that E.P.A. take action to cut these emissions,” “I will use every available legal tool to fight their dangerous agenda.”

Vital Water Infrastructure Improvements Coming to Southern Tier

The Southern Tier is set to receive $23 million in grants to support 12 essential drinking water and wastewater infrastructure projects. These grants are part of a $255 million statewide investment, funded through the Water Infrastructure Improvement Act, as well as the new Intermunicipal Water Infrastructure Grants Program.

Under the landmark $2.5 billion Clean Water Infrastructure Act of 2017, announced by Governor Cuomo in April, these grants are part of $255 million in funding available for municipalities statewide to support critical water quality infrastructure projects. The Act also made $30 million available for the new Intermunicipal Water Infrastructure Grants Program, which provides grant funds for two or more municipalities sharing water quality infrastructure.

In the Southern Tier, $23 million in grant funds will leverage $71 million in total costs and provide nearly $43 million in taxpayer savings. This investment is also projected to create 1,160 jobs across the region. Since 2015, inclusive of this latest round of funding, communities in the Southern Tier have received a total of $57 million in WIIA grant and IMG funds supporting $348 million in total project costs.

The projects announced include upgrades and replacements for drinking water systems, filtration plants and water mains, as well as the construction or enhancement of wastewater treatment plants, pump stations, and sewer systems.

In addition to grants, EFC provides interest-free and low-interest loans to communities further enhancing the taxpayer savings related to the development of these projects. The grants announced are expected to be supplemented with over $48 million in these low-cost loans.

Winners of the Western New York Smart Growth Community Fund Announced

Four Western New York communities have been selected to receive up to $10 million in funding from the Buffalo Billion II initiative. The City of Dunkirk, City of North Tonawanda, City of Lackawanna and Village of Gowanda are recipients of Smart Growth Community Funds for projects that utilize existing infrastructure to support placemaking, walkable communities and sustainable development.

Following the example of successful locations such as Brooklyn, NY, Roanoke, VA, and Bend, OR - the Western New York Regional Economic Development Council is embracing growth and downtown redevelopment as core economic goals in its Strategy for Prosperity. Businesses are increasingly locating in or near vibrant, walkable downtowns built on the principles of smart growth because that's where the millennial workforce wants to live, work, and raise a family. Investments in existing downtowns also have been found to reduce local infrastructure and municipal service costs, thus helping to ease fiscal difficulties. 

The WNYREDC made recommendations for Dunkirk, North Tonawanda, Lackawanna and Gowanda to receive a portion of the available Smart Growth Community funding. Following approval of these nominations, Empire State Development staff made a visit to each of the four recommended communities to discuss their proposed project list and to better understand the locations and readiness of each project. The visit report was presented at the WNYREDC meeting in August and received approval from the committee to proceed with the awards.

Four Western New York communities were chosen based on applications and interviews that closely aligned with and met criteria of the Smart Growth Community Funds. The remaining $10 million of the fund will be awarded in future smart growth rounds.

Recipients of the Western New York Smart Growth Community Fund are included with funding recommended by the Western New York REDC below:

City of Dunkirk: Up to $2.5 million

City of North Tonawanda: Up to $2.5 million

City of Lackawanna: Up to $2.5 million

Village of Gowanda: Up to $2.5 million

The Smart Growth Community Fund follows two rounds of the Better Buffalo Fund, which provided funding from the Buffalo Billion for the Buffalo Main Streets Initiative and Transit-Oriented Development.  Over the past two years, the Better Buffalo Fund has provided over $20 million in support for projects that create compact, vibrant, mixed-use neighborhoods and ensure that all residents have access to the city's emerging job centers in the area.

Investments in historic preservation tax credits since the program was expanded in 2013 have also resulted in more than $3 billion in investments from both the state and federal tax credit.  In Western New York alone, 88 projects are yielding $532.2 million in qualified rehabilitation costs.  That represents the largest number of projects in any region of the state and the largest dollar investment of any region excluding New York City.

Prepared by Eric W. Marriott, Esq.

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August 2017

New York’s Paid Family Leave Is Set to Be Most Comprehensive Program of Its Kind

Beginning January 1, 2018, New York’s Paid Family Leave will provide residents the opportunity to bond with a new child, care for a loved one with a serious illness or help alleviate the family pressures when a family member is called upon for active military service.  New York’s program does not require an employee to first exhaust his/her sick leave or vacation time before using Paid Family Leave 

All New York full-time and part-time private employees are eligible for Paid Family Leave.  Participation in the program is not optional for private employees.  Public employees, however, may be covered if his/her employer opts into the program.  Employees working 20 hours or more per week are eligible for Paid Family Leave after 26 weeks of employment.  Employees who work less than 20 hours per week are eligible after 175 days have been worked.

Maternity and paternity leave is available only after birth and is not available for prenatal care.  Starting in 2018, individuals may be eligible for up to 8 weeks of employee-funded Paid Family Leave.  The number of weeks is set to increase over a four-year period.  A parent may take Paid Family Leave during the first 12 months following the birth, adoption or fostering of a child.

Paid Family Leave allows employees to care for a “close relative” with a serious health condition.  A close relative includes a spouse, domestic partner, child, parent, parent-in-law, grandparent or grandchild.  The program defines serious health condition as “an illness, injury, impairment, or physical or mental condition that involves: inpatient care in a hospital, hospice, or residential health care facility or continuing treatment or continuing supervision by a health care provider.”  Lastly, Paid Family Leave is also available to those families eligible for time off pursuant to the military provisions in the federal Family Medical Leave Act.

How Does the American Health Care Act Differ From the Affordable Care Act

In an effort to repeal and replace the Affordable Care Act (ACA”), the House of Representatives’ Bill, commonly known as the American Health Care Act (“AHCA”), has met much debate.  The Senate just recently released its own draft of the House’s counterpart known as the Better Care Reconciliation Act (“BCRA”). 

According to the Congressional Budget Office (“CBO”), 23 million fewer Americans will be insured under the House’s proposal while 22 million Americans would become uninsured under the Senate’s proposal.  Key areas of both Republican proposals would affect insurance cost, the insurance mandate and guaranteed coverage for individuals with preexisting conditions. 

With respect to insurance cost, the House’s proposal permits subsidies to continue but they are based upon an individual’s age, not income.  The Senate’s proposal, however, still links aid to an individual’s income but caps the amount at 350% of the poverty level, which would be a decrease when compared to the current law.    

The ACA mandates that all individuals maintain health insurance coverage or be subject to a tax penalty.  Both the House and Senate’s bills eliminate the tax penalty for failing to purchase health insurance.  Under the House bill, anyone without insurance for more than two months would face a six-month waiting period in order to purchase a new plan.  Similar to the House bill, under the Senate’s proposal individuals who do not have continuous coverage would be required to wait six months before being able to purchase a new plan.

Under the ACA, insurers cannot deny coverage for preexisting conditions or charge sick individuals higher premiums.  The House’s proposal permits states to obtain waivers from several consumer protections in order to limit those conditions that insurers must cover.  Under this proposal, states could permit insurers to charge individuals with certain health conditions more for their insurance.  Additionally, elderly consumers could face premiums at a rate of five times more than younger consumers could face.  The Senate’s proposal also permits states to limit certain health conditions that insurers must cover, but does not allow insurers to charge sick individuals more for their coverage.  Just as is the case with the House’s proposal, elderly consumers could be charged five time more for their premiums than younger individuals could.     

IRS Office of Appeals Rolls Out Virtual Conferences

Taxpayers will soon have the ability to participate in virtual conferences with the Appeals Office when a pilot test rolls out on August 1, 2017.  According to the Internal Revenue Service (“IRS”), the Office of Appeals hears appeals from over 100,000 taxpayers.  Currently, videoconference is only available at a limited number of IRS sites.    

The pilot program is being implemented in hopes of promoting better efficiency in allowing taxpayers greater flexibility and remote access to the Office of Appeals.  The pilot program “will utilize a secure, web-based screen-sharing platform to connect with taxpayers face-to-face from anywhere they have internet access.”

Prepared by Nicholas M. Hriczko, Esq.

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May 2017

 

President Trump Unveils Plan for Sweeping Tax-Cuts for Corporations

On April 26, President Trump unveiled the blue prints to his plan for an overhaul of the tax code, including a proposal to lower the corporate tax rate to 15 percent. The current U.S. corporate tax rate is 35%, the highest among developed economies. Many smaller businesses don't pay the corporate rate but funnel their income through the individual tax code. The President’s plan would allow millions of these small businesses, known as “pass-throughs” or “S corporations,” to use the 15 percent rate as well. These businesses are often small, family-owned firms, but they can also be large partnerships, such as hedge funds or law firms.

White House officials claim the proposed 15% tax rate won’t be a loophole for rich people who should be paying higher rates; however, they offered no details as to how they would insure against this.  

Trump also proposed a one-time tax “holiday” to encourage companies to bring several trillions of dollars held in other countries back into the United States. This process, called “repatriation,” is controversial. Critics allege that money is brought back and then paid out in dividends to shareholders instead of being used for hiring and investing.

In addition to changes to how businesses are taxed, Trump’s proposal would also impact individual taxpayers.  The plan calls for the replacement of the current seven bracket system with three new income tax brackets of 10 percent, 25 percent, and 35 percent based on a person’s income. The proposal also roughly doubles the standard deduction and calls for the abolishment of the alternative-minimum tax and estate tax.

To offset the loss of revenue proposed by the cuts, Trumps plan will virtually eliminate all tax deductions that Americans now claim except those for mortgage interest, retirement savings, and charitable giving. Also eliminated would be the tax deduction Americans now claim for the state and local taxes they pay each calendar year. 

The goal, according to White House officials, is to cut taxes so much and so fast that it will lead to immediate economic growth, creating more jobs and producing trillions of dollars in new revenue and wealth over the next decade.

Democrats and many budget analysts are skeptical that Trump can slash taxes without causing budget deficits to soar.

Labatt to Open Flagship Brewery and Restaurant in Buffalo

Labatt USA recently announced it will open a flagship restaurant and small test brewery called the “John Labatt House” in Buffalo’s Cobblestone District as part of a project by Pegula Sports and Entertainment to redevelop a five-story warehouse on Perry Street near KeyBank Center.
Details of the plan are still in development, but Labatt will be the main tenant in the redevelopment of the Hi-Temp Fabrication building at 79 Perry Street into retail, commercial, and residential space. Labatt, which employs 56 people locally, also plans to relocate its headquarters from Fountain Plaza to the building’s second floor.

The first floor of the building will contain Labatt’s new brewery and restaurant, which, according to Labatt USA executives, will be used as a pilot project to develop and test new products before bringing them to market. The restaurant and brewery will be the first of their kind for Labatt in the United States.

Both Labatt and Pegula executives cited the two companies’ long relationship as instrumental in developing the project. Labatt has partnered with the Sabres for 30 years and the Bills for 25 years and has also worked with Buffalo-based Try-It Distributing for over 70 years.

The first phase of the Hi –Temp building’s redevelopment is expected to be completed by fall 2018, with the office space coming before the restaurant. Located at the corner of Illinois and Perry streets, the 79,030-square-foot building was constructed in 1914 as a manufacturing plant for Peerless Mill Supply Co.

The proposal to turn the building into a restaurant, commercial and residential space is the latest in a string of new developments in the Cobblestone District, including updates at the Seneca Buffalo Creek Casino and the redevelopment of the Fairmont Creamery Building on Scott Street. Mayor Byron W. Brown said he has tallied more than $635 million in development in the district since 2012.

Ridesharing is Coming to Upstate New York

Ride-hailing services will be coming to upstate New York this summer under a state budget agreement passed in April.

After being unable to reach a deal last year to allow companies like Uber and Lyft to operate outside New York City, Governor Andrew Cuomo and lawmakers were able to find a compromise this year.

The agreement creates a statewide system called the Transportation Network Companies’ (TNC) operational license, to regulate the industry, giving oversight to the state Department of Motor Vehicles.

TNC companies will need to have insurance coverage levels of at least $1.25 million while a TNC driver is traveling to pick up a passenger and until the drop-off is completed. The state will also establish standards to ensure passenger safety, including mandatory background checks, ongoing monitoring for traffic safety, anti-discrimination protections, and zero-tolerance drug and alcohol policies.

Rides are also expected to include a 4 percent sales tax, and counties and large upstate cities may opt out of the law.

The state will also create a board to review the law as it is implemented. The law is expected to take effect in 90 days.

Prepared by Andrew D. Fiske

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February 2017

New York State Anticipates Implication Issues with New Multi-Tiered Minimum Wage System

In April 2016, New York approved a multi-tiered minimum wage system, which took effect December 31, 2016.  The structure of the new law sets minimum wages according to the geographic location of the employer and in some cases the size of the employer’s workforce.  Further, the new law requires annual increases over the course of several years, ultimately resulting in a $15.00 an hour minimum wage, across all counties.

Due to the multi-tiered nature of the new minimum wage law, the government anticipates that implementing the wage increases will be problematic for many employers.  In response to the anticipated problems, Governor Cuomo has called for a “transition period,” during which the state will not seek to punish employers who do not raise the pay of minimum-wage workers simply because of ignorance of the law.  Instead, during the transitionary period, only employers who show “willful” or “egregious” violations will be sanctioned.  In order to educate employers across the state, Governor Cuomo has assembled a task force of two hundred state employees to fan out across the state and inform employers of their obligations under the new minimum wage law.

The new minimum wage rate schedule is as follows:

Location

12/31/16

12/31/17

12/31/18

12/31/19

12/31/20

2021*

NYC- 11 employees or more

$ 11.00

$ 13.00

$ 15.00

 

 

 

NYC – 10 employees or less

$ 10.50

$ 12.00

$ 13.50

$ 15.00

 

 

Long Island/ Westchester

$ 10.00

$ 11.00

$ 12.00

$ 13.00

$ 14.00

$ 15.00

Remainder of NY

$   9.70

$ 10.40

$ 11.10

$ 11.80

$ 12.50

*

 

* Annual increases for the remainder of the state will continue until the rate reaches the $15.00 minimum wage. However, this rate has not yet been determined. Starting in 2021, the annual increases will be determined by the Director of the Division of Budget.

Effective January 1, 2017, The IRS Released Its Standard Mileage Rates

The rates are as follows:

  • 53.5 cents per mile for business miles driven
  • 17 cents per mile driven for medical or moving purposes; an
  • 14 cents per mile driven in service of charitable organizations.
In comparison to the 2016 rates, the business mileage rate decreased .5 cents per mile.  The miles driven for medical or moving purposes decreased 2 cents per mile and miles driven in service of charitable organizations remained the same.

The standard rates are based on annual studies of the fixed and variable costs of operating a vehicle for business, medical, or moving purposes.  These standard rates are optional and employers are afforded the opportunity to calculate and apply the actual costs of using their vehicle.  However, a taxpayer may not utilize the business standard mileage rates if it also claimed a depreciation using any method under the Modified Accelerated Cost Recovery System or claiming a Section 179 deduction.  Additionally, a taxpayer may not use the standard mileage rates for more than four vehicle used simultaneously.

What Does a Trump Presidency Mean for Small Business Owners?

President Trump has laid out some major economic policies that could affect small businesses.  First, President Trump has advocated lowering the income tax on all companies to 15 percent.  Corporate tax rates currently range from 15 percent to 35 percent.  However, the tax law cannot be changed without Congress’ approval, which has historically had trouble agreeing on tax reform.  It is presently unclear, whether these proposed changes will pass.  Further, because 83% of small-business owners are incorporated such that they pay business taxes on their individual tax returns, President Trump would need to also lower individual income taxes to truly benefit small-business owners.

The President has also said that he plans to repeal the Affordable Care Act (‘ACA”) immediately.  He has stated that he would prefer that the states deal with the health-care issues of their residents.  It is unclear at this time how his plans will be implemented or regulated.  President Trump’s supporters are hopeful that deregulation of the insurance industry will vastly lower premiums, making it more affordable for employers to offer their employees health insurance.  However, reports released by the U.S. Treasury Department revealed that in 2014, 1 in 5 people who purchased health care through the ACA exchange were small-business owners and that 31 percent of non-group health insurance enrollees were self-employed.  Those that oppose the repealing of the ACA argue that these statistics demonstrate that the ACA was instrumental in helping small employers acquire coverage they would not have otherwise had.  Many democrats in the Senate have vowed to attempt to block a repeal of the ACA.  Whether they would be successful in doing so is currently unclear.  Equally unclear, is with what President Trump intends to replace the ACA.

Prepared by Justina L. Potenzo

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2016

February
May
August

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May 2016

Britain’s Departure from the European Union has Wide Implications for the U.S. Economy

On June 24, 2016, Britain voted to leave the European Union, sending shockwaves worldwide, including within the U.S. Economy. As such, although trade between the United States and Britain makes up only 0.5% of U.S. economic activity, this change could have implications beyond any direct trade between the two nations.

One of the biggest fears amongst economists is that the European Union may be on the decline as a whole. In light of this decision by Britain, other countries such as France, Italy, Greece, and the Netherlands have begun discussing holding their own referendum votes. Because the European Union is a substantial trade partner with the United States and China, many trade agreements between the two would need to be reorganized should dissolution result.

Additionally, on the day of the vote, the U.S. dollar was up 6.3% over the British pound. This was reportedly the biggest single-day gain since the 1960s. Although this is beneficial to American travelers, U.S. business sales outside of the United States have plummeted. The stronger the U.S. dollar, the more expensive products become to buyers outside of the U.S. Thus, a stronger dollar typically correlates with lower U.S. exports. However, while the U.S. dollar was soaring, Wall Street was not so fortunate. Following the opening bell on June 24, 2016, Wall Street almost immediately dropped 500 points.

Finally, Britain’s departure from the European Union forced the Federal Reserve to revamp its plans for interest rate hikes in 2016. In late 2015, the Federal Reserve projected raising rates four times in 2016, which would indicate recovery from the “Great Recession.” The first rate hike occurred in December of 2015, and was the first increase to occur in almost a decade. However, with uncertainty in the global markets, the Federal Reserve has scaled back its plans and may now only be calling for one rate hike in 2016.

Recent Changes to Department of Labor’s Overtime Regulations will Automatically Extend Overtime Pay Protection to Over 4 Million Workers within the First Year

On May 18, 2016, President Obama and Secretary of Labor Thomas Perez announced the publication of the Final Rule with respect to changes in the overtime regulations. These changes will extend overtime pay protection to over 4 million workers within the first year, and will become effective on December 1, 2016. The regulations will apply to both hourly and non-exempt salaried employees.

Prior to the change in regulations, overtime was only automatically guaranteed to employees earning less than $23,660 per year.  After December 1, 2016, employees earning less than $47,476 will be automatically guaranteed overtime for any work beyond their forty hours.

Additionally, the Final Rule raises the compensation level for highly compensated employees subject to a more minimal duties test from $100,000 to $134,004. The duties test, which affects the determination of who is exempt from overtime, has not been changed as a part of the Final Rule.

Finally, a mechanism has been established to automatically update the salary and compensation levels every three years. This will ensure that the salary and compensation levels keep up with the ever-changing market. The first automatic update is scheduled to take place in 2020.

A study performed by the Department of Labor revealed that although these changes may seem harsh on private employers, only 20% of the affected employees regularly work overtime. Of the remaining 80%, 19% work overtime occasionally and 60% don’t work overtime at all.

Key Bank Gets the Final “OK” on the First Niagara Merger

By August 1, 2016, First Niagara Bank will become part of KeyCorp, the parent of Key Bank.

On October 30, 2015, KeyCorp and First Niagara Financial Group announced that they had entered into an agreement wherein KeyCorp would acquire First Niagara in a cash and stock transaction totaling $4.1 billion. This merger will make KeyCorp the 13th largest commercial bank headquartered in the United States.

But what does that mean for First Niagara Shareholders? Under the terms of the agreement, First Niagara shareholders will receive 0.68 KeyCorp shares and $2.30 in cash for each common share in First Niagara. As such, per share consideration will be valued at $11.40.

Upon completion of this transaction, KeyCorp will have approximately $99.8 billion in deposits, $83.6 billion in loans, and 1,366 branches across 15 states. The majority of the branches being merged are located in the upstate New York region.  The branch consolidations are expected to start in October of 2016 and continue throughout 2017.

Finally, as those in Buffalo are all too familiar with, the name of Buffalo’s only professional sports arena, currently operating as the “First Niagara Center,” will become the “Key Bank Center” for the 2016-2017 Buffalo Sabres season.

Prepared by Ashley E. Trank

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May 2016

Alcoholic Beverage Panel Recommends Modernizing Alcoholic Beverage Control Law

On Wednesday, April 13, the Alcoholic Beverage Control Law Working Group released its final report recommending ways to streamline and modernize New York’s 82 year old Alcoholic Beverage Control Law.

The 19 member group, created by Governor Andrew Cuomo last November, consists of the Chairman of the State Liquor Authority, Executive Director of State Law Revision Commission, and many industry experts and stakeholders. Governor Cuomo created the panel to determine ways to break the bureaucratic barriers contained in the law. The panel’s goal is to promote the state’s burgeoning craft wine, beer, and spirit business and bring the law into the modern era.

The Panel’s report recommends amending the long controversial law that prohibits alcohol sales before noon on Sundays. The recommendations address concerns of Sunday brunch patrons, wine tourists, fans of NFL teams playing in London, and fans of Premier League soccer. The recommendation would allow for the sale and distribution of alcohol at bars and restaurants as early as 8:00 a.m.

The State Panel also recommended streamlining the process for bars to obtain liquor licenses. The recommended reorganization of the licensing system would reduce the number of licenses required from nine to three.

Assembly Majority Leader Joe Morelle (D-Monroe County) has already introduced a bill in this regard and looks forward to working with the Governor in effectuating these reforms. Governor Cuomo intends to review the recommendations and propose some legislation before the end of session in June.

Five Major Banks Are Still “Too Big To Fail”

On Wednesday, April 13, the Federal Reserve and FDIC issued long reports to five of the eight “too big to fail” banks rejecting their “living wills”. The regulators found that the five banks did not have credible plans to wind down in the event of a crisis. Should one of the banks require protection of the Bankruptcy Law, the current living wills would not be sufficient to maintain order during the process and prevent financial crisis, the regulators found.

The five banks faulted include Bank of America, Bank of New York Mellon, JPMorgan Chase, State Street, and Wells Fargo. Morgan Stanley and Goldman Sachs were faulted by only one of the two regulators each, and CitiGroup received approval from both the Federal Reserve and the FDIC.

The “too big to fail” banks are facing this increased regulation after the passing of 2010’s Dodd-Frank Act. The Dodd-Frank Act was as passed in response to the financial crisis of 2008. The Act puts in place a regulatory system operating with much more oversight to engender a safer and more stable financial system. 

The five banks have until October 1 to fix the living wills. Failure to do so will allow the Federal Reserve and FDIC to impose further restrictions on the banks’ activities, which could include raising capital levels. If the banks do not satisfy the regulators’ concerns within the next two years, the banks may be forced to sell assets.

State LGBT Legislation Impacts Local Business

Within the past year, several states including Georgia and North Carolina have passed legislation under the guise of religious freedom and privacy laws that effectuate a weakening of laws protecting LGBT rights. The states engaged in this discriminatory legislative action have seen backlash from big and small business alike in the form of boycotts.

The City of Charlotte recently passed an LGBT non-discrimination ordinance to allow transgender citizens to use public bathrooms corresponding with their gender identity as opposed to their designation on their birth certificate. In response, the state legislature rushed HB2 – a law blocking local governments from passing anti-discrimination ordinances.

Big business struck back against the discriminatory law, threatening to take a large economic toll on a state already facing fierce competition in its prized tech industry from such technology hubs as New York City, Silicon Valley, and Boston. After the anti-LGBT state legislation, PayPal decided to terminate its recently announced plans to build a 3.6 million dollar global operation center in Charlotte which would bring 400 new jobs. Google Ventures CEO, Bill Maris, pledged not to invest in any companies from the State of North Carolina until the new law is repealed Also, Deutsche Bank has withdrawn a facility upgrade it contemplated that would have brought 250 new jobs, in response to the legislation

The entertainment sector has also responded, potentially harming the State’s economy. The NBA has begun to consider whether it should relocate its All-Star Game, which is scheduled to be played in North Carolina next season. Many artists and performers, including Bruce Springsteen and Cirque du Soleil, have begun cancelling shows in North Carolina, refusing to travel to the state.

Additionally, other states have begun poaching the top names in businesses headquartered in North Carolina. Connecticut legislators have begun measures to lure Bank of America away from North Carolina into a state that shares its social values and supports its LGBT workforce.

Small business owners have also been instrumental in combating the discriminatory legislation. Over 170 small businesses signed a petition calling for the bill’s repeal in the name of human rights.

The State of Georgia has seen similar backlash for discriminatory legislation that would have made it easier for businesses to deny services to same-sex couples. Georgia Governor Nathan Deal recently vetoed a religious freedom bill that would have allowed businesses to deny service to same sex couples. Gov. Deal vetoed the bill after facing immense pressure from many businesses including Apple, IBM, American Airlines, Comcast and the NFL.

North Carolina and Georgia are just two examples of many states seeing economic disruption due to the passing of discriminatory legislation. States that were once ripe for startups and small business are appearing less favorable with the advancement of such legislation and could significantly impact their respective economies and business growth. One particular example of the economic impact in North Carolina is the Greater Raleigh Convention Center, which lost 6 firm bookings, amounting to a loss of $2.4 million since the passage of the bill in March. The Convention Center indicated 16 more bookings are in jeopardy amounting to a potential loss of $44 million.

The impact and response to this recent wave of anti-LGBT legislation demonstrates the power of big business in effectuating social change and the good that can be done as here in the fight for protecting human rights. 

Prepared by Richard J. Zielinski

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February 2016

Governor Cuomo’s 2016 Agenda Includes Significant Tax Relief for Small Businesses

In an effort to increase regional economic development, Governor Cuomo unveiled his fourth proposal to his 2016 agenda which focuses on tax breaks for small businesses.  Governor Cuomo’s fourth proposal is projected to save small businesses approximately $298 million dollars annually.  If all goes according to plan, statewide savings could soar to $1.2 billion dollars by 2021.

The plan is simple in that it will impact those small businesses that file under the corporate tax code.  For those small businesses that qualify, Governor Cuomo proposes to reduce the net income tax rate from 6.5 percent to 4 percent.  The tax rate reduction is set to take effect on January 1, 2017.

In order to qualify as a small business for this tax break, the business must have “less than 100 employees, with net income below $390,000.00.”

Additionally, Governor Cuomo also proposed tax breaks for small businesses whose members pay taxes via the personal income tax.  As it stands, sole proprietors and small farming business are eligible to subtract 5 percent of their income from their tax calculations.  Under his proposal, Governor Cuomo plans to increase the exclusion to 15 percent.  The Governor also intends to extend the exclusion to other small business such as partnerships, S-corporations and LLCs.  However, these business entities must derive “some” income from an entity “with less than &1.5 million [dollars] in New York gross receipts, and their total business income from these sources is below $250.000.”

According to the Governor’s press release, approximately 1,091,000 small businesses across New York State will be able to benefit from the new proposals.  A regional breakdown of the small businesses that will benefit from the Governor’s proposals are as follows:


North Country

19,271

Mohawk

21,121

Southern Tier

27,558

Central New York

37,047

Capital Region

54,518

Finger Lakes

55,478

Western New York

65,600

Hudson Valley

134,863

Long Island

191,632

New York City

483,912


IRS Raises Tangible Property Expensing Threshold

By raising the threshold from $500 to $2,500, the IRS has simplified record keeping requirements for small businesses with respect to deducting certain capital gains.

This change only affects those businesses that do not maintain an applicable financial statement (audited financial statement).  Further, the change will only impact those amounts spent to “acquire, produce or improve” tangible property which would otherwise qualify as a capital gain. 

Therefore, the threshold increase allows small businesses to immediately deduct certain expenditures which would typically have needed to be spread over a period of years through annual depreciation deductions.

Although the threshold has been increased, small businesses will still be able to claim deductible repair and maintenance costs even if the business exceeds the $2,500 threshold.

The new threshold will take effect commencing with the 2016 tax year.

IRS Announces 2016 Standard Mileage Rates

Effective January 1, 2016, the IRS released its optional standard mileage rates.  Those rates are as follows:

  • 54 cents per mile for business miles driven
  • 19 cents per mile driven for medical or moving purposes; and
  • 14 cents per mile driven in service of charitable organizations.

In comparison to the 2015 rates, the business mileage rate decreased 3.5 cents per mile while the medical and moving rates decreased 4 cents per mile.

According to the IRS, the standard business mileage rate is based on an annual study of the fixed and variable costs of operating an automobile.

A taxpayer does have the option of calculating the “actual costs” associated with the use of an automobile instead of using the standard mileage rates.  However, a taxpayer may not utilize the business standard mileage rates if it also claimed a depreciation using any method under the Modified Accelerated Cost Recovery System or claiming a Section 179 deduction.

Prepared by Nicholas M. Hriczko

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2015

February
May
August
November

 

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November 2015

 

IRS Announces 2016 Pension Plan & Retirement Item Limitations

            In October, the Internal Revenue Service announced cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2016.  While the pension plan limitations generally remained unchanged, certain other limitations will change due to an increase in the cost-of-living index.

Limitations that changed from 2015 to 2016 include:

  • The deduction for an IRA contributor who is not covered by a workplace retirement plan and is married to someone is covered is phased out if the couple’s income is between $184,000 and $194,000, up from $183,000 and $193,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000.  For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,500 for married couples filing jointly, up from $61,000; $46,125 for heads of household, up from $45,750; and $30,750 for married individuals filing separately and for singles, up from $30,500.

Limitations that remain unchanged from 2015 include:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Low Income Equals Low Participation Rate in Employer-Sponsored Health Care

            Nearly one year after the first phase of The Affordable Care Act’s employer-sponsored mandate went into effect (companies with 100 or more workers), many business owners say that very few employees are purchasing the insurance that they are now required to offer.  The trend is even more noticeable among small to mid-size businesses in fields with low-wage hourly workers, such as restaurants, retail, and hospitality.

            As of the first quarter of 2015, the number of uninsured Americans under the age of 65 was 10.7%, down from 17.5% five years ago.  The Obama administration estimates that 14 million previously uninsured adults have gained coverage in the past two years.  However, the majority of these gains are the result of a vast expansion in Medicaid and subsidies that aid lower-income people to buy insurance through federal and state exchanges.

            The health care law defines affordable employer-sponsored insurance as that priced at 9.5% or less of an employee’s annual household income, however, several “safe-harbor” provisions may be utilized for compliance, notably, simply basing the calculation upon only their own employees’ wages.  Regardless, experts say that the employer mandate has not had any noticeable effect on the number of workers who enroll in employer-sponsored plans.

Recent studies show that workers making $15,000 to $20,000 a year only purchase employer-sponsored plans 37% of the time.  That rate rises at every income increment, until $45,000, when it reaches 82% and then levels off.  This low participation could pose problems for smaller employers, as insurers may be reluctant to sell policies with low enrollment.  And, even though the new law prohibits such minimum participation rules as a basis to initially deny coverage, there is no rule prohibiting insurers from dropping the policy after the first year.

Let the Hunger Games Begin!

Seven regions in New York State are battling in Albany for a share of the $1.5 billion in economic development money. The competition, created by Gov. Andrew Cuomo, has been dubbed the “hunger games,” because, under the rules, only the three regions with the best ideas for use of the money will win. Four other regions will lose out on funds.

The regions vying in the contest include the Finger Lakes, the Southern Tier, central New York, the Mohawk Valley, the Capital Region, the mid-Hudson Valley, and the North Country. The Buffalo region is not competing because it already received the Buffalo Billion as the centerpiece of Cuomo’s plan to jumpstart the upstate economy.

Perhaps the most intriguing idea presented so far by the regions is the North Country’s plan to return the Olympics to New York. Representatives from the region say Lake Placid could once again play host to the winter games, as it did in 1932 and 1980, the year of the renowned “Miracle on Ice” hockey game. Other ideas from the regions include using the money to expand high-tech industries, health sciences, public artwork, high speed trains, and craft brewing.

Despite the flashy moniker and excitement surrounding the contest, the plan is not without its critics. There are some who say the state would be better served by spending taxpayer money on crumbling infrastructure rather than on subsidized development.

Others, however, are touting the contest, saying that the competition among the regions is eliciting fresh ideas and hope for rejuvenation in areas of the state that have been declining for the the past 40 years.

Although only three regions will get to split the $1.5 billion in the contest, the four regions who don’t win will still receive at least $75 million through the regular regional awards held each December.

Prepared by Andrew D. Fiske

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August 2015

Proposal to Expand Eligibility for Overtime Pay May Add to Number of Low-Paid Workers

Under a proposal by the Obama administration, salaried employees earning less that $50,400 annually would be eligible for time and a half pay when they work more than 40 hours a week.  However, some experts predict that the current proposal to expand eligibility for overtime, which is intended to boost what workers earn, may in fact have the opposite of its intended effect and instead add to the number of low-paid workers.  Experts predict that instead of operating businesses with smaller numbers of more experienced employees, employers may instead limit the hours of higher paid employees by using more part-time workers.  The proposal is still in public comment period and implementation is not expected until next year.

Figures Showing Low United States Inflation are Slightly Deceptive

The low U.S. inflation, as reported by Federal Reserve officials, has been well below the central bank’s target for 3 years.  However, this figure may be deceptive.  The overall inflation rate has been measured as below 2% per year, but this number may obscure what is actually happening in the market.  Although prices of goods have been falling, the cost of services has increased.  For example, over the last 12 months the prices of goods fell 3.3% while the prices of services were up 2%.  One of the factors influencing the increase in cost of services includes the rising labor costs in service industries, a factor which may increase further in importance given the mandatory increases in minimum wage.

Consumer Reviews Increasingly Important in Business Ratings

The “sharing economy” is becoming increasingly present in the American marketplace as companies like Airbnb (posting of spare rooms) Lyft, Uber, Sidecar (ride sharing), RelayRides, Getaround (car rental) DogVacay, Rover (pet boarding) allow individuals to provide services independently from the traditionally regulated marketplace.  These sharing services are reputation-based systems that rely on consumer reviews and ratings to police both bad service providers and bad users.  For example, those posting rooms for rent on Airbnb are rated by guests that stay at the property.  Likewise the guests that stay at the property are in turn rated by their host.  Users of Airbnb can view other users’ ratings and use this information to decide whether to rent from or to a given individual. 

The “sharing economy” has the benefit for small businesses of existing outside government regulations and the licensing laws that are different in every state.   The rising importance of consumer reviews will change the likely reshape the economy as we know it.  While consumer reviews and reputational mechanisms will not ever completely replace governmental regulation and consumer protection regulations, it is likely that these reputation based ratings will have an impact on other business realms and may eventually replace some aspects of business regulation that are currently under governmental regulation.  Additionally, some experts predict reputation systems may play increasing importance in dealing with problems in the health care industry. 

Business owners even outside of these burgeoning service sharing companies should be aware of the emergence of these reputation based systems in order to anticipate the effect such rating systems may potentially have on their own businesses in the near future.

 

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May 2015

IPO Stocks May Not Be Worth Their Hype

Many people are interested in whether they should invest in an Initial Public Offering (IPO), which are the first shares offered by a new publicly traded company.  IPOs often draw a lot of media attention relative to companies that obtained fame prior to their status as a new publicly traded company (think: Facebook). 

One reason buying shares of IPOs is more complicated than investing in established stocks is the lack of information available about past sales, earnings and statistics.  While established stocks have reviewable history of performance charts, IPO companies listed on the open market for the first time are often only accompanied by chart analysis

Additionally, be aware that the share price often increases heavily in the first few weeks of the sale.  With a high number of buyers and lower number of sellers, the hype following the initial breakthrough of an IPO company recently listed in the market for the first time does not guarantee that the company will do well.  It is imperative to do some objective research on the company instead of just relying on news articles, which are often fueled by consumer trends and interest.

Know that you will not lose out on profitable gains if you do not buy in on the IPOs first day.  A good tip is to determine the lock-up period and watch how the stock fluctuates in the week after the lock-up expires.  If the stock value plummets in the first few weeks, this could indicate that shares are being sold rapidly, and you may decide the stock is not worth owning.

As with any stock, IPOs should be researched and investigated just as thoroughly as any established stocks.  Taking the time to calculate potential pit falls before buying will result in a more calculated risk and ultimately a benefit to your portfolio.

Verizon/AOL Deal Anticipated to be Completed this Summer

Analysts predict Verizon’s purchase of AOL for $4.4 billion will be completed by the end of summer 2015.  The math works out to $50.00 per share and will result in Verizon gaining such AOL assets as the Huffington Post, TechCrunch and AOL.com.

Though it may seem surprising, AOL’s first quarter earnings report shows that more than 2.1 million people still use dial up internet services.  As part of the acquisition, Verizon will gain control over AOL’s subscription services. 

Analysts report that the deal could result in more advertising and ad targeting from Verizon toward consumers.  This could manifest itself through personalized ads, online videos and content placed on Verizon handsets.  Verizon will also have access to the “One by AOL” platform, which lets customers buy ads across media platforms, including video, internet and television. 

Gender Gap Widens as Women’s Share of New Businesses Falls

In 2014, women opened just 36.8% of new U.S. businesses.  Over the last nineteen years, this figure has dropped 4%, and it is likely reflective of both macroeconomic factors and unique obstacles facing female entrepreneurs, according to analysts.

Though male and female business owners tend to approach entrepreneurship with similar credit profiles, an Experian analysis shows that men are more likely to start contracting or plumbing and heating companies, while women are more likely to open beauty shops, retail stores and personal-services businesses.  Additionally, studies have shown that women have significantly less access to start up capital.  Between 2011 and 2013, only 3% of total venture-capital investments went to companies with a female CEO and only 9% of seed funding was awarded with a female CEO. 

New data also shows that the percentage of people under age 30 who own a private business has reached a 24-year-low.  Among women ages 35-44, start up activity has fallen 20% since 1996 while simultaneously rising 16% for men in the same age group.  Part of this trend could be due to self-perception. Only 45.9% of U.S. women felt they had the capabilities to be an entrepreneur, compared with 61% of men who felt they were capable of being an entrepreneur. 

Buying a Used Car? Avoid These Known Pitfalls

With more than 50% of purchasers open to buying used cars, there has never been a more important time to be an educated auto consumer.  Experts consistently advocate “do your research” before purchasing, but what exactly does that mean?  Here are the most common tips we have seen from the pros.

  1. Request vehicle certifications on any car you’re interested in purchasing.  Certification insures that whichever vehicle you’re considering, though used, still carries some type of warranty from the dealership.  If the car is not certified, you have the option of requesting that the dealer certify it.  However, if the car is not already certified and you have to request dealer certification, be prepared to pay higher than sticker price for the vehicle.
  2. Beware of driving off the lot before a finance deal has been approved.  Since the majority of car sales occur on the weekends, deals are often made outside the hours of finance companies.  If you finance through the dealership, be sure to ask whether your finance deal has been approved before driving off the lot.  Additionally, it’s often cheaper to forego the dealership’s loan altogether and instead work with a local bank or Credit Union to come up with your own financing plan. 
  3. Finally, get a vehicle history report.  Vehicle history reports are sold by numerous companies so long as you can provide the vehicle identification number (VIN) or even just a license plate number.  Negative indicators on a vehicle history report can include anything from a salvage title, which means the vehicle was once declared totaled by an insurance company, to reports of the odometer being rolled back. 

Prepared by Katelyn Dieffenderfer

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February 2015

IRS Warns of Identity Thieves During Tax Season

Tax season is upon us and for some this means a substantial refund check may be due from the government.  However, you may not be the only one seeking to cash in on your refund.  Over the past five years, the IRS has seen a steadily increasing number of fraudulent returns being paid out.  Identity thieves are obtaining Social Security numbers from unknowing individuals, filing their tax returns, and stealing their refunds.

If you are a victim of stolen identity and a fraudulent tax refund has been submitted, you can file a case with the IRS.  However, it typically takes about four months for the IRS to review your claim, determine that the filing was fraudulent, and allow you to resubmit your taxes and receive a refund.  For some, this may prove to be not only a hassle but also a strain on an individual’s finances.

Internally, the IRS indicates that it is taking a number of steps to prevent fraudulent tax returns prior to them being paid out.  The IRS claims that it has stopped approximately 19 million suspicious returns since 2011 and has protected more than $63 billion in fraudulent returns.  It also provides a number of safety measures individuals can take to ensured that their identities are not stolen and that they will not become victim to fraudulent tax return filings.  While you cannot protect yourself entirely, you can ensure that you only provide your Social Security number when necessary and only on protected websites.  The IRS also advised that individuals do not carry their Social Security card with them or keep in their wallet any documents containing the Social Security number or tax identification number for businesses.  These steps will decrease the chances that your identity will be stolen and decreasing your chances of having to deal with the hassle of a fraudulently filed tax return.

Your Retirement Checklist: Hiring a Financial Advisor and Asking the Right Questions

One of the most important issues in preparing for retirement, and also ensuring the future viability of your finances, involves the determination of whether hiring a financial advisor is beneficial to your circumstances.  Certainly engaging the services of a financial advisor is not a decision to take lightly and many individuals may be hesitant in paying for these services, especially considering the trust problems currently surrounding the financial industry.

Despite these trust issues, financial advisors could provide honest, competent and important advice in preparing for your future and the viability and sustainability of your finances.  So, when hiring a financial advisor, you should treat it as if you were hiring a babysitter for your children.  Ask the right questions and make sure that you are comfortable paying this individual with your hard earned money.  But what questions should you ask?

There are a number of standard questions you should ask a financial advisor prior to retaining their services.  What credentials do they have?  You will want to know the educational background and experience of your financial advisor.  What they know and how they know it matters, and their track record for securing retirement is important.  Remember to check whether the advisor is considered a Certified Financial Planner (CFP) or a Chartered Financial Consultant (ChFc).  Do some Internet research and determine if your planner is highly regarded.  Do not hesitate to ask for a list of qualifications and resources from the advisor.

How much will you charge and how am I going to be billed?  This is one of the most basic questions of hiring individuals for the provision of services.  You will want to know whether your advisor will be billing you annually or quarterly and whether the advisor will be taking a commission based on a percentage of your investments, whether they will be charging an hourly or flat fee for their advice, or doing both.  Make sure that your advisor is willing to provide a breakdown of the services provided and how much each item is costing you.

How will I know if your advice is working?  Good advisors will make sure that their clients are advised at every step of the way, not just when certain investments give them high payouts.  Check with your advisor regarding their policies of advising their clients of all of their investments and the status of their investments.  You should always know where your investments are at and how the advisor is acting in the best interest of you and your assets.

The Top 1% of Your State: How Much Richer are They?

With income and minimum wage on the rise, many people are asking how much it takes to get into the top 1% in every state.  According to a report issued by the Economic Policy Institute, which compared IRS data for the 2012 tax returns submitted in each state, the answer to this question may vary.

Interestingly, income data for all fifty states revealed that the five easiest states to get into the top 1% consisted of Arkansas, New Mexico, West Virginia, Kentucky, and Mississippi.  For example, in Arkansas, you only need to meet a threshold of $228,298.00 in income to be in the top 1% of that State.  Similarly, in New Mexico the threshold was $240,847.00 and in West Virginia the threshold was $242,774.00.  Kentucky had a threshold of $262,653.00 and Mississippi had a threshold of $262,809.00.  West Virginia was the only state to report an income decline between the years 2009 and 2012 with all other states declaring some sort of income growth.

What states are the hardest to get into the top 1%?  Connecticut was listed as the number one most difficult state to be in the top 1% with a threshold of $677,608.00.  Behind Connecticut with a threshold of $555,341.00 was the District of Columbia followed by New Jersey with a threshold of $538,666.00.  Massachusetts came in fourth rank for the hardest to get into the top 1% with a threshold of $532,328.00 and New York State came in fifth with a threshold of $506,051.00.

This study provides a clear definition of the economic status of the states and the income received by its residents.  The northeast generally reports the largest income base in the country and declares the largest gap between the top 1% and everyone else.

Bitcoin Expected to Explode as New, Efficient Currency

On Monday, February 2, 2015, the first U.S. bitcoin exchange is due to open and discussions about the success of bitcoin and the financial industry is on the rise.

But, what is bitcoin?  Bitcoin is defined by Bitcoin.org as a “new payment system and completely digital money utilized in a peer-to-peer payment network” and “powered by users with no central authority or middlemen”.  In essence, bitcoin is like cash for the Internet.  Individuals are free to exchange bitcoin as currency for both goods and services via mobile apps or computer programs that provide a virtual “wallet”.  These apps and programs issue each bitcoin user a ledger similar to that issued by a bank for a savings or checking account.  This ledger will allow each user to track their transactions.  Each user is responsible for their own bitcoin and has full control over the exchange of their bitcoins.  And bitcoins are currently being used by a growing number of businesses and individuals worldwide.  A number of large businesses reported to be using bitcoin includes restaurants, law firms, and popular online companies such as Namecheap, WordPress and Reddit.  At the end of 2013, bitcoin.org reported a circulation exceeding 1.5 billion U.S. dollars worth of bitcoins exchanged daily.

This new bitcoin technology may seem like the key to virtual wallets and the hands free future of our finances.  However, the introduction of bitcoins has not been without its security failures.

One of the largest bitcoin users, Mt. Gox, filed bankruptcy in 2014 after losing hundreds of millions of dollars in bitcoins due to an electronic attack.  Bitstamp was forced to shut down and suspend services after losing nearly $5.2 million U.S. dollars worth of bitcoins.  A number of companies do have security in place to fight these electronic attacks and despite these unknowns, bitcoin is expected to explode in worth exceeding that of companies like American Express, Visa and MasterCard.

Prepared by Leah Constanzo

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November 2014

 

Independent Health Becomes More User Friendly

Offering a health care plan that is user friendly and promotes the health and well being of its members may benefit small businesses.  Independent Health has made an effort to become more user friendly in order to benefit employees and employers.  They offer a full range of plan options including low premium plans with ways for employees to lower their out of pocket costs and earn money back.  Independent Health offers a range of plans for small and large employers. 

Additionally, Independent Health offers tools to help employees better manage their own health leading to healthier lives.  Some of these tools include Fit Works, a 24 hour medical help line, a treatment cost advisor and an Independent Health Application for smart phones. The Independent Health “App” allows members to search Independent Health’s local network for participating doctors, allows them to access their member ID card and provides a summary of their health care information.

Furthermore, Independent Health has partnered with local businesses to offer programs that help individuals and families improve their health.  These organizations include the Buffalo Bills, the Biggest Loser Resort Niagara and Fitness in the Parks at the YMCA Buffalo/Niagara.  Many of these organizations offer different exercise classes, nutrition classes and education on living a healthy life style.  Offering tools to a healthy lifestyle can lead to a more productive workforce.

Health Insurance for “Small” Groups

Legislation under the Affordable Health Care Act that takes effect January 1, 2016 could affect small businesses. As of January 1, 2016, Federal Law will impact how health plans are financed for employers with 51 to 100 employees, also known as “small” groups.  Specific requirements for insurers covering “small” groups currently include employers with 50 or fewer employees in New York State. However, starting January 1, 2016, “small” groups will be defined at 100 or less.  

This will affect the type of policies available to employers of this size. Currently, the law requires that policies for “small” groups be “community rated policies” and include certain benefits and underwriting requirements.  Additionally, insurance carriers are not permitted to use “stop loss” policies.  Stop loss policies are typically found in self-funded plans.  The federal deadline which New York will have to comply with will change the small groups to cover 100 or fewer employees.  For small groups, the most common insurance policy will be the community rated products which typically have higher premiums. 

However, legislation is being proposed which will change these requirements and allow for variation in dealing with small group policies.

Combating a Negative Internet Review

First impressions and opinions of a business can develop long before a consumer comes into contact with the business’ products or services.  Internet reviews have become highly influential in a consumer’s choice of product or service. Unfortunately, not all reviews found online are accurate and many negative reviews have a damaging effect on businesses.  One unhappy customer, an ex-employee or even competitors can easily tarnish a good reputation by posting negative reviews. However, there are several ways to combat negative comments and reviews.

In order to protect your online reputation, there are online programs that help monitor your reviews. Google Alerts is a program that sends alerts when new reviews are posted so you can easily track what is being posted. Responses to negative or fraudulent comments should be public and polite. Back and forth comments will only make the negative comment more noticeable. Therefore, the response should be kept to one short post. However, having a few negative reviews provides customers with a more credible view of the company.

Small Businesses Eligible for Health Insurance Tax Credit

In previous years, small businesses were eligible for a tax credit for providing health care for their employees. Small businesses were eligible for a maximum of 35 percent credit for health insurance premiums paid for employees. Tax exempt employers were eligible for a maximum of 25 percent of premiums paid. However, starting in 2014, the maximum credit will increase to 50 percent and 35 percent, respectively.

In order to qualify for the credit, an employer must pay 50 percent of their employees’ healthcare. This does not include families or dependants. Additionally, the business must employ fewer than 25 full-time equivalent employees, with an average wage of less than $50,000.00 per year.

The tax credit is relatively flexible as well.  If a business does not owe any tax during a specific year, but would be eligible for the credit, the credit can be carried forward to other tax years. A business expense deduction may be available for small businesses that paid more in health insurance premiums than their eligible credit. Small tax exempt employers may be eligible for a refund if the employer has no taxable income and the refunded credit does not exceed the income tax withholding or Medicare tax liability. These refunds are subject to sequestration. Refund payments processed on or before October 1, 2014 and on or before September 30, 2015 are reduced by the sequestration rate of 7.3 percent.

The credit can be obtained by filing IRS Form 8941. The IRS website has additional information on claiming the tax credit.

Prepared by Rebecca R. Josefiak

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August 2014

Government Grants are Worth Exploring When Considering the Expansion of Your Business

Applying for government grant funds is probably not the first course of action small business owners consider when looking for capital to upgrade equipment or expand their business. However, there are a variety of programs in New York State intended for just that purpose. These programs exist at the federal, state and municipal levels.

While grants do not require repayment, they come with strings attached; these requirements are often aligned with national, state, or local interests. Grant applications can be quite complex. In some cases grant applications are rejected simply for a failure to follow instructions or provide all of the necessary information. Businesses should consider seeking help from a professional grant writing service in these instances.

If you are looking for grant programs to help you expand your business, purchase new equipment or hire and train new employees, consider the following resources:

Beware of Cyber Squatters, Preserve Your Right to a Domain Name for Business Web Site and Online Presence

Small business owners should keep in mind that intellectual property rights extend beyond patents. Securing intellectual property rights to trademarks, copyrights, or web addresses is a relatively inexpensive process. Unfortunately, some entities scan recent trademark registrations and then, in bad faith, purchase and hold the internet domain that the trademark holder likely intends to use with their registered mark. These bad actors are known as cyber squatters. Cyber squatters claim the domain name with the intent of selling it to the trademark holder at an inflated price when the mark holder realizes the domain name they would like is already taken.

The Uniform Domain-Name Dispute-Resolution Policy (UDRP) is one forum that can be utilized to resolve this type of dispute.  For more information on the UDRP visit https://www.icann.org. Attempting to resolve a domain name dispute via the UDRP is generally less expensive than seeking a legal remedy in a US court. However, US Courts can and have overruled UDRP decisions. The result of UDRP arbitration is not binding and does not prevent a party from filing for relief in a US court regarding the same domain name dispute. Domain name disputes are brought in US courts under the Lanham (Trademark) Act, more specifically, a 1999 addition to the statute known as the Anticybersquatting Consumer Protection Act (ACPA).

A trademark registrant should keep in mind that a separate process is required to secure any desired domain name. By securing both the mark and the domain name simultaneously a business can hopefully prevent itself from falling prey to cyber squatters.

401(K) Plans Have Become Increasingly Viable for Small Businesses

In 2008, just ten percent of small businesses offered 401(k) plans to their employees. In 2014, one in four small businesses (with less than 50 employees) offer a 401 (k) benefit. While it has increased in popularity, a minority of small businesses offer this type of benefit.

Offering a 401(k) benefit can boost recruiting and retention of employees over the long term. Moreover, a 401(k) provides a more effective way for small business owners to save for retirement.  A business owner is limited to a $5,500 annual contribution to an individual retirement fund or Roth IRA ($6,500 if over 50 years old). This is just one third of the maximum contribution permitted by a 401(k) plan.

The cost of setting up and administering a 401(k) plan has decreased considerably. Some basic plans start at $1000 per year. Additionally, there are tax incentives to assist with starting a new plan. Many 401(k) providers offer a variety of levels of customization and hands on assistance or financial planning advice for employees enrolled in the plan.

There is often a misconception that small businesses seeking to start a 401(k) plan will be required to provide a dollar for dollar match. For a traditional 401(k) plan this is not true. The confusion stems from a provision of the Employee Retirement Income Security Act which prohibits companies from allowing the highest-paid employees to contribute disproportionately more than the rest of the work force. Specifically, the average contribution of the highly paid group cannot be more than 2 percentage points higher than the average for rank-and-file employees. If the average employee contributes 5 percent of salary to the plan, for example, the average for the highest-paid employees cannot exceed 7 percent. Some businesses, in order to avoid the inconvenience of addressing this rule, opt for safe harbor plans which require an employer contribution.

If a business owner is uncertain whether they can sustain the contributions required in a safe harbor plan they can always start with a traditional plan and change over when revenue streams become more consistent.

Communicating Cyber Security Measures to Online Customers is Key to Boosting Confidence in Online Consumer Transactions

Online shoppers tend to view small businesses as more likely targets for hackers and data theft in the online market place. Recent history shows that it is also difficult for large corporations to reassure customers that their information is safe when completing online transactions.

There are several steps a small business can take to reassure their online customers. First, get a security badge or security credentials from a brand name in cyber security. This security badge indicates to consumers that your site is in compliance with a set of cyber security standards. For example, McAfee offers small business solutions in which McAfee will routinely scan your online store for vulnerabilities. Your business is in turn provided with a code that will show the security badge on your website and indicate to consumers that your site is trusted.

Second, appearances are quite important. A polished online presence conveys a sense of security to your customers. An online store should appear updated and professional. Major online retailers like Amazon or Zappos! provide a good example to follow.

Third, when reports of a new online security threat or an instance of data theft emerges, it is best to acknowledge the new threat and let your customers know how you are addressing or have already addressed this new security issue. Communicating that you are proactive on the issue of cyber security is key to maintaining and building customer confidence.

Prepared by Christopher S. Safulko

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May 2014

President Obama Issues Executive Orders to Curb “Pay Secrecy Policies” At the Workplace

“Pay Secrecy” refers to workplace policies that prohibit employees from discussing how much money they make.  A survey of private-sector employers from 2001 found that more than one-third of companies had specific policies that banned workers from discussing their compensation with their co-workers. 

In April 2014, President Obama announced two executive orders designed to create more transparency in the rate of pay at work and close the gender wage gap.  The first Executive Order directs the Department of Labor to collect more information on what federal contractors pay their employees.  The second Executive Order prohibits federal contractors from retaliating against employees who talk about their salaries or other compensation information. 

Even before President Obama’s Executive Order of 2014, protections already existed to prohibit federal contractors from retaliating against employees who talked about their salaries or other compensation information.  Under the National Labor Relations Act enacted in 1935, an employer who wrongly terminated an employee for discussing compensation with other employees could be made to pay back pay to the wrongfully terminated employee and to offer that employee back their old job. President Obama’s Executive Order is intended to create greater visibility for that already existing labor law.  Additionally, the Executive Order provides additional penalties that go beyond the National Labor Board’s punishments by providing that companies who retaliate against employees for talking about pay could lose a federal contract.

Businesses that contract with the federal government should take caution not to institute “pay secrecy” policies at the risk of losing valuable government business.

Under The Affordable Care Act, Employers Can Take Advantage of Eligibility Formulas to Classify Employees as “Variable-Hour Employees” To Exclude Employees from Company-Sponsored Health Coverage

About sixty-eight percent of United States employers have “variable-hour employees” according to a survey done by consulting firm, Mercer LLC.  “Variable-hour employees” are those employees whose hours change on a weekly or seasonal basis.

The effect of classifying an employee as “variable-hour” under the Affordable Care Act, is to make that worker ineligible for employer-sponsored health care and benefits and force that employee to seek health insurance on the public exchanges. 

The compliance deadline for the Affordable Care Act is January 1, 2015 for employers.   The IRS allows companies to use a “look-back” period of three to twelve months to calculate an employee’s average weekly hours.  Employers can then lock in that status for six months to a year.  According to a March 2014 report done by Mercer LLC, fifty-five percent of employers with variable workers say they will use the twelve month look-back. 

Businesses should carefully consider the cost benefit that classifying employees as “variable-hour employees” can have on operations, along with any possible negative impact that loss of employee benefits may have on retaining or attracting new employees.     

MyRA Plans Offer New Retirement Savings Options for Workers Without Access to Employer-Sponsored Plans.

In January 2014, President Obama announced a new type of retirement saving account dubbed ” myRA”.  These myRA accounts function as retirement savings accounts for employees who do not have access to employer-sponsored retirement plans such as a 401(k).  According to data collected by the Employee Benefit Research Institute in November 2013, only forty-nine percent of all workers and only thirty percent of part-time, full-year workers have access to a retirement savings plan through work. 

The myRA accounts operate much like traditional Roth IRA accounts.   myRA accounts are open to individuals earning less than $129,000 and couples earning less than $191,000, and there is an annual contribution limit of $5,500.  Unlike the Roth IRA accounts, the myRA accounts offer a single investment option of a government savings bond.  Thus, the principal in a myRA is guaranteed by the government, making this a safe choice for conservative investors.   The average rate of return for government savings bonds from 2003 through 2012 was 3.61%.  Additionally, unlike traditional retirement accounts, there are no penalties for early withdrawals.

Although employers will not administer myRA accounts or contribute to them, employers will have to set up automatic payroll deductions to accommodate employees.   An employee can open a myRA account with twenty-five dollars and make subsequent contributions of “after tax” dollars via payroll deductions as small as five dollars. 

Companies Should Consider Purchasing Insurance for Computer Network Operations and Data and Privacy Breaches Not Covered by General Liability Policies.

A 2012 survey conducted by Towers Watson indicated that seventy-two percent of companies surveyed had not purchased insurance coverage for computer network operations, or data or privacy breaches.  Business owners should take care to carefully review their insurance policies because this type of cyber coverage is typically not included with general liability coverage and must be purchased as an additional rider or endorsement for electronic data liability. 

A typical CGL policy covers only “property damage” to “tangible property.”  Many of these CGL policies will write out coverage for electronic data by including language such that electronic data is not considered to be tangible property.  Even policies that do not specifically write out coverage for electronically stored data may disclaim coverage for damage done by third-party hackers, because damage done by these third-party hackers is not covered by the policy.

Cyber Security Liability Coverage can be purchased as an additional rider to cover loss of digital assets caused by (1) accidental damage or destruction, (2) administrative or operational mistakes, and (3) computer crimes and computer attacks.  In this computer-driven business age, businesses should review their current insurance coverage and consider obtaining additional coverage to protect against hackers and destruction of electronic data.

 

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2013

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November 2013

The Government Shutdown has Lasting Effects on the Bottom Line for Many U.S. Companies

Although the federal government shutdown is behind us, many companies are still feeling its impact by way of a decrease in expected earnings for the year. This may have been foreseeable for some companies, but other businesses are reeling from the somewhat unexpected financial loss.

It certainly does not come as a surprise that the government shutdown has had ramifications on companies with federal contracts. It was also expected that the real estate market would take a hit as a result of the inability to process FHA mortgages, and that the tourism business would likely suffer as federally-owned attractions nationwide were closed.

What some perhaps failed to consider, however, was the possible effect of the shutdown on consumer-driven companies, such as retailers and airliners. Both EBay and Wal-Mart experienced decreased sales during the shutdown. These companies attributed their loss of business to a decrease in consumer confidence. It was thought that consumers may be hesitant to spend money on non-essential items in the wake of the shutdown. 

Airlines also experienced a decrease in sales during the shutdown. Southwest Airlines estimated that the shutdown cost its company approximately $20 million in revenue. US Airways also took a hit, reporting that airline bookings fell approximately 8% in late September and early October, likely as a result of the fact that federal employees were no longer traveling for business. 

The hope is that most of these companies will be able to bounce back from this relatively brief decrease in business. Such a comeback may be able to boost consumer confidence to the extent that sales and revenue will come close to the companies' original projected profits. One would hope that such a recovery would limit the extent of the overall economic ramifications of the shutdown.

Employers Feeling the Heat from Affordable Care Act

Although the implementation of the large employer mandate under the new Affordable Care Act has been delayed until 2015, many companies are already taking steps to ensure that their business is not hit with stiff fines and penalties for failing to comply with the Act. 

The large employer mandate requires that big businesses, defined as those with fifty or more full-time employees, provide health insurance for their employees.  The Act requires that this coverage meet certain minimum standards.  These heightened standards will likely increase the already high premiums paid by the employers for these insurance plans. The penalty for failing to comply with these standards can result in fines of up to $40,000.  

This impending financial burden has caused many companies to act now to avoid facing punitive actions from the government later. Some employers have transferred full-time employees to part-time positions in order to avoid having the minimum number of full-time employees to fall under the ambit of the Act. Other companies have even resorted to laying employees off.

This trend may have catastrophic results not only for individual employees who may lose their jobs or full-time positions, but for the employer as well. It stands to reason that these companies, by getting rid of valued employees, may no longer have the manpower to remain competitive in their field. This could result in additional financial losses and may even cause some businesses to close their doors. 

This is all very speculative at this time; we won’t know with any kind of certainty the impact that that Act will have on these types of businesses until the large business mandate takes effect. By delaying the enforcement of this provision of the Act, some businesses may be able to plan for the added financial responsibility. If they do not, however, the consequences could be disastrous. 

Advantages of Employer-Provided Day Care

As more and more employers are realizing that finding convenient child care is an issue for many of their employees, many companies have begun to offer on-site daycare services. These services provide many advantages not only to employees, but to employers as well.

For employees, one huge advantage of on-site day care is the ability to check on their children during coffee or lunch breaks to make sure they are being properly cared for. This can ease a worker's mind with respect to worrying about their children so they are able to concentrate more on their jobs. On-site daycare can also be a huge timesaver and source of convenience for parents who may otherwise have to travel long distances before and after work to bring their children to daycare.

Providing on-site daycare is often in the best interest of the employer as well. In a work force where many people struggle to find a balance between work and home, such a perk is a huge advantage in both recruiting and job retention where employees may otherwise be unable or unwilling to work outside the home. On-site day care is also deemed to be excellent for employee morale, as employees who are able to interact with their children during the work day are more positive and happy with their employers. This can often result in increased productivity from employees.

Although it may not be feasible for all employers to provide on-site daycare, it is hard to argue with the obvious benefits to both businesses and their employees who are able to provide this service.

Prepared by Katie L. Renda

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August 2013

Taking Advantage of the Home Office Tax Deduction.

If you maintain a home office, it is often a question whether you should deduct the costs of same on your income taxes.  The IRS rule says that your home must be a principal place of business, which means you have no additional primary work place, such as a desk or office at another location. 

There is a two-part IRS test to determine if you can deduct the costs of maintaining a home office on your income taxes.  The first part is whether you are administering your business from your home office.  If you use your home office substantially and regularly, in IRS terminology, it should qualify.  The second part of the IRS test states that your home office must be used exclusively for conducting business.  It does not matter what your home office looks like but it has to be used only as a home office and you cannot sign your personal checks or help your daughter with her homework from that location. 

Generally, deductions for a home office are based on the percentage of the home that is devoted to business use.  This is established by measuring the area of the entire home and then determining what percentage of the total square footage of the home is devoted to office space.  There are options for claiming the home office deduction.  The first is a simplified reporting option which allows the taxpayer to write off $5.00 per square foot up to 300 square feet of home office space for a total tax deduction of $1,500.00.  If more than 300 square feet of the taxpayer's home is used or the taxpayer needs to take a depreciation deduction for the portion of the home used for business, the standard reporting option should be used.   

Preparing a Family Business for the Next Generation.

Baby boomers are reaching retirement age at the rate of 10,000 per day.  That is prompting family businesses to be passed down to the younger generations.  Of course, such transitions are not easy and can be made more difficult due to generational disconnects.  In order to smooth the transition, it is suggested that the following be considered: 

  • Train and coach the successors who will one day lead the business.  It is important to get the successor(s) to buy into the company's vision and mission.  With technology, customer service looks very different in execution today than it did some years ago, but the principles remain the same.  If the current owner works to instill the mission and the vision in the minds of business successors, it will help build the legacy of the business. 
  • Let the members of the younger generations working in your business fail, at least occasionally.  If people are allowed to make mistakes and cope with them on their own, it offers greater learning experience.  It is advisable not to let the failures become catastrophic, but let the next generation make a mistake now and then.  It is better to let them make the mistake now when you are there to catch them rather than make the mistake later after you are gone.  
  • Call on the next generation to help smooth difficult transactions with their children.  Generation X'ers born between 1965 and 1982 can help ease difficult transitions.  They are the best at making every generation feel like there is a place for them in the work place.  They can create bridges between their fathers and their little brothers because they are open to using technology and experimenting, but they can also understand the traditional ways of doing business. 
  • Do not set unrealistic expectations.  Do not leave your company thinking that it is going to grow by 50 percent by year's end.
  • Do not turn over company technology and social media to successors without mastering it yourself.  While it is a good idea to leave your younger successors to manage these parts of the business, it is important to understand what these things do to ensure the business is still being run properly and not being derailed by their new tools. 

How to Classify Student Workers in Your Small Business.

If your business is planning on hiring some college students as interns, it is often a question as to how to treat them for tax purposes.  If you plan to pay your student workers, you should determine whether they are independent contractors or employees. 

If the interns' work schedules are set, they are assigned tasks and they work on site, then they are considered employees.  If they do projects for your company and for other companies, set their own hours and work completely independently, they may be classified as self-employed.  It is important to get the details right.  If you treat people who should be considered employees as independent contractors, you could be held liable for employment taxes for those workers. 

The major difference from the employer's end is that you must withhold payroll taxes from your employees' salaries and match their social security and Medicare taxes, while you do not withhold taxes or contribute a match on the amount you pay independent contractors.  While you pay independent contractors, it is incumbent on them to pay their own self-employment taxes.  Even if a student is classified as an employee, because they presumably worked for a few weeks or months, you will likely not be required to give those students benefits such as health insurance or pension contributions. 

Electric Car Owners Get Taxed for Not Paying Gas Taxes.

Virginia will soon charge green car owners $64.00 a year to make up for lost gas tax revenue. 

Gas taxes are one of the main sources for states' funding for bridges and roads.  People are driving more fuel efficient cars and many states' tax rates have not kept up with inflation during the past decade.  That has left less money available for repairs.

Lost tax revenue is a big reason why Washington State and Virginia are levying green car taxes.  New Jersey, North Carolina, Indiana and at least four other states are considering doing the same. 

The real issue is that traditional cars are becoming more efficient and gas mileage will continue to improve because of the Obama Administration mandate that cars reach 54.5 miles per gallon by 2025.  More miles per gallon means less gas tax per mile.

 

Prepared by Katy M. Hedges

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May 2013

Earning More But Spending Less: Consumerism Tightens as the Economy Grows

The stock market has reached historically high levels, unemployment rates are at an all-time low, and educational achievements and job approval are skyrocketing.  Despite the most successful sustained growth in the economy since the 2008 recession, consumers remain resistant to reinvestment in the retail market, and it may be due to an unreliable past.  This year alone, retail sales have decreased by $1.8 billion.  Spending on gasoline, electronics, appliances and general merchandise has seen an approximate 2% decline.  Motor vehicle sales have plummeted.  Consumers are avoiding major purchases at retail outlets and opting to prepare meals at home rather than dining in restaurants.  Although it is unknown why consumers are spending less, retailers speculate that the drop in spending has more to do with the recent payroll tax increase and less to do with the state of the economy. 

Not all markets are in despair, however.  A report generated by the Commerce Department reflected a sharp rise in real estate purchases and housing-related spending.  Consumers appear to be more comfortable spending on their homes and less so on unreliable retail purchases such as vehicles and electronics. 

Regardless of these trends, retailers expect to see sales pick up over the next few months, particularly entering the spring season, as consumers learn to manage their smaller take-home income. 

TaxTime Brings about Skepticism, Scammers and Identity Theft

Without fail, every year beginning in January and continuing on through April, taxpayers rush to file their tax returns in the hope of receiving that long-awaited refund check.  Many Americans rely on this refund check to pay bills, buy basic necessities or to save for future expenses.  However, every year, thousands of Americans receive notification from the IRS that their returns have been rejected.  A common reason for the rejection is identity theft. 

The crime is simple: scammers steal the taxpayer's identification, file a phony tax return and receive a check or deposit for the taxpayer's refund, all while the taxpayer is unaware.  When the taxpayer later files his/her tax return, the IRS rejects the return.  In 2012 alone, approximately 650,000 Americans received rejected tax return notices due to this scam.  And, since electronic filing and automatic deposits have made filing taxes easier than ever, the numbers are quickly rising. 

For those taxpayers who have been scammed, reissuance of a refund check will not be easy.  Although the IRS has created an identity fraud department to investigate tax crimes, it may still take six months just for the IRS to perform an investigation.  Additionally, many tax refund fraud victims are also victims of other types of identity fraud. 

The Manhattan District Attorney's Office stated that they investigate approximately 300 new identity theft cases each month.  With cyber crimes at an all-time high, growing substantially as technology evolves, this problem becomes increasingly more significant and, unfortunately, more common. 

The Importance of Keeping Your Zip Code Under Wraps

Ever wonder why you receive coupons, magazines or advertisements mailed to your home, which appear to be closely, and almost eerily, related to your lifestyle?  A new study has shown that each time a consumer willingly provides their zip code at the check-out counter, data companies and other retailers are permitted to track everything from their body size to their bad habits. 

Five-digit zip codes give you more than a Google search.  Your zip code enables companies to know your marital status, whether you are purchasing or selling real estate, if you smoke cigarettes and even the ages of your children.  These companies then target specific consumers for their products in an attempt to increase sales.  But, consumers are being tracked without their knowledge.  And, companies are predicting what you plan to do next—storing information including political affiliations, educational background, income level and more. 

Providing your zip code at the check-out counter is now as safe as posting a picture on Facebook.  The Federal Trade Commission only requires information used for credit, employment, insurance, health or housing to be kept private.  So, the next time you make a purchase and the cashier asks for your zip code, you may want to think twice; unless you want your clothing size and child's diaper brand made public.

Prepared by Leah A. Costanzo

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February 2013

CONCISE WRITING CREATES BETTER BUSINESS COMMUNICATIONS

Business executives and CEOs are openly expressing their preference for manageable bits of media as opposed to lengthy reports. Many people associate bullet points or lists with informality and casual communication. However, more and more professionals are accepting the science of the last decade, which shows that our attention spans are shrinking, and therefore, in many circumstances we respond better to piece-meal communications.

In this era of twitter and other length-regulated social media platforms, businesses would be savvy to revamp communications strategies, namely by aiming for shorter, less complex sentences that reflect clear thinking. Recognizing that there will always be exceptions to this “less is more” concept of corporate communications, it would certainly be worthwhile for communications staffers to keep in mind their audience, and keep in mind that almost any audience will respond better to short and clear-cut than lengthy and verbose.

CONSUMER FINANCIAL PROTECTION BUREAU ISSUES RULES AIMED AT PROTECTING HOMEOWNERS FACING FORECLOSURE

The Consumer Financial Protection Bureau recently issued rules it believes will help prevent borrowers from losing their homes in unnecessary situations. The Bureau acted partially because of its contention that many mortgage servicers were unable to keep up with the numerous delinquent loans resulting from the housing crisis, which led them to institute unnecessary foreclosures.

The new requirements, which take effect in January 2014, contain the following provisions:

  1. Servicers may currently engage in a practice known as dual-tracking –beginning foreclosure proceedings on borrowers who are still actively seeking a loan modification or other alternative to the foreclosure. The new restriction requires servers to wait until the borrower falls at least 120 days behind on payments before filing the first foreclosure notice.
  2. What’s being coined as the 37-day rule provides that servicers must consider and respond to any borrower requests for loan modifications that come in at least 37 days before the scheduled foreclosure action.
  3. Borrowers must be notified of examples of alternatives to foreclosure after missing two consecutive payments. Furthermore, the servicers cannot only put forth foreclosure alternative that are favorable to the servicer and must also inform the borrower of options such as deferred payments or loan modifications.
  4. Borrowers will be able to have easier access to knowledgeable employees who can help them through any pre-foreclosure decisions and processes.
  5. Mortgage statements will have to be itemized by principal, interest, fees and escrow and will also need to contain the amount and due date of the next payment, in addition to alerts about fees. Borrowers will gain the right to a clearer mortgage statement.
  6. Where borrowers have an adjustable-rate mortgage, servicers will be required to notify them of upcoming interest rate changes that will affect their payments and will also be required to supply information about alternatives if the borrower expresses that the new payment will not be affordable.
  7. Servicers will be required to give advance notice to borrowers before buying “force-placed” insurance for them, since such insurance is often very expensive and the borrower owes all premiums.
  8. Consumers’ accounts must be credited on the same day a payment arrives. In addition, servicers will have only seven business days to respond to written requests by borrowers to pay off mortgage balances.
  9. Lastly, these regulations will force servicers to keep accurate and accessible documents about borrowers’ information. Servicers must have procedures in place to guarantee borrowers, investors or the courts timely and accurate information.

HOUSE REPUBLICANS TO VOTE ON EXTENDING DEBT CEILING

Both House Speaker John Boehner and House Majority Leader Eric Cantor have taken harsh stances on the April 15 budget deadline for the Senate and House. In a recently released statement, House Majority Leader Cantor went so far as to say that if the Senate or House is unable to pass a budget in three months, Congressmen “will not be paid by the American people for failing to do their job.”
Many cite the Senate’s previous failures to pass a budget on time as the crux of the national debt crisis. This focus on raising the debt ceiling is the subsequent result of the fiscal cliff dilemma that had Congress practically immobilized as Republicans and Democrats failed to reach consensus on how to avoid tax increases while cutting spending.

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November 2012

WHEN THE UNEXPECTED STRIKES: BUSINESS RECOVERY AFTER DISASTER STRIKES

Although unpleasant to think about, the chance that a natural disaster may strike your region is always a possibility. Any sort of situation from a flood, wind damage or a fire can have devastating results for business owners ranging from lost files and merchandise to destroyed equipment. There is, of course, no way to fend off these occurrences, but there are steps that business owners can take to maximize their recovery ability and be able to open back up for business as fast as possible.

  1.  Determine the type of disasters most likely to affect your business. There may be specific risks to your business based on the weather pattern of your region or even your location in a specific city. By becoming knowledgeable on issues that are more likely to affect you, you can engage in more effective planning in the event these disasters can occur.
  2. Understand your insurance coverage. Speak with your insurance representative and be sure you understand which risks are covered and which are not. Inquire as to additional policies that may be purchased for disasters most likely to occur in your area and look into compensation for lost income and operating expenses during your business recovery period.
  3. Examine possible ways to prevent hazards and reduce risk. Take care to store your most important records, equipment or merchandise in a manner that they will be least likely to be damaged or destroyed in the event of a disaster.
  4. Prepare a disaster recovery plan. In the event that the worst does occur, have a plan in place to get your business back up and running with as little interruption as possible.

There are also many resources available to business owners for help in recovering their loss and being able to re-open their doors if disaster strikes. Small business owners in New York can contact the NYS Small Business Development Center for assistance in re-creating lost and destroyed records and applying for disaster loans at www.nyssbdc.org.  The U.S. Small Business Administration has programs and information for disaster planning and recovery available on their website at www.sba.gov.

FORECLOSURE FILINGS CONTINUE TO DECLINE

September 2012 marked the month of the fewest foreclosure filings in the past five years. Foreclosure filings peaked in April of 2009 but the rate has been on the decline in the past several months. The foreclosure filing rate for September 2012 reflects a 7% drop since August 2012 and an overall 16% drop since September of 2011.

This decline, however, has had one unfortunate side effect for potential home buyers. Deeply discounted foreclosure homes are becoming more and more of a rarity. This has caused a rise in the average of purchase price of homes; there has been a 17% increase in the median price for new homes and 9.5% increase for the median price of existing homes since August 2011.

GOING GREEN CAN INCREASE PROFITS FOR BUSINESSES.

The idea of going green can be somewhat intimidating to businesses. Whether it is the idea of a pricey investment in technological updates or the time it will take to train employees in the new manner in which business is to be conducted, and thereby possibly resulting in lower productivity during that training period, there are many reasons which cause businesses to be hesitant to take the plunge. Once the initial investment of time and money has been expended, however, there are many aspects of going green that can have a positive impact on a company’s bottom line.

The most obvious manner in which going green can help increase profits is by spending less money on certain business supplies. Switching to a primarily electronic means of communication and record keeping can save money on paper, postage and filing materials. Even small actions such as switching to low-energy light bulbs or reducing the use of gas for heat or air conditioning can have a huge impact on operating expenses for larger companies.

There are additional advantages to businesses that go green that are less obvious but no less effective when it comes to increasing profits. First, going green can have a dramatic impact on a company’s reputation, attracting clients and business contacts that may have otherwise gone in another direction. There are also tax benefits available to businesses that engage in certain green practices such as using solar power or purchasing hybrid vehicles for employees. 

There is no question that making changes to go green is a significant undertaking and businesses attempting to do so should have a comprehensive understanding of the time and money that such an endeavor will require. Despite the initial cost, companies that fully examine all the benefits can see that going green has the potential to really pay off in the long run

Prepared by Katie L. Renda

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August 2012

WHAT HEALTH REFORM MEANS FOR SMALL BUSINESSES

The healthcare reform means that any employer that has greater than 50 employees must provide health insurance to its employees. Those employers that have less than 25 employees get a credit if they provide health insurance. If the employer has greater than 50 people and does not provide insurance, they will be fined.

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It is expected that some businesses will feel the impact, but it should not prove fatal for them. The key is for the businesses to plan ahead. Although not certain, the net effect of the healthcare law may keep more money in people's pockets.

EMPLOYERS SHOULDN'T ATTEMPT TO DUCK THE NEW HEALTHCARE MANDATE

In the wake of the Supreme Court's recent healthcare decision, several companies with 50 or more full-time employees have attempted to dodge the employer mandate requiring those employers that have greater than 50 or more employees to provide health insurance to their employees. Many of those companies are looking to break up their companies into two different corporations in order to sneak under the 50 company threshold. The problem is that this technique will not work. The government will still consider both companies as a single entity because the employer mandate penalty relies on "controlled group" provisions, focusing on who controls the company, not necessarily what the company does. This is specifically meant to prevent skirting around the law.

In addition, this could also affect married couples. Tax law generally assumes a person owns an interest in their spouse's business. That means small business owners who are married to each other should take the steps necessary to insure the IRS, which will enforce the mandate, won't combine their staff. It is still unclear how the IRS will enforce the rules of requiring health insurance or enforcing a penalty if it is not provided.

SIX REASONS HEALTHCARE COSTS KEEP GOING UP

Healthcare reform will help millions of Americans obtain insurance. Experts say that the Affordable Care Act itself won't stop the cost of healthcare from continuing to rise and consumers from paying bigger bills. The monthly fees consumers pay to get coverage continue to grow at a rate much greater than overall inflation. There are many reasons that the costs are going up, but experts identify the six main factors:

  1. Hospital care – factors driving up hospital costs include the rising cost of goods and services for patient care, such as equipment and information systems, as well as a rising demand for care and compliance with regulatory requirements. An increasingly significant issue for hospitals is the increase in patients covered by Medicare and Medicaid, which now accounts for 60% of all admissions. Neither program fully reimburses the cost of hospital care. Hospitals are also seeing a jump in the cost of care for patients who can't pay, which averages about 6% of hospital expenses.
  2. Doctor's visits – according to the American Medical Association, the cost of physician's care, both to insurers and patients, has risen 1.3% during the past year. Doctors who accept insurance have little wiggle room to recoup higher costs because they are locked into a negotiated fee with their insureds. At the same time, consumers are paying a bigger share of their medical bills than before because their insurers are shifting more payment burden onto the customers through higher co-payments, co-insurance and deductibles.
  3. Medical technology – medical technology, such as robotic surgery, is growing rapidly. These high cost procedures improve the quality of care, but they also push up costs for consumers. As a result, insurance claims for new high-tech procedures are typically higher.
  4. Lab tests – more and more consumers are using medical labs. This is driving up the overall cost of the testing. 51% of laboratory representatives expect an increase in demand in the next 3-5 years because of the aging population and push towards personalized medicine based on a patient's genetic makeup.
  5. Drugs – Drug costs are still rising but at a slower pace. The increase is being mitigated by more expensive brand of drugs going off patent and the cheaper generic equivalents coming to market. However, generic equivalents do not immediately hit the market, so there is a lag time before prices adjust.
  6. Health Plan Administration – Insurers make annual changes to the prices of their plans to factor in their own cost of doing business. For example, insurers may set higher premiums and deductibles if the volume of insurance reimbursements they paid out the prior year was more than what they had anticipated.

Prepared by Katy M. Hedges

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May 2012

JUMPSTART OUR BUSINESS STARTUPS ACT

President Barack Obama has recently signed the Jumpstart Our Business Startups Act. The JOBS Act is intended to enable small businesses to use the Internet to raise up to $1 million in investment capital from a multitude of people by a technique known as "crowdfunding." Larger companies may offer up to $50 million in stock to the public without registering with the Securities and Exchange Commission, which is a significant increase from the previous threshold of $5 million. The JOBS Act will allow both small businesses and high growth enterprises to raise capital from investors more efficiently, allowing startup enterprises across the country to grow and hire faster.

The JOBS Act also includes an increase in the number of shareholders a company may have before being required to register its common stock with the SEC and become a publicly reporting company. Currently, the requirements are $10 million in corporate assets and 500 shareholders. Now the threshold is reached only if the company has 2,000 total shareholders.

INTELLECTUAL PROPERTY: LEAHY-SMITH AMERICA INVENTS ACT

The Leahy-Smith America Invents Act (AIA) was signed into law by on September 16, 2011. The law represents the most significant change to the federal patent system since 1952.
The law switches the U.S. patent system from a "first to invent" to a "first to file" system starting on or after March 16, 2013. The proceedings at the U.S. Patent Office for resolving priority contests among near-simultaneous inventors who both file applications for the same invention ("interference proceedings") are repealed, because priority will be determined based on filing date.

Of note for our readers, an entity has the capability to file an application on behalf of an inventor without seeking the inventor's execution of the application. This occurs in a scenario when an inventor assigns or is under an obligation to assign the invention rights to the entity. However, any issued patent still belongs to the actual inventor, absent a written assignment from the inventor or inventor's estate to the entity.

Here are some additional facts relating to intellectual property:

  • Industries utilizing intellectual property (includes patents, copyrights and trademarks) employ approximately 40 million Americans in 75 different industries, as per the Commerce Department.
  • These 75 industries contribute more than $5 trillion to GDP — more than one-third of the U.S. economy.
  • The U.S. Patent and Trademark Office has already implemented several provisions of the America Invents Act, and has reduced its patent backlog from 750,000 applications in January 2009 to approximately 641,000 currently.

THE CITY OF BUFFALO COMMERCIAL CLAIMS COURT

The City of Buffalo maintains a Commercial Claims Court, which functions as an informal court where corporations, partnerships and associations can sue for money only, up to a limit of $5,000.00.

Any corporation, including a municipal corporation or public benefit corporation, partnership, or association, which has its principal office in the State of New York or an assignee of any commercial claim may file a claim. However, collection agencies, or entities that take assignments of debts for the purpose of bringing an action in the Commercial Claims Court, may not use the Commercial Claims Court.

A PERSONAL BENEFIT OF CREATING A CORPORATION

The corporate form is a legitimate means of avoiding personal liability, and a corporation may be organized for that very purpose provided the corporation really exists and is doing business as permitted by law. The organization of a corporation for the avowed purpose of avoiding personal liability does not constitute fraud. However, the corporate entity may be disregarded on a showing of complete dominion and control or fraud, illegality, or wrongdoing. Also, where incorporation is resorted to for the purpose of avoiding an existing obligation of the incorporators, the separate legal entity of the corporation will be disregarded.

Chelus, Herdzik, Speyer, & Monte, PC would be proud to assist in any type of legal matter. Please contact our office should you or your corporation require any necessary legal assistance in these discussed matters.

Prepared by Christopher R. Poole

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February 2012

FEDERAL PAYROLL TAX CUT EXTENSION FOR 2012.

On December 23, 2011, the Temporary Payroll Tax Cut Continuation Act of 2011 was signed into law.  This provides a two month extension for the two percentage point reduction in the Social Security portion of FICA taxes paid by employees.  It also provides the same deduction in the employee equivalent portion of self employment taxes.  Employers are supposed to implement the tax cut as soon as possible in 2012, but no later than January 31, 2012.  If any Social Security tax has been over withheld, an off-setting adjustment should be made in the employee's pay no later than March 31, 2012.  The cut applies only to the first $18,350 in wages received in January and February.  If an employee earns more than this amount, there is an additional income tax on the excess wages.  In 2012, the wage base for the Social Security tax has been increased to $110,000.00, up from $106, 800 in 2011.

RETIREMENT SAVINGS: 401K VERSUS SEP.

The two most popular retirement plan choices for small business owners are a 401K and a SEP.  Either can be used whether your business is incorporated or unincorporated and whether you work alone or have employees.

A SEP is funded based on a percentage of the participant's earnings.  The maximum deductible amount for 2012 is $50,000.00.  However, in order to achieve the maximum contribution, the employee must earn around $200,000.00 (the maximum contribution is 25% of wages).  A SEP is funded entirely by employer contributions.  The same percentage of compensation must be used for rank and file employees as is used for owners.  A SEP can be set up and funded until the extended due date of the company's tax return.  There is no annual reporting necessary for a SEP.  A SEP cannot permit loans to participants.  Purported loans are treated as taxable distributions.

A 401K plan can provide the greater retirement savings through a combination of employee elective deferrals and employer contributions.  For 2012, the total contribution limit is $50,000.00 (the pre-tax maximum contribution is $17,000 or $22,500 for people over 50).  A 401K plan is funded primarily through employee elective deferrals.  Employer contributions are not required unless the company chooses a safe harbor 401K plan to simplify compliance with complex tax rules.  Employer contributions can be modest so this plan is more cost effective as the size of the staff grows.  A 401K must be set up by the end of the calendar year in order to permit contributions for the year.  In small businesses, employees' elective deferral amounts must be deposited within seven business days of payroll.  A 401K plan can permit participants to take loans from their account within a set limit.

In comparison, a 401K permits greater savings at the same income level.  A 401K may be less costly from a contribution perspective than a SEP.  A SEP has lower administration costs than a 401K.  A 401K can permit borrowing and a SEP cannot.

WHAT IS THE DIFFERENCE BETWEEN AN ESTATE PLAN AND A SUCCESSION PLAN?

An estate plan is a comprehensive plan for administration and distribution of your assets when you die.  It entails such things as bequests and estate tax projections.  A succession plan governs what happens to your business at your death and it may involve transferring ownership of the business or planning for a sale of the business at death.  A succession plan may be part of an overall estate plan.

It is advisable to put a succession plan in place if you run your own business to ensure the long term viability of the business after the death of the business' owner(s).

WHAT ARE THE BENEFITS OF A COMPANY HAVING A DBA?

Registering a DBA or "doing business as" certificate allows a company to transact businesses under an assumed name.  With a DBA, a company can open bank accounts, accept payments and advertise using the business name rather than the corporate name.  DBAs can provide major cost savings to companies that plan to pursue more than one type of business venture.  Companies can maintain their original structure and distinguish among their businesses with DBAs, instead of creating a separate corporate entity for each individual business.

Prepared by Kristen B. Degnan

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November 2011

Repeal of 1099 Reporting Requirements on Small Business Transactions

The passage of health care reform in 2010 brought along with it a new requirement which would have impacted the recordkeeping practices for small businesses. The law required that businesses report all transactions greater than $600 on a IRS Form 1099 issued to the vendor. The law was to go into effect for tax year 2012. Many small businesses were encouraged to begin the practice in 2011 allowing sufficient time to implement new recordkeeping practices.

However, earlier this year, President Obama signed a law that removes the expanded 1099 reporting requirement set forth in the health care reform act. The repeal of this requirement will remove the huge recordkeeping burden, freeing up time for other business related activities.

Businesses are still encouraged to examine their current recordkeeping procedures to make sure they are in compliance with federal and state taxing authorities.

Updated New York State Sales Tax Collection Information

The New York State Department of Taxation and Finance has updated its information regarding business owners' sales tax collection obligations.

Knowledge of the updated material along with understanding the obligations is crucial because a business owner can be held personally liable for sales tax obligations, and there are numerous criminal penalties for failing to comply with the requirements.

The updated information can be found in Publication 900 from the New York State Department of Taxation and Finance. Further, all business owners should consult with their accountants for information regarding the collection and remittance of state and local sales and use taxes.

The Department Of Labor Timesheet App

In response to the increased use of smartphones and the popularity of "apps", the Department of Labor released an app for workers to independently track their hours worked, wages earned, and even breaks taken. A link to the app can be found at the Department of Labor, Wage and Hour Division's webpage at http://www.dol.gov/whd/.

The Department of Labor believes that, "This app will help empower workers to understand and stand up for their rights when employers have denied their hard-earned pay."

The release of this app may raise concerns for small business owners who find themselves in a situation where an employee is disputing time records.

It is important to remember that both the federal government and New York State have set forth recordkeeping requirements for employers. The requirements can be found in the Fair Labor Standards Act.

Additionally, New York State has its own requirements with respect to payroll recordkeeping. Each employer is required to maintain for not less than six years the following records for each week worked by its employees: rate of pay and basis thereof, whether paid by hour, shift, day, week, salary or piece; gross wages, deductions, allowances and net wages; and for non-exempt employees, regular hourly rate, overtime rate, number of regular hours worked and the number of overtime hours worked.

Increased Immigration Audits On Small Businesses

In the past couple of years, there has been a significant increase in the number of employer audits conducted by Immigration and Customs Enforcement, also known as ICE. ICE has been focused on identifying employers who hire workers not legally eligible to work in the United States.

All employers and employees are generally required to complete an I-9 form at the time of hiring which lists documents establishing eligibility for employment in the United States. Given the increased audits by ICE, it is important that all employers, including small businesses, make sure that their I-9 forms are properly completed, and that the correct procedures are put into place to ensure that accurate records are kept.

ICE recommends that employers review their practices and seek professional assistance if they are not knowledgeable about legal requirements. Sloppy recordkeeping can lead to fines for technical violations in the event of an audit.

If a review reveals that there are incomplete I-9 forms, employers should fill in the missing information and initial it with the date and time it was added. Finally, be sure to retain the I 9 forms for the legally required period of time.

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August 2011

HOW SMALL BUSINESSES MANAGE THEIR REPUTATION WHEN EVERYONE'S A CRITIC

Online review sites are reshaping the world of small business. For some business owners, this is a terrifying prospect. A bad review can deter potential consumers from using or frequenting a certain business. Happily, there is an upside for referrals from satisfied clients, which are traditionally the best source of new business, and online forums are a powerful word-of-mouth source.

Managing your online reputation requires monitoring online conversation and engaging with customers and the tech-savvy to promote yourself in the best channels. These skills are becoming essential for mainstream business. Eighty four percent of Americans say online reviews influence their purchasing decisions. Claiming your listing on local search sites is a great way to reach potential clients, and many of these listing sites are free. The more detailed your profile, the more readily your business will appear in such results.

A small business does not need to respond to every review, especially if the overall consensus is positive. A negative review, however, demands special attention. Some business owners post public responses to apologize and try to win back customers. Some privately message their reviewer. Even hostile critics sometimes are nullified by a polite response from the merchant, and often times go back and edit what they have written. The most important point regarding online reviews is not to argue with your customer. Listen to your customer. Put yourself in the customer's place.

HOW BUSINESSES CAN CAPITALIZE IN A WEAK COMMERCIAL REAL ESTATE MARKET

From 2009 to 2010, the commercial real estate market in the United States seemed bottomless. Whether seeking manufacturing, office or retail space, those looking to lease or buy were in the driver's seat. Many small businesses have taken advantage of the market to negotiate more favorable lease terms or lower rents or to move to a better space. Some were able to buy a building, which was only a dream in the pre-recession real estate market. Still, putting together a deal requires timing, cash and market savvy. It is recommended that the small business owner be proactive, not reactive, and not wait to start looking for a new place when the current lease is about to expire. Negotiating aggressively is also highly recommended, especially when the small business is a credit-worthy tenant.

NATIONAL GAS DRILLING ESSENTIAL TO NEW YORK'S ECONOMIC RECOVERY

There are very few opportunities available to New York State with the same job-creating potential as exploring and developing the Marcellus Shale Formation, according to a new report released by the Public Policy Institute, Inc. It finds that creating as few as 300 natural gas wells per year in the Marcellus Shale has the potential to generate more than 37,500 jobs annually in New York. Natural gas exploration also provides high-paying jobs. The average wage in oil and gas extraction and support activities for mining is $79,184.00 in New York State, more than double the average private-sector wage in Upstate New York of $39,157.00. The report also explores the potential real property tax benefits of natural gas wells. The Public Policy Institute estimates that one well in Owego, New York, would generate $190,300.00 in combined real property tax revenue for the county, town and school districts. Revenue such as this would offer a tremendous boost to local economies in the southern tier.

PROPERTY TAX CAP IS A STEP IN THE RIGHT DIRECTION FOR SMALL BUSINESSES

The passage of the property tax cap is great news for all New Yorkers. It especially sends a signal to business leaders that the State is prepared to control the cost of government and begin to rebuild our private sector economy. It is believed that the property tax cap will contain growth of local government spending and ultimately make New York more affordable for homeowners and businesses.

The property tax cap will halt property tax increases well above the rate of inflation, which has been all too common in the past. The Business Council of New York State pointed out that property owners in New York State paid $48 billion in property taxes in 2010.

Prepared by Katy M. Hedges

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May 2011

AN OVERVIEW OF CONSUMER CREDIT

Credit allows individuals to finance transactions without having to pay the full cost of the merchandise at the time of the purchase.  A common form of consumer credit is a credit card account issued by a financial institution.  In 1968, Congress passed the Consumer Credit Protection Act to regulate the consumer credit industry.  This Act requires creditors to disclose the terms of credit to consumers.   It also protects consumers from excessive loan charges and garnishment of wages.  The Act also created the National Commission of Consumer Finance to investigate the consumer finance industry.  Both credit reporting agencies and credit card companies are regulated by the Act.  In addition, the Act regulates debt collectors and it prohibits discrimination based upon marital status or gender.

In May, 2009, President Obama signed into law the Credit Card Accountability, Responsibility and Disclosure (CARD) Act.  This federal law contains several provisions  regulating the practices of financial institutions that issue credit cards.  The Act includes bans on practices such as unfair rate increases, late fees that result from bills that arrive close to the due date, and retroactive rate increases.  The Act also mandates that credit card issuers provide their credit card contracts in plain language that consumers can understand.  Terms must also remain fixed for the first year of the contract.  The Act also contains increased penalties for companies that violate the law.

THINGS YOU NEED TO KNOW ABOUT MODIFICATION OF YOUR MORTGAGE

Many people are debating whether or not a modification of their mortgage terms is a good decision.  For some people, modifying loan terms can have negative financial effects in the long term.  For others, it is the only option that can truly help them avoid foreclosure.  Some homeowners believe that if they are struggling with their mortgage payments, their lender will automatically offer to adjust their loan terms.  However, in most cases, the homeowner has to make an affirmative request to modify loan terms.  Generally, when a bank is faced with either having to foreclose on a property or modify the terms of a loan, they will work with a borrower to adjust the terms in a manner that is agreeable to both parties.  However, borrowers have to take the first step and initiate the process with the lender. 

Individuals do not have to be delinquent on their payments to apply for adjustment of their loan terms.  If borrowers have suffered financial hardships, such as a layoff, reduction in salary, or high medical bills, they can take a pre-emptive step and request an adjustment of their mortgage loan terms.  Borrowers do not have to wait until they are months behind on their payments and already receiving collection calls to take action.

When considering the pros and cons of modification of mortgage terms, borrowers need to consider both short term and long term benefits.  In the short term, homeowners want to consider the amount by which they can reduce their monthly loan payments to make ends meet.  In the long term, they will have to consider that an adjustment of their loan terms will usually require paying more interest over the term of the loan.

BUSINESSES SHOULD KEEP ALL EMAIL COMMUNICATIONS

The Sarbanes/Oxey Act has required all public companies to retain email and instant messaging documents since 2006. 

It should be the custom and practice of businesses to maintain copies of all email correspondence.  Email can be considered evidence in court and courts have made rulings that the failure to maintain and produce email records means that the business in question is hiding key evidence. 

To protect your business, you should have a procedure in place to maintain email communications generated through the business.  Failure to keep these records can lead to rulings in litigation that your business willfully destroyed evidence.

Therefore, if you run a business, you must develop a clear policy on email communications and train all

Prepared by Kristen B. Degnan

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February 2011

PRE-EMPLOYMENT SCREENING AND LEGAL HANGUPS

Many small businesses today are finding it necessary to perform pre-employment screening as a necessary hiring practice in order to avoid lawsuits and costly hiring mistakes.  Regardless of the size of your business, it is important to avoid certain pitfalls so that you can safely and systematically ensure that your workforce is both healthy and motivated.

Before delving into thorough background checks, there are potential legal landmines that need to be avoided.  First, it is important that as a small business you comply with the Fair Credit Reporting Act and the Americans with Disabilities Act.  Under the Fair Credit Reporting Act, your small business is required to have an employee sign a disclosure form granting authorization to perform a background check.  This applies to all "consumer reports".  In some states, certain aspects of a criminal record are prohibited from use during a background check.  It is important to consult with legal counsel before instituting a new policy of performing background checks.

Under the American with Disabilities Act, employers are restricted from using medical or disability data in the hiring process.  This applies to all businesses with 15 or more employees, including both state and local governments.  A disability is defined as a physical or mental impairment that substantially limits one or more major life activities.  It is important that this category of information not come into play in the hiring process.

One option that many small businesses have chosen is to employ the services of a background checking company.  This allows you to obtain accurate and complete information on all candidates while limiting your liability through the use of a third-party background screening company.

HOW TO REDUCE EMPLOYMENT PRACTICES LIABILITY CLAIMS

Employment Practices Liability or EPL claims hit a record high amongst downsizing firms in 2010.  Nearly 100,000 discrimination claims were filed with the Equal Employment Opportunity Commission.  This is the highest number of cases brought in the EEOC's history.

The EEOC estimates that the average tally for one of these cases can exceed $235,000.00, which constitutes a substantial drain on both time and resources for small or midsize businesses.

One way to combat this issue is to obtain EPL insurance which is generally avialable through various insurance companies.  EPL insurance can protect your business from the financial costs incurred as a result of employment-related lawsuits.

Another protection against EPL lawsuits are improved internal policies and procedures with both anti-harassment and anti-discrimination policies.  It is important also that these policies be reduced to writing in an employee handbook which is then distributed to all employees and periodically updated.  Regardless of how you protect your business against these types of claims, it is important to note that they are the rise and that a proactive approach to defending them is much more cost-effective than a reactive approach.

SEC STUDY RECOMMENDS MORE OVERSIGHT OF STOCKBROKERS

A study commissioned by the Securities and Exchange Commission indicates that stockbrokers should be subject to the same fiduciary standard of conduct (i.e., placing a customer's interests above their own) that investment advisors have always been subject to.  It is important for a small business owner to understand that your investment advisor has a duty to put your interests above their own.  However, a stockbroker is only required to ensure that the products they sell are suitable for their clients.  The intention of the SEC is to increase investor protection and decrease confusion in the most practical and least burdensome manner for both investors and brokers/advisors.  This higher duty would require that stockbrokers and their firms take a more personal interest in their clients and maintain their clients' best interests in lieu of their own.

SHIFT IN PAYROLL TAX WILL BOOST TAKE-HOME PAY

New cuts in payroll taxes have altered the take-home pay that most employees will see and most employers will document in 2011.  The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 has cut Social Security tax withholding two percentage points from 6.2% to 4.2% of wages paid.  New withholding tables are now available from the Internal Revenue Service.  Given the lateness with which this change was implemented, employers were asked to start using the new tables as soon as possible in 2011 and no later than January 31st.  If indeed any offset is appropriate for the month of January, and employers are unable to make that change until January 31st, offsetting adjustments should be made as soon as possible and no later than March 31, 2011.  No new W-4 is required from your employees and in all likelihood, if you use a payroll company, they will ensure that the proper withholding changes are effectuated.

TAX BREAKS FOR SMALL BUSINESSES

With the passage of the Small Business Job Act in the fall of 2010, many new business tax breaks have been introduced which could benefit your small business.

Under Section 179 of the Tax Code, business expenses can be claimed in the year in which they were made rather than depreciating the cost over several tax years.  The Small Business Jobs Act of 2010 allows for up to $500,000.00 in business expenses to be written off under Section 179 for both 2010 and 2011.  That doubles the prior limit allowing the average small business to write off all of its asset and equipment purchases in the year of purchase.

Healthcare costs can also be included on Schedule SE rather than solely on Form 1040 to allow for self-employed taxpayers to subtract medical insurance costs from their gross income to get a lower, adjusted gross income.  Also, the Small Business Act has de-listed cell phones and other similar telecommunications equipment, effectively removing the requirement that phone users keep updated logs of business versus personal use.  This allows the phone to qualify as a business deduction much easier.  There are also many good tax breaks which many people forget including expenses related to the business use of your car, out-of-town travel expenses, seminars, classes and training to improve your knowledge and skills in your current profession, as well as membership fees in trade organizations, professional groups and chambers of commerce.  Finally, internet access charges related to business use can be deducted for tax purposes.

Prepared by John M. Coyle

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