August 2008 Business Newsletter

NEW YORK STATE INSURANCE DEPARTMENT DELAYS SETTING MEDICAL MALPRACTICE INSURANCE RATES.

The New York State Insurance Department has postponed setting its new medical malpractice insurance rates in order to pursue reform of the medical malpractice system.  This reform is sought in an effort to reduce the burden on physicians.  Malpractice insurance rates were originally scheduled to be adjusted on July 1^st and it was widely believed that the Department would impose a significant rate hike.  Last year, the rates were increased 14%, which is in keeping with the double-digit increases experienced over the past five years.

This postponement follows on the heels of statements by Dr. Michael Rosenberg, President of the Medical Society of the State of New York, who believed a rate hike, in addition to scheduled Medicare fee cuts, would be extremely detrimental to health care providers.  Dr. Rosenberg requested that, in order to put "pressure on the wound so it does not hemorrhage," any increase in medical premiums be delayed until the legislature has a chance to reform the medical malpractice system.

HEALTH INSURANCE COSTS RATED NUMBER ONE ISSUE FACED BY SMALL BUSINESS OWNERS.

Two recent surveys, performed by the National Federation of Independent Business and Wells Fargo, found that the cost of health insurance is the number one issue facing small business owners, continuing a trend that has lasted for 20 years.  Health insurance costs again topped even the cost of gasoline and fuel oil as the greatest concern for small business owners. 

Other cost issues in the top ten include fuels and electricity, supplies, inventories and Workers' Compensation insurance.  Appearing on the list for the first time is "tax complexity" which ranks fifth on the survey and was cited as a "critical" problem for 23% of business owners.

IRS INCREASES STANDARD MILEAGE RATES TO 58.5¢ PER MILE THROUGH DECEMBER 31, 2008.

On June 23, 2008, the Internal Revenue Service announced that it would increase the optional standard mileage rates from $0.505 per mile to $0.585 per mile for all business miles driven from July 1, 2008 to December 31, 2008.  The IRS made this special adjustment in recognition of recent drastic increases in the price of gasoline.  The IRS sets the optional mileage rate for the next calendar year in the preceding fall and normally does not change its mileage rates during the year.  The optional business standard mileage rate is used to determine the deductible costs of operating an automobile for business use and is also used by many businesses as the rate for which they reimburse their employees for mileage.

NEW YORK STATE ATTEMPTS OVERHAUL OF ITS PENSION SYSTEM.

In a bill recently passed by the Senate, New York State will attempt to overhaul its pension law.  Among the proposed changes are the elevation of pension fraud from a misdemeanor to a felony and a provision which adds a new criminal penalty for attorneys who improperly receive state pension benefits.  The bill would also allow the Attorney General the power to seek penalties equivalent to three times a guilty party's salary.

A portion of the bill is in response to recent investigations by the Attorney General into attorneys who were erroneously listed as employees of school districts and local governments in order to allow them to receive state pension credit.  The new bill would not allow attorneys to be listed simultaneously as both independent contractors and employees of school districts or local governments.

The bill was recently approved by the Senate and awaits action in the State Assembly.  The bill has been endorsed by Governor David Paterson.

IRS MAY BE ALLOWED ACCESS TO CREDIT CARD INFORMATION.

Proposed legislation may grant the IRS access to information from credit card companies which details the amount of revenue received by merchants.  This legislation is designed to help close the tax gap by encouraging small businesses to report their income more accurately.

Proponents of the bill estimate that the legislature could raise nearly $10 billion in the next ten years and would not result in any new taxes; it would instead operate to deter small business owners from paying the Federal government less than what is owed.  Opponents of the bill criticized the plan because they believe it would be costly to implement and may lead to unnecessary and unfair audits of small businesses who already abide by the tax laws.

Prepared by Patrick D. Slade