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New Tax Laws, Hazards of Deferred Compensation, and four lunch hour seminars!
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ACBA Business Section Newsletter

ACBA Business Law Section
August 2015 Newsletter

Hot off the electronic presses

Quick links:
New Tax Law Signed in Late July – Changes in Income Tax Filing Dates for Corporations and Partnerships

Lunch Hour Seminar – Representing Contractors: Nuts and Bolts of Mechanics Liens

Lunch Hour Seminar - What Lies Behind a "No": Effective Negotiation in Practice and in Business
 
She’s Real Fine, My 409 – The Hazards of Casual Deferred Compensation

Save the Date: Arbitration Clauses: Get the Language Right 

Save the Date: Employment Law Update

2015 Business Section Executive Committee

We Welcome Your Contributions!

New Tax Law Signed in Late July – Changes in Income Tax Filing Dates for Corporations and Partnerships


President Obama signed an eleventh-hour extension of a highway-spending bill on July 31, 2015. Tucked away in the corners of this legislation are a few gems that will have an impact on business lawyers and CPAs across the country.
 
Historically, corporations have had an annual tax filing deadline on the 15th day of the third month following the close of their taxable year. Partnerships, by contrast, have had an annual filing deadline on the 15th day of the fourth month following the close of its taxable year. For most corporations and partnerships filing on the basis of a calendar year, that meant March 15th was tax day for corporations and April 15th was tax day for partnerships.

New filing dates
Under the new law, effective for tax years beginning after December 31, 2015, the filing deadline for both partnerships and S corporations will be moved up to the 15th day of the third month after the close of a taxable year. That means calendar-year partnerships and S corporations will have to file by March 15th. C corporations will generally have the filing deadline moved back to the 15th day of the fourth month after the close of the year, or April 15th for most calendar-year corporations.
 
There are a few exceptions, and it is still possible to obtain filing extensions. The new rules are intended to encourage partnerships and S corporations to send out their Forms K-1, reporting flow-through income and loss to owners, at least a month in advance of the traditional April 15th filing date for most individuals. 
 
The tax-filing due dates are relevant in several other areas of the law, including payment dates and the commencement of statutes of limitations, so there will be some ripple effects from the new rules on issues other than the mere act of filing a return. Notably, Section 761(c) of the Internal Revenue Code states that an entity’s partnership agreement, for tax purposes, is the partnership agreement as amended no later than the due date for filing the return, without regard to extensions. This rule allows many partnerships to make final decisions about income allocations after the financial results for the year are in – the new legislation will require partnerships to make those decisions one month earlier.

Due dates for FBARSs 
Congress also took this opportunity to accelerate the due date for Reports of Foreign Bank and Financial Accounts (FBARs), reporting a US person’s signature authority or ownership interest in a non-US financial account. The due date for an FBAR had been June 30th – the new law moves the due date up to April 15th, coordinating the FBAR filing date with the normal income tax filing date.
 
Notable omissions
One controversial proposal omitted from the new legislation would have permitted the US to revoke or deny a US passport to certain individuals who were in default in their taxpaying obligations. Congress also refused to revive the privatization of governmental tax collection, despite some political pressures to permit private companies to conduct these activities.
Mechanics Liens




Lunch Hour Seminar – Representing Contractors: Nuts and Bolts of Mechanics Liens


Wednesday, September 16, 2015, from 12:00 p.m. - 1:00 p.m. 

Please join the ACBA Business Law Section for a program cosponsored by the Barristers, Real Estate, and Trial Practice Sections on Mechanics Liens.

Handling construction payment disputes in California can be a turbulent process. But armed with the necessary legal knowledge, you can successfully manage even the most complex and costly situation. This lunch-hour program will enable you to recognize the scope of mechanics lien protections, and review available remedies and protections.
 
The presenter will be David W. Ginn, the senior partner of Ginn & Crosby, LLP, based in Walnut Creek. For the past 29 years, David's practice has emphasized construction and real property litigation. He has been a chapter author of the CEB's publication on Mechanics Liens for the last 18 years.
 
Pricing is $35 for Section members, $50 for ACBA members and $65 for non-members. You will receive one hour of CLE credit.
Register Here

Lunch Hour Seminar â€“ RESCHEDULED
What Lies Behind a “No”: Effective Negotiation in Practice and in Business


Thursday, October 15, 2015, from 12:00 p.m. - 1:00 p.m.

This program will be presented by Elaine Betts, a member of this year’s Business Section ExComm. Elaine is a business and management consultant and the owner of Go Far Consulting. She has more than 20 years of experience in networking, marketing and client relationship issues. 
 
To have a successful, thriving practice, attorneys must be skilled in many forms of negotiation. The ability to negotiate solutions to conflict is key to resolving client matters, and to the smooth management of one’s own firm and business relationships. This program will discuss ways to becoming an effective negotiator. Topics will include: how to determine what someone else perceives to be true; determining the true reason behind another party’s “no”; and tips on creating “win-win” solutions.  
 
Pricing is $35 for Section members, $50 for ACBA members and $65 for non-members. You will receive one hour of CLE credit. 
Register Here

She’s Real Fine, My 409 – The Hazards of Casual Deferred Compensation  


Managing cash-flow problems
For many small companies, a typical method of managing cash-flow problems has been for corporate-insider employees to voluntarily defer their salaries until the next big check arrives in the company coffers. Sometimes, that happens in a few weeks, allowing all employees to get back on their regular payroll cycle. Too often, though, the dry spells last longer than anticipated, and the corporation ends up booking a substantial back-pay obligation to its executives. Most executives in this situation would consider their salary deferrals to be generous and noble acts, with the insiders sacrificing their own financial well-being to help their company in a time of need.

Risk for penalties 
Imagine the surprise and indignation, then, when the self-sacrificing employees learn that their salary deferrals might have exposed them to penalty taxes. Section 409A of the Internal Revenue Code was enacted in 2004 to prevent corporate executives from cavalierly deferring compensation they’d earned, in an effort to postpone the taxation of that compensation to a more favorable future tax year. But the 409A legislation as drafted and interpreted by regulations vastly overshoots its target. Section 409A can now impose a penalty tax of 25 percent (20 percent federal and 5 percent California) on “nonqualified deferred compensation” that does not comply with the rigid 409A timing rules. The statute generally provides that all compensation, once earned, must be paid either as of the date the employee’s rights to the compensation are vested or at one of five sanctioned 409A trigger events: (i) a designated and specific future date, (ii) a separation from service, (iii) the employee’s disability, (iv) the employee’s death, or (v) a change in corporate control. If nonqualified deferred compensation does not satisfy the 409A rules, the compensation is taxable on the vesting date (whether or not paid to the employee at that time), the 25-percentage-point supplemental tax applies (and is to be enforced by employer withholding), and certain penalty interest amounts can be applied to the employee’s tax liability.

What to do in these circumstances?
There are a few possible workarounds, none of which is completely satisfactory. Under the short-term deferral rule, compensation is normally deemed paid on time if it is paid no later than the 15th day of the third month following the close of the year in which the compensation was due. Under the going-concern rule, an employer does not need to make a compensation payment when due if doing so would “jeopardize the ability of the [employer] to continue as a going concern” (but the catch-up payment then must occur no later than the date on which making the payment would no longer have that effect). And under general principles of compensation taxation, an employer could pay the compensation on time, subject to regular wage withholding as appropriate, and then have the employee loan back the after-tax amount to the employer – this approach, of course, would alleviate some of the cash-flow problems of the employer, but it would deplete corporate cash reserves by the amount of tax withheld.
 
The IRS is only now starting to pay significant attention to 409A problems on audit. Most practitioners hope that the focus of tax authorities will be on situations that prompted the original legislation, involving clearly earned and payable compensation that is being improperly postponed with intent merely to defer the employee’s tax hit. But the statutory and regulatory language is expansive – there is a fear that nothing can catch her, nothing can touch that 409 – here’s hoping there will be a legislative fix to this overreaching set of rules.

Upcoming Lunch Hour Seminars – Save These Dates  

The Business Section will be sponsoring or co-sponsoring these seminars in the coming months:

Arbitration Clauses: Get the Language Right 

Tuesday, November 10, 2015 


The presenters for this seminar will be Marshall Wallace, a partner at Allen Matkins, and Jonathan Levine, a partner at Pritzker Levine LLP. Subjects will include:
  1. what needs to be included in an arbitration agreement for it to be fair and enforceable;
  2. the enforceability of on-line click agreements;
  3. whether an arbitration clause is right for your business; and
  4. the risks and strategies associated with class arbitration waivers. 
This presentation will provide a how-to guide for business and commercial lawyers who are not litigators and who want to protect their clients in the event of a future dispute.

Employment Law Update

Wednesday, December 2, 2015


The ACBA Business Section is co-sponsoring this program with the ACBA Labor and Employment Section.

This year has already seen a lot of change in employment law, and there are more changes to come. Jennifer Protas, an attorney with Hoge Fenton in San Jose, will share what employers need to understand about recent developments in case law and statute to comply with these changes. Specific topics will be determined as the year progresses.

Join us for this presentation, and stay up to date for your clients!

Register Here.

Come Join Us!  The ACBA Business Law Section Executive Committee is Looking for New Members! 


The executive committee for the ACBA Business Law Section is seeking new members. The committee meets most months on the first Wednesday of the month at noon, normally for less than one hour. The meetings take place at the ACBA office at 1000 Broadway. 

As an ExComm Member, you will help shape the committee and develop and plan seminars and events for Business Law Section members. Equally as important, you will become acquainted with other East Bay business attorneys and expand your referral and resource network! Reach out to any member of the ExComm if you would like more information.

ACBA 2015 Business Law Section Executive Committee


The members and officers of the Business Law Section for 2015 are as follows: Please offer the 2015 ExComm your support, and feel free to drop in on any ExComm meetings, generally held on the first Wednesday of the month at noon in the ACBA conference room. 

Newsletter Blurbs

We Welcome Your Contributions! 


Please send in any comments, tips, or interesting stories from your practice! We are looking for quick blurbs, from three to twelve sentences in length. We will credit the author by name and identify his or her firm or company. Please send any write-ups to Tom Maier at tmaier@fddcm.com
Copyright © 2015 Alameda County Bar Association, All rights reserved.


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