On February 7, 2011, the NLRB and a private employer reached a settlement regarding the employer’s termination of an employee allegedly based, in part, on Facebook posts made by the employee. However, because the case had not made it through the courts, employers and employees will have to continue to wait for a definitive decision regarding the legality of disciplining an employee for his or her postings about a supervisor on a personal social media platform.

Continue Reading Settlement Reached in the NLRB Facebook Case

The Patient Protection and Affordable Care Act that was promulgated in March, 2010, includes provisions for creating Accountable Care Organizations (“ACO”). An ACO is an “organization” that is intended to manage the care of a minimum of 5,000 Medicare beneficiaries, with the purpose of improving outcomes to those beneficiaries. In the event an ACO is capable of achieving that goal, the resulting savings to the Medicare program will be shared by the federal government and the ACO.

How an ACO may be structured is left to the imagination and ability to appropriately structure an ACO arrangement. The federal government has not identified what an ACO structure must be. It may, for example, include relationships among hospitals, physicians/physician organizations, home health agencies, rehabilitation agencies, or any single or a combination of any of these types of providers. An ACO may even contain a payer component.
Continue Reading Where Do You Stand on the Subject of Accountable Care Organizations?

The Supreme Court recently struck a blow to employers and made another expansion to the scope of Title VII’s retaliation provisions. By its January 24, 2011 decision in Thompson v. North American Stainless, LP, –U.S. –, 2011 WL 197638 (2011), the court overturned a Sixth Circuit decision which had affirmed the dismissal of the retaliation claims brought by a terminated fiancé of another employee who had brought a sexual harassment charge. By its ruling, the Supreme Court held that the fiancé could bring his own suit under Title VII for the alleged retaliatory termination, even though he did not himself engage in any protected activity prior to his termination.

Continue Reading Supreme Court Holds Title VII Retaliation Claim Available to Terminated Fiance

On January 26, 2011, the U.S. EPA denied petitioner’s request to reconsider the newly promulgated one-hour sulfur dioxide (SO2) national ambient air quality standard (NAAQS). See, 76 Fed. Reg. 4780. The EPA determined that the objections raised were not of “central relevance” purportedly because they failed to support an argument that the promulgated standards should be revised. The petitioners objected, in part, to non-binding preamble guidance concerning implementation issues that were separate and independent from revisions of the NAAQS. Since the EPA denied reconsideration, no need existed for a stay.

Petitioner’s primary objection centered on perceived changes in EPA policy through utilization of modeling data to designate areas as non-compliant with the SO2 NAAQS. EPA countered that modeling had long been utilized “to determine whether areas have attained the NAAQS.” Petitioners also expressed concerns that modeling may over-predict violations. In its denial, the EPA countered that “modeling can very accurate identify areas of potential daily, maximum 1-hour concentrations above the NAQQS,” and if over-predictions exist, “interested parties would have a fair opportunity to show that using modeling in that case may not be appropriate.” See, 76 Fed. Reg. at 4782. Under this implementation process, the designation of non-attainment, based on modeling, will be the challengeable final decision.
Continue Reading EPA Denies Reconsideration of One-hour Sulfur Dioxide Standard

A recent federal district court case (Watson v. U.S., 107AFTR 2d 2011-311) has held that the IRS could recharacterize purported dividend payments to an S corporation shareholder-employee as wages. In this case, a CPA was a sole shareholder, employee, director and officer of a professional corporation that was taxed as an S Corporation. The corporation was a member of a firm that rendered accounting services. In the years at issue, the shareholder-employee paid himself a salary of $24,000.00 while he received dividend distributions totaling over $175,000.00 annually.

In this case, the taxpayer’s wholly-owned S corporation was actually a 25% shareholder in an accounting firm with other members. All of the cash income to the taxpayer’s professional corporation came exclusively from the accounting firm.

After reviewing all of the facts of the case, the court concluded that all of the distributions from the S corporation were in fact remuneration for services paid and recharacterized them as wages with all applicable employment taxes and penalties upon the failure to withhold those taxes being due.

This case illustrates the risk associated with structuring a business entity as an S corporation in an effort to minimize these employment taxes. If the taxpayer had structured this differently, he might have had a greater chance of success.

The Louisiana Supreme Court has refused to review the decision of the First Circuit Court of Appeal in ConAgra Foods, Inc. vs. Bridges, 2010-0907 (La. App. 1st Cir. 10/29/10), 48 So.3d 1249. In ConAgra Foods, the First Circuit determined that ConAgra Foods, Inc. would receive the benefits of Louisiana net operating loss carryovers held by subsidiaries, which had been sold in Internal Revenue Code (“IRC”) §338(h)(10) transactions . Under federal tax law, the parties to a stock sale can elect IRC §338(h)(10) treatment such that the stock sale is treated as an asset sale for income tax purposes and the tax attributes of the subsidiaries that are sold are acquired by the selling parent corporation. The steps that occur under an IRC §338(h)(10) transaction are as follows:

Continue Reading Louisiana Supreme Court Refuses to Review Net Operating Loss Decision

After a long delay, Congress has passed and President Obama has signed into law the new federal estate and gift tax legislation. It has been very difficult for some individuals to prepare an appropriate estate plan not knowing what the potential federal estate and gift taxes will be. For the next two years, 2011 and 2012, there is some certainty. Parts of the new legislation may not impact everyone, but questions always abound concerning “death taxes”. Now is an excellent time to review your estate planning documents to determine whether or not they continue to carry out your intentions.

Federal Estate Tax Exemption Amount and Federal Gift Tax Exemption Amount

Beginning January 1, 2011 and continuing through 2012, the federal estate tax exemption amount will be $5 million and the federal gift tax exemption will also be $5 million. This essentially means that a married couple can pass $10 million in assets to their children without any federal estate or gift tax, with proper estate planning. The top tax rate for the federal estate and gift taxes for 2011 and 2012 will be thirty-five percent (35%). The new exemption and rate provisions are applicable only for deaths or gifts in 2011 or 2012.

Effectively, the exemption for the federal estate and gift taxes are unified again. The gift tax exemption and the estate tax exemption will be the same $5 million amount. Also, the Generation Skipping Tax (GST) Exemption is now $5 million, making it easier to transfer wealth to grandchildren.

Continue Reading New Federal Estate Tax and Gift Tax Legislation

Following a class action or mass joiner settlement certain funds are often unable to be distributed to individual class members.  Either class members do not come forward to file the necessary proof of claim to qualify for an allocation and distribution, the allowed claims do not equal the available settlement funds, reserves or allocations for class costs and expenses are not exhausted, distributions of monies to individual class members have been found impracticable because the amounts owing to each individual plaintiff are exceedingly small and/or calculation of the amount due each individual would be excessively difficult and costly.  In such situations, many Louisiana state and federal courts have employed the “Cy Pres doctrine,” an equitable remedy intended to put the residual funds to a worthy purpose in accordance with their availability.

Read the entire article from the December 2010/January 2011 edition of the Louisiana Bar Journal.

On January 4, 2011, the U.S. Department of Justice (DOJ) announced that seven additional hospitals had agreed to pay $6.3 million to resolve allegations under the False Claims Act (FCA) related to overcharging Medicare for kyphoplasty procedures. These settlements are the fourth round of settlements with hospitals by the DOJ to resolve kyphoplasty-related claims under the False Claims Act. Including the settlements announced on January 4, 2011, the DOJ has entered into similar settlements with 25 hospitals for approximately $26 million.

Continue Reading Department of Justice Continues to Use Data Mining of Billing Errors in False Claims Act Settlements with Hospitals under Kyphoplasty Initiative

As estate planning attorneys, we receive calls from clients concerning the use of revocable living trusts in estate planning. The general public is invited to seminars on the subject, they receive literature in the mail, and, in some cases, receive in-home visits from parties, who are usually not attorneys, who advocate the use of the revocable living trust. Over the years, we have responded to clients to answer their questions concerning what the living trust will do and what it will not do. What follows is a discussion of what we call the “Six Myths” of the revocable living trust.

Myth No. 1: A living trust saves taxes.

A blanket statement that a living trust saves taxes is subject to examination. First of all, what types of taxes are being discussed? One should know that the Louisiana inheritance taxes disappeared in 2004. Accordingly, State of Louisiana inheritance taxes do not come into play with respect to a trust or a will. The Federal Estate Tax may be applicable whether there is a will or a trust. Some parties advocating the revocable living trust indicate that the trust is necessary in order to obtain the benefit of the $5 million Federal Estate Tax exemption. This is not true. The $5 million Federal Estate Tax exemption can be obtained without the use of a will or a trust. The exemption is not utilized when bequests are made through a trust or a will to a surviving spouse; however, federal law for the years 2011 and 2012 provides for “portability” of the exemption of the spouse whose Federal Estate Tax exemption has not been used. This portability applies to the estate of that deceased spouse’s surviving spouse, at least for 2011 and 2012.

Many assets in an estate are referred to as “non-probate assets,” such as annuities, IRAs, and 401k plans. In the event that a trust is made the beneficiary of such accounts, there could be potentially higher federal income taxes. This is clearly a trap for the unwary. Income tax consequences will turn on the design of the trust and, in particular, the design for distribution of income from the trust assets.

Continue Reading Six Myths of the Revocable Living Trust