In 2006 Congress passed the Pension Protection Act (“PPA”), mandating that most tax-exempt organizations file an annual information return with the IRS.  The PPA imposed upon small organizations a filing requirement for the first time in 2007.  More importantly, the PPA automatically revokes an entity’s tax-exempt status if it fails to file required returns for three consecutive years. Recently, the IRS announced that approximately 275,000 organizations had automatically lost their tax-exempt status under the PPA because they failed to file the required annual reports for three consecutive years.  While the IRS believes a vast majority of these organizations are defunct, a large portion is likely active organizations that just failed to file their annual returns, or were unaware of the requirement.  A list of the organizations that have lost their tax exempt status may be found on the IRS’s website (www.IRS.gov).   Being on the list should have no impact on donors who previously made deductible contributions to the auto-revoked organizations.  However, going forward organizations that are on the auto-revocation list that do not receive reinstatement are no longer eligible to … Continue reading →

When times are tough and it is increasingly difficult to pay the rent / mortgage and put food on the table, many benefits (health benefits, life insurance, etc.) elected under “cafeteria plans” (benefits purchased on a pre-tax basis) become luxuries, not necessities.  With rising costs of living and stagnant salaries, many employers are being faced with requests from employees to withdraw from cafeteria plan benefits during the plan year.  Seems simple enough, right?  A few standard forms and a call to your plan manager should do the trick?  Not so fast. Under Section 125 of the Internal Revenue Code (and the regulations promulgated thereunder) cafeteria plans may allow employees to revoke an election during a period of coverage and make a new election for the rest of the period if a “change in status event” has occurred, and the election change is consistent with the event.  “Change in status events” include changes in marital status, employment status, number of dependents; instances where a dependent satisfies or ceases to satisfy eligibility requirements; and changes in residence.  To satisfy the “consistency rule,” … Continue reading →

According to the Chinese Zodiac, one of the traits of the Rat is wit; and it just may be that characteristic that recently saved the Rat from the National Labor Relations Board’s (“NLRB”) chopping block.  You’ve seen it, the giant inflatable Rat that looms outside a work place pulled into some type of labor dispute.  If you have not, just imagine a 60 foot Rat with a nasty smirk on its face bouncing up and down with the wind and the chants from angry union workers. In a recent case remanded from the DC Circuit Court of Appeals to the NLRB (Sheet Metal Workers Local 15 (Brandon Region Medical Center), the NLRB determined that the Rat’s presence at a secondary employer’s premises to protest the use of non-union workers does not violate the law.  Pursuant to the law (The National Labor Relations Act), conduct that “threatens, coerces or restrains” a secondary employer from doing business with a primary employer is illegal.  In a 3 to 1 decision by the Democrat controlled Board, the NLBR determined that the presence of a … Continue reading →

Sales of equity to the public are subject to both state and federal securities laws.  If the securities are not registered, they must be issued under an exemption afforded under applicable law.  One of the exemptions afforded under the Securities Act of 1933 is issuances to individuals who are deemed “accredited investors” as defined by rules issued under such Act.  In general, “accredited investors” (as applied to natural persons) are individuals who have a net worth in excess of $1 million. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which became law on July 21, 2010, changed the manner in which the net worth for individuals is calculated when determining “accredited investor” status.  Prior to the Dodd-Frank Act, an individual’s primary residence was included when calculating net worth.  Not anymore; Section 413(a) of the Dodd-Frank Act adjusted the net worth standards for natural persons by specifically “excluding the value of the primary residence of such natural person.” In the proposed implementing regulations, the SEC seeks to further clarify the “net worth” calculation by deducting from net … Continue reading →

On June 1, 2011 a new law (N.J.S.A. 34:8B-1 et seq.) regulating employment advertisements goes into effect in New Jersey.  Under the statute, employers (and their agents) publishing job advertisements (in print or online) for vacancies in NJ are prohibited from “knowingly or purposefully” utilizing ads that contain one or more of the following: A provision that a qualification for the job is current employment; A provision that the prospective employer will not consider or review job applications from unemployed applicants; or A provision that the prospective employer will only consider applications from employed applicants. Violators will be subject to a civil penalty up to $1,000 for the first offense, up to $5,000 for the second, and up to $10,000 for each subsequent offense.  The act does not create a private right of action for an aggrieved job applicant against a potential employer.  Rather, infractions are to be enforced by the Labor and Workforce Development Commissioner.  In no way does the act impact or regulate an employers’ actual hiring decision; it only addresses advertisements. Staffing companies seeking to fill jobs … Continue reading →

Business owners looking to avoid the double layer of taxes associated with operating a C-corporation (the absurd taxation of dividends) often consider utilizing an S corporation or a limited liability company.  While both structures act as pass through entities for tax purposes, there are noteworthy differences between the two. Ownership & Profit Allocation – There are several significant restrictions on who can be owners of an S corporation.  A shareholder of an S corporation cannot be a nonresident alien and, more importantly, shareholders cannot be other corporations or LLCs.  Also, the number of shareholders is capped at 75 for S corporations.  An LLC has no restrictions on ownership. Unlike C corporations that can have varying forms of equity (common stock, preferred stock, etc.), S corporations can only have one form of stock.  The result is that S corporations have no flexibility as to how profits are split up amongst its owners.  So, even if the owners of an S corporation want to distribute profits in a manner they consider more “equitable,” they cannot do so because all distributions must be … Continue reading →

The Patient Protection and Affordable Care Act (PL 111-148, the “Act”) enacted in 2010 significantly expanded information-reporting requirements for businesses.  As part of the Act, 1099 reporting requirements were expanded to include all payments from businesses aggregating $600 or more in a calendar year to a single payee, starting with payments in 2012.  So, if your business engaged the services of a local florist to water your plants for $15 a week, under the Act you would have to issue the florist a 1099. Rep. Dan Lungren (R-CA) accurately labeled the expanded 1099 reporting requirements as the “Snitch Act.”  According to Rep. Lungren “[i]t’s basically assuming the people you do business with are cheating.”  “So therefore, the government requires paperwork on your side because of something they believe may or may not be occurring with respect to somebody on the other side of a business transaction.” Recognizing the ridiculous implications of the expanded 1099 reporting requirements, the House of Representatives passed a bill on March 3rd to repeal the expanded Form 1099 information-reporting requirements mandated under the Act.  The Senate, … Continue reading →

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