When I suggested to my son, Casey, he could bypass the weekly Team Trivia competition he gave me a very matter-of-fact reply of “No Dad, I have to go for the team.” So off we went to meet up with “Casey’s Team” for an evening of burgers and “I’ve got that one, it’s The Matrix” or “Luxembourg” as “the northern most country beginning with the letter “L” to not play in the last winter Olympics.” Luckily the Coopers were on hand to offer up “entropy” for the science of boiling and cooling water, and “Baltimore” as the location of John Hopkins Medical Center and University. Another round of high fives and beaming smiles as the points began adding up.

In the past I’ve shared comments with you that while listening to Casey I sometimes ask myself, “Who knows this stuff?” While listening to the trivia questions I kept asking myself, “Who makes up these questions?” And then I realized it didn’t matter, because teams were coming together, joining in hushed huddles to come up with their own answers. What mattered was the feeling of community with friends and neighbors in spite of the competitive atmosphere. The timing of one song between each round of questions and answers is enough time spaced out across the evening to catch up on recent events, upcoming activities, and to discover something new about friends and swap summer stories. It’s also enough time to lean back, relax and share a few laughs at our own expense.

We talked about what a great summer it’s been, how families continue to be swamped with summer activities even though Labor Day weekend is fast approaching. Some of you will be sending kids off to college, buying new school shoes, or even heading north to spend the weekend at your family cottage. We all agreed the weather made it a “Chamber of Commerce” summer for Michigan.

Each and every one of us will have our own memories of this great Michigan summer. I hope you and your family enjoy your Labor Day holiday weekend and can find a way to slow down to relax, laugh at silly jokes, and enjoy spending time with each other.

Dan A. Penning

Wright Penning & Beamer is pleased to be one of the sponsors this year of this fun event for both adults and children on Saturday, August 28th from 6 a.m. until 11 a.m. Prizes awarded during the Festival on September 12, 2010.

“The goal is for adults to take a child out on the lake and spend quality time together,” said Parks and Recreation Board member and fishing tournament organizer Phil Peters.

The “catch-and-release” contest is a tradition in the village, when residents go out in droves to fish for the largest catch of the day.

“You should see the expression on their faces when these kids weigh and measure their fish,” Peters said. “It’s priceless.”

Participants are directed to weigh in their catches at the state Department of Natural Resources and Environment (DNRE) boat ramp behind the village offices or on committee boats anchored in the lake. Yellow flags identify the DNRE weigh-in site and the committee boats. Tournament boats will be situated on Wolverine Lake at the Benstein Road end and another at the Penny Lake arm. Weigh in will be held from 7 a.m. until noon at the DNRE boat ramp; and 8 a.m. until 11 a.m. on tournament boats.

Residents are required to register for the event. The cost is $2 for children and $4 for participants 18 and older. Non-residents pay $3 for children and $7 for adults.

Fish caught must meet DNRE size and weight requirements. Winners are based on the largest fish in various categories according to weight. This year there are eight categories: bass, pike, walleye, pan fish (including sunfish and pumpkin seed), perch, crappie, and the most unusual fish.

Participants are divided into age groupings of 1-7 years of age; 8-12; 12-17, and 18-adult.

First-, second- and third-place prizes are awarded in all categories for participants 17 and under, and one first-place prize will be awarded to the winner of the adult categories.

“I try to get prizes that fit into each age bracket,” Peters said.

Grand prize winners will be published on the village website and listed at the village offices.

Awards will be presented at the village corn roast festival scheduled for September 12th.

The village is encouraging prize donations and volunteers to support the program.

Go out and have a great time and be sure to share some of your stories with us!

Dirk A. Beamer

The software involved in the New York case is titled BusyBox. It is described as a series of small utility-type programs that are tailored for and embedded in various products, such as wireless routers, firewalls, modems, internet radios, PDAs, media players, and HDTVs. Various manufacturers use the BusyBox software and its source code to make their products work. Although BusyBox and its source code are available without charge, the use of BusyBox is subject to the GNU General Public License (or “GPL”). GPL is an open-source copyright license. Although the software is free, the license places requirements on further distribution of the licensed software. For example, if a product is embedded with BusyBox software, the product’s manufacturer/distributor must provide the source code and any upgrades or modifications available on the same terms, i.e. without charge. The GPL also prohibits licensees from distributing the software under a license that is more restrictive than the GPL. Gartner, Inc., a leading international IT firm, estimates that 85% of companies use open-source software in some fashion (Source: www.groklaw.net).

BusyBox claimed that Westinghouse, in addition to 13 other distributors, infringed the copyright license in the software. Westinghouse distributed HDTVs that were embedded with the BusyBox software while, at the same time, imposing more restrictive licensing terms than those in the GPL. The more restrictive licensing terms included a limitation for “personal, non-commercial purposes only.”

The federal judge deciding the case

1. found that Westinghouse’s infringement was “willful” and awarded treble statutory damages of $90,000,
2. granted a permanent injunction against the distribution of HDTVs embedded with the BusyBox software,
3. ordered all infringing HDTVs returned to the plaintiff, and
4. awarded attorneys’ costs and fees of $47,865.

The significance of the case is particularly evident considering the software at issue is available at no cost. Businesses should be familiar with the licensing terms of open-source software and abide by those terms. Open-source software remains subject to copyright law and the parameters of the license agreement.

If you are distributing products that rely on the use of open-source software, be aware of potentially infringing activity if you do not make the source code and any modifications available at no-cost, and if you impose more restrictive licensing terms than the GPL, or whatever license the open-source software is subject. The GPL is not that difficult to comply with, see http://www.busybox.net/license.html. If you are contacted by an organization representing any software company or developer, do not ignore their demands. Consult with Wright Penning & Beamer immediately.

Heather Brenneman Miles

Dependent Coverage
For all employer-sponsored health care plans that provide coverage to dependent children of covered employees, PPACA will now require that the dependents’ coverage continue until the dependents turn 26 years old. This requirement is effective for all plan years beginning on or after September 23, 2010.

Penalties for Individuals
Starting January 1, 2014, individuals will incur a penalty for each month that they do not have health insurance coverage. In 2014, that penalty cannot exceed $95 for the year. In 2015 and 2016, the maximum penalty increases to $325 and $695, respectively, for each year.

Penalties for Large Employers
PPACA defines a “large” employer as one that employs 50 or more full-time employees working 30 or more hours per week. Large employers must offer “acceptable” health care insurance to employees starting January 1, 2014, or face penalties. “Acceptable” coverage means coverage that is affordable to the employee.

If a large employer does not provide any coverage, and for that reason an employee qualifies for a subsidy (or “premium credit”), the employer faces a monthly penalty, calculated as follows:
No. of full-time employees – 30 x $166.66 = Monthly Penalty
The $166.66 represents 1/12 of $2,000.

If a large employer does not provide “affordable” health insurance coverage, the monthly penalty assessed for each full-time employee that qualifies for a subsidy because of the lack of affordable coverage is 1/12 of $3,000. This penalty is not based on the number of full-time employees; only the number of employees that qualify for a subsidy.

It is still unclear whether the penalties imposed by PPACA might still be less than the cost of providing acceptable health care insurance, as some critics of the law have suggested.

Julie Pfitzenmaier

The new Michigan Vehicle Code
Despite the media attention, reports of that which the law allows, and that which the law prohibits, have varied widely. It’s not all that long and complicated, so I thought it worth while to reprint it here, in its entirety. The law, now part of the Michigan Vehicle Code, can be found at Michigan Compiled Laws Section 257.602b.

257.602b.
Use of wireless 2-way communication device for text messages while operating motor vehicle; local regulation; penalties

Sec. 602b. (1) Except as otherwise provided in this section, a person shall not read, manually type, or send a text message on a wireless 2-way communication device that is located in the person’s hand or in the person’s lap, including a wireless telephone used in cellular telephone service or personal communication service, while operating a motor vehicle that is moving on a highway or street in this state. As used in this subsection, a wireless 2-way communication device does not include a global positioning or navigation system that is affixed to the motor vehicle.

(2) Subsection (1) does not apply to an individual who is using a device described in subsection (1) to do any of the following:

• (a) Report a traffic accident, medical emergency, or serious road hazard.
• (b) Report a situation in which the person believes his or her personal safety is in jeopardy.
• (c) Report or avert the perpetration or potential perpetration of a criminal act against the individual or another person.
• (d) Carry out official duties as a police officer, law enforcement official, member of a paid or volunteer fire department, or operator of an emergency vehicle.

(3) An individual who violates this section is responsible for a civil infraction and shall be ordered to pay a civil fine as follows:

(a) For a first violation, $100.00.
(b) For a second or subsequent violation, $200.00.

(4) This section supersedes all local ordinances regulating the use of a communications device while operating a motor vehicle in motion on a highway or street, except that a unit of local government may adopt an ordinance or enforce an existing ordinance substantially corresponding to this section.

Distracted drivers scare the daylights out of me
Is the law working? It’s too early to tell. I do know this. As someone who rides a motorcycle, distracted drivers scare the daylights out of me. On a motorcycle, I am pretty much at eye level with drivers, and can easily see what they are doing. Just this past weekend, on a trip to the west side of the state, I encountered numerous erratic drivers; you know the ones, driving too slow, too fast, drifting in and out of their lanes, and so on. In every instance, the driver was either talking on a cell phone or texting while driving. Very scary stuff.

The prohibition couldn’t be simpler: don’t read, type or send text messages while driving.

Duane L. Reynolds

Nonprofits subject to IRS annual reporting requirements
Until recently, most U.S. nonprofit organizations were not required to file an annual information return with the IRS. Beginning January 2007, all that changed when even the smallest of nonprofits became subject to IRS annual reporting requirements. The only exceptions were state organizations, churches and their affiliated organizations, and certain religious groups. Nearly all others were required to file some version of Form 990, and the failure to do so for three consecutive years would mean automatic loss of the organization’s tax-exempt status.

New nonprofit filing requirements
It has now been three years since the implementation of the new filing requirements, and the IRS estimates that perhaps 20% of all nonprofits may have lost their tax-exempt status on May 17, 2010 (the annual filing deadline for nonprofits with a December 31 fiscal year end), for failure to file an information return for three consecutive years.

When nonprofit tax-exempt status is revoked
Revocation of tax-exempt status is a serious matter for a nonprofit. It means that its income is now subject to tax, and that an income tax return must now be filed. It means that the organization can no longer accept tax-deductible contributions, which could potentially mean a loss of its entire base of support.

IRS list of nonprofits whose tax-exempt status has been revoked mailing
So what does this mean for individual donors and grantmakers? The IRS is apparently waiting until 2011 to send out letters of revocation and to publish a list of nonprofits whose tax-exempt status has been revoked. Until that time, individuals can still deduct charitable contributions and grantmakers can still make qualifying distributions to those charities. Beginning in 2011, however, foundations will need to amend their pre-grant due diligence process to include confirmation that a charity has not lost its tax-exempt status.

Welcome relief for small nonprofits only
In the meantime, a press release issued by the IRS on July 26, 2010 offers welcome relief for small nonprofits only. Small exempt organizations have a one-time opportunity to either (1) file their missing returns by October 15, 2010, or (2) engage in a voluntary compliance program. The first option is for very small organizations that are eligible to file Form 990-N (known as the “e-Postcard”). The second option is for somewhat larger organizations that are eligible to file Form 990-EZ.

Organizations that file Form 990-N can simply go online and complete their filings electronically. Organizations that file Form 990-EZ must both bring their delinquent returns up to date and pay a compliance fee.

Regaining nonprofit tax-exempt status
For charities that receive an IRS revocation letter next year, all is not lost. A nonprofit can regain its tax-exempt status by filing a lengthy application (Form 1023 or Form 1024) with the IRS and paying the applicable user fee. (Unfortunately, this application process applies even to organizations that did not have to apply in order to gain their initial tax-exempt status.) Reinstatement will usually be effective as of the date the application is filed. However, if a nonprofit can demonstrate that it had reasonable cause for failing to file returns for three years, reinstatement will be effective as of the date of revocation.

Donor and Grantmaker Questions
Whether you are a donor with questions about an organization, a grantmaker that needs assistance in revamping its due diligence processes or a charity that fears it may have lost its tax-exempt status, the attorneys at Wright Penning & Beamer stand ready to assist you.

Lee Flaherty

Casey’s “list of things to do”
One of the items that is consistently on Casey’s “list of things to do” when we are together up north is to take a day and go kayaking on one of the local rivers or lakes. One Saturday morning, we packed our provisions for the day and headed over to the Putt and Paddle at the The River in Glen Arbor, Michigan (www.theriverglenarbor.com) and met Mike, the owner, to outfit ourselves with a kayak for the day’s trip. We chose a trip down the Crystal River and Mike and his crew took good care of us in driving us to the “drop spot” for a several-hour journey down the river.

While a lot of what I anticipated on our trip, of course, happened, in most cases, right on queue, (i.e., dropping items like our lunch in the water, me getting a workout pushing the kayak over the sandbars and getting sunburned in all the spots I missed putting sunscreen on) I experienced another in what has been a long series of “Holland moments” with Casey as we paddled down the river.

“Who knows this stuff?”
Casey proceeded to give me a dissertation on the types of trees, plants and vegetation we passed by; recited facts on when the area had been first settled and where the people originated from who moved there; and how, before that, he identified the Indian tribes that used the river and related several stories he had read in various books about the history of Leelanau County. As I listened to my son talk, I thought to myself, “Who knows this stuff?” Then it occurred to me. Casey does!

The pizza ritual
We finished our trip with the ritual of eating Shrimp Alfredo Pizza at Riverfront Pizza (www.riverfrontpizza.com) and laughed about our lunch that got wet, and that we had to run after our kayak as it floated away after sliding down a steep hill after we portaged the kayak across a country road during the course of our trip. At the end of our day, Casey, once again, proclaimed as he often does that, “This was the best day of my life.“

It is these experiences that remind me that Casey not only is a young man with special needs, but also a person with extraordinary and special talents.

Enjoy your time with your families and friends this summer.
Remember, whatever disappointments you may experience in your vacation that was supposed to take you to your version of “Italy,” that sometimes the experiences you have in “Holland” are even more special and meaningful.

Dan A. Penning

 

Whether you personally post or tweet, chances are good your company’s employees participate actively on any number of social networking websites. According to the Pew Research Center, adult use of such sites accounted for almost fifty percent of the internet activity in America in 2009. Aside from its personal and entertainment value, social networking can be a valuable tool for fostering successful business relationships. The blurry line between personal and business use, however, can create unforeseen risks for your company, including the risk that posted comments by your employees will be treated as official statements from the company.

Consider the case of an overzealous sales representative who proudly brags about the company’s products online (so far, so good) but in the process decides to talk trash about a competitor. Does the competitor now have a libel or slander case against your company? Or how about a company supervisor who offers the following recommendation on LinkedIn for a subordinate who is also pursuing an approved sideline business: “I have worked with Sally for five years and have always found her to be hard working and high performing.” If the company later lets Sally go for poor performance, can the supervisor’s post be used as evidence that Sally’s performance was fine and that she is being discriminated against because of gender? In both instances, the answer is probably “yes.”

Employers must be careful in monitoring or regulating employees’ personal, online activity too closely. If you track employee use regularly, you are bound to learn information that you would have preferred not to know and that may actually limit your ability to supervise and discipline the employee. Nonetheless, when it comes to employee comments about workplace activities or relationships, serious thought should be given to updating the company’s handbook or policy manual to provide some basic “dos and don’ts” governing this category of online statements.

Questions? Give me a call … or just post them here on our blog.

Dirk A. Beamer

For the time being, the Senate has again abandoned efforts to impose a “carried interest tax” on venture capitalists, investors, and managers of family businesses. The tax would have increased the 15% capital gains tax rate on certain investors’ profits to the top income tax rate, which is scheduled to hit 39.6% on January 1st (H.R. 4213). The share of investors’ profits is called “carried interest.” It might appear at first glance that it’s perfectly fine for investment managers to be taxed at higher rates on their “carried interest.” But venture capitalists and investors don’t reside exclusively on Wall Street. The law was written so broadly that it could have hit approximately 6.5 million people invested in real estate partnerships that own anything from a single dwelling to sizable commercial properties.

The proposed legislation attempts to sway middle America by couching the carried interest tax as imposing a higher rate on “investment management services” and “investment managers” who work for Wall Street houses. In reality, the proposed legislation could have imposed a higher tax rate on any partnerships invested in particular assets. The higher rates would apply to investment gains and also to gains from the sale of the partnership, and therefore, a sale of the family business would not qualify as a capital gains transaction. Family operations are commonly formed as partnerships and managed by a family member. Under the proposed legislation, the managing family member could be subject to the “carried interest tax.” For a family partnership to gain liability protection and also not be subject to the higher taxes, an outsider – not a family member — would have to manage the partnership. The House version of the legislation exempted family farms and ranches held in partnerships. Other family partnerships would have had to wait for the Treasury Department to exempt them through regulations.

Although the proposed legislation is dead for now, it is likely to reemerge as efforts to plug the federal deficit mount. The increased carried interest tax may be reintroduced in some other form. If so, watch carefully to see how the “carried interest” tax will hit families that are well beyond the alleged targets of the legislation, and communicate any concerns to your representatives in Congress.

Heather Brenneman Miles

Michigan Supreme Court: Parental Waivers are Unenforceable

Previously, we informed you of a Michigan Court of Appeals decision from 2008, which held that a parent’s waiver of liability for a child’s personal injuries is ineffective. On June 18, 2010, the Michigan Supreme Court decided that the Court of Appeals reached the correct conclusion: parental waivers are unenforceable. The Court reasoned that parental waivers are an attempt to contractually prohibit a minor from filing a lawsuit. Since parents cannot legally contract on behalf of their children, such waivers cannot be enforced.

While the Supreme Court decision solidifies concerns over heightened liability for commercial recreation establishments, schools, and churches, it does not prevent the legislature from crafting a law that specifically authorizes the enforcement of parental waivers. In fact, a bill is currently pending in the Michigan House of Representatives that would allow a parent or guardian of a minor who participates in a recreational activity to sign a written waiver releasing a person (the sponsor or organizer of the activity, or the owner or lessee of the property) from liability for resulting injuries. The bill would authorize parents or guardians to sign the waivers in advance of the activity. It is unknown at this time, however, if and when the bill will become law.

For now, we are operating under the Supreme Court decision; but there are still protective measures that businesses and individuals can take to attempt to limit their exposure to liability if a child is injured. First, to reiterate our advice from our prior email blast, establishments and individuals should act prudently, maintain adequate insurance, and continue use of pre-injury waivers (while at the same time understanding the potential ineffectiveness of those waivers). Also, some establishments may want to investigate the suitability of contracts that provide for the parents themselves to “indemnify” (or reimburse) the establishment for any losses that arise from the injuries that a child suffers while participating in the activity at the establishment. While parents cannot contract for their children, they can enter contractual commitments of their own. An indemnification agreement would essentially have a parent agreeing that, “If my child is injured while participating in your activity – and if that injury leads to a claim against you – I will reimburse you for the cost of that claim.” While not nearly as clean or as risk free as a release, such an agreement would at least provide one additional tool to use in defense of an injury claim.

For additional information, feel free to contact Wright Penning & Beamer.

Julie Pfitzenmaier