SEC Issues First Cryptocurrency No-Action Letter – Where’s the Action?
By Mark Hiraide
On April 2, 2019, the Division of Corporation Finance of the Securities and Exchange Commission issued a no-action letter to TurnKey Jet, Inc. in connection with a proposed sale of tokens in the United States. It was the first no-action letter relating to cryptocurrencies and was widely heralded as a watershed event (e.g., “SEC Issues First ‘No-Action’ Letter Clearing ICO to Sell Tokens in US”) (see here).
But what does the SEC’s no-action letter really mean? First, a no-action letter is the SEC’s staff response to a request that the SEC not take enforcement action against the requestor based on the specific facts and circumstances set forth in the request. In most cases, the staff will not permit parties other than the requester to rely on the no-action letter. As was the case here, the staff’s response often is based in part on the legal opinion rendered by the requester’s lawyer that the proposed conduct is not a violation of the federal securities laws. Continue reading “SEC Issues First Cryptocurrency No-Action Letter – Where’s the Action?”
California Estate Tax: Gone Today, Here Tomorrow?
California has no estate tax, but that could change in the near future. California State Senator Scott Wiener recently introduced a bill which would impose gift, estate, and generation-skipping transfer tax on transfers during life and at death after December 31, 2020.
California law requires that any law imposing transfer taxes must be approved by the voters. This means that, if the California Legislature approves the California bill, it will be put before the voters at the November 2020 election. Continue reading “California Estate Tax: Gone Today, Here Tomorrow?”
OFAC Brings the Hammer
In March, there was a good deal of consternation in the general press trying to understand news that President Trump had overruled the actions of the Office of Foreign Assets Control (“OFAC”) to impose additional sanctions on North Korea. Beside the oddity of a President overruling actions by a part of the Executive branch after they had been taken, it remains a mystery what the President was seeking to overrule. Not being deterred, OFAC marched on, and in so doing, it provided multiple examples again how compliance programs need to not be just written, but also followed and enforced, and cost at least one American company $1,869,144 plus significant compliance upgrade costs. Continue reading “OFAC Brings the Hammer”
Dynamex Strikes the Ninth Circuit Court of Appeals
Why This Matters
The Ninth Circuit Court of Appeals recently remanded a case, Haitayan v. 7-Eleven, Inc., to the federal district court to reconsider its ruling in light of the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court. The Dynamex Court adopted a new standard to determine whether workers are employees or independent contractors. This standard presumes that workers are employees unless they meet all three factors of what the Court called the ABC test. While Haitayan is an unpublished decision, meaning it is not precedential, it does demonstrate Dynamex’s continuing reach, this time all the way up to the Ninth Circuit. Given Dynamex’s broad impact on employers (see our previous discussions here and here), its trajectory is notable. Continue reading “Dynamex Strikes the Ninth Circuit Court of Appeals”
A Movable Feast
State Taxation of CRT Distributions for Beneficiaries Who Move from California to Another State
MSK private clients sometimes move from California, the state with the highest maximum individual income tax rate in the US – 13.3%! — to states like Nevada and Wyoming that have no income tax at all. Some of these clients are income beneficiaries of large charitable remainder trusts. How are distributions from those CRTs taxed once the income beneficiaries are no longer California residents?
First things first: remember how CRT distributions are characterized for tax purposes. Under Internal Revenue Code §664, distributions are treated as coming first, from the current and accumulated ordinary income of the trust (Tier One); second, from capital gains (Tier Two); third, from tax-exempt interest (Tier Three); and fourth, from corpus (Tier Four). Within each tier, distributions are treated as coming first from income taxed at a higher rate – for example, gain from the sale of collectibles, taxable at 28% before gain from the sale of stock, taxable at 20%. This requires careful record keeping by the trustee, to track the various types of trust receipts in the various sub-tiers, especially for NIMCRUTs that may make no distributions for several years. Continue reading “A Movable Feast”
CA Consumer Privacy Act Gets a Rewrite
When the law was signed by then Governor Brown (see our prior Alert here), the expectation was that Attorney General Becerra would issue the enabling regulations by July of this year, which would allow a phase-in period. Then by January 1, 2020, the requirements would be clear and companies would be able to properly formulate and implement their compliance policies. Regretfully, things are not going as expected.
First, in accordance with the law, General Becerra organized a series of public meetings: Continue reading “CA Consumer Privacy Act Gets a Rewrite”
CA IoT Law: Devices at Risk?
In the last week, both the Dept. of Homeland Security and the Food and Drug Administration have issued a consumer alert about the potential hacking risk regarding cardiac devices, specifically because those devices have no encryption on their software. The devices in question are implantable cardiac devices, clinic programmers and home monitors which are used to regulate one’s heartbeat rate – to speed it up or slow it down, as needed. The focus this time is on the Medtronic Conexus Radio Frequency Telemetry Protocol. Given this latest notice, one has to wonder what will be the impact of the California IoT law.
What both federal agencies had to say is short range access allows interference with, generation, modification or interception of communications. There is also the ability to read/write any valid memory location on the implanted device and, therefore, impact its intended functionality. Continue reading “CA IoT Law: Devices at Risk?”
FAST Act Update: SEC Adopts Amendments to Modernize and Simplify Public Disclosure
By Blake Baron and Nimish Patel
What Happened?
On March 20, 2019, the SEC adopted amendments to modernize and simplify disclosure requirements for public companies. Specifically, the SEC adopted amendments to modernize its disclosure requirements for public filings in a way that the SEC believes will minimize the costs and burdens on public companies while continuing to provide all material information to investors.
Why It Matters
Investors will benefit from these new amendments as they eliminate out-of-date, repetitive and unnecessary disclosure, and should simplify the process by which they assess material information. The SEC hopes investors will benefit from its work to improve disclosure, as they focus on modernizing their disclosure system to meet the expectations of today’s investors while eliminating unnecessary costs and burdens. Continue reading “FAST Act Update: SEC Adopts Amendments to Modernize and Simplify Public Disclosure”
Don’t Let the IRS Yank Your Passport
The IRS has in a recent news release (IR-2019-23) reiterated its warning that individuals who owe federal taxes may not be able to renew their passport or obtain a new passport.
As we recently reported, taxpayers who have a “seriously delinquent tax debt” may be prevented from obtaining a new passport or renewing a current passport. This means that, if someone owes taxes to the federal government, he or she might be unable to travel outside of the U.S. Continue reading “Don’t Let the IRS Yank Your Passport”
Is the West Coast the Best Coast?
Should You Organize Your LLC in California or Delaware? Part 1- Voting Rights
We are often asked whether a new limited liability company (“LLC”) that will be active in California should be organized in California or Delaware. In the next several posts we will explore different topics relating to this threshold question, since an LLC operating in California may have its internal affairs governed by Delaware law if it is organized and properly maintained under Delaware law. And while the answer depends on the facts of each case, there are important common factors that all parties involved in this decision making process must carefully consider.
One of the most important factors in picking between California and Delaware are the default voting rights given to members in California that cannot be waived or altered by agreement. These fundamental voting rights shift a certain amount of power and control away from the managers, who are often the founders or initial investors, and towards the other members. Continue reading “Is the West Coast the Best Coast?”
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