California State Board of Equalization Gutted
The Taxpayer Transparency and Fairness Act of 2017
Established by the California Constitution in 1879, the California State Board of Equalization (the “BOE”) has been the agency charged with administering most of the taxes imposed by California. In addition, the BOE was the tribunal whose function was to decide taxpayer appeals of decisions by the California Franchise Tax Board (the “FTB”) concerning income tax matters. All of this is about to change with the passage of AB 102. AB 102, which is named the “Taxpayer Transparency and Fairness Act of 2017” (the “Act”), was signed into law by Governor Brown on June 27th. The Act effectively cuts the legs out from underneath the BOE.
Background
In March of this year, the California Department of Finance issued a derisive report asserting that the BOE misallocated tax revenues, used BOE employees to assist elected BOE members with political activities, and attempted to improperly affect BOE audits. In response, and at the urging of the Governor, the Act was passed by the California Legislature. Continue reading “California State Board of Equalization Gutted”
If You SEC Something, Say Something
Just about every survey of General Counsels reveals the same #1 culprit of sleepless nights….. a cybersecurity hack. If you run a business in today’s global environment, it is hard to escape the fundamental reality that it is more than likely a matter of when, not if, you will face a cyber threat. And depending on the nature of your business, that threat can have a wide range of implications. If you are a public company, there is an additional issue to consider… what do you have to disclose to your investors and shareholders?
Being prepared for a hack with a comprehensive written information security plan and an equally robust incident response plan is just one component to be considered if you are a public company. You must also have a plan to meet your reporting and disclosure obligations to a variety of governmental bodies. While measuring your response needs in the wake of a hack, and determining if there are state, federal or international laws and regulations that require reporting, you must also pay close attention to possible disclosure obligations in your SEC filings. Specifically, if you have tripped a disclosure to a state attorney general or your company’s customers, then it is possible you may also have a disclosure obligation to your shareholders. Continue reading “If You SEC Something, Say Something”
Three Tiers for California
By Daniel Hayes and Aaron Wais Last week, California’s tied-house law – the Alcoholic Beverages Control Act (Bus. & Prof. Code §§ 23000, et seq.) – withstood a hard-fought First Amendment challenge. In Retail Digital Network v. Prieto, the Ninth Circuit Court of Appeals was asked to decide whether Business and Professions Code § 25503(h) – which prevents manufacturers and wholesalers from paying money or giving … Continue reading Three Tiers for California
Trump’s Cuba Course Clarified
“Trump cracks down on Cuba” or variations on that phrase have peppered the general press since Friday, when the President announced his policy towards Cuba. When you read what was actually written, you come away with a more tempered reaction. Yes, there will be changes, and the most critical one is yet to come, but we focus here on what was actually written.
First, the format is not an Executive Order but rather a June 16, 2017 “National Security Presidential Memorandum on Strengthening the Policy of the United States Towards Cuba” accompanied by a Fact Sheet. The memo can be found here, and the Fact Sheet here. So, nothing changes right away.
Taken together, there are two points that could impact international traders. Continue reading “Trump’s Cuba Course Clarified”
Supreme Limits: Kokesh v. SEC Imposes a 5-Year Limit on Disgorgement Claims
By John Durrant
On June 5, 2017, the U.S. Supreme Court unanimously ruled that claims by the Securities and Exchange Commission seeking disgorgement must be commenced within five years of accrual. The ruling, which resolved a circuit split, represents a very important curtailment of the SEC’s enforcement authority. The SEC had previously argued that there was effectively no limitations period that applied to disgorgement and accordingly sought to disgorge purportedly ill-gotten gains going back, in some cases, decades. Justice Sotomayor’s lucid opinion categorically rejected the SEC’s position. Potentially more disconcerting for the SEC, language in the decision suggests the Court may look at further limitations on the judicially created disgorgement remedy in the future.
The sole question posed in Kokesh v. SEC, case number 16-529, 581 U.S. ___ (2017), was whether 28 U.S.C. § 2462 applied to claims by the SEC for disgorgement. Section 2462 sets forth a 5-year statute of limitations for “an action, suit or proceeding for the enforcement of any civil fine, penalty or forfeiture” brought by the Government. The SEC argued that its claims for disgorgement did not fit this definition – that a disgorging defendant was merely giving up that to which he or she was not entitled and that disgorgement was an “equitable remedy” not a “penalty.” The Court rejected this argument, holding that disgorgement “bears all the hallmarks of a penalty” (i.e., a Government-imposed “punishment”) in two regards: (i) it seeks to redress a wrong to the public (not an individual); and (ii) it seeks to punish wrongdoers and deter similar wrongdoing by others. Continue reading “Supreme Limits: Kokesh v. SEC Imposes a 5-Year Limit on Disgorgement Claims”
DFEH Issues New Workplace Harassment Guidance
Since April 1, 2016, California employers subject to the Fair Employment and Housing Act (“FEHA”) have been required to comply with a number of amendments to the FEHA regulations that were adopted by the California Fair Employment and Housing Council (“FEHC”). FEHA imposes an affirmative duty on employers to “take all reasonable steps to prevent discrimination and harassment from occurring.” To effectuate that duty, the amended FEHA regulations expressly require employers to develop a written harassment, discrimination and retaliation prevention policy. More detailed information regarding the 2016 FEHC may be found here.
To aid employers in complying with their obligations under the FEHA and the 2016 FEHC amendments, the California Department of Fair Employment and Housing (“DFEH”) recently released a “Workplace Harassment Guide for California Employers,” which provides recommended practices for preventing and addressing workplace harassment. The publication is intended to help employers develop effective anti-harassment programs, investigate reports of harassment, and understand what remedial measures they might pursue. In short, the Guide discusses the following:
- What is included in an effective anti-harassment program;
- The basic steps required to conduct a fair investigation;
- Confidentiality of investigations;
- Timing of investigations;
- Recommended practices for conducting workplace investigations, including impartiality, investigator qualifications and training, type of questioning, making credibility determinations, burden of proof, legal conclusions, and documentation;
- Special issues, such as what to do if the target of harassment asks an employer not to do anything, investigating anonymous complaints, and retaliation; and
- Implementing effective remedial measures.
The Workplace Harassment Guide for California Employers is available here. Continue reading “DFEH Issues New Workplace Harassment Guidance”
Dissecting the TC Heartland Ruling – What Does This Mean for Patent Owners?
In an 8-0 decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341, the U.S. Supreme Court placed tighter limits on where a patent owner may file a suit for patent infringement by holding that “a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.” The Court’s decision reverses Federal Circuit precedent that allowed a patent owner to file suit anywhere a defendant made sales.
In TC Heartland LLC, Kraft Foods Group Brands LLC (“Kraft Foods”) brought a patent infringement suit against flavored drink mix maker TC Heartland LLC (“TC Heartland”) in the U.S. District Court for the District of Delaware. TC Heartland, organized under Indiana law and headquartered in Indiana, moved to transfer venue to the U.S. District Court for the Southern District of Indiana, arguing that under the patent venue statute, 28 U.S.C. § 1400(b), it did not “resid[e]” in Delaware and had no “regular and established place of business” in Delaware. TC Heartland based its arguments on the Supreme Court’s decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222, 226 (1957), where the Court concluded that for purposes of § 1400(b) a domestic corporation “resides” only in its State of incorporation.
Continue reading “Dissecting the TC Heartland Ruling – What Does This Mean for Patent Owners?”
And On The Seventh Day…
In Mendoza v. Nordstrom, Inc., the California Supreme Court answered some unsettled questions regarding the state’s day of rest statutes. In short, these provisions of the California Labor Code provide that employees are entitled to at least one day’s rest out of seven. Specifically, section 551 of the Labor Code states that “[e]very person employed in any occupation of labor is entitled to one day’s rest therefrom in seven.” Section 552 states that “[n]o employer of labor shall cause his employees to work more than six days in seven.” Section 556 provides an exception to sections 551 and 552, stating that they “shall not apply to any employer or employee when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.”
At the behest of the federal Ninth Circuit Court of Appeals, the Supreme Court considered three questions, each of which is discussed below.
(1) “Is the day of rest required by sections 551 and 552 calculated by the workweek, or does it apply on a rolling basis to any seven-consecutive-day period?”
Considering the text and history of sections 551 and 552, the Industrial Welfare Commission’s (“IWC”) wage orders, and the statutory scheme of the day of rest provisions, the Supreme Court concluded that employees are entitled to one day of rest each work week (as defined by the employer) rather than one day in seven on a rolling basis. Thus, the Court acknowledged that an employee could be required to work up to twelve consecutive days without violating sections 551 and 552. For example, if an employer defines a workweek as Sunday through Saturday, then an employee could be given a day of rest on the Sunday of Week 1, could be required to work 12 consecutive days, and then could be given off the Saturday of Week 2.
(2) “Does the section 556 exemption for workers employed six hours or less per day apply so long as an employee works six hours or less on at least one day of the applicable week, or does it apply only when an employee works no more than six hours on each and every day of the week?”
With respect to this question, the Court held that the exemption set forth in Section 556 applies only to those employees who never exceed six hours of work on any day of the workweek. If on any one day an employee works more than six hours, a day of rest must be provided during that workweek. Continue reading “And On The Seventh Day…”
Romaine Calm: FSVP is Approaching
Does FSVP Apply to You?
Are you the importer, consignee, or agent for food imported into the United States? If so, the Foreign Supplier Verification Program for Importers of Food for Humans and Animals (FSVP), a key element of the Food Safety Modernization Act (FSMA), likely applies to you. Implementation of the FSVP will begin on May 30, 2017, but categories of companies or foods may be subject to later compliance deadlines. Where do you fit?
The FSVP regulations aligns with key components of the FDA’s overall food safety plan for facilities that manufacture, process, pack or hold food which must now establish and follow the regulations regarding current good manufacturing practice (CGMP) and hazard analysis and risk-based preventive controls for human food and animal food (Preventive Controls or PC).
What Is FSVP? Continue reading “Romaine Calm: FSVP is Approaching”
Can Charitable Remainder Trusts Avoid the Self-Dealing Rules?
A pillar of the conventional wisdom of planning with charitable remainder trusts (CRTs) is that these very flexible split-interest trusts are subject to the private foundation excise tax on self-dealing transactions. But a recent IRS ruling has shaken that pillar and questioned the conventional wisdom.
Some (but not all) of the private foundation excise taxes apply to CRTs pursuant to Internal Revenue Code section 4947(a)(2), which provides that in the case of a trust which is not exempt under Code section 501(a) (i.e. a tax-exempt organization), not all of the unexpired interests which are devoted to one or more charitable purposes (i.e. a split-interest trust like a CRT) and which has amounts in trust for which a charitable deduction was allowed, Code section 4941 (excise tax on self-dealing) shall apply as if such trust were a private foundation.
In Private Letter Ruling 201713003, the grantor established a charitable remainder unitrust, but did not claim a charitable income tax deduction under section 170. The IRS ruled that because no charitable deduction was allowed, section 4947(a)(2) does not apply and the CRT is therefore not subject to any private foundation excise taxes, including self-dealing.
Continue reading “Can Charitable Remainder Trusts Avoid the Self-Dealing Rules?”
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