Fraser Trebilcock Attorney Panelist at Michigan Young Professionals Network Statewide Conference

Gallagher, BrianIn his capacity as the President of the Grand River Connection, Fraser Trebilcock attorney Brian Gallagher served as a panelist at this year’s Michigan Young Professionals Network Statewide Conference, hosted by the Mount Pleasant Chamber of Commerce. The panel discussion focused on success stories and best practices of leading young professionals’ groups around the state.

“It was great to share the Grand River Connection story and to hear how much traction similar organizations are gaining across Michigan,” said Gallagher. “It is an exciting time for young professionals here and this was a great forum for our organizations to learn from each other. At the end of the day, we’re all trying to attract and retain young talent.”

Gallagher was joined on the panel by Anthony Taylor from the Saginaw Young Professionals Network and Lauren Harris from the Traverse City Young Professionals.

As an experienced employee benefits attorney, Brian T. Gallagher helps employers navigate the complicated and ever-changing legal landscape of ERISA and the Tax Code. His outstanding work has already been noticed as he was named as a 2014 Rising Star in Michigan’ by Super Lawyers for Employee Benefits. To contact Brian, call 517.377.0886 or email

DHS Issues Alert Warning of New Cybersecurity Threats

On March 31, the Department of Homeland Security (DHS) issued Alert TA16-091A warning of new ransomware variants—such as Locky and Samas—responsible for infecting computers at several health care facilities in the first quarter of 2016.

Ransomware is a type of malware—malicious software—that is often spread through infected websites or phishing emails.  The ransomware works by locking or encrypting a target’s files. Users are then told that unless a ransom is paid they will be unable to regains access to their files.

In the first few months of 2016, ransomware attacks have infected computer systems at Methodist Hospital in Henderson, KY, several Washington, D.C.-area hospitals run by Medstar, and at the Hollywood Presbyterian Medical Center in California. The attack on the Hollywood Presbyterian Medical Center locked physicians out of electronic health records (EHRs) and disrupted email communications for staff.  Hollywood Presbyterian paid the hackers $17,000 in bitcoin, believing it was the fastest and quickest ways to restore normal operations.

The DHS discourage organizations from paying ransom, because paying the ransom may lead to similar attacks, may provide the hackers with the victim’s banking information, and the decrypted files could still contain a malware infection. But deciding whether or not to pay a ransom is a difficult decision for an organization faced with disruption of its operations, financial losses, loss of proprietary information, and perhaps most importantly, the potential harm to its reputation.

In its Alert, the DHS provides a list recommendations that, at a minimum, all businesses should take to prepare for a ransomware attack:

  • Implement a data backup and recovery plan for all critical information, and regularly test the data backups.
  • Use application whitelisting, which allows only specific programs to run, to prevent malicious software.
  • Make sure operating system and anti-virus software is up-to-date with the latest updates and patches.
  • Restrict the ability of users within your organization to install and run unwanted software.
  • Block emails messages with attachments from suspicious sources, do not enable macros from email attachment, and do not follow unsolicited internet links in emails.

Many of the recommendation in the DHS alert may already be a part of your company’s cybersecurity practices.

To find out more about the effect of cybersecurity on your business, contact Fraser Trebilcock at 517.482.5800.

Governor Snyder Signs Bill Modifying Beer and Wine Licenses For Grocers

Castellani, EdwardGovernor Snyder signed into law this week a bill that would allow grocery stores with on-site gas stations to sell beer and wine at both the store and the station. The new law creates a “secondary location permit” so retailers can sell beer and wine under an extension of their primary license with certain conditions.

The bill also allows beer and wine licensees to operate fuel pumps on or adjacent to the licensed premises and to reduce the minimum distance between a fuel pump and the point of sale of alcohol from 50 feet to five feet.

Some lawmakers believed it unfairly allows big box stores to expand their footprint, and will create an unfair market advantage for them.

A lawyer and certified public accountant, Edward J. Castellani has practiced alcohol beverage law in Michigan for more than 30 years, assisting clients at all levels of the industry, including retailers, wholesalers, manufacturers, and importers. To learn more, he can be reached at or 517.377.0845.

Fraser Trebilcock Attorney Gives Update on IPv4 Address Transfers to IPv6 System

Raven, JonathanAs one of a handful of attorneys in Michigan as a registered transfer facilitator by the American Registry for Internet Numbers, attorney Jonathan Raven has been at the forefront of the rapidly growing technology market.

He recently had an in-depth sidebar with Douglas Levy from Michigan Lawyers Weekly on the address numbering rights process, what businesses are doing to acquire new addresses, and how the world’s addresses will transition from IPv4 to IPv6. The market is currently experiencing exponential growth due to advances such as the cloud and mobile devices with sales and purchases happening every second.

“The people who originally got the old IPv4 addresses may or may not have used them,” states Raven. “They’re companies like Comcast, Ford, Merck, Halliburton, AT&T, Xerox, Bank of America, Bell Canada, and Merit Network. And these companies would say, “You know what? We have more than we need.””

To read the full subscription access article through Michigan Lawyers Weekly, CLICK HERE.

Business Education Series – What’s Trending in Business for 2016?

Looking to get a better grasp on where the business climate is headed? Seeing a trend and like to learn more? Join us on April 19th for the complimentary “What’s Trending in Business for 2016” rapid-fire panel at the Lansing Regional Chamber of Commerce. A group of industry leaders will lend their insight and strategies on how to manage upcoming obstacles while taking advantage of new opportunities for 2016. The panel will cover topics from legal and regulatory, technology, public policy, social responsibility, marketing, human resources, and upcoming economic conditions.

Panel members include:

  • Mark Kellogg, Shareholder, Fraser Trebilcock
  • Tom Donaldson, Regional Director, Michigan Small Business Development Center
  • Linda Lynch, President & Co-Owner, KI Technology Group
  • Jason Sanders, Mid-Michigan President & Commercial Banking Sales Manager, Fifth Third Bank
  • Lynda White, Account Director, Blohm Creative Partners

Fraser Trebilcock is proud to co-sponsor the Business Education Series, along with Fifth Third Bank. If you would like more information, email

Where: Lansing Regional Chamber of Commerce
When: Tuesday, April 19th
Time: 8:00am – 9:30 am
Cost: Free, RSVP Required

How Much Deference is Owed? Court of Appeals Reverses State Tax Administrator’s Use of Federal Tax Concepts

Tax is statutory. No one owes tax unless a statute imposes that liability. Thus, all tax cases begin with the applicable statute. However, tax statutes sometimes are written in general terms, requiring that important details be filled in either by reference to other authorities, administrative rules or guidance issued the state agency.  Further, state tax laws frequently piggy-back on federal tax law. The typical pattern is to begin the calculation of state taxable income with federal taxable income and then to modify it by adding or subtracting items where state tax policies differ from federal tax policies. As a result, a corporation’s state taxable income can be affected by the application of the Internal Revenue Code (IRC).

State tax laws do provide for some incorporation of federal tax concepts, such as where a  term used in the state taxing statute and not defined differently shall have the same meaning as when used in comparable context under the IRC. But how much deference is owed to the state’s interpretation of federal tax concepts when interpreting state tax law?  The answer is not much. The Michigan Supreme Court has cautioned that when employing federal tax laws to define a state statutorily undefined term, the federal context must be comparable to the Michigan context. In the absence of a comparable context, “the Legislature intended that the word was to be [defined] according to its ordinary and primarily understood meaning,” according to the our Supreme Court.

That said, the Michigan Department of Treasury (the “Department”) generally does not consider itself bound by federal determinations respecting the application of federal tax law and believes that it is free to interpret the IRC as it sees fit.  Unfortunately, this has led to problems because often the Department’s auditors do not have wide experience with or are not well-trained in federal tax principles. The same can also be generally said of the Department’s in-house legal staff. A recent decision from the Michigan Court of Appeals illustrates the misapplication of federal tax law by the state tax authorities.

On March 31, the Court of Appeals in Labelle Mgmt Inc v Dep’t of Treasury, reversed a trial court decision which found in favor of the Department’s interpretation that sufficient “indirect ownership” existed among Labelle and two brother-sister entities thus comprising a unitary business group under the Michigan Business Tax Act (MBT).

In reaching for the meaning of “indirect ownership,” the lower court looked to contextually analogous provisions of federal income tax law to supply a definition.   The Court of Appeals found that this impermissibly expanded the definition of the term “unitary business group” beyond what the Legislature intended.  Instead, the trial court should have relied on the normal rules of statutory construction to define indirect ownership, according to the Court of Appeals.

For a generation Michigan experimented with its business tax regime. First, in 1976 with its VAT like Single Business Tax (SBT), and then its hybrid gross receipts/income tax called the Michigan Business Tax in 2008.  These schemes had little need to adhere to, or understand, federal corporate income tax concepts.  Further, although the Michigan Corporate Income Tax, repealed after 1975, used the “unitary” business concept, the SBT did not and relied instead on a separate filing method.  For perceived compliance reasons, the Michigan legislature adopted (or perhaps, reintroduced) the “unitary” concept when it enacted the MBT in 2008.

Under the MBT (and Michigan’s current Corporate Income Tax (CIT)), a “unitary business group” exists where one member owns or controls, either directly or indirectly, more than 50 percent of the ownership interests of the other members. Indirect ownership isn’t defined by the MBT, but it does provide that “[a] term used in this act and not defined differently shall have the same meaning as when used in comparable context in the laws of the United States relating to federal income taxes in effect for the tax year unless a different meaning is clearly required.  In various administrative pronouncements, the Department instructed that “indirect ownership is generally determined by using [IRC] section 318 or analogous authority.”

Finding no “directly comparable” federal income tax provision in this case, the trial court looked to “contextually analogous” provisions of the IRC, specifically sections 957 and 958 to find that “indirect ownership” can include “constructive ownership.”

The Court of Appeals reversed, finding that the trial court erred in using the federal income tax definition of constructive ownership to define indirect ownership. The Court of Appeals stated that “the federal tax statutes and regulations are replete with examples that illustrate the proposition that indirect ownership and constructive ownership are two different concepts.”  “[A]t the point the trial court acknowledged that the federal tax laws do not address a ‘comparable context,’ under Michigan law, it should have used the ordinary rules of statutory construction,” the appeals court said.

Looking at the plain and ordinary meaning of indirect ownership, the Court of Appeals reasoned that it means “ownership through an intermediary, not ownership by operation of legal fiction,” as is the case with constructive ownership as the Department argued. Finding otherwise would expand the statute “beyond the meaning intended by the Legislature,” Put bluntly, if the Legislature had intended the constructive ownership rules of the IRC to apply, they would have said so. Finding that none of the entities involved owned more than 50 percent of any other, through an intermediary or otherwise, the Court of Appeals concluded that the taxpayer was entitled to summary judgment and reversed.

The takeaway here is that one should not rely on administrative interpretive positions of the Department were they apply federal tax concepts, nor should one assume that state tax auditors will understand and correctly apply federal tax principles.  It may be necessary to call upon a company’s federal tax advisors to explain these principles, and it will likely be necessary to talk to senior people in the Department, who are more likely to be knowledgeable about federal tax rules than are the auditors.

Fraser Trebilcock attorney Paul McCord, PaulV. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or