Five Stories that Matter in Michigan This Week – July 15, 2022

  1. Supreme Court Ruling Shouldn’t Affect Michigan’s Healthy Climate Plan

The Supreme Court’s recent ruling limiting the EPA’s ability to regulate carbon emissions from power plants should not affect Michigan’s course of following through with the MI Healthy Climate Plan, which was first released in April 2021. The MI Healthy Climate plan seeks interim reductions of 28% by 2025 and 52% by 2030.

Why it Matters: Businesses should continue to plan for the implementation of the MI Healthy Climate plan and other regulations as the state continues to shift towards the goal of net-zero greenhouse gas emissions no later than 2050. If you have environmental issues with state and/or federal agencies, contact our environmental attorneys.

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  1. Several Groups Send Letter to LARA Seeking Adoption of International Energy Standards

Several groups have sent the department of Licensing and Regulatory Affairs seeking them to adopt a set of international energy standards for residential and commercial buildings in preparation of electric vehicle charging and to help reduce climate impact.

Why it Matters: Including reducing climate impact, the groups have touted hundreds of dollars in energy cost savings for Michigan residents with the adoption of the new standards. “These provisions will lower costs for Michigan residents and businesses, increase household resilience from extreme weather events, and help reduce climate impacts from the building sector,” the groups wrote.

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  1. Tax Reform Goals Priority for New “Fund MI Future” Coalition

A collection of 20 organizations have formed a newly created coalition with the aim of better funding Michigan’s public services with changes to the state’s tax policy. Following the release of Michigan’s next annual budget, the group plans to revise the state’s tax system and close tax loopholes so that wealthy individuals and organizations will now “pay what they owe” to support clean water access, job funding, and school support.

Why it Matters: If the new coalition’s plans for altering the state’s tax policy succeeds, organizations and wealthy individuals are expected to have higher tax bills.

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  1. Mixed Signals in Michigan Marijuana Sales Data

One the one hand, the Michigan legal marijuana industry is booming. Sales in Michigan hit $1.03 billion in the first half of 2022, up by 26.9% from the same period last year, according to the Michigan Marijuana Regulatory Agency (“MMRA”). A Detroit News article reported that Michigan has become the third largest marijuana market in the country. On the other hand, not all news is rosy in the industry. There are now more than 1,000 licensed marijuana retailers in Michigan, and while sales numbers are at all-time highs, the competition in the state is driving down prices. MMRA reported that the average price for flower at $1959 per pound in June, down 41.6% from the same period in 2021.

Why it Matters: With inflation surging across the economy, falling prices in the marijuana industry mean that profits may be hard to come by. This may lead to more consolidation within the industry as operators and investors seek to achieve economies of scale.

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  1. Bipartisan Bills Would Allow Alcohol Sales at Some College Sporting Events in Michigan

New bipartisan bills in the Michigan Legislature would allow alcohol sales at college basketball, football and hockey games. House Bill 6289 and Senate Bill 1125 would allow the Michigan Liquor Control Commission to issue licenses to be used for events within the public areas of university football, basketball and hockey stadiums. Sales would be permitted two hours before and after each game.

Why it Matters: Sponsors of the bills point to data showing that allowing alcoholic beverages in venues during sporting events lowers the probability of excessive alcohol consumption that might otherwise happen during tailgating before a game or if alcohol is snuck into a stadium.


Related Practice Groups and Professionals

Environmental Law | Michael Perry

Business & Tax| Ed Castellani

Taxation | Paul McCord

Cannabis | Klint Kesto

Energy, Utilities & Telecommunication | Michael Ashton

Covid, Force Majeure, and Frustration of Purpose – Some Words of Caution

Courts generally show a pattern of skepticism toward force majeure and frustration of purpose arguments stemming from the Covid-19 pandemic. Here’s what businesses need to know to protect themselves.


Definitions

First, we need to get our terminology straight. Frustration of purpose and force majeure, while related concepts, are distinct in some important ways. Force Majeure is an event mentioned explicitly in a contract that discharges the parties of at least some of their responsibilities. Frustration of purpose, on the other hand, is a contract defense alleging that the basic purpose of the contract being litigated has been frustrated by an event not reasonably foreseeable to the parties. Michigan Courts use a three-part test to assess frustration of purpose: 1) the contract must be at least partially executory; (2) the frustrated party’s purpose in making the contract must have been known to both parties when the contract was made; (3) this purpose must have been basically frustrated by an event not reasonably foreseeable at the time the contract was made, the occurrence of which has not been due to the fault of the frustrated party and the risk of which was not assumed by him. Molnar v. Molnar, 110 Mich. App. 622, 313 N.W.2d 171 (1981).

Primary issues: Causation and Foreseeability.

It’s hard to deny that the COVID-19 pandemic involved possibly the most significant disruption of global commerce since World War II. As of this writing, the WHO reports over six million lives have been lost to COVID-19. Sweeping restrictions on travel and trade across the globe have also come at an enormous and self-evident economic cost. So—why isn’t COVID persuasive as a force majeure or frustration of purpose event?

One issue is causation. It can be challenging to prove that the pandemic caused a disruption when intervening factors like government action come into play.

For example, Michigan saw strict government shutdown mandates related to COVID. Though these shutdowns may have saved numerous lives, they inarguably caused some markets to collapse overnight. Suddenly, college towns were empty; theaters, bowling alleys, and dine-in restaurants were shuttered. Did the pandemic cause this? Or did government action cause it? Alternatively, did a business decline for an entirely different reason? Was it already doomed, with a shutdown being only the final nail in the coffin? The same issue comes up with Covid-related supply chain disruptions. Did the pandemic cause it? Labor shortages and strikes? Both?

In a contract case where the defendant suffered a loss of business amid the COVID pandemic, causation issues might render their force majeure or frustration of purpose defenses ineffective. Whether initiating or defending a lawsuit, a party making a frustration of purpose or force majeure argument has a burden of proof to meet.

Another problem is that COVID-19 and its effects have arguably been foreseeable, negating frustration of purpose and force majeure arguments.

Erin Webb, a legal analyst writing for Bloomberg, noted in a November 2021 article titled ANALYSIS: No Longer Unforeseeable? Force Majeure and Covid-19 that courts have rejected Covid-related force majeure and frustration of purpose arguments on the reasoning that the pandemic and its effects were foreseeable.

“Since early 2021, with Covid-19 the new normal and the coronavirus feeling a lot less’ novel,’ courts have increasingly expected parties to have adjusted to pandemic-related issues—from supply chain disruptions to the challenges of remote work. So, for those still wishing to explore such defenses, careful factual research and analysis early in a case will be more important than ever,” writes Webb.

In short, with the pandemic being in its third year, disruptions related to the pandemic are no longer unforeseeable.

Another older version of this reasoning is that a decline in business, even if resulting from conditions such as a pandemic and stay-at-home order, is an inherent risk of doing business that the parties assume. “The tenant is not relieved from the obligation to pay rent if there is a serviceable use still available consistent with the use provision in the lease. The fact that the use is less valuable or less profitable or even unprofitable does not mean the tenant’s use has been substantially frustrated.” Mel Frank Tool & Supply, Inc. v. Di-Chem Co., 580 N.W.2d 802, 808 (Iowa 1998)

For a frustration of purpose argument to succeed, the entire basic purpose of the contract must be frustrated. This has happened in some cases. See, for example, Bay City Realty, LLC v. Mattress Firm, Inc., No. 20-CV-11498, 2021 WL 1295261 (E.D. Mich. Apr. 7, 2021). The case involved a frustration of purpose defense to the landlord’s breach of contract claim. The court found in favor of the tenant/defendant on the frustration of purpose issue, holding that the Governor’s order shuttering non-essential businesses frustrated the primary purpose of the Lease (retail sales of mattresses).

Force majeure clauses—should we use them for pandemics?

Paula M. Bagger, writing for the American Bar Association, covers this topic in greater detail in a March 2021 article titled The Importance of Force Majeure Clauses in the COVID-19 Era. Bagger warns that “we must not ignore the potential applicability of force majeure to our commercial agreements.”

Possible solutions are not as simple as slapping the word “pandemics” into a force majeure clause. For one, some courts may reason that the parties actually foresaw listed events, even though such reasoning goes somewhat against the logic of a force majeure clause, which lists potential unforeseen events.

Writes Erin Webb: “Some courts have found that the parties’ ability to name a risk—like a pandemic or a government shutdown risk—in a force majeure clause means that the risk was not only foreseeable at the time of contracting, but actually foreseen, defeating other defenses to nonperformance, such as impossibility of performance or frustration of purpose.”

This reasoning may be particularly applicable to Covid-19, given evidence that Covid-19 will be endemic to the human population in the future. If we expect Covid, we can no longer expect to use it as an excuse.

Furthermore, going back to causation, a force majeure clause mentioning a pandemic may not adequately address the issues accompanying the COVID-19 pandemic. More open-ended catch-all-type statements may be better.

However, it is essential to consider one’s own goals when drafting a force majeure clause. For example, if you’re a commercial landlord, you may not want a force majeure clause to encompass pandemics like COVID-19 – it could give a delinquent tenant ammunition in its efforts not to pay you. Conversely, if you’re a commercial tenant, you might want an out if business dries up.

Conclusion

COVID-related frustration of purpose and force majeure are not cure-alls, and courts will not take these arguments at face value. However, with the right facts, frustration of purpose or force majeure arguments can be successful. Businesses should take positive steps to ensure that their interests are protected if/when COVID comes knocking again. For all your business needs regarding frustration of purpose and force majeure clauses, the attorneys at Fraser Trebilcock can help.


Matthew J. Meyerhuber is an attorney at Fraser Trebilcock focusing on general litigation, cannabis law, environmental law, and real estate. Matthew can be reached at mmeyerhuber@fraserlawfirm.com or 517.377.0885. 

Five Stories that Matter in Michigan This Week – July 8, 2022

  1. Michigan Adopts Version of the Uniform Assignment of Rents Act

Michigan recently adopted its version of the Uniform Assignment of Rents Act (the “UARA”), which establishes a comprehensive statutory model for the creation, perfection, and enforcement of security interests in rent. It is the sixth state to adopt the UARA.

Why it Matters: An assignment of rents allows a lender to collect income from rents derived from mortgaged property after the mortgage has been defaulted on. It protects a lender against scenarios in which a borrower (typically a commercial landlord)  is continuing to collect rent from a property but is no longer making mortgage payments. The Michigan UARA codifies rules related to assignments of rents, bringing clarity to both lenders and borrowers.

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  1. Michigan’s November 2022 Ballot to Include Fair Lending Proposal Capping Payday Loan Interest Rates

Supporters of the Payday Loan Interest Rate Cap ballot initiative in Michigan secured sufficient signatures to put the initiative  on the November 2022 ballot.

Why it Matters: Once the petition is validated by Michigan’s Board of State Canvassers, the Michigan legislature will have 40 days to approve the initiative, as submitted.  If the legislature rejects the initiative or fails to act by the deadline, the proposal will be placed on the November 2022 ballot for voters to decide. If passed, payday loan rates will be capped at 36% APR or less.

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  1. Michigan Property Taxes are Set to Jump

Gas, groceries, and now summer property tax bills are spiking in Michigan. The inflation rate adjustment for this year’s property taxes in Michigan is 3.3%.

Why it Matters: Under Proposal A, there is  a maximum 5% inflation rate adjustment allowed. While this year’s increase is less than the cap, it is the highest it has been since 2007. And many expect next year’s increase to hit the 5% cap. In a Detroit Free Press article, Patrick Anderson, CEO of the Anderson Economic Group said: “Basically, we’re baked in at 5% next year.”

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  1. Michigan Leads the Nation in Energy-Sector Job Growth

According to an annual report recently issued by the U.S. Department of Energy, Michigan added 35,463 energy-sector jobs from 2020—more than any other state in 2021, boosted primarily by the automotive industry and its increased focus on hybrid and electric vehicle models.

Why it Matters: With soaring inflation and increased expectations of an economic recession, Michigan’s strength in energy-sector jobs bodes well for Michigan workers and businesses. The energy sector in Michigan represents 9.5 percent of state employment, with 393,207 jobs total.

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  1. Michigan Bill Would Cut Taxes for Small Distillers, Provide Boost to Local Farmers

The Michigan legislature recently approved legislation that would cut the state Liquor Control Commission markup on small distillery alcohol from 65% to 32.5% if more than 40% of the grains and other crops used to distill the liquor are grown in Michigan.

Why it Matters: If signed into law by Governor Whitmer, this tax cut would result in large savings for small Michigan distillers and help them compete with larger national producers. Because the tax savings are tied to the purchase of grains and other crops grown in Michigan, local farmers would also benefit.


Related Practice Groups and Professionals

Business & Tax| Ed Castellani

Real Estate | Jared Roberts

Election Law | Garett Koger

Energy, Utilities & Telecommunication | Michael Ashton

Five Stories that Matter in Michigan This Week – July 1, 2022

Five Stories that Matter in Michigan This Week – July 1, 2022; Legal, Legislative, and Regulatory Insights


  1. Bills Easing Regulations on Michigan Child Care Providers Signed Into Law

Governor Whitmer recently signed into law Michigan House Bills 5041-5048, which increase the number of children family child care and group care homes can serve, and also lowers the minimum age for workers at such businesses.

Why it Matters: Many families struggle to find quality, affordable child care, which is partly to blame for the difficulty businesses in Michigan, and across the country, have had in finding workers over the last several years. In a statement, Governor Whitmer described child care as “the backbone of our economy.” The signing of this package of bills is also significant because it had support from Republicans and business groups, which may be a sign that more bipartisan legislation is on the way in the runup to the November elections.

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  1. Michigan Senate Judiciary Committee Approves Texting While Driving Bills

The Michigan Senate Judiciary Committee recently approved a package of bills expanding the scope of Michigan’s texting while driving laws, which would make requirements more stringent and penalties for violations more costly. The bills explicitly address social media use and live streaming.

Why it Matters: Distracted driving is dangerous. In 2020, according to the National Highway Traffic Safety Association, 3,142 people were killed in motor vehicle crashes involving distracted drivers. Distracted driving is also costly for drivers, as those who violate distracted driving laws tend to see their insurance rates shoot up.

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  1. Marijuana Prices Plummet 41% in Michigan

In a recent public meeting, Michigan Cannabis Regulatory Agency Director Andrew Brisbo stated that legal marijuana prices fell 41% over the past year in Michigan.

Why it Matters: With inflation surging across the economy, falling prices in the marijuana industry mean that profits may be hard to come by. One of the secondary effects of price deflation is the risk of what is called “potency inflation.” In general, marijuana that is more potent—higher THC levels—is more expensive. That can lead to “lab shopping,” which involves producers trying to find a testing lab that will deliver high THC results so that more can be charged to the consumer.

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  1. Housing Market Cools Following Historic Run-Up

The National Association of Realtors recently reported that existing-home sales in May dropped 3.4% from April (four consecutive months of declining sales) and by 8.6% since May of last year. The latest S&P CoreLogic Case-Shiller Index also shows home price growth slowing, as well as a jump in the inventory of homes for sale.

Why it Matters: The residential real estate market is an important indicator of, and driver of, economic vitality across the broader economy. The early signs of a slowdown in the real estate market correlates to increases in mortgage rates due to inflation. Rates for a 30-year mortgage have rocketed higher, from around 3% earlier this year to over 6%, which has significantly reduced buying power for many people.

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  1. Sixth Circuit Draws the “State Action” Line at a City Manager’s Personal Facebook Page

The Sixth Circuit issued an opinion earlier this week in a case involving a city manager who shared both personal and city-related content on his personal Facebook page. After the city manager deleted comments made by a disgruntled citizen on posts about city policies, the citizen sued alleging that his First Amendment rights were violated. The lower court dismissed the citizen’s lawsuit, and the Sixth Circuit affirmed, ruling that under the facts of this case the city manager’s actions did not constitute “state action.”

Why it Matters: In this 21st Century digital era, where there are virtually no barriers to communication, it’s said that we are all “publishers,” especially on social media. This case helps draw the line for municipalities and their employees as to what communications they engage in may constitute personal action vs. state action.


Related Practice Groups and Professionals

Insurance Defense | Emily Vanderlaan

Real Estate | Jared Roberts

Cannabis | Klint Kesto

Labor, Employment & Civil Rights | Aaron Davis

Five Stories that Matter in Michigan This Week – June 24, 2022

Five Stories that Matter in Michigan This Week – June 24, 2022; Legal, Legislative, and Regulatory Insights


  1.  Michigan House Passes Bills Requiring More Stringent Work-Search Requirements

The Michigan House recently passed a pair of bills that would require those seeking unemployment benefits to report weekly about their attempts to seek work. Under the bills, individuals would have to register with the Michigan Works! agency within two weeks of applying for benefits and would have to take and report on certain work search or training steps at least three times per week.

Why it Matters: Despite the volatility in stock markets and discussions about a possible recession, the job market in the United States remains strong, with the unemployment rate at a historically low 3.6%. If these bills become laws—a big “if” since they were passed by Republicans on a party-line vote—the work-search requirements could spur more people to rejoin the workforce.

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  1. Michigan House Passes Bill That Would Change Payment Priority Scheme for Operator or Passenger of Commercial Vehicle

The Michigan House recently passed HB 5719, which would change the order of priority of payment of personal injury protection benefits to a person injured while operating or as the passenger of a commercial vehicle or transport, such as a taxi or ride-share service.

Why it Matters: If signed into law, the bill would require, in the event of an injury described above, that coverage would come from the injured person’s own insurance rather than the vehicle owner’s insurance.

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  1. Markey Submits FOIA Requests for Signatures Process

Following the Michigan Supreme Court’s decision to deny three Republican candidates for governor to be placed on the primary ballot, after state election officials ruled that their campaigns had submitted forged signatures, one former candidate, Michael Markey, recently submitted Freedom of Information Act (FOIA) requests regarding the process the Bureau of Elections took in declaring fraudulent signatures appearing on his nominating petitions.

Why it Matters: Mr. Markey’s FOIA requests broaden to the Secretary of State, Bureau of Elections, and the Department of Attorney General. In a recent statement, Mr. Markey said he wants the exact steps that were taken to be made public. This developing scenario highlights the need for experienced election law counsel.

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  1. Detroit Faces Lawsuits Over Adult-Use Recreational Licenses

Following the Detroit City Council’s vote on the revised ordinance to allow adult-use recreational cannabis sales, multiple medical marijuana companies have filed suit against the city over the licensing program. JARS Cannabis and House of Dank, two companies that own medical marijuana dispensaries licensed in Detroit, are suing the City of Detroit over the revised ordinance claiming that the new law would signal the end for existing medical marijuana facilities already in the area. The two companies pointed to a provision in the revised ordinance that prevents existing medical facilities in the area from getting a recreational license until 2027.

Why it Matters: Detroit, and many other municipalities in Michigan,  have faced lawsuits over their cannabis licensing ordinances, particularly ordinances related to adult-use recreational licenses. Many of the lawsuits stem from scoring systems designed by municipalities for awarding recreational licenses which some applicants argue are unfair. The consequence of this litigation is that a number of municipalities which opted to allow the sale of recreational marijuana still haven’t issued licenses because issues related to their approval process are being litigated.

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  1. MEDC to Make $237 Million Available To Help Michigan Small Businesses

The Michigan Economic Development Corporation recently announced that Michigan has been approved for up to $237 Million in State Small Business Credit Initiative (SSBCI) funding from the U.S. Department of Treasury.

Why it Matters: Small businesses impacted by the COVID-19 pandemic can apply for funds through private lenders and the MEDC would back the loans through the SSBCI program. Learn more about the program from this video interview with Chris Cook, Director of Capital Access at MEDC.


Related Practice Groups and Professionals

Insurance Defense | Emily Vanderlaan

Business & Tax | Ed Castellani

Election Law | Garett Koger

Cannabis | Klint Kesto

Labor, Employment & Civil Rights | Aaron Davis

City of Detroit Faces Lawsuits Over Adult-Use Recreational Licenses

Following the Detroit City Council’s vote on the revised ordinance to allow adult-use recreational cannabis sales, multiple medical marijuana companies have filed suit against the city over the licensing program.

JARS Cannabis and House of Dank, two companies that own medical marijuana dispensaries licensed in Detroit, are suing the City of Detroit over the revised ordinance claiming that the new law would signal the end for existing medical marijuana facilities already in the area. The two companies pointed to a provision in the revised ordinance that prevents existing medical facilities in the area from getting a recreational license until 2027.

In its lawsuit, JARS Cannabis argues that Detroit’s revised ordinance violates a state law providing that municipalities cannot adopt ordinances that are “unreasonably impracticable.” Rather than provide a competitive application process, the city utilizes a scoring system for choosing which companies receive a license.

Detroit has faced lawsuits over its cannabis licensing ordinances before. In 2021, a federal district judge found that the city’s first recreational marijuana ordinance, which gave licensing preference to “legacy” Detroit residents, was “likely unconstitutional.”

JARS Cannabis and House of Dank, in their respective lawsuits, both argue that the revised ordinance still shows too much preference to certain potential applicants—namely, Detroit residents and newcomers to the cannabis business.

While these lawsuits are actively pending, we are monitoring the situation and will provide updates. At Fraser Trebilcock, we have handled multiple lawsuits in the cannabis field and are able to assist you. Please contact Klint Kesto, Matthew Meyerhuber, or your Fraser Trebilcock attorney.


Fraser Trebilcock attorney and former Michigan State Legislator Klint Kesto has nearly two decades of experience working in both the public and private sectors, including serving as Co-Chair of the CARES Task Force. You can reach him at kkesto@fraserlawfirm.com or 517.377.0868.


Matthew J. Meyerhuber is an attorney at Fraser Trebilcock focusing on general litigation, cannabis law, environmental law, and real estate. Matthew can be reached at mmeyerhuber@fraserlawfirm.com or 517.377.0885. 

Five Stories that Matter in Michigan This Week – June 17, 2022

Five Stories that Matter in Michigan This Week – June 17, 2022; Legal, Legislative, and Regulatory Insights


  1.  Court of Appeals Considers Arguments in Significant No-Fault Case

An important case involving Michigan’s auto no-fault law is before the Michigan Court of Appeals. The dispute in the case of Andary, et al v. USAA Casualty Insurance Company, et al is focused on whether the no-fault reforms passed in 2019 apply retroactively for people injured before the law was passed. The plaintiffs in the case argue that retroactive application is unconstitutional.

Why it Matters: The circuit court in this case sided with insurers. To the extent that the appellate court reverses in favor of plaintiffs, it could create considerable uncertainty in the no-fault insurance marketplace in Michigan.

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  1. Michigan Supreme Court Blocks Republican Candidates for Governor from Ballot

The Michigan Supreme Court recently denied requests by three Republican candidates for governor to be placed on the primary ballot, after state election officials ruled that their campaigns had submitted forged signatures. Fraser Trebilcock election law attorney Garett Koger was quoted by The New York Times in an article discussing the Michigan Supreme Court’s decision.

Why it Matters: The Republican primary for governor has been chaotic, to say the least. Five of ten candidates have now been removed from the primary ballot. Candidate Ryan Kelley was arrested by federal agents this week and charged with four misdemeanors related to his alleged attendance at last year’s U.S. Capitol riot. And former Detroit police chief James Craig announced that he is mounting a write in campaign for the August 2 primary. These different scenarios all highlight the need for experienced election law counsel.

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  1. IRS Does Rare Mid-Year Adjustment to Mileage Rates

The Internal Revenue Service recently announced that it has increased the 2022 mileage rates for the last six months of the year in response to high gasoline prices, including rates for business travel, deductible medical or moving expenses, and deduction for charitable contributions. Learn more about the new mileage rates here.

Why it Matters: Midyear increases in mileage rates are rare. Accordingly, self-employed individuals who operate an automobile for business use, as well as employers who reimburse employees who use their own vehicles to conduct business, should take note of the changes.

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  1. New Education and Information Requirements for Michigan Schools

New legislation was recently enacted requiring schools to provide informational materials on post-secondary education options. The Michigan Department of Education must create informational packets, including information about Advanced Placement programs, all public universities and community colleges in the state, and student loans and tuition assistance, that will be distributed to all students in 8th to 12th grades each year. In addition, by overwhelming margins, the Michigan House and Senate recently passed legislation that would mandate personal finance education at the high school level.

Why it Matters: To remain economically competitive, it is important that Michigan continues to focus on having a well-educated workforce in order to attract and retain employers.

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  1. City of Detroit Faces Lawsuits Over Adult-Use Recreational Licenses

JARS Cannabis and House of Dank, two companies that own medical marijuana dispensaries licensed in Detroit, are suing the City of Detroit over the revised ordinance claiming that the new law would signal the end for existing medical marijuana facilities already in the area. The two companies pointed to a provision in the revised ordinance that prevents existing medical facilities in the area from getting a recreational license until 2027.

Why it Matters: State law mandates that municipalities cannot adopt “unreasonably impracticable” adult-use cannabis ordinances. As the City of Detroit faces multiple lawsuits over their revised ordinance, other municipalities may face the same issue.


Related Practice Groups and Professionals

Insurance Defense | Emily Vanderlaan

Election Law | Garett Koger

Business & Tax | Liz Siefker

Cannabis | Klint Kesto

IRS Announces Increase for 2022 Mileage Rates

On June 9, 2022, the Internal Revenue Service announced that it has increased the 2022 mileage rates for the last six months of the year in response to high gasoline prices. The new mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate that has been effective since the beginning of 2022. The new rate for deductible medical or moving expenses, which is available for active-duty members of the military, will be 22 cents, also up 4 cents from the effective rate at the start of the year. The mileage rate that applies to the deduction for charitable contributions remains fixed by the Internal Revenue Service at 14 cents per mile. These new rates will become effective on July 1, 2022.


Attorney Elizabeth Siefker

Elizabeth M. Siefker is an attorney at Fraser Trebilcock in the trusts and estates practice group focusing on business planning, estate planning, and elder law. You can reach her at esiefker@fraserlawfirm.com, or at 517.377.0801.

Five Stories that Matter in Michigan This Week – June 10, 2022

Five Stories that Matter in Michigan This Week – June 10, 2022; Legal, Legislative, and Regulatory Insights


  1. Wayne County Announces $54 Million Fund for Small Businesses

A new $54 million fund to support small businesses, called the Wayne County Small Business Hub, was announced at last week’s Detroit Regional Chamber’s Mackinac Policy Conference (“Mackinac Conference”). It will provide support to new and existing businesses, with a specific focus on minority- or women-owned businesses, and micro businesses with 10 or fewer employees with a focus on technical assistance.

Why it Matters: Small businesses are often the first to be hit when the economy slows, and with credit markets tightening there are likely to be fewer sources of liquidity for small business owners to tap. This new fund, a collaboration between the Wayne County Executive’s Office and New Economy Initiative, will provide needed resources for historically disadvantaged businesses.

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  1. Ford and Pfizer to Make Significant Investments in Michigan

Also at the Mackinac Conference, Ford Motor Company and Pfizer announced significant investments in Michigan. Ford reportedly will spend $2 billion across the company’s Michigan plants, and intends to create more than 3,000 jobs. Pfizer will make a $120 million investment at its Kalamazoo facility.

Why it Matters: With a great deal of economic doom and gloom in the headlines, these announcements are bright spots showing that large companies are still making investments in their businesses—and in Michigan, in particular.

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  1. Concerns Expressed About Losing Another EV Investment in Michigan

But it’s not all good news on the economic front in Michigan. At the Mackinac Conference, John Rakolta Jr., chairman of Walbridge, pointed out that Michigan is missing out on major opportunities in the electric vehicle industry. For example, Stellantis announced last week that it was bypassing Michigan and locating its new electric vehicle battery manufacturing plant in Kokomo, Indiana.

Why it Matters: According to a study by Fortune Business Insights, the global electric vehicle market is expected to grow from approximately $287 billion in 2021, to $1.3 trillion by 2028. To take advantage of this opportunity, Michigan must make itself attractive to companies in the electric vehicle market. As Rakolta points out, this involves more than designing tax incentives. It requires a more comprehensive approach to utilities, zoning and other important business, financial,  legal and regulatory issues.

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  1. Unemployment Claimants Get to Keep Pandemic Overpayments

Michigan sought to claw back Pandemic Unemployment Assistance benefits paid to many Michigan residents who were accused of misreporting their income. Michigan argued that claimants were liable because they entered their gross pay from prior years to determine their weekly benefit amount when they should have entered their net pay. Michigan reversed course and announced that it would no longer seek to claw back the funds after media reports revealed that at least some claimants were asked during the application process to provide total pay—not net pay—which resulted in confusion and overpayments.

Why it Matters: This announcement surely came as a relief to many Michigan residents who were embroiled in disputes with the Michigan Unemployment Insurance Agency. More broadly, this situation demonstrates the importance of using precise, accurate language in contracts and other important documents. The alternative is to invite confusion, dispute and litigation.

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  1. Michigan Cannabis Company Files for Chapter 11 Bankruptcy

A Kalamazoo cannabis company, Master Equity Group,  recently filed for  Chapter 11 bankruptcy in the U.S. Bankruptcy Court in the Western District of Michigan.

Why it Matters: This case will be closely watched by the cannabis industry, as well as by corporate restructuring professionals. Bankruptcy courts have historically prevented cannabis companies from filing for protection under the United States Bankruptcy Code because, while marijuana is legal in Michigan, it remains illegal under the federal Controlled Substances Act. And because bankruptcy courts are federal courts, similar attempts by cannabis companies to file for bankruptcy protection have been disallowed.


Related Practice Groups and Professionals

Administrative & Regulatory | Michael Ashton
Business & Tax  | Mark Kellogg
Labor, Employment & Civil Rights | Aaron Davis
Cannabis | Klint Kesto

Client Alert: Updated PCORI Fees Payable in 2022

In Notice 2022-4, the Internal Revenue Service set forth the PCORI amount imposed on insured and self-funded health plans for policy and plan years that end on or after October 1, 2021 and before October 1, 2022.

Background

The Patient-Centered Outcomes Research Institute (PCORI) fee is used to partially fund the Patient-Centered Outcomes Research Institute which was implemented as part of the Patient Protection and Affordable Care Act.

The PCORI fees were originally set to expire for plan years ending before October 1, 2019. However, on December 20, 2019, the Further Consolidated Appropriations Act was enacted and extended the fee to plan years ending before October 1, 2029.

The fee is calculated by using the average number of lives covered under a plan and the applicable dollar amount for that plan year. Code section 4375 imposes the fee on issuers of specified health insurance policies. Code section 4376 imposed the fee on plan sponsors of applicable self-insured health plans. This Client Alert focuses on the latter.

Due to the fact that the US Department of Health and Human Services did not publish updated National Health Expenditures tables for 2021, this year’s fees are based on the projections set out in the 2020 tables. As such, plans should pay close attention to next year’s fee changes as the accuracy of 2020’s projections may be affected by current inflationary trends.

Adjusted Applicable Dollar Amount

Notice 2022-4 sets the adjusted applicable dollar amount used to calculate the fee at $2.79. Specifically, this fee is imposed per average number of covered lives for plan years that end on or after October 1, 2021 and before October 1, 2022. For self-funded plans, the average number of covered lives is calculated by one of three methods: (1) the actual count method; (2) the snapshot method; or (3) the Form 5500 method.

Deadline and How to Report

The PCORI fee is due by August 1, 2022 (as the typical due date, July 31, 2022, falls on a Sunday), and must be reported on Form 720.

Instructions are found here (see Part II, pages 8-9).

The Form 720 itself is found here (see Part II, page 2).

Form 720, as well as the attached Form 720-V to submit payment, must be used to report and pay the requisite PCORI fee to the IRS. While Form 720 is used for other purposes to report excise taxes on a quarterly basis, for purposes of this PCORI fee, it is only used annually and is due by July 31st of each relevant year.

As previously advised, plan sponsors of applicable self-funded health plans are liable for this fee imposed by Code section 4376. Insurers of specified health insurance policies are also responsible for this fee.

  • For plan years ending on or after October 1, 2017 and before October 1, 2018, the fee is $2.39 per covered life.
  • For plan years ending on or after October 1, 2018 and before October 1, 2019, the fee is $2.45 per covered life.
  • For plan years ending on or after October 1, 2019 and before October 1, 2020, the fee is $2.54 per covered life.
  • For plan years ending on or after October 1, 2020 and before October 1, 2021, the fee is $2.66 per covered life.
  • For plan years ending on or after October 1, 2021 and before October 1, 2022, the fee is $2.79 per covered life.

Again, the fee is generally due no later than July 31 (see above for 2022 date) of the year following the last day of the plan year.

As mentioned above, there are specific calculation methods used to configure the number of covered lives and special rules may apply depending on the type of plan being reported. While generally all covered lives are counted, that is not the case for all plans. For example, HRAs and health FSAs that are not excepted from reporting only must count the covered participants and not the spouses and dependents. The Form 720 instructions do not outline all of these rules.

More information about calculating and reporting the fees can be found here.

Questions and answers about the PCORI fee and the extension may be found here.

As you are well aware, the law and guidance are continually evolving. Please check with your Fraser Trebilcock attorney for the most recent updates.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.


Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients in business transactions, civil matters, regulatory compliance, and employee matters. Robert also has a background in employee benefits, having been a licensed agent since 2014. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.


Aaron L. Davis works in employee health and welfare benefits. He is also Chair of the firm’s labor law practice and serves as Firm Secretary. He has litigation experience in a diverse range of employment matters, including Title VII, the Age Discrimination and Employment Act, the Americans with Disabilities Act, the Family Medical Leave Act, and the Fair Labor Standards Act. You can reach him at 517.377.0822, or email him at adavis@fraserlawfirm.com.