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Chicago Tribune Feature

Fraser Trebilcock cottage law attorney Mark E. Kellogg was interviewed by the Chicago Tribune for an article detailing the intricacies of vacation properties left behind for families, and the importance of implementing a succession plan before a family member has passed away.

You can view the full article by clicking HERE.

Mark E. Kellogg’s breadth of knowledge and experience gives his clients unique insight into the special considerations associated with the cottage law practice. If you have any questions, you can reach out to Mark at mkellogg@fraserlawfirm.com or (517) 377.0890 for assistance.

Department of Labor Weighs In On Deferral of FMLA Designation – Don’t Let Michigan’s New Paid Medical Leave Law Trip You Up!

In a recent Opinion Letter ruling, the United States Department of Labor (DOL) examined the question of whether an employer subject to the federal Family and Medical Leave Act (FMLA) could permissibly allow an employee “to exhaust some or all available paid sick (or other) leave prior to designating leave as FMLA-qualifying?” The apparent intention of the employer submitting this inquiry was to permit such employee essentially to extend “additional FMLA leave beyond the 12-week FMLA entitlement” by adding some other leave at the beginning of the leave period. Another reason an employer might consider deferring its statutory FMLA eligibility determination could be simply to avoid that exercise when the leave is otherwise covered by another leave entitlement policy of the employer, whether paid or unpaid.

Since many Michigan employers have under the recently-enacted Michigan Paid Medical Leave Act undoubtedly created or modified their sick leave policies, this ruling presents a timely opportunity for your enterprise to avoid conflicts between the two statutes.

DOL’s OPINION

The DOL concludes that an employer may not defer or delay designating leave as FMLA or not FMLA. Applicable regulations, the Department notes, “require employers to provide a written ‘designation notice’ to an employee within five business days.”

The Department concludes that “(f)ailure to follow this notice requirement may constitute an interference with … or denial of … an employee’s FMLA rights.” This conclusion may be surprising, as an effective extension of leave would seem to benefit the employee, and it is an established principle under the FMLA regulations that employers may adopt leave policies more generous than those required by the FMLA.

MICHIGAN’S PAID MEDICAL LEAVE ACT

Michigan’s new Paid Medical Leave Act requires covered employers to provide paid leave for various purposes or reasons. Those reasons generally, but not in all cases, track the reasons a leave may qualify for FMLA protection. Based on the known principle that an employer may adopt a “more generous” policy than federal law requires, many employers may assume that allowing an employee to use paid leave under the Michigan Act would be permissible and would excuse them of any obligation under the FMLA while the worker is on paid leave.

NOT!

Moreover, one of the most common FMLA errors employers make is to fail to designate an absence as FMLA-qualifying even if the absent worker does not indicate that the leave is FMLA-eligible, and even if the employee doesn’t refer to FMLA or use the words or acronym. Applicable regulations require that whenever the employer “has enough information to determine whether the leave is being taken for a FMLA-qualifying reason” according to the Letter, the FMLA designation determination and notice must be provided within the five business-days period. And, note that this standard is not limited to information provided by the employee. The designation obligation arises as long as the employer has enough information on the nature of the reason for the absence to have reason to believe that the employee’s right to an FMLA-protected leave may be implicated.

THE RULE IN BLACK AND WHITE

Always provide notice of a designation of FMLA eligibility within five business days of when you have enough information to make that determination, whether an FMLA leave is requested, and whether or not the employee is eligible for some other leave, including a paid leave under the Michigan Act.

IMPORTANT P.S.: FREE ADVICE

Savvy employers know that FMLA regulations permit them to require use of other leave concurrently with FMLA leave. The reason to adopt such policy is to prevent the employee from obtaining more leave than the 12 weeks allowed by the FMLA. Thus, a Michigan employer may adopt a written policy requiring its employees to use – and even, exhaust — paid leave provided in conformance with the Michigan Paid Medical Leave Act while employees are on an FMLA-qualifying leave.

You can view the full letter here: https://www.dol.gov/whd/opinion/FMLA/2019/2019_03_14_1A_FMLA.pdf

Contact us if we can assist you in revising or reviewing your policies.

Fraser Trebilcock Shareholder Dave Houston has nearly 40 years of experience representing employers in planning, counseling, and litigating virtually all employment claims and disputes including labor relations (NLRB and MERC), wage and overtime, and employment discrimination, and negotiation of union contracts. He has authored numerous publications regarding employment issues. You can reach him at 517.377.0855 or dhouston@fraserlawfirm.com.

New License Requirements for Michigan Used Motor Vehicle Dealers

Effective March 20, 2019 the Michigan Vehicle Code was amended to include the following dealer requirements for used vehicle dealers:

All owners and officers of used vehicle dealer applicants must attend a prelicensure training program. This requirement does not apply to dealers licensed as of March 20, 2019.
Within 90 days after a Class B license is issued the dealer must select an individual that must complete the training program for each sales location. This requirement applies to existing used vehicle dealers upon renewal of their license.
A designated individual must complete the training program one time in each 24-month period.

The training programs may be conducted by the Department of State or by a trade organization approved by the Department of State.

This is brief summary of the new law. Used vehicle applicants and dealers are encouraged to review the new law in its entirety or to seek the advice of effective counsel.

Edward J. Castellani is an attorney and CPA with Fraser Trebilcock and serves as Chair of the Firm’s Auto Dealer Practice Group. He may be contacted at ecast@fraserlawfirm.com or 517-377-0845.

Michigan’s New Paid Medical Leave Act Is About To Become Effective. Are You Ready?

Paid Medical Leave Act in General

The recently enacted Paid Medical Leave Act (PMLA) requires entities which employ 50 or more individuals to provide paid medical leave for their eligible employees and family members.

Effective Date

March 29, 2019

Affected Employers

Any employer (aside from certain governments) that employs 50 or more individuals is subject to the law, regardless of where those employees work or live. However, even though the employer would be subject to the law, employees whose primary work location is outside of Michigan would not be protected by it. So if you had 55 employees with 45 working out of state, the law only applies to the 10 working in Michigan.

Eligible Employees

Significantly, eligible employees do not include individuals who are exempt from overtime requirements under the FLSA section 13(a)(1), non-public agency employees covered by CBAs currently in effect, federal or state (or political subdivision) government employees, employees in a job scheduled for 25 weeks or less (and work 25 weeks or less), employees who worked on average less than 25 hours per week during the immediately preceding calendar year, variable hour employees (as defined under Pay or Play), as well as a few other exceptions (including certain employees under the railroad unemployment insurance act, railway labor act, MI employment security act, and improvement opportunity wage act).

Family Members

The definition of family member is broad and includes:

A biological, adopted or foster child, stepchild or legal ward, or a child to whom the eligible employee stands in loco parentis.
A biological parent, foster parent, stepparent, or adoptive parent or a legal guardian of an eligible employee or an eligible employee’s spouse or an individual who stood in loco parentis when the eligible employee was a minor child.
An individual to whom the eligible employee is legally married under the laws of any state.
A grandparent.
A grandchild.
A biological, foster, or adopted sibling.

Therefore, if an employee’s brother is ill, the employee is allowed to take leave to care for his/her brother.

Basis of Accrual

The employer can provide paid medical leave on either: (1) an accrual basis (of at least one hour for every 35 hours worked – cannot be less than 40 hours in a benefit year) or (2) can front at least 40 hours of paid leave at the beginning of the benefit year (and can prorate for mid-year hires).

If the accrual basis is used, an employer is not required to allow the employee to accrue more than 1 hour per calendar week and may limit the accrual and use of paid medical leave to 40 hours per benefit year. However, the employer must allow the employee to carryover at least 40 hours of unused accrued paid medical leave from one benefit year to the next.

If the front load option (of at least 40 hours) is used, the employer is not required to allow the eligible employee to carry over any of the paid leave to another benefit year.

For new hires, an employer can require a 90 day waiting period after hire to use any accrued paid leave.

The paid medical leave must be provided at a pay rate equal to the greater of the normal hourly wage / base wage for that eligible employee or the minimum wage rate under the improved workforce opportunity wage act. An employer is not required to include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, or gratuities in the calculation of an eligible employee’s normal hourly wage or base wage.

Use of Medical Leave

Leave can be used for personal or family health needs, domestic violence and sexual assault (documentation can be required but cannot ask details), missing work due to closed schools (to take care of children) or closed work for public health emergencies, and for issues with regard to communicable diseases. Specifically, paid medical leave is for:

The eligible employee’s mental or physical illness, injury, or health condition; medical diagnosis, care, or treatment of the eligible employee’s mental or physical illness, injury, or health condition; or preventative medical care for the eligible employee.
The eligible employee’s family member’s mental or physical illness, injury, or health condition; medical diagnosis, care, or treatment of the eligible employee’s family member’s mental or physical illness, injury, or health condition; or preventative medical care for a family member of the eligible employee.
If the eligible employee or the eligible employee’s family member is a victim of domestic violence or sexual assault, the medical care or psychological or other counseling for physical or psychological injury or disability; to obtain services from a victim services organization; to relocate due to domestic violence or sexual assault; to obtain legal services; or to participate in any civil or criminal proceedings related to or resulting from the domestic violence or sexual assault.
For closure of the eligible employee’s primary workplace by order of a public official due to a public health emergency; for an eligible employee’s need to care for a child whose school or place of care has been closed by order of a public official due to a public health emergency; or if it has been determined by the health authorities having jurisdiction or by a health care provider that the eligible employee’s or eligible employee’s family member’s presence in the community would jeopardize the health of others because of the eligible employee’s or family member’s exposure to a communicable disease, whether or not the eligible employee or family member has actually contracted the communicable disease.

Procedural Requirements

Eligible employees must comply with the employer’s usual and customary notice, procedural and documentation requirements for requesting leave; however, the employer must give the employee at least 3 days to provide the documentation. Furthermore, the law has parameters on documentation required for domestic violence or sexual assault. If you require such documentation, you should discuss these parameters with legal counsel.

Additionally, unless the employer has a different written increment policy in an employee handbook or other benefits document, paid leave must be used in 1 hour increments.

Employers who transfer to other divisions, entities or locations but remain employed by the same employer are allowed to retain all accrued paid medical leave. However, if the employee separates from service and is rehired, the accrued paid leave may be lost. There are no requirements to reimburse employees for unused time.

Notice and Document Retention

You are required to display a poster at your place of business, in a conspicuous and accessible place, containing the amount of paid leave required, the terms under which the paid medical leave may be used, and the employee’s right to file a complaint with the department for any violation. The department will create and make said posters available at no cost.

Finally, PTO records shall be retained for not less than 1 year and are subject to inspection.

Penalties

For violations of the law, the department may impose penalties and grant an eligible employee or former eligible employee payment of all paid medical leave improperly withheld. Employers failing to provide paid medical leave are also subject to an administrative fine of not more than $1,000.00. Additionally, an administrative fine of not more than $100.00 may be imposed for each separate violation of the posting requirement.

This communication serves solely as a general summary and does not constitute legal advice, and cannot be used or substituted for legal advice.

Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or elatchana@fraserlawfirm.com.

Now is the Time to Consider Appealing Your 2019 Property Taxes

Arriving in a mail box near you is your annual property tax Notice of Assessment. Property taxes are a significant business operating expense and they are typically the second highest expense of homeowners after their mortgage. We routinely assist industrial and commercial property tax appeals for our clients. Our experience practicing before the Michigan Tax Tribunal can help you achieve significant tax savings depending on the circumstances.

Deciding whether to challenge an assessment, business and property owners should consider a variety of factors including current market value of their property, valuation methods used, and practices used by local assessing authorities. Once the decision has been made to appeal, the procedures involved are often technical, complex, and time sensitive. The legal requirements for filing an appeal are usually strictly enforced against the property owner. Experienced legal counsel is invaluable in protecting the taxpayer’s rights.

If you disagree with the valuation on the Notice of Assessment, you can reach out to your local assessor to gain either a better understanding of the factors used. In some communities this process is required as an “assessor’s review.” If you can’t reach an understanding or an agreement with the assessor’s office, the next step is to protest to the Board of Review.

For most industrial and commercial property owners, a protest to the local Board of Review is not a requirement. There are, however, certain types of property tax claims that do require a Board of Review protest, even for industrial and commercial property owners. Although it does not happen often, there are instances where a taxpayer protests an assessment and the Board is made aware of something, typically a factual matter, that provides some relief. Other times, the assessor may notice a discrepancy on closer examination that may actually cause the assessment to increase.

If the Board of Review denies your protest, you can always proceed to the Michigan Tax Tribunal. The Michigan Tax Tribunal is an administrative tax court that has authority over assessment disputes relating to both property and non-property tax matters. While most property tax reductions are obtained through the process of negotiation, on occasion, however, formal hearings or court action are necessary to achieve the desired result.

Procedural matters in the Tax Tribunal is perhaps where many property owners go wrong. While the Tax Tribunal is not a court in the formal sense, many taxpayers fail to appreciate that the Tribunal nevertheless has its own procedures, formalities, and timelines. For a number of reasons, the Tax Tribunal is rather strict in the application of its rules and is rather unforgiving regarding its deadlines. Substantial compliance is an argument one never wants to have to make.

Another area where taxpayers tend to go astray is in appreciating how the Tax Tribunal approaches property tax claims and evaluating evidence. Property owners have a sense of what their property is worth, what features, in their subjective knowledge, add and/or detract from its value, and a feel for the local market. A valuation, for property tax purposes, must meet a certain evidentiary threshold, and involves an expert appraiser that comes in and gives an exact value on the property based on a greater number of factors that a property owner in a general sense may not be aware of or able to articulate. The Tax Tribunal looks and evaluates the valuation evidence much the same way.

All of this being said, it is important to consult with professionals, a tax attorney, qualified appraiser and other experts to evaluate if an appeal is in your best interest and to properly guide you through the process. And now is the time to consider this with your Notice of Assessment arriving in the mail soon.

Fraser Trebilcock attorney Paul V. 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 pmccord@fraserlawfirm.com.

Parking Changes for Our Downtown Lansing Location

Please note that effective immediately, the parking ramp located on Townsend Street between Washtenaw and Allegan Streets in downtown Lansing will no longer offer validated parking.

Continue reading Parking Changes for Our Downtown Lansing Location

Ten Reasons You May Want to Consider a Family Cottage Succession Plan

The goal of cottage succession planning is to set up legal ground rules that provide the best chance to keep a cottage in the family for future generations. A cottage plan usually addresses concerns through the creative use of a limited liability company (LLC) to own the property. Here are ten reasons why you and/or your family may want to consider a family cottage succession plan.

Prevent a joint owner from forcing the sale of the cottage through an action for partition.
An alternative to allowing common law rules dictate how the cottage operates.
Prevent transfer of an interest in the cottage outside the family.
Protect owners from creditor claims.
Establish a framework for making decisions affecting the cottage.
Provide sanctions for nonpayment of cottage expenses.
A vehicle for an “endowment” (money set aside to fund cottage expenses).
To require mediation or arbitration of family disputes.
Allocate control of the cottage between or among generations of owners.
May help delay (or avoid) the uncapping of Michigan property taxes.

These are the basics, but just as each family is different, each agreement can be tailored to fit specific needs.

Trust Income: SCOTUS to Consider State Tax Nexus Case Based on Beneficiary’s Residence

Last year, the U.S. Supreme Court decided South Dakota v. Wayfair upending 51-years of precedence holding that a state could require an out-of-state seller with no physical presence in the state to collect and remit sales taxes on goods the seller ships to customers in the state. In January, the U.S. Supreme Court announced that it will hear another state tax nexus case, Kaestner 1992 Family Trust v North Carolina. Kaestner will address whether the due process clause prohibits states from taxing trusts based on the in-state residency of a beneficiary. In light of last year’s Wayfair decision and the Court’s apparent reluctance to take up nexus cases, the result is expected to have broad implications.

Background

In Kaestner, the trust’s only connection with the taxing state during the tax years at issue was a resident beneficiary. The Kimberly Rice Kaestner 1992 Family Trust, was created in New York and governed by New York Law. The Trust documents, financial books and records, and legal records were kept in New York and all tax returns and Trust accountings were prepared in New York. At the time it was created, neither the settlor nor any of the beneficiaries resided in North Carolina. The trustee was a Connecticut resident, and the trust held financial instruments located in Massachusetts. The beneficiary had no absolute right to the Trust’s assets or income, as distributions were made at the sole discretion of the trustee. No distributions were made to the beneficiary during the years at issue. The terms of the Trust provided that the trustee was to distribute the assets to Kimberly Kaestner when she reached a specified age, which did not occur until after the tax years at issue.

State Law

North Carolina tax law imposes a tax on the taxable income of trusts. The statute provides, in part: “The tax is computed on the amount of the taxable income of the estate or trust that is for the benefit of a resident of this State.” Adding to this, the North Carolina Department of Revenue issued administrative guidance interpreting the statute application based on the “beneficiary’s state of residence on the last day of the taxable year of the trust.” At this point it should be noted that Michigan law differs from that of North Carolina. In Blue v Department of Treasury, the Michigan Court of Appeals held that Michigan may not tax trust income if all trustees, beneficiaries and trust administration occurs outside of the state (even if there is non-income producing property in the state – including real property).

The Dispute

At first the trust in Kaestner paid the tax for tax years 2005 through 2008, but later filed a refund claim on the basis that the taxing statute is unconstitutional as the presence of a resident beneficiary was not a sufficient connection with North Carolina for the state to impose its income tax on the trust. The North Carolina Department of Revenue denied the claim and the underlying refund suit followed.

In a divided opinion, the North Carolina Supreme Court ruled in the trust’s favor finding that the presence of an in-state beneficiary alone was not enough to establish tax jurisdiction. The court reasoned that the trust is an entity separate from individual beneficiaries and distinguished cases in Connecticut and California that reached contrary results under similar facts. The dissent, argued that the trust had subjected itself to North Carolina’s taxing power because it, in the dissent’s view, purposely availed itself to the state through the in-state beneficiary.

Reasons to Watch

Trusts are a common planning tool and subjecting them to state income taxation based only upon an in-state beneficiary could have significant consequences. The states that have faced this issue are split on this question. The split is among nine states – four have said “Yes”; California, Missouri, Connecticut, and Illinois allow taxing a trust based on the presence of an in-state beneficiary, and five states have said “No”; New York, New Jersey, Minnesota, Michigan, and now, North Carolina. Nearly every state taxes trust income. As a result, the outcome of the Kaestner case could have important implications for tax planning and state tax policy. Some commentators have surmised that from the states’ perspective, a loss in Kaestner could nudge them away from extending the economic nexus reach of Wayfair into the area of state income taxation. All of this remains to be seen and deserves a close watch.

Client Alert/Reminder: Form W-2 Reporting Due for Employer-Provided Health Care / Disclosure Due to CMS for Medicare Part D

Upcoming Deadlines: (1) Form W-2 Reporting of Employer-Provided Health Coverage; And (2) Medicare Part D Notices to CMS

Reminder: Form W-2 Reporting on Aggregate Cost of Employer Sponsored Coverage

Unless subject to an exemption, employers must report the aggregate cost of employer-sponsored health coverage provided in 2018 on their employees’ Form W-2 (Code DD in Box 12) issued in January 2019. Please see IRS Notice 2012-09 and our previous email alerts for more information.

The following IRS link is helpful and includes a chart setting forth various types of coverage and whether reporting is required: http://www.irs.gov/Affordable-Care-Act/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage. Please note this is a summary only and Notice 2012-09 should also be consulted. The IRS has issued questions and answers regarding reporting the cost of coverage under an employer-sponsored group health plan, which can be found here: https://www.irs.gov/newsroom/employer-provided-health-coverage-informational-reporting-requirements-questions-and-answers.

If you have questions regarding whether you or your particular benefits are subject to reporting, please feel free to contact us.

Deadline Coming Up for Calendar Year Plans to Submit Medicare Part D Notice to CMS

As you know, group health plans offering prescription drug coverage are required to disclose to all Part D-eligible individuals who are enrolled in or were seeking to enroll in the group health plan coverage whether such coverage was “actuarially equivalent,” i.e., creditable. (Coverage is creditable if its actuarial value equals or exceeds the actuarial value of standard prescription drug coverage under Part D.) This notice is required to be provided to all Part D eligible persons, including active employees, retirees, spouses, dependents and COBRA qualified beneficiaries.

The regulations also require group health plan sponsors with Part D eligible individuals to submit a similar notice to the Centers for Medicare and Medicaid Services (“CMS”). Specifically, employers must electronically file these notices each year through the form supplied on the CMS website.

The filing deadline is 60 days following the first day of the plan year. If you operate a calendar year plan, the deadline is the end of February. If you operate a non-calendar year plan, please be sure to keep track of your deadline.

At a minimum, the Disclosure to CMS Form must be provided to CMS annually and upon the occurrence of certain other events including:

Within 60 days after the beginning date of the plan year for which disclosure is provided;
Within 30 days after termination of the prescription drug plan; and
Within 30 days after any change in creditable status of the prescription drug plan.

The Disclosure to CMS Form must be completed online at the CMS Creditable Coverage Disclosure to CMS Form web page at:
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/CCDisclosureForm.html.

The online process is composed of the following three step process: Enter the Disclosure Information;
Verify and Submit Disclosure Information; and
Receive Submission Confirmation.

The Disclosure to CMS Form requires employers to provide detailed information to CMS including but not limited to, the name of the entity offering coverage, whether the entity has any subsidiaries, the number of benefit options offered, the creditable coverage status of the options offered, the period covered by the Disclosure to CMS Form, the number of Part D eligible individuals, the date of the notice of creditable coverage, and any change in creditable coverage status.

For more information about this disclosure requirement (instructions for submitting the notice), please see the CMS website for updated guidance at: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/CCDisclosure.html.

As with the Part D Notices to Part D Medicare-eligible individuals, while nothing in the regulations prevents a third-party from submitting the notices (such as a TPA or insurer), ultimate responsibility falls on the plan sponsor.

This email serves solely as a general summary of the Form W-2 reporting requirements and CMS disclosure for Medicare Part D.

Year-End Tax Planning Considerations

For many people, the end of the year tends to sneak up on us in a whirlwind of winter weather activity, family gatherings, and holiday festivities. However, even as 2018 draws to a close, it’s not too late to think about your year-end taxes, and engage in estate & income tax planning opportunities. At Fraser Trebilcock, our tax attorneys have made sure you don’t have to start your preparations from scratch, with a two-part checklist of year-end tax considerations you should make before 2019.

Continue reading Year-End Tax Planning Considerations