Five Stories That Matter in Michigan This Week – December 1, 2023

  1. Michigan Overhauls K-12 Evaluation Process

Governor Whitmer signed two bills into law (SB 395 & SB 396) on November 22, 2023, transforming the evaluation methods for teachers and school administrators in K-12 education.

Why it Matters: This new legislation substantially alters how teachers are evaluated, including streamlining rating categories, adjusting the evaluation criteria to prioritize teacher performance, and requiring educator participation in creating evaluation instruments.

———

  1. Governor Whitmer Signs Package of Clean Energy Bills

Earlier this week, Governor Whitmer signed a package of clean energy bills, including one that would require companies to make 100% of their energy through renewables such as solar and wind by 2040, and also seeks to reduce energy waste, among other objectives.

Why it Matters: Clean energy legislation is a major priority for Michigan Democrats but is opposed by Republicans and has received pushback from many business groups, who argue the legislation would increase energy costs.

———

  1. Cannabis Consumption Lounges Set for Detroit

The City of Detroit back in August announced its second round of recreational cannabis licenses, which included licenses for consumptions lounges. These lounges would be a place for adults 21 years or older to meet and safely consume cannabis that was legally purchased elsewhere.

Why it Matters: For some residents in Detroit, these consumption lounges can be the only safe and legal spot to consume cannabis. It is important to understand the rules and regulations tied to these lounges to ensure compliance.

———

  1. Michigan Minimum Wage Set for Increase for 2024

Michigan’s minimum wage is set to increase on January 1, 2024, per the Improved Workforce Opportunity Wage Act of 2018 which establishes the annual schedule of increases. The minimum hourly wage will increase to $10.33 per hour; the 85% rate for minors aged 16and 17 will increase to $8.78 per hour; the tipped employee rate of hourly pay increases to $3.93 per hour; and the training wage of $4.25 per hour for newly hired employees ages 16 to 19 for their first 90 days of employment remains unchanged.

Why it Matters: As we approach the new year, t’s important to be aware of new laws, and changes to existing laws, that are set to take effect as of January 1, 2024. Contact us with any questions.

———

  1. Streamline Corporate Transparency Act Reporting with a FinCEN Identifier

The Financial Crimes Enforcement Network (FinCEN), announced and elaborated on the use and availability of FinCEN identifiers. Under this new guidance, FinCEN identifiers may be crucial for business owners, particularly for those managing multiple entities.

Why it Matters: A FinCEN identifier is a unique number assigned by FinCEN to individuals and reporting companies, streamlining the reporting process under the CTA. Businesses will need to be prepared come 2024 for the new reporting requirements. Learn more from your Fraser Trebilcock attorneys.

Related Practice Groups and Professionals

Energy, Utilities & Telecommunication | Sean Gallagher
Cannabis Law | Sean Gallagher
Labor, Employment & Civil Rights | David Houston
Business & Tax | Robert Burgee

Five Stories That Matter in Michigan This Week – November 24, 2023

  1. Michigan Minimum Wage Set for Small Increase for 2024

Michigan’s minimum wage is set to increase on January 1, 2024, per the Improved Workforce Opportunity Wage Act of 2018 which establishes the annual schedule of increases. The minimum hourly wage will increase to $10.33 per hour; the 85% rate for minors aged 16and 17 will increase to $8.78 per hour; the tipped employee rate of hourly pay increases to $3.93 per hour; and the training wage of $4.25 per hour for newly hired employees ages 16 to 19 for their first 90 days of employment remains unchanged.

Why it Matters: As we approach the new year, t’s important to be aware of new laws, and changes to existing laws, that are set to take effect as of January 1, 2024. Contact us with any questions.

———

  1. Streamline Corporate Transparency Act Reporting with a FinCEN Identifier

The Financial Crimes Enforcement Network (FinCEN), announced and elaborated on the use and availability of FinCEN identifiers. Under this new guidance, FinCEN identifiers may be crucial for business owners, particularly for those managing multiple entities.

Why it Matters: A FinCEN identifier is a unique number assigned by FinCEN to individuals and reporting companies, streamlining the reporting process under the CTA. Businesses will need to be prepared come 2024 for the new reporting requirements. Learn more from your Fraser Trebilcock attorneys.

———

  1. Michigan Cannabis Sales Exceed $262 Million in October

Cannabis sales surpassed $262 million in October, via the monthly report from the Michigan Cannabis Regulatory Agency. Michigan adult-use sales came in at $258, 474,612.51, while medical sales came in at $4,416,590.58, totaling $262,891,203.09.

Why it Matters: Marijuana sales remain strong in Michigan, particularly for recreational use. However, there still are significant concerns about profitability and market oversaturation that the industry is contending with.

———

  1. Package of Clean Energy Bills Head to Governor’s Whitmer’s Desk

A package of bills, including one that would require companies to make 100% of their energy through renewables such as solar and wind by 2040, and also seeks to reduce energy waste, among other objectives, is on its way to Governor Whitmer’s desk for signature after passing both the Senate and House.

Why it Matters: Clean energy legislation is a major priority for Michigan Democrats but is opposed by Republicans and has received pushback from many business groups, who argue the legislation would increase energy costs.

———

  1. CRA Issues Bulletin for Product Recall

On November 20, the Cannabis Regulatory Agency (CRA), issued a bulletin for a voluntary product recall, after it was discovered that the product exceeds the maximum dosage of 10mg of THC per serving.

Why it Matters: It is important for cannabis producers to adhere to the rules and regulations when handling medical and adult-use cannabis, otherwise they can face product recalls and fines and/or penalties.

Related Practice Groups and Professionals

Labor, Employment & Civil Rights | David Houston
Business & Tax | Robert Burgee
Cannabis Law | Sean Gallagher
Energy, Utilities & Telecommunication | Sean Gallagher

Streamline Corporate Transparency Act Reporting with a FinCEN Identifier

While much has already been written about the Corporate Transparency Act of 2021 (“CTA”) – under which the vast majority of companies and other entities will have a reporting requirement at some time in 2024 – not a lot has been published regarding the actual mechanisms through which those reports will be made.

The Role of FinCEN Identifiers

This month, however, the Financial Crimes Enforcement Network (FinCEN), announced and elaborated on the use and availability of FinCEN identifiers. Under this new guidance, FinCEN identifiers may be crucial for business owners, particularly for those managing multiple entities. A FinCEN identifier is a unique number assigned by FinCEN to individuals and reporting companies, streamlining the reporting process under the CTA.

Simplifying Reporting for Individuals

Individuals can apply for a FinCEN identifier, providing all necessary information required in the initial report. Once an individual obtains this identifier, they can then provide it to any reporting company. The reporting company, in turn, can use this identifier number in their reports instead of the detailed information otherwise required, making the process more efficient.

Updating Information

A critical aspect of maintaining a FinCEN identifier is the obligation of the individual to keep information current. If there’s any change in the information provided by an individual for their FinCEN identifier, they must submit an updated application within 30 calendar days of the change. Similarly, if initial information was inaccurate, a corrected application is required within 30 days of becoming aware of the inaccuracy.

Conclusion

For serial entrepreneurs and those overseeing multiple business entities, obtaining a FinCEN identifier is a strategic move to streamline the reporting process under the Corporate Transparency Act. For reporting companies, requiring beneficial owners to obtain, report, and maintain their own FinCEN identifier number could be part of a policy to shift the reporting obligation to the beneficial owner when their information changes.

You can learn more about FinCEN identifiers pursuant to the final rule FinCEN recently published on the topic. The identifier process not only simplifies compliance but also ensures that all required information is accurately and efficiently communicated to FinCEN. If you have any questions, or require assistance, please contact Fraser Trebilcock attorney Bob Burgee.

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 with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.

Five Stories That Matter in Michigan This Week – November 17, 2023

  1. Withdrawing Your Employee Retention Credit Claim: Navigating the New IRS Process

The ERC is a refundable tax credit intended for businesses that kept employees on their payroll while facing economic hardships caused by the pandemic. However, not long after its introduction, issues surfaced. Some businesses, influenced by the aggressive marketing of ERC promoters, have filed claims without fully meeting the eligibility criteria, leading to a slew of inaccurate claims.

Why it Matters: In order to provide a safe harbor to those entities that may have filed such false or inaccurate claims, the IRS has established a new withdrawal process. This measure is designed to aid businesses in re-evaluating the accuracy of their ERC claims and wish to avoid the penalties and other complications of incorrect filings. Learn more from your Fraser Trebilcock attorney.

———

  1. CRA Suspends Licenses of Medical and Adult-Use Marijuana Processor

On November 15, the Cannabis Regulatory Agency (CRA) suspended the medical and adult-use marijuana processor licenses of Michigan Investments 10, Inc, after it was determined that both businesses violated various administrative rules.

Why it Matters: After onsite inspections and reviews of the statewide monitoring system (Metrc) data, the CRA discovered that the businesses incorrectly entered data into the monitoring system and failed to properly track large quantities of product as well as other violations.

———

  1. CRA Publishes October 2023 Data: Average Price Hovers

Per data released by the Cannabis Regulatory Agency (CRA), the average retail price for adult-use sales of an ounce of cannabis in October was $97.62, a decrease from $100.14 in September. This is still a decrease from October 2022, where the average price was $102.65.

Why it Matters: While the prices of cannabis and cannabis-related products continue to decrease and make consumers happy, growers on the other hand are seeing profits decrease resulting in them seeking ways to halt new licenses to be granted in an effort to steady prices. Contact our cannabis law attorneys if you have any questions.

———

  1. Package of Clean Energy Bills Head to Governor’s Whitmer’s Desk

A package of bills, including one that would require companies to make 100% of their energy through renewables such as solar and wind by 2040, and also seeks to reduce energy waste, among other objectives, is on its way to Governor Whitmer’s desk for signature after passing both the Senate and House.

Why it Matters: Clean energy legislation is a major priority for Michigan Democrats but is opposed by Republicans and has received pushback from many business groups, who argue the legislation would increase energy costs.

———

  1. Corporate Transparency Act Takes Effect January 1, 2024

The federal Corporate Transparency Act (the “CTA”) takes effect on January 1, 2024. It will require many companies, including small businesses, to report certain beneficial ownership information to the Financial Crimes Enforcement Network, which is a division of the Treasury Department. We previously summarized key aspects of the CTA in a post on our blog, which you can find here.

Why it Matters: Willful failure to file an initial or updated report with FinCEN is subject to a $500/day fine (up to $10,000) and imprisonment for up to two years. If you have any questions about your compliance obligations, filing deadlines, or any other questions, please contact your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Business & Tax | Robert Burgee
Business & Tax | Paul McCord
Cannabis Law | Sean Gallagher
Energy, Utilities & Telecommunication | Sean Gallagher

Five Stories That Matter in Michigan This Week – November 3, 2023

  1. Michigan Senate Passes Package of Clean Energy Bills

Three bills recently passed by the Michigan Senate would require companies to make 100% of their energy through renewables such as solar and wind by 2040, and also seeks to reduce energy waste, among other objectives. The bills have now moved to the Michigan House.

Why it Matters: Clean energy legislation is a major priority for Michigan Democrats but is opposed by Republicans and has received pushback from many business groups, who argue the legislation would increase energy costs.

———

  1. Fraser Trebilcock Welcomes Andrew G. Martin to the Firm

Fraser Trebilcock is pleased to welcome Andrew G. Martin to the firm’s Lansing office, focusing his practice on intellectual property law, business law, health law, and litigation.

Why it Matters: Andrew is an experienced registered patent attorney with history working in the automotive, electrical, agricultural, and medical device industries. He regularly advises startups and small businesses on the patent and trademark prosecution process, assisting clients from start to finish. Andrew also provides general business and legal governance counseling to a variety of firms and individuals. Learn more about Andrew.

———

  1. Client Update: Corporate Transparency Act Report of Beneficial Ownership Information

Pursuant to the Corporate Transparency Act of 2021, beginning on January 1, 2024, most newly formed entities will be required to report to the Financial Crimes Enforcement Network information (FinCEN) about the identity of the entity’s beneficial owners and senior officers. And by the end of 2024, nearly all companies will have to report.

Why it Matters: There are roughly 1 million entities in good standing in the State of Michigan and at some time in 2024, most will need to make a beneficial ownership report to FinCEN. While there are numerous exemptions available, their application is limited to large enterprises and businesses that operate in industries that are already highly regulated. Therefore, it is important to remember that the reporting requirement will extend hundreds of thousands of entities. Learn more.

———

  1. Cass County Circuit Court Rules that Growing Cannabis is an “Agricultural Operation” Under Michigan’s General Property Tax Act

HRP Cassopolis, LLC (“HRP”) owns real property located in LaGrange Township, located in Cass County, Michigan. The property, which consists of two parcels, is leased to a cannabis grower and retailer. LaGrange Township’s assessor classified both parcels as “Commercial” under the Michigan General Property Tax Act (“GPTA”). In response to the classification, HRP submitted a petition to the board of review, which denied the petition. HRP then appealed to the State Tax Commission, which also upheld the decision to classify the parcels as commercial. HRP then filed a Claim of Appeal with the Cass County Circuit Court.

Why it Matters: On appeal, the appellee argued that the assessor properly classified the property as commercial because HRP did not establish that growing cannabis is an “agricultural operation” under the GPTA. The GPTA defines an agricultural operation as “growing and harvesting any agricultural, horticultural, or floricultural commodity.” The Circuit Court rejected the appellee’s arguments and ruled in favor of HRP. The court explained that caselaw requires it to give the words in a statute their plain and ordinary meaning, and in this case, according to the court, “cannabis cultivation falls squarely within [GPTA’s] definition of an agricultural operation.”

———

  1. November Member Mixer in the Boji Tower

Join us for the November Member Mixer on Tuesday, November 14, at the historic Boji Tower, Lansing’s tallest and most historic building.

Why it Matters: Averaging 100+ attendees, Member Mixers occur on the second Tuesday of every month and provide an opportunity to gather and network, meet other members and business professionals and get a glimpse of a local business. Learn more.

Related Practice Groups and Professionals

Energy, Utilities & Telecommunication | Sean Gallagher
Intellectual Property | Andrew Martin
Business & Tax | Robert Burgee
Cannabis Law | Sean Gallagher

Final Rule Issued for Corporate Transparency Act: What Businesses Need to Know

As we previously addressed in 2021, Congress passed the Corporate Transparency Act (“CTA”), which requires certain business entities to report the “beneficial ownership” of an entity to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCen”).

The CTA is intended to deter activity such as money laundering, financing terrorism, and tax fraud, among other things. Failure to disclose the necessary information may subject businesses to significant civil and criminal penalties.

On September 29, 2022, FinCEN issued its Final Rule, and a corresponding Fact Sheet. These rules set forth the requirements for certain businesses (“reporting companies”) to disclose information regarding the individuals who own or control the business (“beneficial owners”). The CTA is a complex statute, and non-compliance with its reporting requirements can subject businesses to significant penalties, so it’s important to consult with a business attorney to understand your business’s reporting obligations.

Here are some of the key takeaways from the Final Rule.

Who Must Report

The CTA applies to a “reporting company” which includes:

  • Domestic Company: a corporation, limited liability company (LLC), or any entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
  • Foreign Company: a corporation, LLC, or other entity formed under the law of a foreign country that is registered to do business in any state or tribal jurisdiction by the filing of a document with a secretary of state or any similar office.

Several types of entities are exempt from reporting requirements, including:

  • Companies with 20 or more full-time U.S. employees, more than $5 million in federal income tax revenue, and have an operating presence at a physical office within the United States;
  • Issuers registered with the Securities and Exchange Commission;
  • Banks, bank holding companies, savings and loan holding companies, credit unions, financial market utility entities, and money services businesses registered with FinCEN;
  • Registered Commodity Exchange Act entities, registered investment companies or investment advisers, broker-dealers, and registered venture capital fund advisers;
  • Insurance companies or state-licensed insurance producers;
  • Accounting firms;
  • Public utilities;
  • Certain pooled investment vehicles;
  • Tax-exempt entities or entities that exist solely to assist a tax-exempt entity; and
  • Certain inactive companies.

Defining Beneficial Owners

Under the Final Rule, a “beneficial owner” includes any individual who, directly or indirectly, either (i) exercises substantial control over a reporting company, or (ii) owns or controls at least 25 percent of the ownership interests of a reporting company.

Filing Beneficial Ownership Information Reports

The Final Rule requires that when filing beneficial ownership information reports with FinCEN, the reporting company must identify itself and report the following four pieces of information for each of its beneficial owners:

  • Full legal name,
  • birthdate,
  • residential address, and
  • a unique identifying number from either an unexpired passport, state identification document, or driver’s license, and an image of that document.

Timing for Reports

The effective date for the Final Rule is January 1, 2024. Reporting companies created or registered before January 1, 2024, will have one year from that date to file their initial reports, while reporting companies created or registered on or after January 1, 2024, will have 30 days after receiving notice of their creation or registration to file their initial reports. Furthermore, a reporting company will need to update their prior report within 30 days of any change to a beneficial owner’s information

What to do Next

The foregoing is a summary of some of the important provisions of the Final Rule. The CTA and Final Rule are lengthy and complex and there is much more to know. Businesses should consult with their attorney to understand their obligations.

This is a brief summary and does not constitute legal advice. For assistance, please contact Robert D. Burgee.


Attorney Robert D. Burgee

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.

Corporate Transparency Act Imposes Significant New Reporting Requirements on Businesses

Congress recently passed the Corporate Transparency Act (“CTA”), which requires certain business entities to report the “beneficial ownership” of an entity to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FINCEN”).

The CTA is intended to deter activity such as money laundering, financing terrorism, and tax fraud, among other things. Failure to disclose the necessary information may subject businesses to significant civil and criminal penalties.

FINCEN is charged with developing regulations to implement the CTA by January 1, 2022. It released an advance notice of proposed rulemaking on April 5, 2021.

What Businesses Does the CTA Apply to?

The CTA applies to a “reporting company,” which under the statute includes a corporation, limited liability company, or other “similar entity” formed by filing with a secretary of state (or similar office under the law of a state) or formed under the law of a foreign country and registered to do business in the United States. We anticipate that the regulations developed by FINCEN will further clarify what “similar entity” means.

Several types of entities are exempt from reporting requirements, including government entities, as well as certain financial institutions, certain nonprofits, and publicly traded companies. Entities that (i) employ 20 or more full-time employees in the United States; (ii) filed a federal income tax return showing more than $5 million in gross receipts or sales; and (iii) have an operating presence at a physical office within the United States are also exempt.

An “exempt grandfathered entity” is one that: (i) was formed over one year prior to January 1, 2021; (ii) has not engaged in active business; (iii) is not owned, directly or indirectly, by a foreign person; (iv) has not, in the preceding 12-month period, experienced a change in ownership or sent or received funds in an amount greater than $1,000; and (v) does not otherwise hold any type of assets.

Who is a Beneficial Owner or Applicant?

Under the CTA, a “beneficial owner” is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, (i) exercises substantial control over a corporation or limited liability company; (ii) owns 25% or more of the equity interests of a corporation or limited liability company; or (iii) receives substantial economic benefits from the assets of a corporation or limited liability company.

A reporting company must submit a report to FINCEN that discloses the full legal name, date of birth, address, and a unique identifying number from an acceptable identification document or a FINCEN identifier of any beneficial owner.

Reporting companies must also disclose similar information for any “applicant.” An “applicant” includes an individual who: (i) files an application to form a corporation, LLC, or other similar entity under state or Indian Tribe law; or (ii) registers or files an application to register a corporation, LLC, or other similar entity formed under the laws of a foreign country to do business in the United States by filing a document with the secretary of state or similar office under state or Indian Tribe law.

When Must Reporting Occur?

A reporting company that is formed or registered after the effective date of the regulations must submit a report to FINCEN with the beneficial ownership information related to the reporting company at the time it is formed or registered. A reporting company that was formed or registered before the effective date of the regulations must submit a report to FinCEN no later than two years after the effective date of the regulations. To the extent that there are changes in reported beneficial ownership information, a reporting company must submit an updated report to FINCEN by no later than one year after the date of the change.

What are the Penalties for Failing to Comply?

It is unlawful for any person to willfully provide, or attempt to provide, false or fraudulent beneficial ownership information to FINCEN, or willfully fail to report complete or updated beneficial ownership information to FINCEN. Violations are subject to civil penalties of not more than $500 for each day that the violation continues, and criminal penalties of imprisonment of up to two years and fines of up to $10,000.

There is a safe harbor rule that protects individuals from liability if they voluntarily follow procedures and submit a report with correct information within 90 days. The safe harbor is inapplicable to individuals who submit a report with knowledge that it contains incorrect information in an effort to evade reporting requirements.

We Can Help

The foregoing is a summary of some of the important provisions of the CTA. The statute is lengthy and complex and there is much more to know. Businesses should consult with their attorney to understand their obligations under the CTA. For assistance, please contact Ed Castellani or your Fraser Trebilcock attorney.


Fraser Trebilcock Business Tax Attorney Edward J. CastellaniEdward J. Castellani is an attorney and CPA who represents clients involved with alcohol beverages as a manufacturer, wholesaler, or retailer. He leads the firm’s Business & Tax practice group, and may be contacted at ecast@fraserlawfirm.com or 517-377-0845.