Tag: California

California IOUs

California

California started issuing IOUs instead of checks. I know some people that got an IOU instead of their tax refund. They are not alone. In the last week, State Controller John Chiang’s office issued 91,000 IOUs worth $354 million to people expecting tax refunds, to state vendors and to local governments.

Banks have been willing to accept the IOUs and redeem them for cash. However, some major banks are getting ready to stop cashing them, although credit unions appear to be willing to continue redeeming the IOUs.

Since an IOU doesn’t work for anyone who needs cash, markets have opened for buying and selling these IOUs. There have been some sitings on eBay and Craigslist. It looks like eBay has been vigilant about pulling down listings. Craigslist has dozens of listings.

It should be so surprise that the IOUs are securities and subject to securities laws. The SEC has issued an Investor Alert on State of California IOUs.

While the IOUs are “securities” for purposes of the federal securities laws, as obligations of the State of California they are “municipal securities.” This means that sales of the IOUs are not required to be registered with the Commission. Also, as municipal securities, the IOUs are subject to the rules issued by the Municipal Securities Rulemaking Board, which include a requirement that the securities sold are suitable for the purchaser.

In addition, persons engaged in the business of buying and selling the IOUs may need to be registered as market intermediaries, such as brokers, dealers, or municipal securities dealers, alternative trading systems, or national securities exchanges.

Meanwhile, California’s bind debt rating has been lower to BBB from A minus, with another downgrade to junk status possible next week.

References:

You’re a Victim of a Ponzi Scheme, But What About Your State Taxes?

IRS_Logo

You missed the warning signs and got suckered into a Ponzi scheme. The IRS offered some tax relief for long-term Ponzi scheme investors (like some of the Madoff victims) who have paid taxes on gains from the investment. The IRS clarified the federal tax law governing the treatment of losses in Ponzi schemes. They also set out a safe harbor method for computing and reporting the losses.

The revenue ruling (2009-9) addresses the difficulty in determining the amount and timing of losses from Ponzi schemes and the prospect of recovering the lost money. The revenue procedure (2009-20) simplifies compliance for taxpayers by providing a safe-harbor for determining the year in which the loss is deemed to occur and a simplified means of calculating the amount of the loss.

But what about state taxes?

California: On March 25, 2009, the California Franchise Tax Board announced that the federal guidance (Revenue Ruling 2009-9 and Revenue Procedure 2009-20) regarding the treatment of Madoff-related or other Ponzi scheme losses would be generally applicable for California purposes.

Connecticut: On April 9, 2009, the Connecticut Department of Revenue Services released Connecticut Announcement No. 2009(7), which describes the effect for Connecticut income tax purposes of the reporting of Madoff-related or other Ponzi scheme losses under the Revenue Procedure 2009-20 safe harbor and under Revenue Ruling 2009-9. In general, Connecticut does not allow federal itemized deductions for Connecticut income tax purposes. Thus, any theft loss deduction claimed by a taxpayer under the Revenue Procedure 2009-20 safe harbor will not affect a taxpayer’s 2008 Connecticut income tax liability. However, if the amount of a taxpayer’s theft loss deduction allowed under Revenue Ruling 2009-9 or Revenue Procedure 2009-20 creates an NOL, then the taxpayer must file amended Connecticut income tax return(s) for the year(s) to which such NOL may be carried back for federal income tax purposes.

Massachusetts: On March 20, 2009, Massachusetts issued: “Notice—Individual Investors; Investments in Criminally Fraudulent Ponzi-type Schemes and Reporting of Fictitious Investment Income.” Massachusetts did not adopt the Revenue Procedure 2009-20 safe harbor in the case of individual investors since Massachusetts tax law does not recognize the theft loss deduction provided under federal tax law.

New Jersey: On April 2, 2009, the New Jersey Division of Taxation had issued guidance on the treatment of Madoff-related
or other Ponzi scheme losses for New Jersey gross income tax purposes. Under this guidance, taxpayers are allowed a theft
loss deduction for New Jersey gross income tax purposes in an amount equal to the original investment plus the income
reported in prior years minus distributions received in prior years. New Jersey does not allow NOL carrybacks or carry
forwards.

New York: On May 29, 2009, the New York State Department of Taxation and Finance issued guidance TSB-M-09(7)I (.pdf) on the
reporting of Madoff-related or other Ponzi scheme losses. In general, New York State will recognize the Revenue Procedure
2009-20 safe harbor.

For more information, Seyfarth Shaw put together some information: Some States Have “Weighed In” on Tax Treatment of Madoff-Related and Other Ponzi Scheme Losses (.pdf)

Recent Changes to the ADA and FMLA

goodwinprocter_logoGoodwin Procter presented a webinar on recent changes to the Americans with Disability Act and the Family and Medical Leave Act. Rob Hale moderating the presentation.

Heidi Goldstein Shepherd led off with a background on the ADA. The key concept for employers is that it is up to the employee to request a “reasonable accommodation” by the employer. New amendments to the ADA went into effect on January 1.

The new term is “substantially limited” which is supposed to be defined by the EEOC. Unfortunately, the EEOC has not promulgated this definition.

The question of disability is still considered on a case-by-case basis. Employer needs to determine if the accommodation requested is reasonable. Employer is not required to lower quantitative or qualitative standards as a “reasonable accommodation.” Conduct standards can be enforced if  “job related and consistent with business necessity” and applied consistently.

Steve Feldstein looked closer at the EEOC enforcement guidance. An employee who first requests the accommodation during a discipline process still remains subject to the discipline. If you go to fire a person and person first claims a disability, it is too late for the employee.

An employer should not raise the possibility of disability in discussing a performance problem. Leave it up to the employee.

California has a different standard than the federal law for disabilities. It is not a “substantial impairment of a major life activity.” It is just an “impairment of a major life activity.”  In making a reasonable accommodation it requires you to engage in an interactive process.

Rob Hale moved on to the new FMLA regulations. There were many changes and extensive. But the substance did not change much. Rob focused on three types of changes: (1) National Defense Re-Authorization act and military leaves, (2) some substantive leave changes, and (3) changes in the notice and information right.

The military change only applies to reserve and national guard being called up for military service.  Allows time off for when the soldier returns. Also allows leaves for childcare when a family member leaves for service.

Rob moved on to new substantive changes.

  • There is longer period for counting the 12 months of service
  • If the person is out on leave that could count as part of the 12 months of service
  • Serious health condition standard changed for 2 doctors visits, now within 30 days
  • Paid leave during FMLA leave, then the paid leave provisions overrule so you can get kicked out the paid leave to the unpaid FMLA leave
  • Intermittent leave allows you to count part of day absence as a full day absence under the “physical impossible rule”  (Rob used the example of a clean room worker.)
  • You can deny a perfect attendance bonus if the employee was out on FMLA leave.
  • Releases of past FMLA claims are now permissible. (You cannot release future FMLA claims.)

Rob moved on to the new notice changes. There is a new poster you need to put up. (Ours is up.) Rob points out that you can also post it electronically.

The designation notice needs to be delivered in five days. Employee notifications have largely not changed. They have to state that they want to take a FMLA leave. Saying you want to take time off to take care of a sick child (etc.)  may not be enough. There is more pressure on frontline managers to determine if the reason is FMLA eligible.

Employer can impose requirements on FMLA request that they do with other leave request. So you can require written notice or require them to call a certain number.

There are new forms for medical certification. There are also some new procedures for completing the form and what to do if the form is incomplete.

Rob emphasized the need to have a leave counting period. Employers need to designate the 12 month period during which they can use the 12 weeks of leave.  He has seen some employees win suits by using an alternative counting method.

Steve pointed out that California has an alternative law covering medical leave: California Family Rights Act.  California allows leave for domestic partners (registered with the state and living in the same residence). Pregnancy gives you a longer time off.  Interestingly, the domestic partner situation allows a longer time off because you can take the CFRA leave and then the FMLA since the domestic partner leave is not recognized under the FMLA.

Goodwin also made some materials available:

California’s Pay-to-Play Laws

California requires disclosure of gifts to officials at public agencies. The disclosure is made using Form 801 (.pdf).

This form is for use by all state and local government agencies to disclose payments made to the agency when the payments provide a personal benefit to an official of the agency. Examples may include travel, meals or other benefits. Under certain circumstances, these payments will not result in a gift to the official, but will be considered a gift to the agency. The payments must be used for official agency business and must meet other requirements that are set out in FPPC Regulation 18944.2 (.pdf), which is available on the FPPC website www.fppc.ca.gov. This form must be filed within 30 days of the use of the payment.

California treats the giving of tickets to officials at state and local agencies slightly differently. FPPC Regulation 18944.1 (.pdf) regulates this practice, with disclosure made on Form 802 (.pdf)

There is a whole series form for reporting lobbying activity:

  • Form 601 — Lobbying Firm Registration Statement
  • Form 602 — Lobbying Firm Activity Authorization
  • Form 603 — Lobbyist Employer/Lobbying Coalition Registration Statement
  • Form 604 — Lobbyist Certification Statement
  • Form 605 — Amendment to Registration
  • Form 606 — Notice of Termination
  • Form 607 — Notice of Withdrawal
  • Form 615 — Lobbyist Report
  • Form 625 — Report of Lobbying Firm
  • Form 630 — Payments Made to Lobbying Coalitions
  • Form 635 — Report of Lobbyist Employer/Lobbying Coalition
  • Form 635-C — Payments Received by Lobbying Coalitions
  • Form 640 — Governmental Agencies Reporting
  • Form 645 — Report of $5,000 Filer
  • Form 690 — Amendment to Lobbying Disclosure Report

Fortunately the FPPC put together a Lobbying Disclosure Information Manual (.pdf)

There is an extensive collection of campaign disclosure forms for California.

The key form may be Form 461 — Independent Expenditure Committee and Major Donor Committee Campaign Statement. There is an associated manual: Campaign Disclosure Manual 5 – Information for Major Donor Candidates (.pdf).  Chapter 4 of the Manual (.pdf) details the reporting requirements.

The FPPC Regulations are very long and detailed.

Littler Mendelson White Paper on California’s Mandatory Training Law

Littler mendelson, P.C. put together a White Paper on California’s Mandatory Training Law for Sexual Harrassment.

The purpose of this white paper is to provide analysis and practical information to employers as they re-train their supervisors in the 2007 training year pursuant to California’s mandatory training law.

The authors of the White Paper are David Goldman, Tara Bedeau and Christopher Cobey.

How Big Do You Need to Be to be Required to Provide Sexual Harassment Training

California Assembly Bill 1825 codified in California Government Code section 12950.1 requires that employers train supervisors on sexual harassment every two years if the company has 50 or more employees.

But does that mean more than 50 employees in California or more than 50 employees in total?

The Sexual Harassment Training and Education Regulations Section 7288.0 (a)(5) provides:

“Having 50 or more employees” means employing or engaging fifty or more employees or contractors for each working day in any twenty consecutive weeks in the current calendar year or preceding calendar year. There is no requirement that the 50 employees or contractors work at the same location or all work or reside in California.

Regulations for Sexual Harassment Training in California

On April 23, 2007, the Fair Employment and Housing Commission Adopted its March 27, 2007 Sexual Harassment Training and Education Regulations With No Further Changes. I previously posted about the enactment of the statue: Sexual Harassment Training in California.

Sexual Harassment Training and Education Regulations

Sexual Harassment Training Requirements in California

California Assembly Bill 1825 codified in California Government Code section 12950.1 requires that employers train supervisors on sexual harassment every two years.

AB 1825 applies only to entities that regularly employ 50 or more employees or regularly receive the services of 50 or more persons pursuant to a contract. Presumably the “receiving services” language is an attempt to avoid deciding if a worker is an employee or independent contractor. Although not specified by the statute, courts have held that Fair Employment and Housing Act (FEHA)’s other minimum employee requirements count only employees working in California.

The law imposes an initial and continual training requirement on covered employers.  Covered employers must provide sexual harassment training and education to each supervisory employee once every two years, and to each new supervisory employee within six months of their assumption of a supervisory position.

While AB 1825 does not define “supervisor,” presumably, the definition contained in the FEHA will apply. A “supervisor” is any individual having the authority “to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or the responsibility to direct them, or to adjust their grievances, or effectively to recommend that action . . . if the exercise of that authority is not of a merely routine or clerical nature, but requires the use of independent judgment.” (Government Code § 12926(r).)

The training must be conducted via “classroom or other effective interactive training” and include the following topics:

  • Information and practical guidance regarding the federal and state statutory provisions concerning the prohibition against and the prevention of sexual harassment.
  • Information about the correction of sexual harassment and the remedies available to victims of sexual harassment in employment.
  • Practical examples aimed at instructing supervisors in the prevention of harassment, discrimination, and retaliation.