Alerts & Newsletters

As the first of several deadlines under the Qualified Opportunity Zone (“QOZ”) program rapidly approaches, investors still on the sidelines are discovering that time is running out on the ability to take advantage of the full suite of tax benefits under the program. December 31, 2019 marks the last day in which investors may roll over capital gains into Qualified Opportunity Funds (“QOF”) and obtain a 15% reduction in the amount of the deferred gain.

The second quarter continued the brisk M&A activity for our clients. During the second quarter, we closed 18 transactions. Although this number of closed deals represents a drop-off from the first quarter during which we closed 21 deals, it represents a more than 45 percent increase over the second quarter of 2018. The real headline item for this quarter, however, was deal size. Average deal size increased by 46 percent to $35M when compared to the first quarter.

The City of Chicago recently enacted the “Fair Work Week Ordinance,” requiring that many businesses provide workers with up to two-weeks advance notice of their work hours and schedules. The FWW Ordinance becomes effective on July 1, 2020, and will require employers to set most employee schedules at least 10 days in advance. The Ordinance is expected to have a significant impact on industries where “variable” schedules are most common, including the hospitality, retail, and food and beverage industries. Employers operating in Chicago should consider formulating a plan to ensure compliance of the Ordinance.

UPDATE III: Judge Agrees to Delay San Antonio Paid Sick Leave Ordinance

At a hearing this morning, Judge Sol Casseb entered the Agreed Order submitted by attorneys for the City and the businesses that filed suit regarding their agreement to delay the effective date of the PSL ordinance from August 1 to December 1. Entry of the Agreed Order eliminated the need for a hearing on the businesses’ request for an injunction prohibiting the ordinance from going into effect on August 1 and should, hopefully, allow sufficient time for the Texas Supreme Court to determine whether it will consider the enforceability of the City of Austin’s PSL ordinance, which case is currently pending before the Supreme Court.

With the State of Illinois’ recent legalization of recreational cannabis, municipalities have started to debate whether to “opt in” to allow such businesses. While municipalities cannot prohibit the use of recreational cannabis, they can decide whether recreational cannabis businesses are allowed to operate within their boundaries. Many have already begun to weigh the pros and cons and are moving toward decisions.

The United States Patent and Trademark Office announced it will implement a rule requiring U.S. counsel for foreign-domiciled trademark applicants and registrants effective August 3, 2019. The new rule applies to all trademark owners with a foreign address. For any new filings after the effective date, licensed U.S. counsel must be designated.

The U.S. Supreme Court recently released its opinion in North Carolina Department of Revenue v. Kimberley Rice Kaestner 1992 Family Trust, largely vindicating the understanding of most estate planners: A state cannot tax the income of a trust where the only connection to the state is the presence of the trust’s discretionary beneficiary.

Governor Gretchen Whitmer and the Michigan Department of Agriculture and Rural Development (MDARD) announced MDARD’s decision to allow for commercial solar energy development on land currently enrolled in the Farmland and Open Space Preservation Program, commonly known as PA 116. This new policy creates a substantial opportunity for solar developers with respect to land in the State of Michigan. Currently, there is an estimated 3.4 million acres of farmland enrolled in PA 116 which presents a significant opportunity for new solar energy development in Michigan.

Among the many benefits of investing in a qualified opportunity fund (QOF) is the deferral of tax on current capital gains. Specifically, if an amount equivalent to a current capital gain is invested in a QOF within 180 days of the realization event, the tax generally will not come due until the earlier of the year in which the QOF investment is disposed of or 2026. As an added benefit, there may be a reduction in the amount of the capital gain subject to tax (up to 15 percent) when the tax bill comes due.

In mid-May, Treasury Secretary Mnuchin told the Subcommittee on Financial Services and General Government of the Senate Appropriations Committee that cannabis businesses would not be eligible for Opportunity Zone (“OZ”) tax benefits. According to news reports of his testimony, Secretary Mnuchin said that the business of growing and dispensing cannabis is misaligned with the intent of the OZ program, which he appears to believe is designed to directly uplift low-income residents of distressed communities through OZ investment dollars. Secretary Mnuchin apparently believes that the business of growing and dispensing cannabis has less tangible impact on the residents of distressed communities than the building of new upscale rental units or luxury hotels.

The Illinois legislature has approved and Governor Pritzker has signed into law significant revisions to the Illinois Tax Delinquency Amnesty Act (35 ILCS 745/10). The new amnesty program is the first in Illinois since 2010 and is an important opportunity for noncompliant taxpayers to resolve both known and previously unknown Illinois tax obligations.

When the Supreme Court accepted the cert petition to resolve a Circuit split regarding the False Claims Act’s statute of limitations when the government does not intervene, it created the potential that the Court would extend the limitations period for private relators’ FCA actions. That is exactly what happened. The Supreme Court unanimously ruled that a relator can bring suit within three years after a government official knows, or should know, about a potential FCA violation—up to 10 years after the underlying event—and the relator does not count as a government official.

On the heels of the DOJ Criminal Division’s revisions to its Corporate Enforcement Policy to encourage cooperation, the Civil Division’s Commercial Litigation Branch has issued its own cooperation guidelines that identify a non-exhaustive list of types of cooperation that may entitle entities or individuals to cooperation credit. The guidelines also discuss how a potential cooperation credit should be calculated, including the size of the credit and the impact of remedial measures.

The U.S. Department of Labor on Monday unveiled its first guidance under the current Administration on the hotly contested issue of employee-versus-independent contractor classification, saying workers for an unnamed technology platform that connects service providers with clients are independent contractors. The guidance was provided through an Administrator’s Opinion Letter, and as such it provides unique defenses to employers with similar situations and who rely on the letter.

The Criminal Division of the U.S. Department of Justice recently issued an updated guidance document on the Evaluation of Corporate Compliance Programs. The new document, which significantly expands on the prior version issued in early 2017, largely follows the structure of its predecessor but provides much more detail than ever before. Indeed the new version is more than double the length of the prior version.

The results of Dykema’s 2018 M&A Survey indicated greater optimism among our survey respondents—principally M&A dealmakers and service providers in the middle market—than ever reported in the 14 years we have conducted it. And Dykema’s first quarter M&A activity seems to support that optimism. During the quarter just ended, we closed 21 transactions, which annualizes to a 78% increase over 2018. Average deal size remained just under $24M, virtually flat with 2018. 

The Granston Memo raised concerns that the U.S. Department of Justice (DOJ) would employ its authority under 31 U.S.C. § 3730 to undermine qui tam relator actions. Since the Memo was issued, the DOJ moved to dismiss 11 Anti-Kickback Statute cases brought by a professional relator, the National Health Care Analysis Group (“NHCAG”). In those cases, the Government asserted its position that it had absolute discretion to dismiss actions. A federal court in Illinois recently challenged this position.

Earlier this month, the DOL published a Notice of Proposed Rulemaking (“NPRM”) to increase the minimum salary level most exempt employees must be paid in order for them to be deemed exempt from the FLSA’s overtime pay requirements. The comment period for the proposed changes will close in late May, and it is anticipated that the salary level rules will be finalized and implemented in early 2020. This NPRM was “big news,” particularly in light of the 2016 national injunction barring the implementation of the Obama Administration’s attempted changes to the regulations.

The new Michigan Paid Medical Leave Act soon becomes effective—on March 29, 2019. By then, employers employing 50 or more employees must have policies in place allowing employees to use up to 40 hours of paid time for various specified reasons.

The much awaited revised new regulations governing who qualifies for the FLSA white collar exemption has finally been revealed by the Department of Labor. It did so on March 8 by publishing an NPRM (“Notice of Proposed Rule Making”).

The fallout from the Illinois Supreme Court’s January 25, 2019, opinion in Rosenbach v. Six Flags Entertainment Corp., 19 IL 12316, continues. Rosenbach settled the dispute of who qualifies as an “aggrieved person” under the Illinois Biometric Information Privacy Act (“BIPA”), and in doing so opened the floodgates for this litigation to proliferate.

On January 19, 2019, federal Magistrate Judge Kandis Westmore of the Northern District of California denied the Government’s application for a search warrant that sought: (1) “all digital devices” present at a California residence; (Order at 3), and (2) that “any individual present at the time of the search to press a finger (including thumb) or utilize other biometric features… for the purposes of unlocking the digital devices found in order to permit a search of the contents,” (Order at 1).

On February 14, 2019, the United States Patent and Trademark Office (PTO) issued a Notice of Proposed Rulemaking (“NPRM”) to require foreign domiciled trademark applicants and registrants to be represented by a licensed U.S. attorney at the PTO. The comment period on the NPRM is open until March 18, 2019.