Monday, December 23, 2013

Jennings Strouss & Salmon Selected as One of the “2013 Best Places to Work”

PHOENIX, Ariz. (December 23, 2013) – Jennings, Strouss & Salmon, a leading Phoenix-based law firm, is pleased to announce that it has been named to The Phoenix Business Journal's, "2013 Best Places to Work" list in the medium-sized business category (under 500 employees).

The "Best Places to Work" list, which was started in 2003, recognizes Valley companies who, through a third party administered employee survey, rank their respective companies as being the best places to work. The areas surveyed are varied parts of employee life, including workplace environment, leadership direction, culture, and management practices. Jennings Strouss & Salmon was acknowledged for creating an enjoyable corporate culture and work environment that fosters personal and professional growth for its employees.

"We are excited to rank on the ‘Best Places to Work' list this year," said J. Scott Rhodes, Managing Attorney. "Making the list is truly an honor that undoubtedly provides all of our employees with a sense of pride."

Winners were announced at the "Best Places to Work" Luncheon, held December 12th at the Fairmont Scottsdale Princess.

About Jennings, Strouss & Salmon
Jennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for over 70 years through its offices in Phoenix, Peoria, and Yuma, Arizona; and Washington, D.C. The firm's primary areas of practice include agribusiness; bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment; litigation; real estate, land use and zoning; surety and fidelity; tax; and trust and estates. For additional information please visit and follow us on LinkedIn, Facebook and Twitter.

Contact:  Dawn O. Anderson  ||  602.495.2806

Think Twice Before Photocopying Military Identification Cards

Many businesses offer active-duty and retired members of the United States’ Armed Forces discounts on products and services.  While this is certainly a commendable practice, it is not without risk to the business offering the discount.  Many such businesses require some type of verification of a customer’s military status before qualifying the customer for the offered discount.  Many businesses, including those not offering discounts but needing verification of identity for other purposes, have adopted the practice of making a photocopy of the customer’s military identification card.  Doing so, however, while seemingly the easiest way to obtain such verification, can result in a criminal violation of Federal law.
The statute in question, 18 U.S.C. § 701, does not require intent or an evil motive, but rather, requires only the simple act of photocopying a military identification card to establish the violation. 
The statute in question provides:
Whoever manufactures, sells, or possesses any badge, identification card, or other insignia, of the design prescribed by the head of any department or agency of the United States for use by any officer or employee thereof, or any colorable imitation thereof, or photographs, prints, or in any other manner makes or executes any engraving, photograph, print, or impression in the likeness of any such badge, identification card, or other insignia, or any colorable imitation thereof, except as authorized under regulations made pursuant to law, shall be fined under this title or imprisoned not more than six months, or both.
(Emphasis added).
If your business offers military discounts and collects verification of a customer’s military status, make sure your employees are aware of this prohibition and, if you have not done so already, a policy should be adopted and incorporated into your training program to ensure that this prohibition is known and complied with by your team. 
Please note that the only prohibition arising out of the above statute relates to photocopying the military identification card. You can ask to see the customer’s military identification card and can make note of all information contained on the card, you just cannot photocopy it. If merely making note of the information on the card is not sufficient for your internal purposes, you can request that the customer provide written confirmation of his or her status as a military member from his or her commanding officer.  Alternatively, you can obtain a Service Members Civil Relief Act Certificate through a public website which allows businesses to verify the current active military status of specific individuals. There is no charge for the certificate if obtained online. You can submit a request for the certificate on the Department of Defense’s website at by searching for “Service Members Civil Relief Act Certificates.” 
As with any blanket prohibition, there are certain exceptions where the photocopying of military IDs is permitted. There is an exception for health care providers, which permits them to make photocopies of military IDs only for the purpose of providing benefits. This exception can be found in a  Department of Defense Instruction issued in 1997, and provides that civilian and military medical providers are authorized to photocopy military ID as proof of insurance for the purposes of providing medical care to Department of Defense beneficiaries.
Another exception is in connection with an employer’s compliance with the Immigration and Nationality Act, the federal statute governing the form I-9 process. This Act expressly permits the photocopying of any “document presented by an individual pursuant to this subsection.” Since a military identification card is one of the permissible forms of identification under this Act, an employer may photocopy the military ID and retain the copy (only for the purposes of complying with the Act). 

If your business offers military discounts, or has a practice of photocopying military identification cards for your business/commercial purposes, make certain your employees are aware of this prohibition and adjust your policies and procedures accordingly so you do not become an example of no good deed going unpunished.

If you have any questions regarding your policies or procedures in this area, please seek the advice of competent counsel.

Monday, December 9, 2013

Client Alert: 2013 Year End Tax Planning Strategies

For the first time in several years, taxpayers can consider their year-end tax planning devoid of speculation as to what, if any, eminent changes Congress may enact to the tax laws. Most commentators are predicting that there will be no substantial tax law changes in 2014.

This year, for the first time, tax planning for taxpayers with adjusted gross incomes over threshold amounts ($200,000 for single taxpayers; $250,000 for married taxpayers) must take into account the new 3.8% Medicare tax on Net Investment Income that was enacted as part of the Affordable Care Act of 2010. Net Investment Income includes interest, dividends, rents, royalties and annuity income, but also includes taxable income from trades or businesses that were passive activities of the taxpayer under IRC § 469.

You may recall that a passive activity is a trade or business in which the taxpayer does not actively participate. The temporary regulations under IRC § 469 set forth seven different tests to determine whether the taxpayer actively participated in the activity. (The 500 hour standard is the most commonly used test). Taxpayers (together with their tax advisors) should analyze whether they are on track to satisfy the material participation standards for their profitable trade or business activities. The expenditure of a few additional hours in the activity prior to year-end may permit exclusion of that activity's income from Net Investment Income, thus avoiding the 3.8% Medicare tax on that income.
Contemporaneous documentation of the time that the taxpayer devoted to the activity is imperative for these purposes. In our experience, IRS auditors tend to accord much greater credibility to records that are prepared prior to the filing of the related returns, in contrast to those that are generated at a later time in connection with the audit.

The timely recording of participation hours is, of course, also important to any taxpayer activities that are not profitable, in order to avoid the suspension of the deductibility of such losses under the passive activity loss rules.

We have compiled a checklist of actions that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you will likely benefit from many of them. We can narrow down the specific actions that you can take once we meet with you to tailor a particular plan. In the meantime, please review the following list and contact us at your earliest convenience so that we can advise you on which tax-saving moves to make.
Depending upon the individual circumstances of a taxpayer, customary year-end tax planning strategies might include the following:
  • Increase the amount you set aside for next year in your employer's health flexible spending account (FSA) if you set aside too little for this year.
  • If you become eligible to make health savings account (HSA) contributions in December of this year, you can make a full year's worth of deductible HSA contributions for 2013.
  • Realize losses on stock while substantially preserving your investment position. There are several ways this can be done. For example, you can sell the original holding, then buy back the same securities at least 31 days later.
  • Postpone income until 2014 and accelerate deductions into 2013 to lower your 2013 tax bill. This strategy may enable you to claim larger deductions, credits, and other tax breaks for 2013. These include IRA and Roth IRA contributions, child credits, higher education tax credits, the above-the-line deduction for higher-education expenses, and deductions for student loan interest. Postponing income is also desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income into 2013. For example, this may be the case where a person's marginal tax rate is much lower this year than it will be next year. Finally, taxpayers should realize that for tax years 2013 and after, the "Pease" phase out of itemized deductions is once again applicable.
  • If you believe a Roth IRA is better than a traditional IRA, and want to remain in the market for the long term, consider converting IRA money that is invested in beaten-down stocks (or mutual funds) into Roth IRAs if eligible to do so. Keep in mind, however, that such a conversion will increase your adjusted gross income for 2013. Remember also to take your required minimum distributions from your IRA, 401(k) plan, or other qualified plan.
  • It may be advantageous to try to arrange with your employer to defer a bonus that may be coming your way until 2014.
  • If you own an interest in a partnership or S corporation, you may need to increase your basis in the entity so that you can deduct a loss from it for this year.
  • Consider prepaying expenses that can generate deductions for this year.
  • If you expect to owe state and local income taxes when you file your return next year, ask your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2013, if doing so will not create an Alternate Minimum Tax (AMT) problem.
  • Those facing a penalty for underpayment of federal estimated tax may be able to eliminate or reduce it by increasing their withholding prior to year-end.
  • Estimate the effect of any year-end planning moves on the AMT for 2013, keeping in mind that many tax breaks allowed for purposes of calculating regular taxes are disallowed for AMT purposes. This includes the deduction for state property taxes on your residence, state income taxes (or state sales tax if you elect this deduction option), miscellaneous itemized deductions, and personal exemption deductions. Other deductions, such as for medical expenses, are calculated in a more restrictive way for AMT purposes than for regular tax purposes. As a result, in some cases, deductions should be deferred rather than accelerated to keep them from being lost because of the AMT.
  • Businesses should consider making expenditures that qualify for the business property expensing option (under IRC § 179) for assets bought and placed in service this year.
  • You may want to settle an insurance or damage claim in order to maximize your casualty loss deduction this year.
  • If you are self-employed and have not done so yet, set up a self-employed retirement plan.
  • If you are thinking of donating a used auto to charity, you may want to inquire whether the charity plans to sell the car or use it in its charitable activities, the latter may yield a bigger deduction for you.
  • If you are age 70½ or older, own IRAs (or Roth IRAs), and are thinking of making a charitable gift before year-end, consider arranging for the gift to be made directly by the IRA trustee. Such a transfer can achieve important tax savings.
  • Consider extending your subscriptions to professional journals, paying union or professional dues, enrolling in (and paying tuition for) job-related courses, etc., to bunch into 2013 miscellaneous itemized deductions subject to the 2%-of-AGI floor.
  • Depending on your particular situation, you may also want to consider triggering a debt-cancellation event in 2013, electing to deduct investment interest against capital gains, or disposing of a passive activity to allow you to deduct suspended losses.
  • Make gifts sheltered by the annual gift tax exclusion before the end of the year and thereby save gift and estate taxes. You can give $14,000 in 2013 to each of an unlimited number of individuals, but you cannot carry over unused annual exclusions from one year to the next. The transfers also may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax. Certain taxpayers should also consider using some or all of their lifetime gift and estate tax exclusion (asset value equivalent of $5.25 million in 2013, increasing to $5.34 million for 2014) prior to year end.
  • Purchase qualified small business stock (QSBS) before the end of this year. There is no tax on gain from the sale of such stock if it is (1) purchased after September 27, 2010 and before January 1, 2014, and (2) held for more than five years. In addition, such sales won't cause AMT preference problems. To qualify for these breaks, the stock must be issued by a regular C corporation with total gross assets of $50 million or less, and a number of other technical requirements must be met.
These are just some of the year-end steps that can be taken to reduce taxes. These suggested strategies must, of course, be carefully considered in light of the precise circumstances confronting each taxpayer. Obviously, one size does not fit all when it comes to tax planning.

About the Author: Jack N. Rudel is a member of Jennings, Strouss & Salmon law firm. Mr. Rudel is a seasoned practitioner, having provided legal advice to international, national, regional and local business clients for over thirty-five years. Mr. Rudel is certified as a Tax Specialist by the State Bar Board of Specialization, and provides representation to such clients in tax (U.S. and International), general business planning, corporate law, mergers and acquisitions, and real estate matters. Mr. Rudel can be contacted by email or 602.262.5951.