I made a public service announcement to the folks at my seminar this morning at the South Metro Denver Chamber of Commerce annual Business Expo. The least I can do is share the PSA with you, even if a post detailing my seminar topic---using non-qualified incentive plans to create value by aligning key employees with owner objectives (it's more interesting than it sounds)—is beyond the time I have available for blogging today.
The PSA was directed at companies and employees that already have nonqualified plans in place and concerns Section 409A of the Internal Revenue Code. My message was: ACT NOW—the IRS is giving you a second chance, and how often does that happen?
Section 409A was enacted a few years ago to stem perceived abuses in non-qualified deferred compensation (a classic example of the Pig Rule in taxes—pigs get fat, hogs get slaughtered). Existing deferred compensation plans were given time to fix their 409A issues by 2009. Well, 409A can get pretty tricky, so early this year the IRS issued Notice 2010-6 to allow noncompliant plans to get into compliance, retroactive to January 1, 2009. You just need to make the fixes by December 31, 2010.
The consequences of not making a fix include the employee being taxed on his or her deferred benefits immediately (potentially years early), an extra 20% income tax on top of that (just because), and applicable state income taxes and interest charges. If you knew you were facing that, you would see your lawyer and fix it, right? Now you know, so, like I said, ACT NOW.
Well, maybe you don’t know, because maybe you don’t even realize you have a plan that must be 409A compliant. Here’s a partial list of the types of arrangements (regardless if they are a plan that covers a group or an agreement that covers one person) that may well have a problem. If you have one of these and you haven’t seen your lawyer, ACT NOW.
Deferred Compensation plans
Supplemental Executive Retirement plans
Restricted Stock agreements
Phantom Equity plans
Stock Appreciation Rights
Stock Options
Bonus plans
Separation or Change of Control Agreements
Severance Agreements
Employment Agreements containing any feature of the above
For those of you that have bothered to read this far even though you don’t have an existing deferred compensation plan, and likely don’t know what the heck I’m talking about, bless you. Taxes are a necessary part of any discussion of nonqualified employee incentives—timing (now or later), nature (ordinary or capital) and amount (what’s the value of the incentive). I hope to soon post on the more interesting parts of key employee incentives—identifying owner goals and designing cash and/or equity plans to motivate your employees to get you there.
Friday, October 29, 2010
Saturday, October 23, 2010
Skip ‘em or Guess? Voting on Colorado Judges
Election Day is coming fast and some of you are already voting under Colorado’s early voting, so I have a question for you. What do you do with the judges on the ballot? Skip 'em? Guess?
My work as a lawyer is all about effective negotiations, understandable contracts and landmine avoidance to keep human-owned businesses out of court. Lawsuits, in all but the rarest cases, are a no-win situation for business owners who would be much better off focusing their time and money on the business instead of on litigation. When litigation is unavoidable, I bring in a litigation specialist to take the case into the courtroom.
So, what I know about the performance of Colorado judges is not much; it’s likely you are no different. Nevertheless we need to know something about these men and women because voting for or against the retention of judges is a right of Colorado citizens and a duty for everyone who cares about our state.
Fortunately for the vast majority of us who don’t regularly watch the work of our judges, Colorado has a system of Judicial Performance Commissions to provide nonpartisan evaluations of our judges. This year the work and work product of these Commissions are highlighted on the Know Your Judge website.
This site contains a number of useful links on everything from how a judge becomes a judge to the workings of the performance commissions. It also features a humorous public service announcement (from which this post's title is taken) that reminds us that facts are what count when deciding on our judges. Most importantly, the site gives you the facts about the judges on your ballot and the retention recommendation developed by our Commissions.
Early voters have the advantage of using the site as they complete their ballots. Folks, like me, who still like to wait in line (but not too long) to vote with our neighbors at a polling place need to do homework in advance, and come with notes, if your memory is like mine. Trying to decide on judges (or ballot measures for that matter) in the voting booth results in decisions like those in the PSA, definitely not funny or recommended.
My work as a lawyer is all about effective negotiations, understandable contracts and landmine avoidance to keep human-owned businesses out of court. Lawsuits, in all but the rarest cases, are a no-win situation for business owners who would be much better off focusing their time and money on the business instead of on litigation. When litigation is unavoidable, I bring in a litigation specialist to take the case into the courtroom.
So, what I know about the performance of Colorado judges is not much; it’s likely you are no different. Nevertheless we need to know something about these men and women because voting for or against the retention of judges is a right of Colorado citizens and a duty for everyone who cares about our state.
Fortunately for the vast majority of us who don’t regularly watch the work of our judges, Colorado has a system of Judicial Performance Commissions to provide nonpartisan evaluations of our judges. This year the work and work product of these Commissions are highlighted on the Know Your Judge website.
This site contains a number of useful links on everything from how a judge becomes a judge to the workings of the performance commissions. It also features a humorous public service announcement (from which this post's title is taken) that reminds us that facts are what count when deciding on our judges. Most importantly, the site gives you the facts about the judges on your ballot and the retention recommendation developed by our Commissions.
Early voters have the advantage of using the site as they complete their ballots. Folks, like me, who still like to wait in line (but not too long) to vote with our neighbors at a polling place need to do homework in advance, and come with notes, if your memory is like mine. Trying to decide on judges (or ballot measures for that matter) in the voting booth results in decisions like those in the PSA, definitely not funny or recommended.
Thursday, October 14, 2010
Changing a Law to do the Right Thing: An Example of Government Helping Business
If you knew your customers had overpaid your business, you would return the excess payment without the customer having to ask for it, wouldn’t you? It’s the right thing to do; besides, it’s also great customer service. Until recently, however, it was against the law for the State of Colorado to do right by the tens of thousands of individuals and businesses who regularly use the services of the Business Division of our Department of State.
The Business Division is where corporations, limited liability companies and certain partnerships are formed, where liens securing most business loans are recorded, and where trade names and trademarks are registered. As a result, many Colorado businesses are regular customers of the Department of State.
Yesterday’s mail at my law firm, Minor & Brown, brought us the following letter, and a check, from the Secretary of State of Colorado.
The letter explains that we and other customers had made a collective $1,507,000 in overpayments to the Department of State between 1997 and 2005; however, Colorado law prohibited refunds being made to anyone who hadn’t formally requested one. The problem was, of course, that my firm, like thousands of others, either didn’t know or forgot that we had overpaid.
Kudos to Colorado Secretary of State Bernie Buescher, Representative Christine Scanlan, and Senator John Morse for recognizing that the State could and should do better by the business community. Earlier this year, they undertook the process of changing Colorado law to remove the refund prohibition. Now refund checks will be hitting mailboxes all around the State.
Here’s the list of customers owed refunds by the Secretary of State. It’s probably worth checking it for your business, especially if you’ve changed your address, and in that case you might need to change your records with the State, which you can do at your customer-service oriented Secretary of State’s office.
The Business Division is where corporations, limited liability companies and certain partnerships are formed, where liens securing most business loans are recorded, and where trade names and trademarks are registered. As a result, many Colorado businesses are regular customers of the Department of State.
Yesterday’s mail at my law firm, Minor & Brown, brought us the following letter, and a check, from the Secretary of State of Colorado.
The letter explains that we and other customers had made a collective $1,507,000 in overpayments to the Department of State between 1997 and 2005; however, Colorado law prohibited refunds being made to anyone who hadn’t formally requested one. The problem was, of course, that my firm, like thousands of others, either didn’t know or forgot that we had overpaid.
Kudos to Colorado Secretary of State Bernie Buescher, Representative Christine Scanlan, and Senator John Morse for recognizing that the State could and should do better by the business community. Earlier this year, they undertook the process of changing Colorado law to remove the refund prohibition. Now refund checks will be hitting mailboxes all around the State.
Here’s the list of customers owed refunds by the Secretary of State. It’s probably worth checking it for your business, especially if you’ve changed your address, and in that case you might need to change your records with the State, which you can do at your customer-service oriented Secretary of State’s office.
Monday, October 11, 2010
Columbus Day, Rediscovered
Happy Columbus Day. Huh? You’re not taking advantage of our federal holiday observing Columbus Day? Well, you’re hardly alone. Virtually no private employers, and increasingly fewer state and local governments, recognize it. The prime reasons for our abandonment of the Columbus Day holiday had been a blend of political correctness and economic reality, but I suspect economics has won out. In an economy overflowing with tough choices, traditional ethnic pride isn’t worth the cost of shutting the government down.
Tradition is, of course, the foundation of all our federal legal holidays. Tradition is also the reason I’m revisiting, if not rediscovering, Columbus Day as this blog’s legal holidays series moves well into its second season.
Columbus Day has a special place in the list of legal holidays, at least for Colorado, because while the New World was “discovered” 1900 miles to our southeast, the legal holiday commemorating it happened here. Colorado was the first state to make Columbus Day a legal holiday in 1907; the feds didn’t follow suit until 1971. Denver’s parade is the oldest in the country, and as it is typically one of largest, it is frequently the focus of protests.
As this blog is focused on business, we should recall that Columbus’s voyage was, in fact, a business venture that took advantage of increasing competition and imperialistic attitudes among European nations, but if this Italian had not opened the door to Europe’s colonization of the Americas, another European would have. Exploitation, slavery and disease would have followed just the same. We can’t change how cultures collided 500 years ago, but we don’t have to accept continuing collisions.
Americans of Italian descent (which included me and my family) should be able to celebrate their heritage. In Denver, St. Patrick’s Day, Cinco de Mayo, and Juneteenth are all popular with folks outside of the focal ethnic group. These days are occasions to celebrate our varied backgrounds. They happen, quite naturally, without need for a legal holiday and without reason for protest.
Changing the paradigm requires the Italian community to rename its celebration and for our state (and federal for that matter) government to decide if we can continue to afford a mid-October legal holiday. Tradition and pride are obstacles to change, but Italian culture is among the richest in the world, surely another rallying theme can be found. Simultaneously, we can and should be able to celebrate Native American cultures outside of a European frame of reference
If, however, a mid-October legal holiday is kept, then it should be re-conceived as a celebration that honors the peoples, not the conquest, of the Americas. An Americas day, plural not possessive, can honor the original peoples of the hemisphere as it reminds us, its current peoples, that we share more than a land mass, we share a future.
Tradition is, of course, the foundation of all our federal legal holidays. Tradition is also the reason I’m revisiting, if not rediscovering, Columbus Day as this blog’s legal holidays series moves well into its second season.
Columbus Day has a special place in the list of legal holidays, at least for Colorado, because while the New World was “discovered” 1900 miles to our southeast, the legal holiday commemorating it happened here. Colorado was the first state to make Columbus Day a legal holiday in 1907; the feds didn’t follow suit until 1971. Denver’s parade is the oldest in the country, and as it is typically one of largest, it is frequently the focus of protests.
As this blog is focused on business, we should recall that Columbus’s voyage was, in fact, a business venture that took advantage of increasing competition and imperialistic attitudes among European nations, but if this Italian had not opened the door to Europe’s colonization of the Americas, another European would have. Exploitation, slavery and disease would have followed just the same. We can’t change how cultures collided 500 years ago, but we don’t have to accept continuing collisions.
Americans of Italian descent (which included me and my family) should be able to celebrate their heritage. In Denver, St. Patrick’s Day, Cinco de Mayo, and Juneteenth are all popular with folks outside of the focal ethnic group. These days are occasions to celebrate our varied backgrounds. They happen, quite naturally, without need for a legal holiday and without reason for protest.
Changing the paradigm requires the Italian community to rename its celebration and for our state (and federal for that matter) government to decide if we can continue to afford a mid-October legal holiday. Tradition and pride are obstacles to change, but Italian culture is among the richest in the world, surely another rallying theme can be found. Simultaneously, we can and should be able to celebrate Native American cultures outside of a European frame of reference
If, however, a mid-October legal holiday is kept, then it should be re-conceived as a celebration that honors the peoples, not the conquest, of the Americas. An Americas day, plural not possessive, can honor the original peoples of the hemisphere as it reminds us, its current peoples, that we share more than a land mass, we share a future.
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