COVID-19: May the Force (Majeure) Be With You

The strain of of the corona virus pandemic is not only a threat to our health and safety, but it is also creating economic hardship for people, businesses and entire industries.

As the ability to perform obligations under existing contracts are being strained, whether for supplies, paying rent or making payroll, parties to agreements are doing more than exercising self-help or looking to the government for assistance. They are also calling their lawyers to find out if anything in their contracts will allow them to legally extricate themselves from the obligations that may have seemed routine only a few months ago.

One of the primary areas of contractual inquiry has focused on the force majeure or excusable delay clause that is ‘boilerplate’ in many agreements. Force majeure literally translated from the French means ‘superior force’ and refers to situations in which some external intervening event has impaired a party’s ability to perform its obligations under the contract and allows that party’s performance to be excused.

For some insight on how effective, applicable and even understandable these so-called ‘standard clauses’ are, you can take a look at my Insight Note: Managing Contract Risks & Remedies in a Time of Coronavirus.

You might also check out a similar Insight Note from my partner and colleague, Juan Zuniga entitled:  Memo on Force Majeure and COVID-19 which goes into great detail as to how the law in California might be interpreted in light of the current health crisis.

In fact, you can find all of the recent Insights from Rimon Law professionals on our Insights & Analysis page and once again a reminder that Rimon lawyers and legal professionals are always available to help.

 

During this time of year our thoughts turn gratefully to our relationships and to all those who have helped enrich our lives personally and helped make our business progress and professional growth possible.  To all my family and friends, loved ones, colleagues, connections and contacts, the holidays and new year seem like perfect times for me to say ‘thank you’ and express appreciation to each of you.

There are so many things we can be thankful for and among them I count your friendship and support, as well as your contributions to my growth as a person and professional – in short, our relationship, whether near or far, close or casual, constant or sporadic.

In the year ahead, I look forward to being better at staying in touch with many of you whose time and schedules have not intersected with mine as often as I might like;  to facing challenges together and in the process, learning and growing; to listen more to those who mean well, to ignore those who don’t and to try and have the wisdom to know the difference.

Most of all to appreciate the countless blessings around us every day that we far too often take for granted. Thank you!

I wish each of you a new year filled with health, happiness and prosperity.

Best wishes,

Joe Rosenbaum

25th Anniversary Edition: Best of the Best USA Expert Guide

I am honored at having been notified I will be listed in the 2019 Best of the Best USA Expert Guide, as one of the Top 30 Media Practitioners in the USA.

Over the course of a quarter of a century, Euromoney’s Legal Media Group has researched the world’s legal markets. Based on extensive review, with legal peers and in-house counsel, they identify the world’s leading lawyers, advisers and legal practitioners.

Over these past 25 years, the Expert Guides have become a valuable reference tool and trusted resource for international buyers of legal services.

This is their 25th Anniversary Edition and although I have been listed in previous editions of the Guide to the World’s Leading Technology, Media and Telecommunications Lawyers, each time I receive such a notice, it reminds me of the professional relationships I have enjoyed over the last 40 years and the great privilege I have been afforded of serving and working with clients and colleagues, not only in the USA, but around the world.   Thank you!

Joe Rosenbaum

 

Rimon’s Complimentary 2019 CLE Webinar Series: Coming in January

Enrollment for the 2019 Rimon Law CLE Webinar Series being held in January is now open, so don’t wait too long to register!

Don’t miss the chance to register, to learn and to earn CLE credits.

This January (2019) we will be offering the following programs:

  • State and Local Taxation: Headline News and Trends, conducted by David Fruchtman;
  • Corporate Governance Issues Related to Mergers and Acquisitions of Delaware Corporations, conducted by Frank Vargas and Michael Vargas;
  • It All Ads Up: Advertising, Promotions & Celebrity Endorsements in a Digital, Mobile, Social & Augmented World, conducted by Joseph I. Rosenbaum;
  • Copyright and Trademark Law: The Uncomfortable Interface, conducted by Mark S. Lee; and
  •  Law and Behavior: Ethics in Deception before the PTO, AIA Proceedings and Enforcement Presentations, conducted by Maxim Waldbaum.

To get dates, times and more information and to register for any or all of them go to 2019 Rimon Law CLE Webinar Series.

The Blockchain Ecosystem

Dror Futter, a Venture Capital and Technology Partner at Rimon, P.C. has authored a comprehensive update on the state of blockchain law, which has been published by The Journal of PLI Press, the quarterly journal of the Practicing Law Institute The Current, (Winter 2018 Edition; Vol. 2, No. 1, Winter 2018 – Page 21.   The article summarizes developments in the blockchain ecosystem to date, draws attention to considerations that participants in that ecosystem should take into account and also highlights many currently unanswered legal questions.

In addition to a growing blockchain practice, Mr. Futter focuses his practice on startup companies and their investors, and has worked with a wide range of technology companies.  You can read the entire article right here: Blockchain Law ICO Regulation and Other Legal Considerations in the Blockchain Ecosystem and if you need more information you can contact Mr. Futter directly or if you want to know more about his practice click here.  Of course, you can always contact me, Joe Rosenbaum, or any of the Rimon lawyers with whom you regularly work.

 

The Digital Economy is So Taxing

– By Stephen Díaz Gavin and Claudio Palmieri

Economic activity is not only transnational, but increasingly digital.   A business is physically located in one country, sells goods or services in another country and then declares its profits in yet a third country?  Who is the taxing authority? Where is the transaction taxed and to which government do taxes get paid? This has never been a simple question internationally, but in today’s digital world, where borderless transactions are more frequent and more common, the leaders of the G-20 countries, in the Summit declaration of 18-19 June 2012 in Mexico, decried the consequences of these developments — tax base erosion and profit shifting to lower-tax jurisdictions.  Even the proposed U.S. tax reform currently before the U.S. Congress addresses concerns about tax base erosion.

In 2013 the Organization of Economic Cooperation and Development (“OECD”) began a project to combat tax base erosion and profit shifting and the first action item of their Final Report of 2015 concludes the digital economy cannot be considered separate from the rest of the economy for tax purposes – it is increasingly becoming the economy itself.   Significantly, the OECD believes solutions lie not so much in creating new rules, but adapting existing regulations to address the new, digital environment.  Meanwhile, the European Union and some countries in Europe are making their own provisions for dealing with changes caused by the digital economy. With its Communication of September 2017, A Fair and Efficient Tax System in the European Union for the Digital Single Market, the European Commission (“EC”) announced a legislative proposal for the Digital Single Market in Europe, that is intended to be available for implementation if an adequate, ready and preferably international solution inside the G-20/OECD project framework is not implemented.  The two main policy challenges addressed by the EC are: (1) where to tax digital services provided by companies with little or no physical presence and (2) what is taxable (e.g., the value created by intangible assets, data and knowledge).  While a long term approach is favored, the EC is focused on short term measures to address some of these problems quickly such as a tax on untaxed or insufficiently taxed income generated from internet-based business activities (whether creditable against the corporate income tax or as a separate tax); a standalone gross-basis withholding tax on certain payments made to non-resident providers of goods and services ordered online; a levy on revenues generated from the provision of digital services or advertising activity.

In addition to European-wide solutions, some individual countries are also attempting to address the taxation of the digital economy.  For example, in September 2016, a bill was introduced before the Italian Parliament regarding tax measures applicable to competition in digital commercial activities (DDL S.2526 “Misure in materia fiscale per la concorrenza nell’economia digitale” del 10 novembre 2016).  The bill would not only reinforce the powers of Agenzia delle Entrate, the Italian governmental agency which collects taxes and revenue, but would introduce a “hidden permanent establishment” (“stabile organizzazione occulta”) concept which would consider revenues generated from certain types of international transactions, as income generated in Italy. For example, fees paid to non-Italian companies by Italian consumers for the purchase of software licenses distributed on the Italian market. Thus, if a U.S. company engages in online business regularly, with greater than 500 transactions in any six-month period and collecting more than € 1 Million in that same period, that company would be considered to have a “hidden permanent establishment” subject to tax by the Italian authorities.  In addition, the proposed Italian 2018 Budget Law (not yet adopted), includes a proposal for a 6% web tax on services provided by nonresident companies and individuals on revenues generated from the sale to Italian residents  of fully “dematerialised services” (e.g., intangible services such as video and audio downloads).

The common theme in these new proposals in the European Union and EU member countries suggests that governments will look increasingly to tax where economic value is delivered.   If your business is part of the digital economy you clearly need to monitor these developments and pay attention to the legislative and regulatory initiatives being considered at the national, regional and multinational levels, especially in Europe, an important market and one which appears to be moving more quickly than other regions of the world.  You can read the full Client Alert on this issue and if you need more information, have questions or would like assistance, the International Practice Group at Rimon, with an office in Rome, is particularly well suited to serve your needs.  Feel free to contact Stephen Díaz Gavin, Partner based in Washington, DC and Rome or Claudio Palmieri, Counsel to Rimon and principal of Studio Legale Palmieri – Rimon Italia,  based in Rome.   Of course, you can always contact me, Joe Rosenbaum, or any of the lawyers at Rimon with whom you regularly work.

 

Missing Children, Genetics & the Law

As I mentioned in my Legal Bytes post a few weeks ago (Forensic DNA and Missing Children: The Legal & Ethical Issues), I had the honor and privilege of being a featured speaker on 25th of May 2017 – International Missing Children’s Day – at this year’s conference for Missing Children and Genetic Identity, organized and chaired by Patrícia Cipriano, President of the Portuguese Association for Missing and Exploited Children [Associaçāo Portuguesa de Crianças Desaparecidas] held at Lusófona University in Lisbon.

Featuring expert investigators, law enforcement, geneticists and forensic scientists, the conference explored how tough police work, forensic science, government legislators, judges and lawyers can work more effectively and cooperatively within and across national borders.  It also reminded us that DNA kits and learning aides for use by parents, coupled with greater educational efforts and more timely reporting, can help save children’s lives and futures.

The conference was attended by notable dignitaries, including Charlie Hedges, Police Expert, Missing Children and European Alert Coordinator for Amber Alert Europe, Professor Maria do Carmo Fonseca, President of the Institute of Molecular Medicine, Professor Maria do Ceu Machado, President of Infarmed, members of Portuguese Assembly of the Republic , senior law enforcement and forensic scientists with closing remarks delivered by His Excellency Dr. Fernando Negrão, a jurist and former Minister of Social Security, Family and Children, Minister of Justice, director general of the Judicial Police and chairman of the Board of Directors of the Institute of Drugs and Drug Addiction.

The conference highlighted the work being done in Portugal and, of course, the work that still needs to be done.  You can read and download the Conference Agenda & Brochure (Lisbon, PT) and feel free to take a look at my presentation Missing Children – Missing Opportunities, Legal Obstacles in our DNA (Rosenbaum) right here on Legal Bytes.

As always, f you would like to know more about this post, the conference, or the topics discussed at the conference, feel free to contact me, Joe Rosenbaum.

 

 

US Treasury Regulation Changes Could Impact Foreign Owned Single Member LLCs

Melinda Fellner Bramwit, Partner, Rimon, P.C.

Changes to US Treasury Regulations Under Section 6038 of the Internal Revenue Code could affect filings for single member LLCs owned by non-US individuals or entities.

Many non-resident individuals and non-resident entities maintain title to real estate and other assets in single member limited liability companies incorporated under state law in the United States, for a variety of reasons.  Under Federal tax law, such an entity is disregarded for tax purposes unless the owner elects otherwise.  From a corporate perspective, these limited liability companies can be used to harness assets in an entity separate from the owner, providing a layer of corporate protection and perhaps anonymity for the ultimate owner.  These entities are also reasonably simple to form and maintain.

Changes to U.S. Treasury Regulations effective December 13, 2016, throw a wrinkle into the use of this malleable entity in some circumstances, which can be managed with some planning.

These changes require that a non-resident owning 100% of a United States limited liability company (“LLC”) file a Form 5472, an information return, when certain transactions occur between certain parties (“related” parties) and the LLC.

The following example from the regulations illustrates a scenario where this filing would be triggered:

In year 1, F, a foreign corporation forms and contributes assets to US-LLC, a U.S. limited liability company that is a disregarded entity for US Federal tax purposes.  In year 2, F contributes funds to US-LLC, and in year 3, US-LLC makes a payment to F.

Under the modified regulations, F’s payment to US-LLC as well as US-LLC’s payment back to F are both reportable transactions for which a Form 5472 would be required with respect to US-LLC.

This is a simple, yet common situation which triggers the filing requirement. It is important to note that this requirement is applicable to tax years of entities beginning on or after January 1, 2017 and ending on or after December 13, 2017 (Note: This is not a typo. The date is the 13th, not the 31st).  As such, there is a window of opportunity for tax planning to avoid the requirement of this form and if you want to know more or need help, don’t hesitate to contact me, Melinda Fellner Bramwit, a partner here at Rimon, P.C.

Of course, if you need assistance, you may always contact me, Joe Rosenbaum, or any of the lawyers with whom you routinely work at Rimon Law.