To be eligible for a catering permit, the licensee must be a “specially designated distributor, specially designated merchant, or holder of a public on-premises license,” AND must also be a licensed “food service establishment or retail food establishment.”  For example, the following types of businesses might be eligible for a catering permit: a restaurant, hotel, or banquet facility that caters offsite events; or a grocery store that sells liquor and provides catering.

A catering permit holder may use the permit at multiple events and locations simultaneously, and there is no limit on the number of catering permits issued in a particular city or county.  A permit holder must complete an MLCC server training program before beginning to use the permit.  The catering permit application fee is $70 and the annual permit fee is $100.

This new law was originally part of the Sunday liquor sales law that went into effect late in 2010, but Governor Granholm vetoed the catering permit section from that law.  It was recently reintroduced and quickly became law.

For additional analysis of the new law, see the Michigan House and Senate analysis.

One of the most important changes to the Act is to allow a corporation to be converted into a limited liability company, or the conversion of a limited liability corporation into a corporation. Until now, it was necessary to go through a formal merger of a corporation and an LLC to accomplish this result. Now all that will need to be done to convert the form of the entity is to file a form with the State of Michigan.

Tax, corporate governance or other considerations may make it desirable to change the form of an existing entity from a corporation into an LLC, or  from an LLC into a corporation. The new conversion process will make this much simpler and less expensive.

The amendments to the Limited Liability Company Act became law on December 16, 2010. The conversion forms have not yet been developed by the State’s Corporation Division.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Changes to the Federal Estate Tax Law – Although the Federal Estate Tax was eliminated for individuals dying in 2010, under the Tax Relief Act of 2010, the Federal Estate Tax will be reinstated in 2011 and 2012, but subject to a new set of rules during such period, including:

1. Estates will now be able to claim a $5 million “applicable exclusion amount” ($10 million for couples), indexed for inflation after 2011, thereby exempting estates valued at less than $5 million from any Federal Estate Tax;
2. The top marginal tax rate will be 35% for Federal Estate, Gift, and Generation Skipping Transfer Taxes;
3. Effective for gifts made after December 31, 2010, the tax rates and applicable exclusion amounts for Federal Gift Taxes will be determined with respect to the rates and exclusion amounts of the Federal Estate Tax (in other words, the $5 million applicable exclusion amount can be used to shield gifts from the Federal Gift Tax, and, to the extent not used to exempt lifetime gifts from the Federal Gift Tax, can also be used to shield transfers at death from the Federal Estate Tax);
4. As an additional benefit to the estates of those individuals who have died in 2010, they may now elect to either be governed by the Federal Estate Tax rules under EGTRRA (under which the Federal Estate Tax was eliminated for 2010 subject to a modified carryover basis rule) or the new rules set forth in the Tax Relief Act of 2010; and
5. The personal representative of the estate of the first spouse to die will be able to transfer any unused “applicable exclusion amount” ($5 million) of the decedent to the decedent’s surviving spouse.

FAVORABLE TAX PROVISIONS AFFECTING BUSINESSES

Exemption of employers for having to pay their 6.2% Share of the Social Security Tax for certain hires of previously unemployed workers – Your business will be exempt from paying the employer’s 6.2% share of the Social Security payroll tax on the formerly unemployed new-hire for not only the remainder of 2010, but also for all of 2011. Plus, if you keep that formerly unemployed new-hire on the payroll for a continuous 52 weeks, your business will be eligible for a nonrefundable tax credit of up-to-$1,000 after the 52-week threshold is reached.

Bonus Depreciation Rules and Section 179 Limits – Under the Tax Relief Act of 2010, a 100% write-off will be allowed on new qualifying property acquired and placed in service after September 8, 2010 through December 31, 2011. For new qualifying property acquired and placed in service during 2012, the bonus depreciation rate has been set at 50%. For tax years beginning after December 31, 2011, the maximum expensing amount under IRC Section 179 has been set at $125,000 and the investment-based phase-out amount at $500,000 (under current law, the expensing figures were set to drop from $500,000/$2 million for 2010 and 2011 to $25,000/$200,000 after 2011). Also, off-the-shelf computer software will qualify for the Section 179 expensing election if placed in service in a tax year beginning before 2013.

As described above, both businesses and individuals are affected by the Tax Relief Act of 2010. For questions or more information on this topic, please contact your tax professional at UHY Advisors in Houston at (713) 960-1706 or in Dallas at (214) 243-2900, or visit us on the Web at uhy-us.com.

The statements contained herein are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. Furthermore, such statements are not presented or intended as, and should not be taken or assumed to constitute, legal advice of any nature, for which advice it is recommended that you consult your own legal counselors and professionals.

UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of “UHY Advisors.”  UHY Advisors, Inc. and its subsidiary entities offer services from offices across the United States. UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms.

UHY LLP is a licensed independent CPA firm that performs attest services.

UHY Advisors, Inc. and UHY LLP are independent U.S. members of Urbach Hacker Young International Limited.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

The following summary (see below) of the Tax Relief Act of 2010 is provided compliments of UHY Advisors, Inc. UHY is a tax and business advisory services firm with whom we have had a strategic partnership with for over 25 years:

The State of Michigan has recently created an exception to the requirement that a minor must have a work permit from the minor’s school in order to be employed. Effective immediately, a work permit is not required for a minor who is working as an unpaid volunteer for a charitable organization that is recognized as tax exempt under Section 501(c)(3) of the Internal Revenue Code. The law also seems to cover organizations that do not have a 501(c)(3) tax exemption from the IRS, as long as the organization’s “purposes, structure, or activities are exclusively those that are described in Section 501(c)(3).” A copy of the amended law is attached.

The exception does not apply to a non-profit organization that is outside the scope of Section 501(c)(3), such as a Chamber of Commerce, trade association or real estate board. These other organizations would need to get work permits for volunteers who are minors.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Here is the press release from Nancy Pelosi yesterday:

“We will continue discussions with the President and our Caucus in the days ahead. Democratic priorities remain clear: to provide a tax cut for working families, to promote policies that produce jobs and economic growth, and to assist millions of our fellow Americans who have lost their jobs through no fault of their own.”

While the tax cuts will most likely pass in a slightly tweaked form, the politicians are missing the point, since most of them have probably never run a small business. Here are a few points to consider.

1. The IRS does have a deadline for printing withholding tables and forms that employers will be using in 2011.  With Congress’ continued delaying tactics to score political points, if the publishing deadline is missed to revise the forms, the IRS will be forced to print outdated tables. The losers will be workers who will have higher taxes taken out of their paycheck in 2011 and the government who will have to pay to print the forms twice.
2. Business owners do not make spending decisions to hire or invest in their companies when no one knows what the tax laws will be. Investing in companies via equipment and other items means more money in the private sector which has been proven time and time again to be a better economic stimulus than monies spent by government.
3. The American voters fired the current leadership last month for not fixing the economy. Obviously the leadership didn’t get the message since they have decided to continue the choice of uncertainty that affects decisions that could improve the economy. See item 2 above.

This article was written by Jay Kossen, CPA at Numerico, PC. Click here to view Numerico’s website.

Below are a few of the key provisions the Act:

• To assert a lien, there must be a written commission agreement entered into after October 5, 2010.

• The broker must actually be entitled to a commission pursuant to the written agreement.

• The individual asserting the lien must be a licensed real estate broker in Michigan.

• The lien must be recorded with the register of deeds before the real estate transaction closes and before the real estate is conveyed.

• The lien must be mailed to the land owner within ten (10) days of recording.

• If there is a commission dispute, escrow accounts are to be established with funds to satisfy the lien until the dispute is resolved.

• The broker has one year to foreclose upon the lien after it is recorded.

Commercial real estate transactions often involve complex legal issues. The recent enactment of the Act further adds to the complications of entering into a commercial real estate transaction.  Parties entering into real estate transactions may wish to consult with an attorney in order to obtain a lien waiver from the real estate agents involved in the transaction before closing.

This article was written by Matt Ehrlich, Associate Attorney at Demorest Law Firm.

“Smoking” is defined as “the burning of a lighted cigar, cigarette, piper or any matter or substance that contains a tobacco product.” There is a ban on smoking in “public places.” A “public place” includes areas owned and operated by the government; areas not owned or operated by the government, but used by the general public for certain specified purposes; and (unless otherwise exempt) a place of employment. The third one covers almost all of the businesses in the State. A “place of employment” is an enclosed indoor area that contains a work area for one or more people.

Business owners are expected to take steps to reasonably prevent customers, employees, or other people from smoking on their premises. Business owners are expected to do ALL of the following:

1. Clearly and conspicuously post no smoking signs (or the international no smoking symbol) at the entryway and in all buildings where smoking is prohibited.
2. Remove all ashtrays or other smoking paraphernalia from any place smoking is prohibited under the Act.
3. Inform individuals smoking in violation of the Act that they are in violation of state law and are subject to penalties.
4. Refuse to serve an individual smoking in violation of the Act.
5. Ask an individual smoking in violation of the Act to refrain from smoking, and ask them to leave if they refuse to stop.

If owners do all of the preceding things, they have an affirmative defense against any prosecution against them for a violation of the Act. This means that the business owner can be exempt from penalties under the Act, but only if all of the preceding conditions are met.

The Act includes a few exceptions. Casinos in existence before the Act can allow smoking in gaming areas only. Casinos built later cannot allow smoking. (The term casino in the bill does not include a casino operated under the Indian Gaming Regulatory Act. Thus, the smoking ban does not apply to these casinos.) An existing separate specialty tobacco shop may allow smoking. Cigar bars may also allow smoking (but only the smoking of cigars, not other tobacco products).  The ban also does not apply to motor vehicles.

Overall, business owners should be proactive in preventing smoking in their place of business by following the five requirements described above.

Download a copy of the Bill in PDF format by clicking here.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

A recent Michigan Court of Appeals ruling in the case Reicher v SET Enters, Inc (click here to view) decided that a settlement agreement between the representative and principal after the representative was terminated and had filed a lawsuit against the principal can negate the non-waiver rule.  In other words, when Reicher decided to settle his claims against the principal he signed away his rights to protection under the SCRA.  When the principal breached the settlement agreement, the statutory penalties under the SCRA did not apply.  Reicher was limited to the damages for breach of contract.

The non-waiver provision will still apply to a contract or agreement establishing or modifying the business relationship between the principal and the sales representative, but does not apply to post-termination agreements.

These laws do not apply to a prepaid card issue by a financial institution that may be used at many different types of retailers (such as a prepaid Visa card).

Furthermore, companies cannot refuse partial payment of a good or service with a gift card. In other words, even if the total sale is more than the balance on the card, a business must accept the gift card as partial payment for the good or service. Companies also cannot refuse gift cards during sales or closeouts.
Lastly, the terms and conditions of a gift card cannot be altered after the gift card has been purchased. Terms must be disclosed on the gift card or certificate, on the envelope it comes in, or an 800 number must be provided to obtain the terms and conditions.

To add to all the State changes, President Obama recently signed into law the Credit Card Accountability Responsibility and Disclosure Act. Title IV of the Act—relating to gift certificates, gift cards, and prepaid cards—becomes effective August 22, 2010. These regulations will not have as great an impact in Michigan as they may in other places around the country because Michigan has already enacted rules governing the use of gift cards and gift certificates. The new Federal law provides:

•    Gift cards may not expire less than 5 years after the date of purchase (already in effect in Michigan).
•    Dormancy fees, inactivity fees, and service fees are prohibited unless (1) there has been no activity with respect to a certificate or card for the preceding 12 months, (2) disclosure requirements are met, (3) not more than one fee per month is charged, and (4) any additional requirements imposed by Federal Reserve Board regulations are met. (Companies in Michigan may still have to follow Michigan laws if stricter).

These State and Federal laws must be strictly followed to avoid becoming liable for damages and penalties.