May 15, 2013 0

EPA Issues Proposed Guidance for Vapor Intrusion at Cleanup Sites

By in Environmental and Sustainability Law

On April 16, EPA issued a revised proposed guidance for assessing and mitigating vapor intrusion risks from chlorinated solvents and petroleum at cleanup sites.  The proposed guidance documents revise earlier versions from last year.  The current versions eliminate language from the chlorinated solvents guidance for calculating limits to protect against health hazards from short-term exposure.  Instead, EPA is working to separately develop a strategy for addressing short term exposure to chlorinated solvent vapors.

The proposed petroleum guidance reduces the separation distance from light non-aqueous phase liquid (LNAPL) contamination to occupied buildings from 30 feet to 15 feet, which likely will significantly reduce the number of sites that must be evaluated for vapor intrusion from petroleum contamination.

EPA will take comment on the proposed guidance documents until May 24.  For more information, or if you would like assistance in reviewing and submitting comments on the proposed guidance documents, contact Steve O’Day or Phillip Hoover.

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May 13, 2013 0

“There is nothing permanent except change.” -Heraclitus

By in Estate Planning & Wealth Protection

Authored by: Paul J. Sowell

Just when those impacted by the moving target that was the gift and estate tax exemption collectively sighed in relief at the passage of the fiscal cliff deal, it appears the celebration may have been premature.  President Obama recently released his proposed budget for 2014 where he seeks to revisit the exemption amounts. Under the President’s proposed budget, the gift and estate exemption would be reduced to the 2009 level of $3.5 million and the estate tax rate would be set at 45% starting in 2018.  In addition to fiddling with the gift and estate exemption amounts and estate tax rate, the President continues to advocate for the “tightening of the screws” of some popular wealth transfer planning tools, such as the popular trust arrangement known as a GRAT, which allows families to potentially move large amounts of assets off their balance sheet at discounted values. The administration’s proposals would also severely limit the use of GRATs by requiring a minimum 10-year term (Grantor must survive to the end of the term), rather than the current 2-year requirement.  If implemented, this would certainly (negatively) impact many clients by restricting their estate planning opportunities. Many clients,  who because of their advanced age, might simply find it unreasonable to expect to survive such an extended age hurdle.

Curiously, a mainstay of his prior budget proposals, the elimination of valuation discounts for family owned entities, is not mentioned in the proposed budget. This may portend something even more ominous for the future of family entity discounting and the impact may be significant. 

Valuation discounting of privately held business interests is in many instances a predicate to the most sophisticated wealth transfer planning strategies. At the core of the use of discounts is the ability of families to pass wealth at values which are less than the assets gross value. Primarily (but not exclusively) this is accomplished by applying discounting principles known as lack of marketability and minority interest. Lack of marketability means that finding a willing buyer for a privately held company may be more difficult because the shares of such company are not traded on a public exchange, like shares of Apple stock. Minority interest means that the owner lacks control of the asset and can’t get income from it unless the business makes a distribution. Based on these principles, families looking to transfer family owned business have been able to get the face value of the business reduced by appraisers who apply these concepts. Many estate tax advocates, including the current administration, feel that this is just another loophole for the rich which needs to be closed. So how might they close it? It appears a new treasury regulation may be on tap. 

What exactly is a treasury regulation? Treasury regulations pick up where the Internal Revenue Code (IRC) leaves off by providing the official interpretation of the IRC by the U.S. Department of Treasury.  The IRS has for several years maintained that it has the authority to restrict or eliminate valuation discounts by regulation. Prior Department of Treasury commentary states that sections of the IRC were intended to limit planning techniques designed to reduce transfer tax values, but that does not reduce the economic benefit to the transferee. Can the absence of any mention of family discounting in the 2014 budget indicate a shift in strategy by the administration and the imminent issuance of a regulation as the IRS has been alluding to for years now? It is very possible. It looks like that collective sigh at the beginning of the year may become a hiccup.

What does all this mean to affluent clients, their families and their family business interests?  Generally speaking it requires them to pay careful attention to weighing the benefits of engaging in wealth transfer planning at a time when the current administration seems inclined to raise taxes and restrict wealth transfer opportunities that have been taken for granted for a long time by many of our clients.

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May 13, 2013 0

Industry and Environmental Groups Challenge New Rules for Commercial and Industrial Solid Waste Incinerators

By in Environmental and Sustainability Law

Petitions have been filed in the U.S. Circuit Court of Appeals, District of Columbia Circuit, challenging EPA rules, finalized in December, for control of emission of hazardous air pollutants from commercial and industrial solid waste incinerators (CISWI).  The petitions, filed by industry and environmental groups, also challenge a companion EPA rule defining non-hazardous secondary materials (NHSM), under which EPA determines whether materials used as fuels cause a facility to be governed by the maximum achievable control technology rule for emissions from boilers (Boiler MACT) or the CISWI rule.  The new petitions join already pending challenges to EPA’s Boiler MACT rule.

The petitions do not spell out the portions of the rules being challenged.  It is expected that recordkeeping and reporting requirements, classification of certain materials such as used railroad ties, and weakening of emission limits from the previously promulgated versions of the rules will be addressed.

For more information on the Boiler MACT, CISWI and NHSM rules, contact Steve O’Day or Phillip Hoover.

 

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May 8, 2013 0

THE GEORGIA SUPREME COURT REJECTS THE INEVITABLE DISCLOSURE DOCTRINE IN A TRADE SECRET DISPUTE

By in Georgia Appellate Developments

The following situation can occur when employees and executives possess a company’s trade secrets and confidential business information.  An employee works for Company A.  The employee signs a confidentiality agreement promising not to disclose certain information after his employment ends.  His employment with Company A ends, and he goes to work for a competitor, Company B.  There is no evidence that the former employee has documents with confidential information or trade secrets or has revealed any of A’s trade secrets or confidential information to Company B.  However, Company A argues that its former employee has the trade secrets and confidential information in his head and that because of the nature of his employment with Company B, the former employee must inevitably disclose those trade secrets or confidential information to Company B or make use of them in his employment with Company B.  This argument is called the “inevitable disclosure” doctrine.  Courts in some states have recognized it.  However, in Holton v. Physician Oncology Servs., L.P., Case No. S13A0012 (decided May 6, 2013), the Georgia Supreme Court rejected the inevitable disclosure doctrine.

The inevitable disclosure doctrine works, in effect, as a non-compete covenant.  The Georgia Supreme Court held that inevitable disclosure doctrine cannot support an injunction against a departed employee.  The alleged injured party must prove either a violation of an agreement or an actual or threatened disclosure of trade secrets that rises to a violation of the Georgia Trade Secrets Act.

This case reinforces the need for employers to have in place effective agreements with their employees with access to confidences that limit the ability of those employees to leave and join a competitor.  In recent years Georgia has adopted statutes that give more favorable treatment to non-competition covenants.  Georgia employers should explore that option.

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May 6, 2013 0

Federal Court of Appeals Addresses Superfund Liability of Brownfield Developers

By in Environmental and Sustainability Law

In a case of first impression regarding brownfield developer liability under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund), the Fourth Circuit Court of Appeals on April 4 decided the issue of whether a current owner of a hazardous waste site can escape liability as a Bona Fide Prospective Purchaser (BFPP) under Brownfield redevelopment legislation enacted by Congress in 2002.  Specifically, the opinion in PCS Nitrogen Inc. v. Ashley II of Charleston LLC LP, Nos. 11-1662, 11-2087, 11-2099, 11-2104 and 11-2297 (4th Cir. April 4, 2013), interpreted the requirement that, in order to escape liability as a current site owner under Section 107 of CERCLA, a BFPP must show that it “exercises appropriate care with respect to hazardous substances found at the facility by taking reasonable steps to (i) stop any continuing release; (ii) prevent any threatened future release; and (iii) prevent human, environmental, or natural resource exposure to any previously released hazardous substance.”  42 U.S.C. 9601(40)(D).  Because the Fourth Circuit upheld a finding that Ashley II, a brownfield redeveloper of a site in Charleston, SC, did not exercise such care, and is therefore liable for a share of cleanup costs as the current site owner, it is feared that the Fourth Circuit’s opinion will chill the redevelopment of brownfield sites.  A close reading of the opinion, however, shows that it is based on specific failings by Ashley II that may limit its effect to the facts of the case, and also provides guidance for brownfield redevelopers who wish to take advantage of BFPP immunity.

The principle effect of PCS Nitrogen is to interpret the meaning of the requirement that a BFPP “exercise appropriate care”.  The Fourth Circuit rejected arguments by Ashley II that the “appropriate care” standard should be a lesser standard of care than that required of current owners who are liable parties under Section 107 of CERCLA, because the BFPP immunity provided for by Congress as part of the Small Business Liability Relief and Brownfields Revitalization Act enacted in 2002 was intended to lift the liability impediment to investors acquiring and redeveloping contaminated sites.  Instead, the court observed that the standard for a BFPP, which acquires a site with full knowledge of its contamination, should, if anything, be higher than the “due care” standard required of an innocent landowner under CERCLA, which by definition “did not know and had no reason to know” of the contamination of a site it acquired.  The court ruled, however, that the “appropriate care” standard is at least as stringent as the “due care” standard required to establish an innocent landowner defense, citing a 2003 guidance document issued by the EPA, “Office of Enforcement & Compliance Assurance, U.S. Envtl. Prot. Agency, Interim Guidance Regarding Criteria Landowners Must Meet in Order to Qualify for Bona Fide Prospective Purchaser, Contiguous Property Owner, or Innocent Landowner Limitations on CERCLA Liability” (March 6, 2003).  Agreeing with the Second Circuit’s interpretation that the “due care” inquiry involves determination as to whether a party “took all precautions with respect to the particular waste that a similarly situated reasonable and prudent person would have taken in light of all relevant facts and circumstances.”  New York v. Lashins Arcade Co., 91 F. 3d 353, 361 (2nd Cir. 1996). 

The opinion in PCS Nitrogen therefore provides guidance to redevelopers of contaminated brownfield properties as to what is required to meet the “appropriate care” criterion (one of eight criteria) to take advantage of BFPP immunity from Superfund liability.  An evaluation of the cited failings of Ashley II, relied upon by the District Court and 4th Circuit, shows what to avoid.  The court cited failings of Ashley II that prevented it from establishing “appropriate care”:  (i) Ashley II delayed in filling underground sumps that contained hazardous substances—Ashley II’s own expert admitted the sumps should have been filled a full year before Ashley II did so; (ii)  Ashley II allowed a cover of crusher gravel to deteriorate, leaving soil contaminated with high levels of lead and arsenic exposed in many areas; and (iii) Ashley II allowed a trash pile to accumulate on the site.

The lesson of PCS Nitrogen, therefore, is that brownfield redevelopers should: (i) have as complete an understanding of site contamination as possible before acquiring a brownfield site; (ii) before acquiring a site, understand, based on expert advice, what needs to be done to protect against exposure to site contamination, stop any continuing release of hazardous substances, and prevent any future release; and (iii) promptly follow qualified expert advice regarding steps to take, or actions to avoid, in order to accomplish those requirements.  Also, a brownfield redeveloper must be aware of and follow the other seven criteria contained in CERCLA that are necessary to establish BFPP immunity.

For more information on brownfield redevelopment, the availability of BFPP immunity, and the effect of the PCS Nitrogen decision, contact Steve O’Day or Phillip Hoover.

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April 29, 2013 0

EPA’S AUTHORITY TO VETO PERMITS CHANGES

By in Environmental and Sustainability Law

On 23 April 2013, the DC Circuit reversed the district court in Mingo Logan Coal co. v. EPA, which deals with the scope of EPA’s authority to veto permits issued by the Corps.  In relevant part the court held the following (using a straightforward statutory interpretation): Section 404 imposes no temporal limit on the Administrator’s authority to withdraw the Corps’ specification but instead expressly empowers him to prohibit, restrict or withdraw the specification “whenever” he makes a determination that the statutory “unacceptable adverse effect” will result. 33 U.S.C. § 1344(c) (emphasis added).

The decision is attached and available online here.  If you have any questions or need additional information, please contact Andy Thompson.

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April 22, 2013 0

Global Solar Photovoltaic Industry is Likely Now a Net Energy Producer, Stanford Researchers Find

By in Environmental and Sustainability Law

The construction of the photovoltaic power industry since 2000 has required an enormous amount of energy, mostly from fossil fuels. The good news is that the clean electricity from all the installed solar panels has likely just surpassed the energy going into the industry’s continued growth, Stanford researchers find.  To read the complete article, click here.

For more information, please contact Steve O’Day.

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April 16, 2013 0

You Are Not Finished With Your 2012 Gifting Until You File Your Gift Tax Return

By in Estate Planning & Wealth Protection

Authored by: Neeli G. Shah

Many opportunistic taxpayers rushed to make year-end gifts during 2012. As a result, a record number of 2012 gift tax returns are expected to be filed in 2013. These returns were due yesterday, April 15, 2013, although the due date can be automatically extended by six months.  The importance of accurately reporting and timely filing a 2012 gift tax return should not be understated, even if no gift tax is expected to be due.  This is especially true if you made gifts to a trust for the benefit of your grandchildren; gift-split with your spouse; or made gifts using a defined value clause.

Unless your accountant specializes in filing gift and estate tax returns, chances are he or she may not be familiar with certain details involved in filing a Form 709 – Gift (and Generation-Skipping Transfer) Tax Return (“Form 709” or “Gift Tax Return”).  It is advisable that your estate planning attorney, who is more familiar with your gifting program, consults and discusses the nature of your gifts with your accountant, before he or she prepares your 2012 Gift Tax Return.  It is also recommended that your estate planning attorney review the Gift Tax Return before it is filed with the Internal Revenue Service (“IRS”).

Here are a few points to keep in mind to avoid some common (and costly) mistakes when preparing your 2012 Gift Tax Return(s):

1. Election to split gifts between spouses. If you are gift-splitting, the non-donor spouse’s consent must be signified on the first Gift Tax Return reporting the transfer that is filed with the IRS. Failure by non-donor spouse to consent by signing Line 18 of Form 709 can result in the IRS treating the entire gift as being made by one spouse and can result in significant gift tax to the donor spouse.  Also, a split-gift election must be made as to all gifts, except gifts to the donor’s spouse, by the donor during the calendar year. The donor’s spouse cannot select which gifts made by the donor will be split.

Last year was also the year of the spousal lifetime access trust (“SLAT”), a trust created for the benefit of a spouse and descendants. Notwithstanding the above, gifts to a SLAT (allocated to the donor’s spouse) generally cannot be split by the donor’s spouse and careful attention should be given to accurately report such gifts.  However, this does not prohibit the donor’s spouse from splitting the remaining gifts made by the donor.

2. Allocation of GST Exemption. If you made gifts to a trust that may benefit your grandchildren or more remote descendants, even if they are contingent beneficiaries, your Gift Tax Return should make the appropriate election either to allocate your generation skipping transfer (“GST”) tax exemption ($5.12MM in 2012) to the gift or to opt out of any automatic allocation that may apply, as determined by your estate planning attorney.  While a taxpayer’s GST exemption is automatically allocated to certain GST Trusts (a defined term under the Internal Revenue Code (“Code”)), taxpayers and preparers are advised not to rely solely on these automatic allocation provisions as they may cause unintended tax consequences.  It is recommended that you make an appropriate election in or out of GST automatic allocation rules on the Gift Tax Return with regard to such transfers.  Also note, a timely filed Gift Tax Return allocates the GST exemption to a transfer as of the date the transfer was initially made, while with a late filed Gift Tax Return, the allocation is deemed to be made on the date that the late return is filed.

3. Adequate Disclosure. The IRS generally has three years from the date a Gift Tax Return is filed to challenge a gift or other transfers disclosed on the return. However, this three year period does not begin to run unless the gift is “adequately” disclosed as provided under the Code and the Treasury Regulations thereunder.  It is important that either your estate planning attorney or your accountant or both confirm that proper appraisals were obtained for the gifts and the gifts are adequately disclosed on the Gift Tax Return to start the three (3) year statute of limitations.  This is especially important for taxpayers who made formula or defined value gifts in 2012 (perhaps in reliance on Wandry v. Commissioner).   The Gift Tax Return should include appropriate documentation to show that the amount transferred is determined pursuant to the formula contained in the transfer documents; in no event should a taxpayer report the transfer as a fixed percentage interest of the property.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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April 15, 2013 1

Green Chamber of the South: Greenhouse Accelerator

By in Environmental and Sustainability Law

greenSteve O’Day is a Mentor for the Greenhouse Accelerator of the Green Chamber of the South.  The Accelerator’s purpose is to help green entrepreneurs create local, sustainable jobs, providing management support through mentors, and financial support through loans.  After two years of operation, the Accelerator has evaluated 28 companies, screened out 11 companies, and accepted 3 companies for mentoring. 

For a full report on the Accelerator’s activities, click here.  For more information, contact Steve O’Day.

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April 8, 2013 0

When Is a Published Decision Not Binding Precedent?

By in Georgia Appellate Developments

A practitioner might expect that a published decision appearing in the official reports of the Georgia Court of Appeals is binding precedent.  However, Georgia practice contains a wrinkle that affects the ability of a practitioner to cite a published decision as precedent.  It may be a wrinkle to which practitioners need to pay closer attention.

The Georgia Court of Appeals has 12 judges, and an overwhelming majority of cases are decided by panels consisting of three judges.  Under Rule 33(a) of the Georgia Court of Appeals, a decision by a three-judge panel is “physical precedent only” with respect to any part of the opinion in which there is concurrence in the judgment only or a special concurrence without a statement of agreement with all that is said.  If a published decision is “physical precedent,” that decision is not binding on a subsequent panel of the Georgia Court of Appeals in another case, although they may be persuasive authority.  See Bituminous Ins. Co. v. Coker¸ 314 Ga. App. 30, 36 n.4 (2012); Fulton County Bd. of Tax Assessors v. National Biscuit Co., 296 Ga. App. 884, 886-88 (2009).  Often, a concurrence in judgment only is not accompanied by an explanatory opinion.  Therefore, a practitioner can determine that the published decision is “physical precedent” only by looking at the very end of the opinion and noting whether or not one or more of the judges concurred in the judgment “only.” 

This wrinkle in Georgia practice may be becoming more important.  A review of opinions appearing in FASTCASE in the last few years shows that in each January court term (January through March) of the Georgia Court of Appeals since 2009, the Court issued the following numbers of three-judge decisions in which one or more of the judges concurred in the judgment only as to some part of the disposition of the case. 

Year                            Number

2009                            3

2010                            3

2011                            10

2012                            16

2013                            32

The causes of the increase in the number of three-judge decisions that include a concurrence in judgment only are unclear.  However, these numbers identify a trend to which careful practitioners should pay attention.  Before you cite a decision of the Georgia Court of Appeals, in addition to checking the cite and making sure that case has not been overruled, you also should note whether or not a judge concurred in the “judgment only.”

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