Congress Adopts PPP Application Extension

The United States Congress has adopted legislation to extend access to the Paycheck Protection Program (“PPP”) loan program through August 8, 2020.
Prior legislation set the deadline for applications at June 30, but, given that over $130 billion of funds remained available, the application was extended to August 8. The latter date gives Congress additional time to determine appropriate use of the remaining funds.

PPP loans provide small businesses with funds for payroll and certain other operating expenses and can be forgiven if conditions are satisfied.
Additional flexibility for borrowers was adopted in June, which may make PPP funding more attractive to some businesses.

Congress is expected to adopt additional legislation in response to the COVID-19 pandemic later in the summer. Making a second PPP loan available to qualifying borrowers is one possibility that is being discussed, but until such a change is adopted borrowers are limited to only one loan.

 

VW Contributor: Jim Pieper
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Pre-registration of a Copyrightable Work

An often overlooked method to protect copyrightable works is pre-registration. This method will likely become a little more prominent because, earlier this year, the United States Supreme Court determined in Fourth Estate Public Benefit Corp. v. Wall-Street.com, 585 U.S. ___ (2019) that a copyright owner must wait to bring suit for copyright infringement until their works have been registered. Previously, in the view of certain lower courts, the copyright owner simply had to apply for registration. This decision increased the burden on copyright owners to bring a suit for infringement, but the Supreme Court noted several reasons for its decision, including pre-registration.

Pre-registration is a tool used to protect unpublished works that are in the final stages before commercial distribution, making them particular susceptible to copyright infringement. Instead of following the full registration process that will take over half a year, the copyright owner would submit the work to the United States Copyright Office and, after a limited review, will receive pre-registration. Under Section 408(f) of the Copyright Act, a work that has been pre-registered provides the copyright owner an opportunity to immediately bring a suit for copyright infringement.

Although this particular method of protection might have limited application, it is an important tool to ensure that owners of particularly vulnerable copyrightable works are able to bring suit immediately against those infringing on their works. Otherwise, the copyright owner will have to wait eight or nine months to receive actual registration from the copyright office before they can bring a suit for copyright infringement, which would likely damage the value of the underlying intellectual property. As always, the attorneys at Vandenack Weaver are available to assist with protecting your intellectual property.

VW Contributor: Alex Rainville
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Nebraska Sales and Use Tax on Short-Term Rentals: New Guidance by the Nebraska Department of Revenue

By Ryan Coufal

Earlier this year Nebraska LB 284 passed into law requiring remote sellers—those without a physical presence—whose retail sales exceeded $100,000 in the previous year or current calendar year or if the seller made 200 or more separate Nebraska retail sales transactions in that same time frame, to obtain a sales tax permit from the Nebraska Department of Revenue (DOR) and begin collecting and remitting Nebraska and local sales tax.  Included with the online retail sales were sales made Multivendor Marketplace Platforms (MMP), or online marketplace facilitators.  Remote sellers selling through MMP’s must file sales tax returns reporting all of their Nebraska sales, but are relieved of the duty to collect and remit the sales tax on sales facilitated by the MMP if the MMP reports and remits the tax to the DOR.

Recently, the Nebraska DOR provided guidance on sales and use tax collection for remote sellers and MMPs which transact sales regarding Short-Term Lodging and Rentals in General Information Letter (GIL) 1-19-1.  The GIL clarifies that beginning on April 1, 2019, MMPs which facilitate short-term rentals must obtain sales and lodging tax licenses and begin collecting and remitting these taxes on the sales they facilitate, much like MMPs facilitating retail sales.  Additionally, the MMP is to complete the MMP Lodging Tax Worksheet-Breakdown by County with the Nebraska and County Lodging Tax Return (Form 64) to report the lodging tax by each county for sales facilitated in Nebraska.  Hotel or tourist home owners who provide short-term lodging and rentals are relieved of the duty to collect and remit the sales and lodging taxes on sales facilitated by an MMP if the MMP reports and remits the taxes themselves to the DOR, however, any sales and lodging not facilitated by an MMP must still be reported by the short-term rental provider themselves.

Per the Nebraska Revenue Act, a retailer or seller of lodging is defined as any person who, directly or indirectly, rents or leases property for a profit or gain when the transaction is subject to the sales tax, including sales facilitated by an MMP.[1]  The GIL indicates that travel agents who do not publish room availability and rates on behalf of hotels or tourist homes are generally not considered MMPs. This helps clarify a travel agent from a more well-known MMPs, such as Airbnb.

[1] Neb. Rev. Stat. §§77-2701.07, 77-2701.13, 77-2701.16, 77-2701.32 and 77-2701.36; see also Neb. Rev. Stat. §§77-2701.25, 77-2701.31, and Nebraska Sales and Use Tax Regulations 1-004.02C.

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Business Entities as Parties to Real Estate Transactions: Who Has Authority?

Business entities buy and sell real estate on a regular basis. A successful transaction hinges, in part, on the proper parties executing the requisite documents. Because failing to correctly identify the parties and obtain proper signatures can be fatal to any real estate transaction, understanding who has authority to sign, on behalf of the entity, is imperative.

Four types of business entities are commonly involved in real estate transactions: (1) general partnerships; (2) limited partnerships; (3) limited liability companies; and (4) corporations.

A general partnership is an association of two or more persons to carry on as co-owners a business for profit. Formation of a partnership does not require a filing with the State, nor does it require a partnership agreement. As such, any conveyancing documents must clearly identify whether partnership property, versus non-partnership property, is being sold. In general, all partners should sign the conveyancing document to sell partnership property. However, a Statement of Authority may be voluntarily filed with the Secretary of State, granting specific partner(s) express authority to solely dispose of partnership property. Unlike the general partnership, a limited partnership (“LP”) is registered with the Secretary of State and is comprised of one or more general partners and one or more limited partners. Like the general partnership, a limited partnership may be governed by a partnership agreement. To convey real property, a deed must be executed by all general partners, unless a duly executed and authorized partnership agreement or Statement of Authority provides otherwise.

A limited liability company (“LLC”) is either member-managed or manager-managed and is created by filing a Certificate of Organization with the Secretary of State. The entity is governed by an operating agreement, which is not filed. Unless the operating agreement dictates otherwise, consent is typically required by all managers (if manager-managed) or members (if member-managed) to transfer real property outside the ordinary course of business. A duly executed and authorized Statement of Authority can be filed with the Secretary of State to supersede the signing authority as designated in the operating agreement. As such, be sure to confirm that the Statement of Authority is executed by all members or managers, depending on the LLC management structure.

A corporation is a legal entity that is owned by shareholders and operated by the Board of Directors. Articles of Incorporation must be filed with the Secretary of State to create a corporation. The corporation’s affairs are governed by its bylaws. If the corporate president does not have authority to transfer real estate, corporate disposition of property is generally a two-step process. The Board of Directors, as dictated by the bylaws, must consent to the transaction, and upon consent, the Board must pass a resolution that authorizes the transaction and designates the authorized signatory.

Early review of the relevant entity documents is key, if not crucial, to ensuring the proper parties are named and have executing authority in any real estate transaction. This simple, but fundamental, step can certainly facilitate not only a timely and efficient real estate closing, but also a successful transaction.

© 2018 Vandenack Weaver LLC
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Broker-Dealers Offered Opportunity to Provide Comments to FINRA Rules for Capital Formation

The Financial Industry Regulatory Authority, known as FINRA, is undergoing a review of internal operations and programs as part of a review process dubbed FINRA 360. FINRA, as an independent self-regulatory organization with the overall goal of protecting investors and creating efficiency in the markets, governs many in the financial services industry in conjunction with the securities and exchange commission. FINRA has been issuing notices and seeking comments from those in the industry, as part of FINRA 360, with the goal of identifying opportunities to further the FINRA mission.

Recently, FINRA started the review process for rules that pertain to broker-dealers and their involvement with the capital formation process, and has issued corresponding notices. One of the recent notices from FINRA includes regulatory notice 17-14, seeking comments regarding broker-dealers when involved with unregistered securities and operating funding portals. The broad spectrum of rules that fall within the purview of notice 17-14 include funding portals, crowdfunding, capital acquisition brokers, unlisted real estate investment trusts, and other administrative and operational rules for raising capital.

For those wishing to submit comments on the rules, FINRA has set a deadline of May 30, 2017. For more information, FINRA notice 17-14 can be found at the following link: http://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-17-14.pdf

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New Corporate Compliance Guidance Issued by the Department of Justice

Earlier this year, under the direction of the new Attorney General, the United States Department of Justice (“DOJ”) issued new guidance for corporate compliance programs. This guidance applies when the DOJ is investigating a business and determining how to prosecute a business for federal crimes, such as certain types of fraud. The DOJ notes that the recently issued “Evaluation of Corporate Compliance Programs” updates the prior guidance and does not replace or substantially alter the investigation process.

Currently, federal prosecution of a business will follow the United States Attorney Manual, which provides factors for determining whether to charge a business, negotiate a plea, or come to some agreement. When making these determinations, the government will, among other items, evaluate the compliance program instituted by the business entity. The new guidance specifically pertains to the business compliance program pertaining to fraud prevention. The new fraud compliance guidance lists 11 topics to be evaluated by the DOJ, including Analysis and Remediation of Underlying Misconduct, Risk Assessment, Senior and Middle Management, and other topic areas.

The new guidance provides granularity and clarity regarding the DOJ evaluation of corporate compliance programs, when facing corporate criminal investigations. Although designed for corporate criminal investigations, this should guide companies implementing a compliance program, especially those in highly regulated industries, such as healthcare, pharmaceuticals, and securities. The updated factors issued by the DOJ can be found at the following link: https://www.justice.gov/criminal-fraud/page/file/937501/download

© 2017 Vandenack Weaver LLC
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SEC Updates Rules for Capital Raises Through Regulation D

Over the past couple of years, the Securities and Exchange Commission (“SEC”) has evolved how companies can raise capital, while simultaneously maintaining adequate protection for investors. For example, starting in May of 2016, companies were provided the option of raising capital through the newly created Regulation Crowdfunding, but the SEC was not finished modernizing the laws for exempt securities issuance. On October 26, 2016, the SEC finalized rules amending Regulation D, which contains exemptions from securities registration.

 

Many non-public companies, at all stages, rely on Regulation D for capital raises. Depending upon the unique circumstances of the company, the company may have utilized registration exemptions under rule 504, 505, or 506 of Regulation D. However, exemption under rule 505 became disfavored compared to rule 504 and 506 because of the additional, and oftentimes onerous, regulatory requirements. Recognizing this trend, the SEC finalized rules that increased the amount a company can raise under rule 504 to $5,000,000 dollars, up from $1,000,000, in a 12-month period. This means that the same amount of capital can be raised under rule 504 as was possible under rule 505, allowing the SEC to repeal rule 505.

 

For most companies relying on Regulation D to raise capital, the factors used before the rule change will likely continue to be the predominate factors when determining whether to use rule 504, often referred to as the “seed capital” exemption, or rule 506 exemption. For example, an entrepreneur in the first few years of business that requires additional capital to get a product, currently in research and development, to the market, will likely look to rule 504, which limits the total money raised, but is more navigable for new companies. Moving forward, as the SEC undergoes a change of leadership, starting when SEC Chairwoman Mary Jo White steps down in early 2017, these rules may continue to evolve and any company looking to utilize a Regulation D exemption should consult with legal counsel. For more information on the current changes under SEC Regulation D, please visit the following SEC website: https://www.sec.gov/news/pressrelease/2016-226.html

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IRS Implements New Safeguards for Income Verification Express Service

The Internal Revenue Service (“IRS”) is implementing new requirements for taxpayers who use the Income Verification Express Service (“IVES”), a service companies use when signing off on the incomes of loan applicants. The new safeguards are part of a larger effort to protect taxpayers and fortify authentication standards.

The new requirements were sent to IVES participants shortly after the IRS announced the initiative. Among others, the requirements involve collecting data to verify participant clients and the individuals that clients authorize to submit and receive IRS transcripts on the clients’ behalf. The IRS will not deliver borrower income transcripts unless IVES participants certify their compliance with the new requirements. Additional safeguards include requiring individuals to have strong passwords and unique login credentials.

The new protections reflect initiatives being taken elsewhere in the tax system. Recently, the IRS shut down the electronic filing (“e-file”) PIN tool, a tool to assist with electronic tax filing, after criminals attacked the system and stole PIN numbers. The IRS is taking these steps in an attempt to protect taxpayer information and combat potential fraud.

The new requirements are in effect as of July 1, 2016.

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Can Franchise Agreements Be Terminated or Not Renewed?

A Business FAQ with Mark A. Williams.

The simple answer is yes, franchise agreements can be terminated and that is pretty scary for somebody that owns a franchise business. The more complicated answer is that you have to look at your franchise agreement. Usually there are provisions in there that cover the renewal of the franchise and what happens if it is terminated.

There is also state and federal law that apply to franchises. In some states, the franchisor might not just be able to terminate your franchise even if the franchise agreement says they can.

Yes, franchise agreements can be terminated, they can be not renewed, but in almost every circumstance, whether it is by your franchise agreement or whether it is by law, you have some rights to renew and you need to make sure you pay attention to those rights when you get into a franchise relationship.

© 2014 Parsonage Vandenack Williams LLC

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What Rights Do Minority Shareholders Have?

A Business FAQ with Mark A. Williams.

Minority shareholders have the same rights that every shareholder has. Generally, that means they have the right to access books and records of the company, financial information, and they have the right to attend shareholders meetings and they have the right to vote on things. When you are a minority shareholder, the majority shareholders and the officers and directors of the company might actually owe you more fiduciary duties than they would owe to other shareholders. There are some legal protections if you are the small guy to make sure that that majority shareholder can’t do too much for their own personal benefit to your detriment.

© 2014 Parsonage Vandenack Williams LLC

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