Starting July 1, 2018 the City of Philadelphia has a new reduced local tax structure. It impacts local businesses, employees and residents as follows:

City Wage Tax (applies to all businesses that operate within the City limits or hire Philly residents)

• 3.8809% city wage tax for Philadelphia residents
• 3.4567% for non-residents

All paychecks issued by businesses after June 30, 2018 must comply with the new withholding rates. Be sure to notify your HR department of payroll company to avoid needless headaches down the road.

Earnings Tax

• 3.8809% earnings tax for Philadelphia residents
• 3.4567% for non-residents

The earnings tax is essentially the same as the City Wage Tax. The City Wage Tax is withheld by your employer. If your employer does not withhold the City Wage Tax however, it is still the responsibility of the individual to pay this tax directly to the City – the City Earnings Tax.

Net Profits Tax and School Income Tax

• 3.8809% for Philadelphia residents
• 3.4567% for non-residents

Only residents of Philadelphia are responsible for the School Income Tax.

For more information directly from the Department of Revenue, click here.

Douglas Leavitt is an attorney with Danziger Shapiro and focuses his practice on guiding business with their daily operational needs. Please feel free to contact him or any of the other attorneys at Danziger Shapiro to discuss how this new change will affect your business or any other issue you may have that concerns you and your business.

This entry is presented for informational purposes only and does not constitute legal advice.

This week I reviewed three Non-Disclosure Agreements and was surprised when two of the NDAs were silent regarding employee solicitation. Working with clients over the years I have found that in virtually every successful company, it is almost always the employees, along with the technology, that are among the most valuable assets that need protection. Yet in the deals my clients were exploring, these valuable assets were not protected, or at least would not have been protected had my clients not shared the NDA with me before signing. First however, I want to take a step back and discuss why the NDA (also called a Confidentiality Agreement) is used, and identify common NDA scenarios.

Protect Confidential Information

There are many situations where a business will need to share confidential information with employees, another business, potential investors or consultants. Confidential information frequently includes trade secrets, formulas, data, customer pricing and the like. However, when confidential information is shared, it must be also be protected. This means that confidential information is shared in a controlled manner such that the receiving party cannot use the information to its competitive advantage without the consent of the disclosing party. For Example, if a competitor is considering whether it wants to acquire your business or make an investment and in its review of the information you provide your competitor will gain insight into how you produce similar products cheaper. Without any protections in place, what would stop your competitor from using this information for its own competitive advantage? Your sources and methods must be protected. This is accomplished through a carefully drafted Non-Disclosure Agreement.

Common Non-Disclosure Agreement Situations

A Non-Disclosure Agreement is commonly used when:

• Sharing financial information, key vendors and other information to potential equity investors or prospective buyers of your business.
• Allowing employees access to confidential and proprietary information – Click here for a recent example of where a Teva employee violated the terms of her confidentiality agreement.
• Presentations of new products to potential customers.
• Your vendors have access to your sensitive information.
• Your clients may require the other businesses you engage (your subcontractors or professionals retained by you) with be bound by NDAs similar to the one between you and your client.

Employees as a Protected Asset

Turning back to what surprised me, two of the NDAs I reviewed this week failed to treat employees as protected assets. Employees are perhaps one of, if not the, most valuable asset to any organization. “Your company is only as good as your employees”, is not an uncommon sentiment shared by many of the top organizations around the world. Why would you not protect them? How does this come into play you ask? Simply stated, the investor that is considering making a sizable investment into your tech company will want not only to review your work papers, but also discuss them with your key employees. How does this technology work? What are the hidden dangers? What are the challenges? How do you plan to overcome these challenges? What happens if the prospective investor decides that he doesn’t want to invest in your business but makes a job offer to your key employee? This can be disastrous. Thus, an NDA must protect your employees through an appropriate non-solicitation clause.

Other NDA Considerations

There are many other concepts that need to be considered before you sign an NDA as well. For example, the definition of “Confidential Information”, term limits, key contacts, prior knowledge, disclosures to authorities, injunctive relief and document destruction come to mind. These considerations are just as important as protecting your employees through non-solicitation clauses. If you have any questions regarding a NDA that has been placed before you, or want to develop an NDA for future use, or any other aspect of your business, please feel free to contact us at Danziger Shapiro, P.C.
This entry is presented for informational purposes only and is not intended to constitute legal advice.

Potential clients frequently ask me why they should not buy contract forms online or from an office supply store. Why pay for an attorney when I can buy a legal form for a nominal fee? I understand the inclination to go online because its entirely at your convenience and it is undoubtedly cheaper. However, this comes at a potentially high cost. Legals forms do not always comply with all legal requirements for a given industry and location (federal, state and local). The danger you expose yourself to by avoiding working with a lawyer is the unknown. It is the risks you don’t realize you are taking that frequently come back to bite you the hardest. I am writing this blog today as a cautionary tale why such forms should be avoided because of a recent conversation I had with a potential client.

The Form Office Lease

Last week a potential client came into my office with a complaint that a former tenant had recently filed against him. The tenant claimed damages against the landlord because the lease did not comply with the Philadelphia Lead Disclosure & Certification Law. This law applies to any dust, dirt/soil, paint, and as of March 1 pipes that drinking water may pass through. If the allegations set forth in the complaint are true, the landlord will have to refund all rents received during the rental period, pay for his tenant’s attorneys’ fees and other fines up to $2,000. The landlord in this case thought he followed all of the rules. He even showed me the lead based paint disclosure form that came with his form lease. Unfortunately, Philadelphia has very specific requirements concerning lead disclosures for buildings that were built prior to 1978. Moreover, not only are there requirements for what has to be disclosed; but the manner in which disclosures must be made are also regulated by code. In fact, this is such a prevalent problem in Philadelphia because it is such and old city that it has an excellent publication on this topic. Click here for Philadelphia Landlord’s Guide to Lead Disclosure. While, the form lease that was purchased at the chain office supply store might have complied with Pennsylvania state law, it did not satisfy the Philadelphia Code and this will be an unfortunate and expensive lesson for this landlord.

Advice From Lawyer Can Avoid Dangerous and Costly Business Practices

During the course of our meeting, I recognized this landlord had many other dangerous business practices that could have been avoided if he had simply met with a lawyer before he embarked on his career as a landlord. However, the landlord to be just did not know what he did not know. For example:

Philadelphia Facade Ordinance

• If your building is more than 6 stories tall and located in Philadelphia, your building’s facade is subject to an initial inspection and thereafter a follow up inspection every 5 years. This local ordinance applies not to facades but also to to all buildings six or more stories in height; all buildings with any appurtenance in excess of sixty feet in height; and any building, other than one or two-family dwellings, greater than two stories located in specific areas.
• This landlord’s three unit brownstone was covered by this ordinance but I could tell from our conversations that no effort to comply was made. This wasn’t because the landlord was trying to avoid his legal obligations. No, rather it was simply just not being aware of what his responsibilities under the law required. This time, it was once again a local ordinance, as opposed to a state or federal law that was being violated. There is no way any form legal agreement purchased at an office supply store or online can protect you from what you do not know because you don’t have the opportunity to ask questions to a living person and the lawyer who drafted the agreement you are purchasing is not involved in the process.

Employment Application Forms

Another form that business owners repeatedly get into trouble with is relying upon store bought employment applications. In today’s legal environment, these forms need to be updated regularly. Consider in Philadelphia alone you can no longer inquire on the application if your applicant has a criminal record (effective March 2016) or what they were being paid at their current job (will become effective April 2017) . A recent corporate client asked me to review its employment application and his store bought forms did not comply with either Philadelphia specific legal requirement. In reviewing his other store purchased form we told him the restrictive covenant in its employment agreement was also not enforceable because it was too broad and that the manner in which it was implemented with respect to current employees was also an issue that prevented enforcement.

The attorneys at Danziger Shapiro, P.C. are available to assist you in connection with preparing or reviewing your transaction documents. An ounce of prevention is a good investment to make sure the agreements you are using will actually work and accomplish what you want to achieve. Please call us for a consultation to discuss your concerns. We look forward to hearing from you.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

What is the Pennsylvania tax amnesty program?

Tax amnesty is a program where taxpayers (businesses and individuals) who owe outstanding taxes can settle with the Pennsylvania Department of Revenue (“Department”) by paying less than what is owed. Under the program, if the taxpayer pays the entire amount of the outstanding tax due, the Department will waive all penalties and one-half of the interest associated with the underlying tax. This is an incredible opportunity for taxpayers to settle with the Department and take advantage of the savings being offered.

When does the tax amnesty program take place?

From April 21, 2017 through June 19, 2017, the Department will offer tax amnesty to all eligible taxpayers and waive all penalties and one-half interest if the taxpayer is able to pay the underlying tax and the one-half interest that was assessed. This is a strictly enforced sixty (60) day window. There will be no extensions of time to file. All required returns must be filed by the last day of the deadline.

Who is eligible to participate in the program?

Any taxpayer may generally participate in the program so long as they are not:

• A participant in the 2010 Tax Amnesty Program;
• Under criminal investigation relating to the violation of any tax law;
• Prior to the amnesty period been named as a defendant in a criminal complaint alleging a violation of any law imposing a tax administered by the Department; and
• A defendant in a pending criminal action for an alleged violation of any law imposing an eligible tax.

What taxes are eligible?

While not an exhaustive list the following taxes are eligible for the program:

• personal income tax – for the tax period January 1, 2014-December 31, 2014 – Due April 15, 2015
• inheritance and estate tax – Death of decedent March 31, 2015 – Due December 31, 2015
• capital stock or foreign franchise tax – for the tax period January 1, 2014-December 31, 2014 – Due April 15, 2015
• corporate net income tax – for the tax period January 1, 2014-December 31, 2014 – Due April 15, 2015
• gross receipts tax – for the tax period January 1, 2014-December 31, 2014 – Due March 16, 2015
• employer withholding tax – Third Quarter 2015 – Due November 2, 2015
• realty transfer tax – December 31, 2015
• sales and use tax – varies depending on manner collected and when paid

For a complete list click here.

When are payments required to be paid?

All payments under the tax program are required to be paid electronically by the close of the sixty day window – June 19, 2017.

What should I do going forward?

The 2017 amnesty is an incredible opportunity for taxpayers to resolve outstanding debts with Pennsylvania. Going forward, if a taxpayer receives an assessment in the mail for the above tax periods and they are greater than what is being offered by the 2017 amnesty program – don’t settle. Negotiate a deal that is comparable to the program. This is an excellent time for taxpayers who might have not filed all of the required returns or perhaps may have under reported income to come to the table and settle up with the Commonwealth.

If you have any questions regarding the 2017 tax amnesty program or any other issue affecting your business, please feel free to call the attorneys at Danziger Shapiro, P.C. We are available to assist you with your business needs. We look forward to hearing from you.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

As a professional real estate developer or someone with an interest in purchasing real estate at a sheriff sale, you need to understand how the bankruptcy and foreclosure laws work together. Foreclosure is a process by which a private party (a bank for example) or a municipality bring a lawsuit to collect monies that are past due. This can be taxes or other fees owed. Once a judgment is entered, the sheriff will schedule a sale to satisfy the money owed at a public auction. This is known as a foreclosure or sheriff’s sale. Can a bankruptcy filing stop a foreclosure? The simple answer is yes. However, the investor that fails to perform simple due diligence can make a foreclosure sale purchase a very costly and time consuming proposition. Before turning to this, a little background on the bankruptcy laws.

Bankruptcy: The Automatic Stay.

The day a debtor files bankruptcy (Chapter 13, for example), is the petition date. On the petition date, a legal wall comes down known as the automatic stay. All creditors are now required by federal law to stop collection efforts for debts owed prior to the petition date. This includes all demand letters, lawsuits and sheriff sales. So long as the petition date is prior to the “gavel falling” at the sheriff sale, the real estate remains with its original owner. However, if bankruptcy is filed after foreclosure, even one day after, the real property passes to the successful bidder. The real property is then not part of the debtor’s bankruptcy estate.

Best Practice Tip: When Purchasing at Sheriff Sale, Do Your Own Bankruptcy Search.

Problems arise however when a real estate investor buys real property at a sheriff sale but is not aware that the owner filed bankruptcy before the sale. The law is very clear- if the owner filed bankruptcy before the hammer falls at the sheriff sale, it is as if the sale never happened. The bankruptcy term is void ab initio meaning “to be treated as invalid from the outset.” Knowing this, it is a best practice to determine on three separate occasions if the property owner filed bankruptcy.

Initial Search.

First, run a search to see if the property owner(s) has filed bankruptcy immediately upon identification of a potential property. If the sheriff sale is a non-starter, it’s best to know from the beginning. Why waste your time and money on the rest of your due diligence?

Research During The Process.

It’s important to search the day before the sheriff sale to make sure the property owner still has not filed. You will be doing a lot of research as a part of your due diligence during the process. It’s easy to miss this step- Don’t. Frequently a property owner files bankruptcy at the 11^th hour to save the property from sheriff sale. The sheriff may not be aware of a bankruptcy that was filed the day before the sale. If the sale is continued, another check before the continued date is recommended as well.

Final Check.

Check again right before you make the final payment to the sheriff. In Pennsylvania, a successful bidder needs to pay ten (10%) percent of its bid at the actual sale. The remaining balance is due thirty (30) days after the sale. I always recommend to my investor clients to check one final time before they tender the remaining ninety (90%) of their winning bid. Otherwise you may face an unfortunate situation where the sale is set aside. That will leave you the difficult task of trying to recover your bid from the sheriff. Worse yet, maybe you made improvements to the property? Who benefits from these improvements? If the debtor keeps the property, does he/she have any money to pay you for these? Remember, the debtor is in bankruptcy and has very limited funds.

If you still believe checking is not necessary, I leave you with one recent war story. A client I represented came into my office with a motion to set aside a sheriff sale filed by a municipality. The motion was filed 16 months after the sheriff’s sale. The investor just finished with renovations and was ready to rent the triplex to tenants. Before the town served the motion, my client was not aware the prior owners filed bankruptcy. Of course, while the sheriff is required to refund the amount paid to my client, nothing was mentioned concerning the $75,000 my client spent improving the triplex. The debtor certainly did not have money to repay the investor. As of the posting of this blog, negotiations are still ongoing regarding this issue.

Searching for a Bankruptcy Filing.

This could all have been avoided if my client performed its own bankruptcy due diligence prior to bidding at the sheriff sale or before it paid the remaining balance. To accomplish this, simply run a search through an online search program called PACER. It is important to conduct the PACER search in the correct bankruptcy court for each party identified on the deed. This means doing the search in the bankruptcy court where the property is located. If the debtors do not live at the property in question, then another search must be performed at the location they reside at as well. Another very useful website is the United States Courts’ website that provides a link to every bankruptcy court in the United States. To reach this website, click here.

If you have other questions regarding how to invest in real estate through the sheriff sale process, please feel free to call us at Danziger Shapiro, P.C. We look forward to hearing from you.

This entry is presented for informational purposes only and does not constitute legal advice.

In practice however, the episode shows an entirely different contractor who is not licensed in North Carolina. A scaled down and subpar version of the original plans was completed.

The homeowners have since filed a lawsuit in Durham County Superior Court asserting claims for breach of contract and deceptive trade practices. The lawsuit contends that the work completed was shoddy and left the home “irreparably damaged”, with holes in the floor, low grade supplies, windows painted shut and more. It also questions why payments were not distributed as agreed to in the original contract as well as Big Coat TV’s use of unlicensed professionals. Instead of the couple paying for their renovation with a licensed contractor and having it filmed for a television program, they essentially paid for a set to be built that benefits the show and its advertisers that leaves this family with a potentially uninhabitable home.

Pennsylvania has similar laws in place to protect the owners of real estate from poor construction. When the quality of the workmanship differs from what was promised under the contract to such an extent as alleged in complaint against the Love It or List It show on HGTV, you have in addition to claims for breach of contract a claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law – also known as UDAP. What is great about UDAP from a plaintiff’s point of view is that if you are successful, a judge, in his or her discretion, may award up to three times the amount of damages sustained plus reasonable attorneys’ fees. This last part is a great hammer to use in negotiations.

While at first glance you may ask yourself what does this have to do with me because I am not on a TV show or I am a commercial landlord. The answer to both is plenty. First, whether you are a residential or commercial land owner, make sure your contractor is properly licensed to do business in your state. Second, make sure the construction agreement is clear on what is to be done and by whom. Stated differently, make sure your contractor is either not using subcontractors or if it is, make sure you know what subcontractors it is using. Third, never get ahead in payments. Be wary of the contractor that asks for money upfront to buy the materials for your project. If the contractor does not have sufficient funds available, you might find yourself funding the costs associated with the contractors’ prior project. Sounds crazy but this is a very common occurrence. And finally, be present and observe what is happening during the project. Once the walls go up and the studs are covered, you no longer know what has or has not been done. While this may not be practical for you due to either time, location or cost of the project, perhaps it might make sense to consider retaining a construction manager to oversee the project and make sure it is completed timely, on budget and according to the specifications set forth in the plan.

The attorneys at Danziger Shapiro, P.C. are available to assist you in connection with your residential or commercial real estate project. Whether it is in reviewing or creating transaction documents that will enable you to acquire, develop or improve real estate or bring a lawsuit against your contractors for faulty construction, Danziger Shapiro has done this before and can help you today.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

On January 4, 2016, Pennsylvania Governor Tom Wolf eliminated the Capital Stock Tax and Foreign Franchise Tax for all taxpayers effective for tax years beginning on or after January 1, 2016. Previously, the Capital Stock and the Foreign Franchise were imposed on all limited liability companies (LLC), corporations and a few other entities that were formed or doing business in Pennsylvania. These taxes were not imposed however on an entity that was formed as a state law partnership. As a result, the limited partnership was the entity of choice to own real estate.

LLC Now Entity of Choice in PA to Own Real Estate

With these taxes eliminated, Pennsylvania joins the rest of the country with the LLC now being entity of choice for owning real estate. Keep in mind however that with while this is the law right now, there still is no budget in place. The theory is that the elimination of these taxes will spur economic development and create greater tax revenue in the long run at the cost of losing what had been declining capital stock tax revenue.

Who knows what will happen if the budget is just a little short of what is needed that the January 4, 2016 repeal isn’t tweaked to bring the budget into balance. Regardless, this is the law as it stands today and we are here to advise you of the best way to invest in real estate while protecting your assets and giving you the most flexible management choices that are available. If you have any questions, please feel free to contact us at Danziger Shapiro, P.C.

This entry is presented for informational purposes only and does not constitute legal advice.

“(a) In general.—If the Secretary (of State) receives certification by the Commissioner of Internal Revenue that any individual has a seriously delinquent tax debt in an amount in excess of $50,000, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport….”

Think about this for a second. Your passport will now be used against you as a collection tool. If notified by the IRS, the Secretary of State may pull your passport; refuse to renew it or even to issue you one in the first place. The monetary threshold for a “seriously delinquent tax debt” is only $50,000. Once you consider this includes interest and penalties, it is easy to see how quickly this threshold can be met.

As with every law there are exceptions. For example, the FAST Act does not apply if you have a tax debt over $50,000 but you are paying this down under an agreement known as an “offer and compromise”. Another situation where this law would not apply is if you are fighting the “seriously delinquent tax debt” under the “innocent spouse doctrine”.

The take away here is pay your taxes! If you have foreign travel plans, know where you stand with the IRS. Also, keep in mind that international travel sometimes has a way of sneaking up on you. By this I mean, boarding a cruise ship in Florida and island hopping is international travel. It will be interesting down the road to see how this plays out in the courts. I can easily imagine this being challenged on a constitutional basis. Does this unreasonably restrict our fundamental right to travel? If you have any questions, please feel free to contact us at Danziger Shapiro, P.C.

This entry is presented for informational purposes only and does not constitute legal advice.

The Act starts off by identifying five distinct circumstances when personal property remaining on leased premises may be deemed abandoned.

(1) The tenant has vacated the unit following the termination of a written lease.

(2) An eviction order or order for possession in favor of the landlord has been entered and the tenant has vacated the unit and removed substantially all personal property.

(3) An eviction order or order for possession in favor of the landlord has been executed.

(4) The tenant has provided the landlord with written notice of a forwarding address and has vacated the unit and removed substantially all personal property.

(5) The tenant has vacated the unit without communicating an intent to return, the rent is more than fifteen days past due and, subsequent to those events, the landlord has posted notice of the tenant’s rights regarding the property.

If any of the five (5) situations described above applies, the property will be deemed abandoned. Before a landlord may remove or dispose of abandoned property, the landlord must provide written notice of the tenant’s rights regarding the property. The written notice will look very similar to this:

“Personal property remaining at [address] is now considered to have been abandoned. Within 10 days of the postmark date of this notice, you must retrieve any items you wish to keep or contact [name of landlord] at [telephone number and address] to request that the property be retained or stored. If you request that we store your abandoned property, we will do so for up to 30 days from the postmark date of this notice at a place of our choosing, and you will be responsible for costs of storage.”

Under the Act, the landlord is required to exercise ordinary care in handling and securing the tenant’s property. In addition, the Act requires that landlords provide tenants with reasonable access to retrieve their property.

These are the basic rules of the game. If a landlord violates these rules, the Act provides that the tenant is entitled to treble damages and attorneys’ fees. Additionally, to the extent there is an inconsistency between the Act and the terms of a written lease, the terms of the written lease control. With any law, there are always exceptions and this Act is no different. For example, there is a different notice period if a protection from abuse order is in effect. If the tenant has died the Act does not apply at all and disposition of the personal property owned by the decedent will be governed by the laws and jurisdiction of the Orphans’ Court.

The take away here if you are a landlord is really quite simple. If you don’t like any of the definitions of abandoned property or the manner in which you are required to store it and how costs will be allocated-change it. The Act gives you this right so modify your lease to set forth how you want to deal with this issue. If you have any questions regarding this or any other aspect affecting your real estate portfolio, please feel free to contact us at Danziger Shapiro.

This entry is presented for informational purposes only and does not constitute legal advice.

In contract law, when party fails to perform according to the terms of the agreement it is viewed as a breach of contract. However, sometimes there are justifiable reasons that will allow or excuse a party from performing according to the terms of their agreement. For example, when Hurricane Sandy destroyed most of the hotels along the Jersey Shore, these hotels were excused from liability based upon their failure to provide accommodations or being able to host wedding receptions. In essence, an act of God may be interpreted as a defense for failure to perform based upon impossibility or impracticality. So I ponder, is the Pope being in Philly the ultimate Act of God defense.

If you have any questions regarding your legal obligations under a contract you are a party to or any other issue affecting your business, please feel free to contact us at Danziger Shapiro.

This entry is presented for informational purposes only and does not constitute legal advice.

The new Entity Transaction Law sets forth five (5) fundamental business transactions that may now take place irrespective of the form of either business entity involved:

• Merger of one entity with or into another business entity;
• Conversion of one type of entity to another type of business entity (e.g. a business corporation converts to a limited liability company);
• Interest exchange between two entities such that one business entity is controlled by the other without actually merging the two business entities;
• Division of one existing entity into two or more resulting types of associations; and
• Domestication into Pennsylvania of a foreign business entity originally organized in another state (i.e. converting your DE corporation into a PA corporation).

This is a great opportunity for early stage growth companies. Under the old law, if you wanted to change the form of your existing business entity to make it more attractive for potential investors, you had to wind down the business affairs of your existing company by satisfying all existing obligations, dissolve the company and then form a new company.

This long delay would hurt principals of the early stage companies who, for example, may have originally formed their venture as a LLC for tax reasons but now need to convert to a corporation to satisfy requirements of potential investors. As a result of this rigid approach, PA businesses would flee to Delaware where its statutory scheme afforded business entities the flexibility to change its form; be it through merger, conversion or any other manner set forth above without the need to dissolve. With the enactment of this new Entity Transaction Law, this is no longer the case and makes Pennsylvania a more attractive option.

It is important to note that this new law has no effect on how the transaction will be treated from a tax perspective. Some transactions may be tax free exchanges whereas other transactions may trigger immediate tax recognition. It is important to meet with tax counsel to structure these changes properly before you make any of these fundamental business changes. If you have any questions regarding this or any other aspect affecting your business, please feel free to contact us at Danziger Shapiro.

This entry is presented for informational purposes only and does not constitute legal advice.

Circular 230 was the IRS’s compilation of regulations regarding tax services provided by lawyers and other tax professionals with respect to the tax shelter abuses of the 1990s. Circular 230 set the minimum standard with respect to written tax advice and therefore wound up being placed on everything.

Thankfully the IRS issued new rules on June 12 (click here for PDF of rule) which included the following statement; “Treasury and the IRS expect these amendments will eliminate the use of a Circular 230 disclaimer in email and other writing.” Good riddance and where are we meeting for lunch again?
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The lawyers at Danziger Shapiro P.C. are always available to assist you with your business and litigation needs in a professional and cost effective manner. Having said this, it is with laughter I must include the following:

This entry is presented for informational purposes only and is not intended to constitute legal advice.

For example, after you incorporate you need to decide whether you want to be a C corporation or an S corporation. Usually the S election is preferable for smaller entities because it eliminates taxation at the shareholder level whereas a C corporation is taxed at both the corporate level and the shareholder level. Seems straightforward enough, right? You google S election and click on a link to the Department of Revenue website (click here) where it clearly states that any federal S election is automatically a S election unless you opt out. However, right under the Department of Revenue’s link is Pennsylvania’s Open for Business website link (click here) that clearly states you must file for S-corporation status within 75 days of incorporation. This is a website that was created for the purpose of assisting new business owners and has the Governor’s name on the top yet its advice is 180⁰ opposite the Pennsylvania Department of Revenue.
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My point is that when I need brain surgery I go to a doctor. If I need help with my lawnmower I go to my local repair shop. I let the experts in their respective fields help me. If you try to save a few dollars, it may prove costly down the road. I started this firm because I wanted to help people get to where they needed to be in their business life. Whether it is starting your business, leaving a business you created, shareholder disputes, litigation to protect your rights, the attorneys at Danziger Shapiro are here to assist you. Please feel free to call me to schedule a free consultation or visit our website and explore our other blog entries that might be of interest.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

Act 93 changed the tax lien law, making real estate tax judgments personal. What does this mean? Before this new law took effect, when a property owner failed to pay their tax bill the municipality would obtain a lien against the property. But because of the way liens worked, this was not a judgment against the owner, only against that one property. This procedure led to a situation in which many property owners simply did not pay their real estate taxes. In cities like Philadelphia, where a lot of rental properties are owned by small investors or passed down between family members, this has created tax collection issues. Since the municipal lien didn’t affect the owner’s personally, many owners found it advantageous to simply not pay. If a property owner owed more than the property was worth, they could just kept collecting rent until the Sheriff Sale, if it ever happened. The municipality never got paid what was owed, and personal liability never attached.

Under the new law, the idea is that the lien will also be against the owner, not just the property. This means you will not be able to finance or sell a different property until the lien on the tax delinquent property is paid. Additionally, your own home may be at risk, and you can no longer just walk away from a property without ever paying the tax due. This makes perfect sense; it’s finally giving local municipalities the ability to collect outstanding taxes which is something cities like Philadelphia have spent years clamoring for.

Unfortunately, Act 93 creates as many issues as it solves, something frequently seen in real estate legislation coming from Harrisburg. This new law will clearly mean more work for title insurance companies and Realtors, many of whom didn’t see this coming. There are also open questions with regard to how this will affect large entities and REO properties. Clearly, the banks have foreclosed on numerous properties with tax delinquencies. Having those taxes paid will be a boon to local government, but a nightmare for searchers. Additionally, it’s easy to imagine the situation where a homeowner lacks the equity to both sell a property and clear the lien arising from another investment. I fear in many parts of the Commonwealth this could really hurt the ability of sellers to get out of low equity or distressed properties.

Finally, we are already seeing the impact of this legislation in lease-purchase and rent-to-own deals. The threat of personal judgments being transferred from out of the county to attach to the seller’s property creates the need for a whole new level of due diligence.

Of course, we’ve always recommended to our clients that investment properties should rarely, if ever, be held in their personal name. Using LLC’s, LP’s or corporations as an entity to own your investment property can provide numerous benefits and protection from this new law is only one of them.

If you would like to discuss how this new law may affect you, or how to best structure your portfolio in light of these ongoing changes, please feel free to contact H. Adam Shapiro of Danziger Shapiro and we will be happy to review and discuss your situation with you.

If you have any questions regarding how to comply with this new Philadelphia commercial real estate requirement, please feel free to contact us at Danziger Shapiro, P.C..

This entry is presented for informational purposes only and is not intended to constitute legal advice.

The Delaware Benefit Corporation is almost identical to the Pennsylvania Benefit Corporation. Both acts are designed to allow “social” entrepreneurs to focus not only on the bottom line but to also consider other non economic societal factors (community, environment, employees etc…). Both acts have provisions governing allowed purposes, accountability and transparency requirements (although Delaware has an every 2 year reporting requirement as opposed to Pennsylvania’s every year).

One interesting difference between the two states relates to derivative litigation (click here for link to derivative information on Danziger Shapiro website). While Pennsylvania is silent with respect to minimum share ownership requirements for shareholders to bring derivative actions, Delaware decided to establish minimum share ownership requirements. Most likely, this is a reflection of Delaware recognizing the practical consequences that will follow by allowing officers and directors to consider subjective societal concerns when making business decisions. Namely; not everyone shares the same political, religious and social concerns. By placing a minimum share ownership requirement in order to bring a derivative action, Delaware is just trying to reduce the strain on an already overburdened court system.

It remains to be seen whether this new business entity will take off. It certainly is gaining steam in terms of being available as a new choice of entity. However, the tax incentives that are supposedly going to be offered to such corporations have not been fleshed out yet at the local level. Perhaps when this happens the Benefit Corporation will gain traction. For now, the only real reason you might choose to become a Benefit Corporation is that you are socially conscious and believe a corporation has a responsibility to focus on more than just the bottom line. Whatever your reason for considering the Benefit Corporation, or any choice of entity for that matter, please call us at Danziger Shapiro for assistance. We will be happy to assist you with this and any other matter concerning you and your company.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

The act defines both “qualified investment” and “New Jersey emerging technology business” and I will not bore you with every detail here. However, in brief; in order for an investment to be a “qualified investment,” the investment must be a non-refundable transfer of cash to a “New Jersey emerging technology business” in exchange for rights to participate in the upside of the business or to use or market the technology.

To be considered a “New Jersey emerging technology business,” the act specifies the physical connection the company must have to New Jersey as well as the technological areas the business must be involved with. For example, the New Jersey business must have fewer than 225 employees, of whom at least 75 percent work in New Jersey. The company must also transact business, own property, or maintain an office in New Jersey. Finally, the company is required to operate in one of the following industries: advanced computing, advanced materials, biotechnology, electronic device technology, information technology, life sciences, medical device technology, mobile communications technology or renewable energy technology.

For investments made on or before July 1, 2013, an investor must submit a completed application before July 1, 2014. For all other investments, an investor must submit a completed application within one year of the date of the qualified investment. There are application fees not to exceed $1000 and approval fees that will be offset against the tax credit.

Whether this act actually spurs investments in the emerging technology industries remains to be seen. In the funding universe, angel investors are among the first ones in and take the biggest risk. Hopefully this tax credit will offset some of the risk and encourages investors to place seed money with the types of science and technology businesses New Jersey wants to grow. However, New Jersey’s commitment is questionable with such a low tax credit percentage (10%) combined with the legislature’s decision to have an “approval fee” as an offset to the allowed the tax credit. If you want to discuss any aspect of this or any other business transaction, please feel free to contact one of the attorneys at Danziger Shapiro.

This entry is presented for informational purposes only and is not intended to constitute legal advice.

Under this new ordinance, the owner of a “covered building” must report the required information no later than June 30 of each year for the previous calendar year. For 2013 only, information must be entered into the EPA’s system by October 31, 2013.

Required information will include the building’s energy and water usage as well as the building’s “characteristics”. A building’s characteristics are defined to include not only the street address and year the building was built, but also specific items such as the percent of the building heated or air conditioned and the number of computers and refrigeration/freezer units in the building. The ordinance requires that each building’s characteristics must be updated annually. Failure to comply will result in the City assessing fines against the building owner.

What does this mean from a landlord and tenant perspective going forward? From the landlord’s point of view, it means that you are going to have to immediately notify tenants of the new reporting requirements and the associated deadlines. Going forward landlords should consider default and penalty provision language as possible additions to new leases.

From the tenant perspective, a tenant should consider what impact this new legislation will have on a landlord. Will public access to the results contained in the Energy Star Manager force landlords to update their mechanical systems? If so, will such improvements be passed onto the tenant? Can carefully crafted representations and warranties in the lease protect the tenant from these types of improvements being passed onto the tenant?

Danziger Shapiro has frequently assisted their commercial real estate clients by drafting and reviewing commercial leases from both the owner and tenant’s perspective. If you have any questions regarding how to comply with this new Philadelphia commercial real estate requirement, please feel free to contact us at Danziger Shapiro, P.C.

With this as background, in order to be entitled to the family owned business inheritance tax exemption the following requirements must be met:

• Qualified Business – The business must be a “qualified business” which requires that the business must be operated by either a sole proprietor or through a business entity (LLC, partnership or corporation). The business must have fewer than 50 employees and a net book value of less than $5million dollars.

•Ownership of Qualified Business – The business must have been in existence for the past 5 years and must have been owned by the decedent and members of the decedent’s family.

•Qualified Transferees – The “qualified business” may only be transferred to “qualified transferees”. Qualified transferees are, as you would expect, the decedent’s immediate family – spouse, children, grandchildren, siblings, cousins, parents and grandparents.

•Time Restriction – In order to retain this tax savings, the family business may not be transferred to another individual or entity for a period of 7 years from the date of the decedent’s death. Yearly certifications to the taxing authority will be required. If the business is transferred within this 7 years period, all inheritance tax plus interest that would have been due will now become immediately due and payable.

The take away here is that we now know that inheritance tax liability for certain qualified businesses under certain conditions are now exempt. Having this knowledge, a business owner can create a careful succession plan such that the business he has given his life to creating will not be crippled by his passing. If you would like to discuss this, or any other aspect of your business and its daily operations, please feel free to contact us at Danziger Shapiro, P.C..

This entry is presented for informational purposes only and is not intended to constitute legal advice.

August 1: Buck, Chester, Delaware and Montgomery
October 7: Philadelphia
With the Pennsylvania State Tax Equalization Board releasing the new Common Level Ratio (CLR) on July 1, this leaves a very short time period to determine whether an appeal is necessary. (Please click to see my February 2013 post on how the CLR is used to determine your property tax)

If you have any questions, please feel free to contact the real estate attorneys at Danziger Shapiro and we will be glad to assist you to determine if a property tax appeal make sense.

This entry is presented for informational purposes only and is not intended to constitute legal advice.