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White and Williams LLPExecutive Newsletter Spring 2009

Retirement PlansNew Legislation Provides Retirement Plan Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

White and Williams Mentors “Future Giants” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Intellectual PropertyTo Intellectual Property, With Love . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

International Business: ChinaPrivate Equity in China: Enforceability of Drag-Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Insurance LawNew York Insurance Law: Changes to Insurer’s Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Construction LawBeing Ready to Bid on Public Jobs: Are you Stimulus Ready? . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Rising Stars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Healthcare Summit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Employment LawNew FMLA Regulations in Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Table of Contents

Personal and Business Tax

The 2009 Stimulus Bill: Unveiling The Tax Breaksby Ryan P. Flynn and Kevin S. Koscil

The American Recovery and Reinvestment Act of 2009, popularly known as the Stimulus Bill or some variation thereof, was signed into law by President Obama on February 17, 2009. The fiscal floodgates are now open as the American economy awaits a $787 billion deluge of federal stimulation, including a variety of tax breaks for individuals, businesses, and clean energy. Most individuals will find some relief, among other provisions, in the form of the “making work pay” credit, the homeownership credit, and an improved higher education credit. Ailing businesses will gladly welcome provisions for extended bonus depreciation, accelerated cost expensing, and longer net operating loss carrybacks. There are many more tax cuts provided under the Stimulus Bill than highlighted here which will benefit a wide spectrum of taxpayers. How stimulating is the Stimulus Bill? Keep reading...

Tax Relief for Individuals and Families

“Making Work Pay” Income Tax CreditAvailable in 2009 and 2010, this credit for working individuals

and families is equal to the lesser of: 1) 6.2 percent of earned income; or 2) $400 ($800 for joint filers). It can be claimed as a reduction in the amount of income tax that is withheld from a paycheck or through a credit on an annual income tax return. The credit is also completely refundable so, if the credit is greater than the tax liability, the excess can be received as a tax refund. The credit begins to phase out for taxpayers with modified adjusted

From the Chair…George J. Hartnett Chair, Executive Committee

Warmer weather, longer days, and the start of baseball season are just some of the tell-tale signs that spring is in bloom. At White and Williams, we have had some new beginnings of our own, including the opening of a new office in Boston, Massachusetts, the addition of new attorneys, and promotions within.

Boston OfficeOn February 2, 2009, the Firm opened an office in the heart

of Boston’s financial district, furthering a goal of expanding our commercial litigation services. The Firm’s tenth office now offers new and existing clients in New England the resources of a regional network of attorneys and staff already established in Pennsylvania, New York, New Jersey, and Delaware.

New AdditionsSettling in, and practicing from our new Boston office, are

David B. Chaffin, partner, and Sarianna T. Honkola, counsel.David brings over 25 years of experience to White and

Williams. His practice involves commercial disputes, intellectual property disputes, environmental matters, employment disputes, and real estate matters. He graduated cum laude from Amherst College and received his J.D. from Duke University School of Law. During law school, he served as an editor of, and was published in, the Duke Law Journal. Before joining White and Williams, David was a partner at Boston-based Hare & Chaffin. David can be reached at 617.748.5215 or [email protected]

(Continued on page 11)(Continued on page 7)

White and Williams LLPWhite and Williams LLP

reTiremenT Plans

New Legislation Provides Retirement Plan Reliefby Ryan P. Flynn and William C. Hussey, II

In the waning days of 2008, President Bush signed legislation aimed at safeguarding the retirement plans of seniors which have been battered during the current economic storm. Under the Worker, Retiree, and Employer Recovery Act of 2008, the required minimum distributions for most retirement plans and accounts (other than defined benefit pension plans) e.g. money purchase pension plans, IRAs, 401(k) and 403(b) plans, will be waived for the 2009 tax year.

Ordinarily, qualified retirement plan and IRA owners over age 70 1/2 are required to take yearly distributions from their accounts. (Owners of inherited retirement plans are subject to required minimum distribution rules as well, regardless of age.) At age 71, the required distribution is approximately 3.8 percent of the value of the account, and, by age 90, such required amount increases to 8.8 percent. Failure to take the required distribution in any year triggers an excess accumulation tax equal to 50 percent of the amount not properly distributed, except in 2009.

Due to the ongoing distress in the securities markets, retirement plan participants and account owners have witnessed a substantial decline in the value of assets in their accounts. In an effort to resuscitate retirement plans across the nation and help rebuild diminished value, Congress has suspended required minimum distributions for 2009. Put simply, owners of IRAs, and participants in 401(k), 403(b), and other defined contribution plans are not required to withdraw funds from their accounts this year.

It is expected that the special 2009 dispensation will not be extended, so it is best to proceed as if the normal required minimum distribution rules will resume in 2010. Also note that this waiver has no effect on required minimum distributions for the 2008 tax year.

If you would like to discuss how any of these changes may affect your business or tax

planning, or have any other tax and estate planning questions, please contact the authors.

Bill Hussey is a partner in the Tax, Pensions, and Estates Practice

Group where he focuses on taxation and estate planning issues.

He can be reached at 215.864.6257 or [email protected]

Ryan Flynn also focuses on taxation and

estate planning issues. He can be reached at

215.864.7188 or [email protected].

IRS Circular 230 Notice: To ensure compliance with certain regulations promulgated by

the U.S. Internal Revenue Service, we inform you that any federal tax advice contained

in this communication is not intended or written to be used, and cannot be used, by any

taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal

Revenue Code, or (2) promoting, marketing or recommending to another party any tax-

related matters addressed herein, unless expressly stated otherwise.

White and Williams Attorneys Mentor “Future Giants”

Twenty-two students joined attorneys and staff of White and Williams’ New York office on January 19, 2009 for a luncheon, formally kicking-off a yearlong mentoring program.

The program was established as a partnership between White and Williams and Future Giants, a non-profit organization created in 2005 to educate, encourage and empower teens and young adults in New York City from becoming another statistic in the ever-increasing high school drop-out, teenage pregnancy, and HIV rates

The students, juniors and seniors from Thurgood Marshall Academy for Learning and Social Change in upper Manhattan, are interested in pursuing a career in law as well as architecture, accounting, engineering and business. Through this program, they will spend a year learning and preparing for one. They will meet with attorneys on a regular basis for mentoring sessions, “shadowing” days, and tutoring lessons. They will work side-by-side on college applications, essay writing, and interviewing techniques.

“This partnership allows White and Williams to make a difference in the community by helping to prepare future leaders in law. It’s a rewarding program and our attorneys and staff are excited to see the relationship mature and grow over the next year,” said Bob Wright, Managing Partner of White and Williams’ New York office.

Attorneys Marlene Goldberg, Emily Horsfield, Sedgwick Jeanite, Alexandria Kane, Geoffrey Sasso, Judith Sullivan, Rebecca Waldren, Bob Wright, and Frances Zujkowski are participating in the program. Additionally, staff members, including law clerk, Jennifer Ballard, are participating.

New York Managing Partner, Bob Wright, welcomes “Future Giants .”

inTellecTual ProPerTy

To Intellectual Property, With LoveThe Prioritizing Resources and Organization for Intellectual Property Act of 2008

by Ryan J. Udell and Shari Gekoski Pressman

Intellectual property creation, development and commercialization is, and will continue to be, a key driver of the United States economy. According to a recent report of the United States Chamber of Commerce, intellectual property from industries such as entertainment, biopharmaceuticals, and information technology is valued at more than $5 trillion, accounts for more than one half of all U.S. exports, and contributes to 40 percent of all U.S. economic growth. In addition, it is estimated that approximately 18 million Americans are employed by intellectual property intensive industries. However, this vital national resource is increasingly under attack both domestically and abroad. Indeed, the FBI estimates that hundreds of billions of dollars in sales are lost each year to counterfeiting and piracy of intellectual property. Despite this imminent and significant threat to the U.S. economy, until very recently, there was no formal coordination among the various Federal agencies charged with safeguarding and protecting intellectual property.

Recognizing a need to more vigorously protect and defend U.S. intellectual property, Congress passed the Prioritizing Resources and Organization for Intellectual Property Act of 2008 (PRO-IP Act), which became law in mid-October. The PRO-IP Act provides law enforcement and intellectual property owners with significant additional weapons and resources to combat counterfeiting and piracy. Additionally, and perhaps more importantly, the Act creates a new cabinet level position, the (IPEC) also known as the Copyright Czar, whose charge is to foster a coordinated strategy among the various federal agencies involved with protecting and enforcing intellectual property rights.

Some of the more important changes to existing intellectual property protections implemented by the PRO-IP Act include: (1) availability of treble damages and attorneys’ fees in trademark counterfeiting cases against so called “contributory infringers” (i.e., those who knowingly provide the goods or services used to engage in trademark counterfeiting); (2) increasing the maximum statutory damages award that a plaintiff may receive (in lieu of having to prove actual damages) in trademark counterfeiting cases if use of the mark to produce counterfeit goods or services was willful from not more than $1 million to not more than $2 million per mark per type of good or service sold and increasing the minimum for other violations from $500 to $1,000 per mark per type of good or service sold; and (3) clarification that exportation of copyrighted works from the United States (through any kind of media) is a violation of their holders’ exclusive right to distribute copies of their works. The PRO-IP Act also authorizes appropriations of an additional $35 million

per year for fiscal years 2009 through 2013 to federal, state and local law enforcement for intellectual property enforcement and prosecution and an additional $20 million per year for fiscal years 2009 through 2013 for hiring and training law enforcement officers and procurement of advanced forensic science tools and expert computer forensic assistance.

The primary role of the Copyright Czar will be to chair the Interagency Intellectual Property Enforcement Advisory Committee (IPEA), comprised of representatives from the Office of Management and Budget, Department of Justice (including the FBI), United States Patent and Trademark Office, United States Trade Representative, Department of State, U.S. Agency for International Development, Bureau of International Narcotics Law Enforcement, Department of Homeland Security, U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, Food and Drug Administration, Department of Agriculture, and the Register of Copyrights. Specifically, the Committee will be tasked with reducing counterfeit and infringing goods in both the domestic and international marketplace, identifying weaknesses and impediments to law enforcement actions, sharing information among government agencies so as to aid in the arrest and prosecution of individuals and entities who are knowingly financing, producing, trafficking or selling counterfeit or infringed goods, and working with the international community to establish uniform standards and policies for protection and enforcement of intellectual property rights.

Through a two-headed approach of further empowering intellectual property owners and governmental activism, the PRO-IP Act is a step in the right direction of protecting and preserving our most abundant and important resource.

Ryan Udell is a partner in the Intellectual Property

Group. He concentrates his practice on intellectual

property matters, general business matters, mergers

and acquisitions and divestitures and financing

transactions. He can be reached at 215.864.7152 or

[email protected].

Shari Gekoski Pressman concentrates her practice on

helping clients with general corporate matters, mergers

and acquisitions, intellectual property issues involving

trademarks and copyrights, and complex lending

transactions. She can be reached at 215.864.6300 or

[email protected].

White and Williams LLP

(Continued on page 9)

by Gary Biehn and Chunsheng (Tony) Lu

IntroductionNotwithstanding the current credit crisis and general global

economic downturn, private equity in China continues to attract attention across the private equity spectrum from global and regional funds and other investors. Three factors can be attributed to the continuing success of private equity funds in China:

1) the continued growth of China’s economy despite a global downturn (8 percent growth target for 2009);

2) the increasing global competitiveness of local Chinese companies that desire expertise and capital to expand internationally; and

3) the shortage and unavailability of financing from local Chinese banks.

While significant business opportunities in China remain, private equity firms also face issues that are unique to China transactions. Culturally, most local Chinese business people are unfamiliar with modern corporate governance and management practice. Additionally, an underdeveloped legal system remains a continuing challenge for most private equity firms. By way of example, China did not have a limited liability company (LLC) concept similar to a Delaware LLC until 2006; similarly China did not have a limited liability partnership law, which is commonplace in private equity structures, until June 2007. Traditional concepts common in a Western private equity context—such as preferred shares, convertible shares, anti-dilution, drag-along and tag-along rights—are still unfamiliar under current Chinese law. Under many private equity investment contracts, these concepts have been widely negotiated and adopted, but whether such concepts will be enforced under Chinese law remains uncertain.

LawsuitIn early 2008, White and Williams participated in a lawsuit

initiated to enforce a drag-along clause under a private equity investment agreement. Prior to this lawsuit, which was tried in a local Shanghai court, there was no public record of any Chinese court addressing the enforceability of drag-along rights under Chinese law.

The suit involved a Hong Kong-based private equity firm that invested in a local Shanghai company and obtained a majority equity interest. Under the shareholders agreement for the Shanghai company, a drag-along clause was included which gave the majority shareholder, the Hong Kong firm, the right to force the minority shareholder—the original shareholder of the local Shanghai company—to join in the sale of the company to a third-party buyer with the same price, terms and conditions

that would apply to the majority shareholder. When the Hong Kong firm received an offer to buy the total equity interest of the company from a third-party buyer, it decided to sell the company and exercise the drag-along right as provided in the contract. The minority shareholder refused to sell its shares, arguing that such drag-along rights were unfair, not recognized under Chinese law, ambiguous and therefore, not enforceable.

White and Williams assisted our Shanghai-based strategic alliance partner firm, the Xue Firm, in representing the Hong Kong firm and brought the suit before the Shanghai court in March 2008. The Hong Kong firm petitioned the court to grant performance. But due to the concern over possible time delay and uncertainty of the validity of the intended transaction, the third party withdrew the offer. The Hong Kong firm then amended the claim to seek, among other things, monetary compensation from the minority shareholder for the loss of the economic benefit from the proposed transaction and declaratory judgment.

In June 2008, before the Shanghai court made its final decision, the underlying legal issues in the lawsuit were presented, on an anonymous basis, to the attendees of the second China International Private Equity Forum in Tianjin (CIPEFT). CIPEFT is viewed in China as the premier private equity event for China-based private equity, attended by in excess of 1,000 private equity investors and professionals. The presentation in June 2008 at CIPEFT was received by a high level of interest from the private equity investor community, many of whom communicated that the result of the lawsuit would be an indicator of the maturity level of China’s private equity investment environment.

At the end of October 2008, after a lengthy trial, the Shanghai court recommended a settlement between the parties and the parties complied. In doing so, the court implicitly adopted the position

inTernaTional Business: china

Private Equity in China: Enforceability of Drag-Along Rights

by Michael Kozoriz

A significant change to the New York Insurance Law took effect on January 17, 2009, which (1) requires insurers on liability policies to show prejudice before disclaiming coverage on personal injury or property damage claims, and (2) allows a claimant in a personal injury or wrongful death claim to commence a declaratory judgment action against the tortfeasor’s insurer, which is disclaimed on late notice grounds.

The Previous LawInsurance Law § 3420(a)(4) provided that an insurer against

injury to person or property may disclaim coverage for the insured’s late notice of claim (i.e., when a claim is not made within the time period prescribed by the policy) unless the insured could show that it was not “reasonably possible to give such notice within the prescribed time and that notice was given as soon as was reasonably possible.” Under this law, an insurer did not need to show prejudice before it could disclaim coverage for an insured’s late notice. An insured’s failure to comply with the notice provisions of the policy was sufficient to disclaim coverage.

Insurance Law § 3420(a)(2) provided that no claimant could commence or maintain an action against an insured’s insurance carrier until a judgment against the insured remained unsatisfied for at least 30 days after the claimant served the insured or the insured’s attorney with notice of entry of a judgment against the insured. This meant that a claimant, usually a plaintiff in

a personal injury or property damage case, could not seek a declaratory judgment against the insurance carrier of the insured, usually the defendant in the personal injury or property damage case, unless and until the claimant obtained a judgment against the defendant. Furthermore, unless the claimant was awarded summary judgment in the underlying action, the claimant would have to undergo a potentially lengthy and costly trial against the defendant to obtain the judgment, only to be faced with the fact that either the defendant is insolvent or the defendant’s insurance carrier has disclaimed coverage, or both.

The New LawOn July 21, 2008, New York Governor David A. Paterson

signed a bill passed by the New York State Legislature effectively eroding the late notice defense available to insurers under liability policies providing coverage for personal injury and property damage, and allowing claimants in personal injury or wrongful death cases to bring direct actions against insurers who have disclaimed coverage due to late notice. The bill signed by Governor Paterson states that the law is effective 180 days from signing, which is January 17, 2009. The change in the law will impact only those liability insurance policies issued on, or subsequent to, the effective date.

The new law provides that an insured’s failure to give timely notice as prescribed by the policy will not invalidate a claim unless the late notice has prejudiced the insurer’s ability to investigate or defend that claim. If notice is provided to the insurer within two years of the time prescribed by the policy, then the burden falls upon the insurer to show that it has been prejudiced. After two years, the burden would fall upon the insured or the claimant seeking the benefits of the policy. However, irrespective of this two-year time frame, if notice is not provided until after the insured has settled the claim against himself or after his liability has been determined, then the insurer will enjoy an irrefutable presumption of prejudice.

Regarding the time period in which a claimant is permitted to commence a declaratory judgment action against the insurer, the new law provides that if an insurer disclaims coverage based on late notice with respect to a personal injury or wrongful death claim, then a claimant need not wait until the lapse of 30 days after a judgment against the insured has gone unsatisfied. Rather, the claimant may commence and maintain an action directly against the insurer on the issue of late notice unless the insured or the insurer commence their own declaratory judgment action within 60 days after the disclaimer. If the insured or insurer commence the declaratory judgment action, then they must include the claimant as a party to the action.


insurance law

New York Insurance Law: Changes to Insurer’s Rights

consTrucTion law

Being Ready to Bid on Public Jobs: Are You Stimulus-Ready? by Jerrold P. Anders and Gaetano P. Piccirilli

In light of the new federal stimulus package, Pennsylvania contractors should be preparing themselves for what is projected to be a large-scale investment in public works. According to Governor Rendell, Pennsylvania has hundreds of “shovel ready” road projects, not to mention school construction and other state and local projects. As a result, Pennsylvania contractors must brush up on their knowledge of the Commonwealth’s bid process, including contracts subject to bidding requirements, prequalification, the bid process, bid withdrawal and bid protests.

Bidding In PennsylvaniaAs a general rule, most public contracts are subject to

the sealed, competitive bidding process. The types of projects subject to bidding is diverse and includes the construction of highways and roads, prisons, sewers, schools and other public improvements. In addition, bidding is often required for certain types of services and goods, such as printing services or office supplies, respectively. However, this article deals strictly with construction projects.

Competitive bidding begins with notice. Traditionally, the Commonwealth or local authority will publish notice that a particular project is going out to bid. Sufficient notice of an Invitation to Bid (ITB) is legally required under the Commonwealth Procurement Code (the Procurement Code), and other agencies have similar legal requirements. Interested contractors can often go to the agency’s or locality’s website to learn of jobs being bid. For instance, the Pennsylvania Department of Transportation provides a running list of projects and general bid information on its website.

An interested bidder is required to obtain (sometimes purchase) the ITB from the contracting agency. The ITB is the gospel. The ITB is meant to insure that all bidders are treated

equally and fairly, bidding on the same project with the same amount of knowledge. In addition to cost, the primary focus of competitive sealed biddings is to insure an equal playing field for all bidders. In fact, on a number of occasions, the Pennsylvania Supreme Court has stressed the importance of standard bidding requirements in “[guarding] against favoritism,” “fraud and corruption”1 and to insure a level playing field for all bidders.2

Prior to bidding, however, a contractor must determine if pre-qualification is necessary. Executive agencies like the Department of General Services, Department of Transportation and the Department of Education each require bidders be pre-qualified. In addition, some local agencies such as the School District of Philadelphia require pre-qualification. The process for pre-qualification is an attempt to determine bidder responsibility in a prospective manner. In Pennsylvania, pre-qualification of bidders is legal. For example, the Procurement Code allows agencies and authorities to pre-qualify bidders.3 As with the ITB, however, pre-qualifying agencies must apply the rules of pre-qualification evenly to all potential bidders and avoid favoritism.4

The Bid and Contract Award ProcessBidders are required to submit their bid at the time and place

provided in the ITB. The agency will open the bids and rank the bid from lowest to highest according to dollar amount. It is well established that public entities are required by law to award contracts to the lowest responsive and responsible bidder.

Responsibility is generally interpreted as a contractors ability to complete the job, including fiscal responsibility and experience, among other items. Agencies cannot, however, reject a bidder as unqualified without conducting an investigation into qualifications. As a result, many agencies have turned to pre-qualification (discussed above) of bidders.

Bidder responsiveness is based upon a bidder’s satisfaction of the required terms, conditions and instructions of the ITB. Prior to submitting a bid, therefore, contractors must be sure to pay particular attention to the requirements of the ITB. Areas where bidders do not comply with the ITB are called “bid defects.” Where there is a “bid defect,” a bid is non-responsive. Given the competitive nature of the bidding process, a non-responsive bid, particularly one that has the lowest price, will typically result in a bid protest from a frustrated bidder.

A bid defect may also result in bid disqualification, though this is not a certain outcome. A local agency can waive certain bid defects, but cannot waive what are deemed material bid defects. The determination as to materiality is guided by case law, particularly the Pennsylvania Supreme Court’s decision in



gross incomes in excess of $75,000 ($150,000 for joint filers) and is unavailable to taxpayers with modified adjusted gross incomes exceeding $95,000 ($190,000 for joint filers).

American Opportunity Tax CreditAvailable in 2009 and 2010, this credit serves as a temporary

amendment to the Hope Education Credit. While the Hope Education Credit was applicable to expenses incurred during the first two years of higher education, the new American Opportunity Tax Credit extends eligibility to the first four years of higher education. Taxpayers are allowed a tax credit of up to $2,500 for the cost of tuition and related expenses (including books) paid during the taxable year. The credit is calculated as 100 percent of the first $2,000 of tuition and related expenses and 25 percent of the next $2,000 of tuition and related expenses. Only 40 percent of this education tax credit is refundable. The credit begins to phase out for individual taxpayers with modified adjusted gross incomes in excess of $80,000 ($160,000 for joint filers) and is unavailable to individual taxpayers with modified adjusted gross incomes exceeding $90,000 ($180,000 for joint filers).

First-time Homebuyer CreditFirst-time homebuyers who purchase a principal residence

between January 1 and December 1, 2009 are eligible for a completely refundable tax credit equal to the lesser of: 1) 10 percent of the purchase price of the home; or 2) $8,000. The credit begins to phase out for taxpayers with modified adjusted gross incomes in excess of $75,000 ($150,000 for joint filers), and

is unavailable to taxpayers with modified adjusted gross incomes exceeding $95,000 ($170,000 for joint filers). Interestingly, a taxpayer is considered a first-time homebuyer if he or his spouse had no present ownership interest in a principal residence in the U.S. during the three-year period ending on the date of purchase. Thus, it is possible for a taxpayer who already owns a vacation home, and uses rental property as his principal residence, to be eligible for the credit. If the residence for which the credit was claimed is not used as the taxpayer’s principal residence for at least 36 months, the credit must be repaid to the government on the tax return for the year in which the residence ceased being used as the taxpayer’s principal residence. The credit repayment amount cannot exceed the amount of gain from the sale of the home to an unrelated person.

Temporary Suspension of Taxation of Unemployment BenefitsNormally, all federal unemployment benefits are subject to

federal taxation. In 2009, however, federal income tax on the first $2,400 of unemployment benefits per recipient is temporarily suspended. Unemployment benefits over $2,400 will be subject to federal income tax. On a related note, the Stimulus Bill also increases weekly unemployment benefits by an additional $25 through 2009 and provides up to 33 weeks of extended unemployment benefits to workers who have exhausted their regular benefits.

Alternative Minimum Tax PatchFor the 2009 tax year, the Alternative Minimum Tax (AMT)

exemption amounts are substantially increased, but the phaseout rules remain unchanged. Individuals are allowed a $46,700 AMT exemption which is phased out by subtracting 25 percent of alternative minimum taxable income (AMTI) exceeding $112,500 from the exemption. The exemption is unavailable when AMTI reaches $299,300. Joint filers are allowed an AMT exemption of $70,900 which is phased out by subtracting 25 percent of AMTI exceeding $150,000 from the exemption. The exemption is unavailable to joint filers with AMTI of $433,800 or more. While these AMT exemption increases are expected to provide AMT relief to millions of individuals and families in 2009, it is only a temporary fix. In 2010, absent legislative action, AMT exemptions will revert to the amounts prevailing in the year 2000.

Additionally, all otherwise allowable nonrefundable personal credits may offset AMT as well as regular tax in 2009. This change benefits middle-income individuals who: 1) have low taxable income because of a large number of personal exemptions; 2) are subject to the AMT because personal exemptions (as well as the standard deduction and certain itemized deductions) generally are not allowed in computing the AMT; and 3) have substantial nonrefundable personal credits such as the child tax credit.

The 2009 Stimulus Bill: Unveiling The Tax Breaks (Continued from page 1)



Rising StarsEach year, the publishers of Law and Politics Magazine conducts polls and

research to identify outstanding Pennsylvania lawyers who have demonstrated superior professional potentials. Rising stars is a comprehensive and diverse listing of exceptional emerging attorneys, representing a wide range of practice areas, firm sizes, and geographic locations.

We are very proud of our six attorneys who were named to the 2008 list of Pennsylvania Rising Stars. Please join us in congratulating:

Chris BallodPhiladelphia Office, Litigation DepartmentP: 215.864.7129E: [email protected]

Dave HaasePhiladelphia Office, Commercial Litigation DepartmentP: 215.864.7136E: [email protected]

Jeff SeyfriedAllentown Office, Workers’ Compensation Practice GroupP: 610.782.4958E: [email protected]

Ryan Udell Philadelphia Office, Business DepartmentP: 215.864.7152E: [email protected]

Dave WeissPhiladelphia Office, Reinsurance and Insurance Coverage Practice GroupsP: 215.864.7039E: [email protected]

Dave ZaslowBerwyn Office, Professional Liability, Healthcare, and Transportation Practice GroupsP: 610.240.4716E: [email protected]

For more information about our Rising Stars and their practice, please visit www.whiteandwilliams.com.

Changes to Insurer’s Rights (Continued from page 5)

ConclusionSince January 17, 2009, there has

been a significant change in the New York Insurance Law. Insurers on liability policies issued on or after January 17, will no longer be permitted to deny claims based on late notice in the absence of prejudice. In addition, a claimant, usually the victim of the insured’s negligence, will no longer have to obtain a judgment against the insured in a personal injury or wrongful death action before commencing a declaratory judgment action against the insured’s insurance carrier on the late notice issue.

Insurance Law § 3420(d) remains unchanged. This section provides that an insurer on a liability policy seeking to disclaim or deny coverage for any reason arising out of a motor vehicle accident or any other type of accident occurring within the state of New York, must disclaim or deny coverage in writing as soon as reasonably possible to the insured, the injured party, or any other claimant. An insurer’s failure to timely disclaim coverage may preclude its ability to do so.

Finally, it is important to note that this change in the law only affects liability policies. Life, health, and disability policies, and other policies providing first-party insurance benefits are not affected by the change in the law.

Michael Kozoriz is an

associate in the Insurance

Fraud Practice Group

and has a broad range of

experience in insurance

defense and insurance

coverage matters.

Michael can be reached

in our New York office (212.631.4412) or

New Jersey office (201.368.7212) or at

[email protected].

that the drag-along right should be enforceable notwithstanding the fact that such a concept had not been expressly stated in any Chinese laws. During the trial, the minority shareholder’s counsel vigorously argued that the drag-along clause is inherently unfair. The judge, while not rendering a definitive opinion, rejected such argument by stating the fact that the same price, terms and conditions would be applicable to both the majority shareholder and the minority shareholder and, therefore, he could not discern any unfairness in the agreement.

Ultimately, the parties settled the dispute by agreeing that the minority shareholder would transfer all of its equity to the Hong Kong firm at the same price and with the same terms offered by the original third-party buyer, less any legal fees that the Hong Kong firm incurred in connection with this lawsuit.

While this result did not give rise to a final written opinion by the Shanghai court on the enforceability of the drag-along right, the Hong Kong firm did obtain the ultimate protection contemplated under a drag-along clause. Further, the court’s recommended settlement is a strong indication that the Shanghai courts are in favor of the “free-contracting” approach consistent with traditional private equity investment agreements as long as a contract is not patently unfair.

ConclusionAs China’s legal and economic framework continues to

mature, we believe traditional western private equity concepts will become more commonplace. Many also believe that China will continue to develop law and business practices on private equity more consistent with international standards. Understanding the evolving legal framework of China is of critical importance to appropriately document private equity transactions with China-based companies.

Gary Biehn is Chair of the Business Department

and China Business Practice Group. He focuses his

practice on corporate matters relating to mergers

and acquisitions, emerging businesses and global

transactions. He can be reached at 215.864.7007 or

[email protected]

Tony Lu focuses his practice on general corporate

governance, mergers and acquisitions, security,

and China-related commercial transactions.

He can be reached at 215.864.7006 or

[email protected].

Private Equity In China (Continued from page 4) healThcare summiT

Hundreds Gather to Discuss Emerging and Legal Topics Affecting the Healthcare Industry

On May 21, 2009, nearly 200 healthcare professionals from about 100 area companies, joined healthcare and appellate attorneys from White and Williams LLP, as well as guest speakers from Tsoules, Sweeney, Martin, and Orr, LLC, Geisinger Health System, the Commonwealth of Pennsylvania MCARE Fund, Temple University School of Medicine, Ringler Associates, Forensic Resolutions, Inc., and TrialGraphix, for an in-depth look at recent case verdicts, changes in law, emerging technology, and developing trends affecting the healthcare industry today.

The half-day event allowed physicians, nurses, hospital administrators, risk managers, insurance adjusters, and other industry experts to attend general and breakout sessions on topics including:

• TheCaseoftheMissingandAlteredEvidence• PunitiveDamages:PuttingSquarePegsintoRoundHoles• Beyond the Numbers: The Practical Effect of Liens on

Healthcare Litigation• EmergingIssuesfromtheAppellateCourts• ManagingPhysicianPracticeRisk:LinkingPatientSafety

and Quality to Best Business Practices• Discovery of Electronic Health Records: Mountains of

Paper and Back Again — An Attorney’s Tale• MinimizingDamages inCatastrophic InjuryCases ina

Changing Economic Climate• What you Need to Know Before Crossing State Lines:

Important Distinctions in Multi-Jurisdictional Practice in PA, NJ, and DE

In addition to the sessions and networking opportunities, guest speaker Barbara Holland, Esquire, shared valuable insight as the Chief Counsel of the Pennsylvania Governor’s Office of Healthcare Reform regarding the impact of tort reform on the healthcare industry in Pennsylvania.

Dr. Brian McDonough—medical editor for a Philadelphia radio station and Chairman of the Department of Family Medicine of St. Francis Hospital in Wilmington—delivered an engaging keynote address on the threat of litigation and its effect on the practice of medicine and the physician- patient relationship.


Being Ready to Bid on Public Jobs (Continued from page 6)

Gaeta v. Ridley School Dist., 788 A.2d 363, 367 (Pa. 2002), where the Court determined that a public agency cannot waive a defect where it would: (1) deprive the agency of contract execution and performance per the ITB; and (2) where the bid defect places the bidder in a position of competitive advantage over other bidders. Some examples of immaterial defects include mathematical or clerical errors. Examples of material bid defects include the failure to include bid security, unsigned bids, failure to comply with certain minority contracting requirements, and deviations from specified means and methods.

Public entities do not, however, have to award a contract. They are, in fact, permitted to reject all bids and re-bid the job at another time. The rejection is proper, provided it is not arbitrary and is not done with bad faith, collusion, or fraud.

Withdrawal of BidsBid withdrawals are allowed in certain, limited conditions.

The first place to look is the bid documents, which may provide for circumstances where a bid can be withdrawn. Beyond the bid documents, a bidder may only withdraw a bid if there is an honest and good-faith mistake (which must be supported by evidence) in the calculation of the bid price. The law differentiates between a clerical mistake and a mistake in judgment. In addition, a bidder typically has two business days from bid opening to withdraw a bid.

A bidder who withdraws a bid is generally not permitted to bid on the project a second time or provide any work or materials to the project. In the case of a withdrawn bid, the contracting agency could re-bid the project and charge the withdrawing bidder the associated costs.

Bid ProtestsIt is likely that any contractor who has bid on a public job

in the past has been through the bid protest process—in either defending an award or as a frustrated bidder. Bid protests are extraordinarily time sensitive, often requiring immediate action to preserve legal and administrative rights. Waiting too long to start the process, including the factual investigation, could waive the right to protest.

There are two methods of challenging a bid. It should be noted, however, that both options are not always available to contractors depending on the contracting agency. The first and oldest method is a tax-payer challenge. In a tax-payer bid challenge, a taxpayer has standing to insure that the contracting agency awards the contract to the lowest responsive and responsible bidder. A tax-payer lawsuit requires a party to request a temporary, then permanent injunction, or ask the court to award the contract to the proper bidder. Courts have directed the award of a contract. This does not, however, occur frequently. Usually, a court will go no further than to order a re-bid.

In some contexts, there is a second avenue to contest a bid—an administrative process. The Commonwealth Procurement Code, which applies to certain state and state-related agencies, sets out the process for frustrated bidders to seek redress. The most important deadline involved in this process is the initial deadline, which allows a frustrated bidder only seven days after the party knew or should have known the facts giving rise to the protest. In no cases may a protest be filed more than seven days after the contract has been awarded. Ultimately, if the parties pursue the matter long enough, the administrative process under the Procurement Code leads to court.

It should be noted that, the Commonwealth Procurement Code has not been held to deprive tax-payers the right to seek an injunction. Further, the seven day rule of the Procurement Code does not apply to a tax-payer challenge.

The attorneys of the Construction Practices Group at White and Williams

LLP can help you before, during and after a bid. We can help with the

pre-qualification process, reviewing bids for conformity to avoid bid

defects, bid protests and review of contracts and sub-contracts for all of

your jobs. For further information, please contact one of our practice

group chairs, Jerry Anders (215.864.7003) or Bill Taylor (215.864.6305).

Jerry Anders is co-chair of the Construction Practices

Group. His practice focuses on the construction

industry, mainly construction claims litigation

and construction defect litigation. He can also

be reached at [email protected]

Gaetano Piccirilli an associate in the Construction

Practices Group. His practice focuses on the

construction industry, mainly construction claims

litigation and construction defect litigation. He

can be reached at 215.864.6288 or piccirillig@

whiteandwilliams.com.

1 Yohe v. Lower Burrell, 208 A.2d 847 (Pa. 1965).2 See Ez Parks v. Larson, 454 A.2d 928 (Pa. 1990) (enjoining award by

DOT where bid instructions were ambiguous and did not promote level playing field).

3 62 Pa. C. S. § 5324 See Harris v. City of Philadelphia, 149 A. 722 (Pa. 1930) (holding

prequalification permitted where standards are determined in advance and applied equally).

White and Williams LLPwww.whiteandwilliams.com

PennsylvaniaThe Frederick Building

3500 Winchester Road, Suite 200Allentown, PA 18104Phone: 610.435.8414

One Westlakes 1235 Westlakes Drive, Suite 310

Berwyn, PA 19312Phone: 610.251.0466

115 Fayette StreetConshohocken, PA 19428

Phone: 610.897.2550

1650 Market Street One Liberty Place, Suite 1800

Philadelphia, PA 19103Phone: 215.864.7000

The Frick Building437 Grant Street, Suite 1001

Pittsburgh, PA 15219Phone: 412.566.3520

Delaware824 N. Market Street, Suite 902

Wilmington, DE 19899Phone: 302.654.0424

Massachusetts100 Summer Street, Suite 2707

Boston, MA 02110Phone: 617.748.5200

New JerseyLibertyView

457 Haddonfield Road, Suite 400Cherry Hill, NJ 08002Phone: 856.317.3600

The AtriumEast 80 Route 4

Paramus, NJ 07652Phone: 201.368.7200

New YorkOne Penn Plaza

250 W. 34th Street, Suite 4110New York, NY 10119Phone: 212.244.9500

This newsletter is a periodic publication of White and Williams LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation with any specific legal question you may have. For further information about these contents, please contact the Editor.

Editor: William D. Kennedy 610.240.4703 [email protected]

© 2009 White and Williams LLP

Page 11

Sarianna focuses her practice on complex commercial disputes in state and federal courts, including intellectual property, employment, environmental, education and construction law matters. She is a graduate of Colgate University and a 1989 graduate of Boston University School of Law, where she served as a member of the Law Review. Prior to joining White and Williams, Sarianna was associated with Hale and Dorr, Edwards & Angell and Hare & Chaffin. She is admitted to practice in Massachusetts and the District of Columbia. Sarianna can be reached at 617.748.5221 or [email protected]

PromotionsThe Firm would like to congratulate Charles Eppolito, David S. Huberman,

and William C. Hussey, newly admitted partners, and Michael P. Rausch, newly elected counsel.

Chuck is a partner in the Healthcare Group whose practice consists primarily of medical malpractice defense. He represents a wide variety of healthcare clients, including hospitals and physicians throughout Pennsylvania. Chuck has successfully tried medical and psychiatric malpractice cases to verdict in jury trials and has arbitrated others to successful resolution. He also has participated in numerous mediations in catastrophic medical malpractice cases.

Chuck can be reached at 215.864.6302 or [email protected].

Dave is a partner in the Subrogation Department. He devotes his practice exclusively to the prosecution of complex insurance subrogation matters involving products failures, fires and explosions, construction defects, water damages, structural collapses and transit and maritime claims. Dave can be reached at 215.864.6344 or [email protected].

Bill is a partner in the Tax and Estates Group of the Business Department. He focuses his practice on matters of federal, state, local and international taxation. As part of a multi-disciplinary team, Bill counsels clients in structuring their business and investment affairs in a tax-efficient manner, including the formation and operation of business entities, and structuring taxable and non-taxable acquisitions, mergers, and divestitures. Bill can be reached

at 215.864.6257 or [email protected].

Michael is counsel in the Litigation Department and has extensive experience handling a variety of cases. He defends large corporations and insurers in complex products liability and negligence lawsuits. He also coordinates and conducts the defense of Porsche Cars North America, Inc. and Hyundai Motor America in warranty and consumer fraud litigation. Michael can be reached at 856.317.3660 or [email protected]

White and Williams is proud of the strides we’ve made despite these challenging economic times. We thank you for your continued confidence and trust in our firm.

From the Chair… (Continued from page 1)


On January 28, 2008, former President Bush signed into law the first amendments to the Family and Medical Leave Act since the law was enacted in 1993. The amendments to the FMLA provide for new leave entitlements for employees whose immediate family members are members of the Armed Forces. The amendments allow eligible employees to take military caregiver leave, as well as “qualifying exigency” leave. However, Congress delegated to the Department of Labor the task of drafting regulations which would provide the necessary definitions to comply with the law regarding “qualifying exigency” leave. In the interim, employers were encouraged to provide such leave, but were not required to do so.

On November 17, 2008, the Department of Labor issued important new regulations which address the military family leave amendment to the FMLA, as well as making a number of changes to the existing FMLA regulations. The new regulations are now effective.

The new regulations provide clarification to many of the former provisions in response to certain court rulings, as well as in response to feedback from various stakeholders and public commentary.

Some highlights of the new regulations include the following.

Serious Health ConditionThe new regulations modify the test for a serious health

condition in connection with those periods of incapacity involving “continuing treatment.” The FMLA permits leave for any period of incapacity involving absence from work, school, or other regular daily activities of more than three calendar days, that also involves continuing treatment by a health care provider. Under the new regulations, “continuing treatment” requires either: (1) two or more treatments by a health care provider, which now must occur within 30 days of the start of the incapacity; or (2) one treatment by a healthcare provider which results in a regimen of continuing treatment under the supervision of the health care provider. In both cases, the first visit with a health care provider must be an in-person visit, and must occur within seven days of the start of the incapacity. The regulations further clarify that the initial period of incapacity must be more than three consecutive, full calendar days.

Chronic Health ConditionThe FMLA also permits leave for any period of incapacity or

treatment due to a chronic serious health condition, which requires periodic visits. The new regulations provide that “periodic visits” for chronic serious health conditions must include at least two visits to a health care provider per year.

Medical CertificationThe new regulations also address the issue of the process of

obtaining a medical certification. If a certification is incomplete or insufficient, the new regulations require the employer to give the employee written notice of the additional information needed and allow the employee seven days to cure the deficiency. Also, while a manager or human resources professional may contact an employee’s healthcare provider to clarify or authenticate a certification, the employee’s immediate supervisor may not. However, employers may not ask healthcare providers for additional information beyond that required by the certification form. Employers are also cautioned to keep in mind that the Americans with Disabilities Act provisions limiting medical inquiries also apply, which strictly limit medical inquiries by employers.

Perfect Attendance AwardsThe new regulations permit employers to deny a “perfect

attendance” award to an employee who does not have perfect attendance due to taking FMLA leave, provided that the employer treats employees taking non-FMLA leave in an identical way.

Military Family LeaveIn addition to the various changes made throughout the

regulations, the regulations include new provisions implementing the FMLA amendments providing for military family leave.

Military Caregiver LeaveThe FMLA now provides for up to 26 weeks of leave during

a single 12-month period to care for a covered servicemember with a serious injury or illness. Under the new regulations, an eligible employee is entitled to a combined total of 26 work weeks of leave for any FMLA-qualifying reason; however, an employee is entitled to no more than 12 weeks of leave for reasons under the other FMLA provisions. Thus, for example, an eligible employee may take 16 weeks of FMLA leave to care for a covered servicemember, and 10 weeks of FMLA leave to care for a newborn child, all within a single 12-month period.

Under the law, eligible employees are entitled to FMLA leave to care for a current member of the Armed Forces who has a serious injury or illness incurred in the line of duty for which he or she is undergoing medical treatment, recuperation, or therapy, or on the temporary disability list. A “serious injury or illness” means an injury or illness incurred in the line of duty on active duty that may render the servicemember medically unfit to perform the duties of his or her office. Employees may not

emPloymenT law

New FMLA Regulations in Effectby Tanya A. Salgado

(Continued on next page)

take leave to care for former members of the Armed Forces, or members on the permanent disability retired list.

In order to be entitled to military caregiver leave, an eligible employee must be the spouse, son, daughter, parent, or next of kin of a covered servicemember. This provision differs from other parts of the FMLA, in that it includes “next of kin.” “Next of kin” of a covered servicemember is the nearest blood relative, other than the spouse, parent, son or daughter. The regulations provide an order of priority for making the determination.

Intermittent leave may be taken to care for a covered servicemember who has a serious injury or illness. Intermittent leave may also be taken to provide care or psychological comfort to a covered family member with a serious health condition or a covered servicemember with a serious injury or illness.

The employee is required to obtain a medical certification providing that the employee is “needed to care for” a covered servicemember, and the Department of Labor has issued a certification form in the new regulations.

Qualifying Exigency LeaveThe second category of military family leave is meant to help

families of members of the National Guard and Reserves manage their affairs while the member is on active duty in support of a contingency operation. Unlike military caregiver leave, qualifying exigency leave is limited to 12 weeks in a 12-month

period. The new regulations identify eight circumstances that constitute a “qualifying exigency” for which an eligible employee is entitled to FMLA leave while that employee’s spouse, son, daughter, or parent is on active duty or called to active duty status, as follows:

1) Short-notice deployment (to address any issues that arise from the fact that a military member is notified of a call to duty on short notice);

2) Military events and related activities (official ceremonies or events sponsored by the military that are related to the active duty, or to attend family support programs sponsored by the military that are related to active duty);

3) Childcare and school activities (to arrange for alternative childcare when call to duty necessitates a change in existing childcare arrangements, or to provide childcare on an urgent need basis due to a call to active duty);

4) Financial and legal arrangements (to make arrangements to address military member’s absence while on active duty, such as preparing powers of attorney, transferring bank account signature authority, or preparing or updating a will);

5) Counseling (to attend counseling; the need for which arises from the active duty status);

6) Rest and recuperation (up to five days for each period of rest and recuperation leave);

7) Post-deployment activities (to attend ceremonies, briefings and events); or

8) Additional activities (a catchall category to address other events that arise out of the military member’s active duty status, provided that the employer and employee agree that such leave shall qualify as an exigency and agree to the timing and duration of the leave).

Conclusion and Recommendations Employers who are subject to the FMLA will need to

familiarize themselves with the new regulations and update their policies and procedures, including Employee Handbooks, to comply with the changes. In addition, the Department of Labor has issued new certification and notice forms in connection with the new regulations, and employers will need to update all FMLA forms to comply.

Tanya Salgado is an associate in the Labor and

Employment Group of White and Williams LLP and

focuses on all aspects of employment law, and also

represents clients in a variety of commercial litigation

matters. She can be reached at 215.864.6368 or

[email protected].

New FMLA Regulations in Effect (Continued from previous page)


Tax Incentives for Businesses

Extension of Bonus DepreciationIn general, businesses are allowed to recover the cost of capital

expenditures over a period of time according to a depreciation schedule. In 2008, Congress temporarily provided for “bonus depreciation” so that businesses could recover the costs of capital expenditures faster than ordinary depreciation methods allow. Under the Stimulus Bill, bonus depreciation for qualified property (machinery, equipment, solar panels, computers, etc.) is now extended to property placed in service before January 1, 2010. In the year an asset is placed in service (2008 or 2009), a business may opt to immediately deduct, as bonus depreciation, 50 percent of the cost. In that same year, the business may claim the regular depreciation according to applicable methods for the remaining 50 percent of the cost of the asset.

One-Year Extension of Optional Election to Monetize Accumulated AMT and R&D Credits in Lieu of Bonus Depreciation

This provision allows businesses to forego bonus and accelerated depreciation on certain property in favor of present use, as a refundable tax credit, of a portion of historic AMT or research and development credits. The amount of these otherwise deferred credits that taxpayers may accelerate is limited to 20 percent of the bonus depreciation on qualified property to which the taxpayer would otherwise be entitled. This benefit was applicable in 2008 under the Foreclosure Prevention Act of 2008. The provision in the Stimulus Bill extends the temporary benefit through 2009.

Enhanced Business ExpensingIn general, business taxpayers may elect to deduct some of

the cost of capital expenses in the year of acquisition in lieu of recovering such costs over time through depreciation. For capital expenditures incurred in 2008 or 2009, business taxpayers are allowed to immediately write-off up to $250,000 of the cost subject to a phase-out when such costs exceed $800,000. In 2010, the deductible expense cannot exceed $125,000 and the phase-out begins when costs exceed $500,000.

Five-Year Carryback of Net Operating LossesNormally, net operating losses (NOLs) may be carried

back to the two taxable years preceding the year that the loss arose and carried forward to each of the next 20 taxable years following the loss year. The Stimulus Bill extends the maximum carryback period from two to five years for businesses with three-year average annual gross receipts of $15 million or less. Only NOLs arising in a taxable year that begins or ends in 2008 are eligible for the extended five-year carryback period. This temporary extension provides businesses that are experiencing current losses with the ability to obtain refunds of income taxes paid in earlier years.

Delayed Recognition of Certain Debt Cancellation IncomeThe Stimulus Bill allows businesses to recognize income

from certain discharges of their indebtedness over a period of ten years. Tax on such income can be deferred for the first four or five years (depending on circumstances) with the income recognized ratably over the following five taxable years. The provision applies to the reacquisition of a debt instrument by a taxpayer who is the issuer of the debt instrument, the obligor under the debt instrument or any person related to the debtor. This benefit applies only to acquisitions made during 2009 or 2010.

Increased Exclusion of Gain on Sale of Certain Small Business StockIndividuals are allowed an income exclusion for 75 percent of

the gain from the sale of qualified small business stock held for more than five years. The amount of gain eligible for exclusion is limited to the greater of: 1) 10 times the taxpayer’s basis in the stock; or 2) $10 million less the total amount of eligible gain taken into account by the taxpayer on dispositions of qualified small business stock issued by the corporation in all prior tax years. The portion of the gain includible in taxable income is taxed at the lesser of ordinary income rates or 28 percent, instead of the lower capital gains rates for individuals. This enhanced 75 percent exclusion is applicable only to stock acquired after February 17, 2009 and before January 1, 2011.

Temporary Reduction of S Corporation Built-In Gain Holding PeriodWhen a C corporation elects to become an S corporation and

disposes of certain assets within 10 years of the date from which it made the election, gain from the disposition is taxed at 35 percent. Assets covered by this provision are those whose value at the time of election are greater than their tax cost. The Stimulus Bill reduces this ten-year period to seven years for dispositions that occur in 2009 or 2010. This change will affect corporations making the election in 2002 or before with appreciated assets at the time of election.

Grants in Lieu of Tax Credits for Low-Income HousingUnder current law, owners of certain low-income rental

property may claim a low-income housing tax credit with respect to a portion of their investment. Under the present system, each state receives an allocation of credits based upon population figures, which may then be allocated to eligible property owners. Under the Stimulus Bill, the Department of the Treasury will make grants to state housing credit agencies in lieu of the tax credits. Grant money will be awarded by the housing credit agencies to finance the acquisition, construction and rehabilitation of qualified low-income buildings as defined under existing law. These cash grants may be used regardless of whether a project has received an allocation of low-income housing credits, subject to additional testing for a project that has not received a credit


(Continued on next page)

allocation. Grant recipients must satisfy the low-income housing credit rules, and grants received under the provision do not reduce the building’s tax basis.

Increased Eligibility for Industrial Development BondsThe Stimulus Bill expands eligibility for industrial development

bonds. Such bonds are now available with respect to any facility used in manufacturing, creating, or producing: 1) tangible property; or 2) any patent, copyright, formula, process, design, pattern, know-how, format, or other similar item. The Stimulus Bill also clarifies the definition of “ancillary” physical components of a manufacturing facility. This clarification is important because of a 25 percent limitation on the amount of bond issuance that can be used to build or re-construct such ancillary components.

Executive Compensation OversightThe Emergency Economic Stabilization Act of 2008 imposed

non-tax-related rules with respect to compensation paid by Troubled Assets Relief Program (TARP) recipients. Provisions in the Stimulus Bill modify and expand those rules by:

• Expanding the government’s right to recover certain typesof incentive compensation based on statements found to be materially inaccurate. Previously, this right encompassed only senior executive officers (the top five most highly compensated executives). It now applies to the next 20 most highly compensated employees of a TARP recipient as well.

• Expanding the prohibition on golden parachute paymentsmade by TARP recipients. The prohibition now applies not only to senior executives, but also to the next five most highly compensated employees. Additionally, the legislation defines the term “golden parachute payment” to include “any payment to a senior executive officer for departure from a company for any reason, except for payments for services performed or benefits accrued.”

• Phasing in a prohibition preventing TARP recipients frompaying or accruing incentive compensation (including bonuses and retention awards but not restricted stock) to the 25 most highly compensated employees of the TARP recipient. The phase-in feature is based on the level of assistance the entity receives from TARP.

• ProhibitingTARPrecipientsfromimplementingcompensationplans that encourage manipulation of reported earnings in order to enhance compensation.

• Addressing the adoption of policies regarding luxuryexpenditures, providing rules for executive compensation committees, and providing that TARP assistance is not deemed outstanding while the government only holds warrants to purchase stock in the recipient.

Incentives to Hire Unemployed Veterans and Disconnected YouthUnder the Work Opportunity Tax Credit, businesses are

eligible to claim a tax credit equal to 40 percent of the first $6,000 of wages paid to employees who are members of certain targeted groups. The Stimulus Bill expands this credit to include two new groups: 1) unemployed veterans, who were discharged or released from active duty during the five-year period prior to their hiring and who received unemployment compensation for more than four weeks during the year before being hired; and 2) individuals between the ages of 16 and 25 who, within the six months prior to hiring, neither had attended school, nor been regularly employed.

Uncapped Business Energy Tax CreditsUnder current law, businesses are allowed to claim a tax

credit equal to the lesser of: 1) 30 percent of the cost of qualified small wind energy property; or 2) $4,000. The Stimulus Bill repeals the $4,000 cap on this credit. As a result, businesses are now eligible for an unlimited 30 percent tax credit on the cost of qualified small wind energy property placed in service after December 31, 2008.

Tax Credits for Alternative Fuel PumpsGas stations and other businesses that install alternative fuel

pumps which dispense E85 fuel, electricity, hydrogen, and natural gas are eligible for this tax credit. Alternative refueling property (except hydrogen-related property) placed in service in tax years beginning after December 31, 2008 and before January 1, 2011 qualifies for a tax credit equal to the lesser of: 1) 50 percent of the cost of the property; or 2) $50,000. Hydrogen refueling pumps are eligible for a 30 percent credit that is capped at $200,000.

Ryan Flynn practices in the Business Department

where he focuses on taxation and estate planning

issues. He can be reached at 215.864.7188 or

[email protected].

Kevin Koscil focuses his practice on taxation

and estate planning issues. He can be reached at

215.864.6827 or [email protected].

IRS Circular 230 Notice: To ensure compliance with certain regulations

promulgated by the U.S. Internal Revenue Service, we inform you that

any federal tax advice contained in this communication is not intended or

written to be used, and cannot be used, by any taxpayer for the purpose

of (1) avoiding tax-related penalties under the U.S. Internal Revenue

Code, or (2) promoting, marketing or recommending to another party any

tax-related matters addressed herein, unless expressly stated otherwise.



Nancy Conrad, a partner and Chair of the Labor and Employment and Education Practice Groups, was recognized as a 2009 Take the Lead honoree. The award is given by the Girl Scouts of Eastern Pennsylvania to a woman whose professional and personal accomplishments exemplify the organization’s mission of building girls who lead with courage, confidence and character to make the world a better place.

Nancy has been, and continues to be, a leader in the legal community. Professionally, she practices in the area of employment law and litigation. In addition to representing management in all areas of employment relations, Nancy’s practice includes the defense of federal and state discrimination claims, wrongful discharge, contract and injunction proceedings. She also represents colleges, universities and schools in employment and education law matters related to faculty, staff and students.

Nancy joins Wendy Body, Project Manager, Alvin H. Butz, Inc.; Dr. Alice Gast, President, Lehigh University; Dr. Debbie Salas-Lopez, Chief, Division of General Internal Medicine, Lehigh Valley Hospital & Health Network, and Meloney Sallie-Dosunmu, Manager of Organization Effectiveness & Talent Management, Just Born as honorees this year.

We hope you will join us in congratulating our partner, Nancy Conrad.

A Girl Scout presents Nancy Conrad (left) with the Take the Lead Award .

awards

Gale Whiteawards

Nancy ConradOne hundred lawyers and insurance professionals gathered on April 16, 2009, to honor White and Williams partner, Gale White, recipient of the 2009 Franklin Award. The award was presented by the Philadelphia Chapter of the Chartered Property Casualty Underwriters Society in recognition of Gale’s outstanding

achievement and contribution to the insurance industry in the Delaware Valley. Prior recipients of the Franklin Award include Philadelphia District Attorney Lynne Abraham and Thomas P. Nerney, CEO and Chairman of United States Liability Insurance Group.

Not only is Gale active locally, she also takes a leadership role in national organizations. She serves on the Board of Directors of the Federation of Defense and Corporate Counsel and is chairing an upcoming symposium titled, “The Challenges Facing the Insurance Industry as we Approach the Year 2020.” The symposium will be a unique opportunity for insurance industry professionals to come together to learn and share insights, concepts and approaches to the climate of the next decade. She is also a member of the Lawyers for Civil Justice, a coalition of over 30 corporations and 65 member law firms across the country. LCJ is an organization devoted to civil justice reform through participating in the legislative process.

For 14 years, Gale volunteered as a faculty member at the weeklong FDCC Litigation Management College and served as the College’s Dean for four years. Gale also developed and implemented White and Williams’s Coverage College®, an annual daylong event that provides master’s level classes to over 400 insurance professionals from more than 130 companies.

Gale is also active in the women’s professional community and chairs the White and Williams Woman’s Initiative, “Inspiring the Future,” and enjoys educating and mentoring the young women of her profession.

In addition to her service to the community and the industry, Gale has been named as one of the top 50 women lawyers in Pennsylvania and has a full commercial litigation and insurance coverage practice.

We hope you will join us in congratulating our partner, Gale White.

Gale White (left) is presented with the Franklin Award .

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