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Please click here for a complete PDF of the issue.

Please click here for a complete PDF of the issue.

This year, the Kentucky General Assembly refrained from making any substantive changes to the Commonwealth’s income tax laws.  This is a welcome respite from the wholesale changes made just a few years ago (remember the Tax Modernization legislation of 2005 and 2006?).  That said, there are several legislative developments of potential significance to select businesses and individuals and to Kentucky’s tax system as a whole.  Plus, several interesting income tax-related cases have been winding their way through the courts of the Commonwealth.  

The Supporting Military Families Act of 2009 was introduced in both houses of Congress in late July 2009.  A mere three months later — on October 28 — it was signed into law as part of the defense funding bill for 2010.  The legislation expands the circumstances in which employees may take both qualifying exigency and military caregiver leave under the Family and Medical Leave Act (FMLA).

Manufacturing is a very important segment of Kentucky’s economy and has been for many years.  Its importance to Kentucky is particularly evident in the sales tax arena.  Ever since Kentucky enacted its sales tax in 1960, there have been exemptions provided specifically for manufacturers.  While these sales tax exemptions certainly encourage businesses to locate their manufacturing facilities in Kentucky, they also perform another important function – avoiding tax pyramiding, a form of multiple taxation.  

Law Letter, Issue 3, 2009

December 2009

On October 28, 2009, President Obama signed into law the Fiscal Year 2010 National Defense Authorization Act, which amended the Family Medical Leave Act (FMLA) to expand the availability of FMLA leave to military families.  Employers should both be aware of these changes and modify FMLA policies accordingly.

As the title of this article suggests, if you own or manage a Kentucky limited liability company (LLC), you may want to review your Operating Agreement. In a recent case, Patmon v. Hobbs, the Kentucky Court of Appeals held that, as a matter of first impression, members and managers of LLCs owe similar common law fiduciary duties as corporate officers and directors or partners in a partnership in the absence of contrary provisions in the Operating Agreement of the LLC. The Court of Appeals also extended, for the first time, the business opportunity doctrine to members and managers of Kentucky LLCs. While many other states have concluded that members and managers of an LLC owe a duty of loyalty to the company and its members, Kentucky courts had not, until Patmon, had occasion to address the same question. This major ruling should prompt every member or manager of a Kentucky LLC to re-examine his or her Operating Agreement and determine the extent, if at all, he or she has contractually limited these new obligations or want to limit such duties.

On November 21, the Genetic Information Nondiscrimination Act of 2008 ("GINA") became effective. Viewed as a "proactive" measure, this federal law seeks to prevent discrimination in employment and health insurance based on an individual's genetic information that could arise as a result of future scientific advances in genetics.

Genetic testing has grown dramatically in the past ...

In February, the IRS will launch the largest employment tax audit in 25 years in an effort to close the "tax gap," the difference between the amount of employment taxes owed and the amount actually collected. This effort comes after a 2005 study revealed that employment taxes are the second largest "tax gap" contributor. A total of 6,000 businesses will be affected by the audit.

The IRS ...

A recent United States Supreme Court decision makes it more difficult for employees to prove age discrimination under the federal Age Discrimination in Employment Act (ADEA) and is being touted as a victory for employers. In Gross v. FBL Financial Services, Inc., 557 U.S. ___ (2009), the Court ruled that an employee who brings a disparate treatment claim under the ADEA must prove that ...

Gift program 

One of the remaining tax breaks in the estate and gift tax system is your right to make gifts of $13,000 to any number of donees ($26,000 apiece if you are married) free of transfer tax this year. Making these gifts is a great way to reduce your estate and avoid death taxes. Each year that goes by without your making these gifts is a lost opportunity, and a gift to Uncle Sam. Use it by the end of December – and again in January – or lose it!!