2009 ended without Congress having taken action to change our current transfer tax laws (estate, gift and generation-skipping law). Under current law, estate and generation-skipping taxes are repealed for 2010. While this may sound like a good thing to many, the repeal will only last for one year. Unless Congress takes further action, the tax breaks that led to the one year repeal under the 2001 tax act will end on January 1, 2011 when the estate tax returns with an exemption of only one million dollars. Last year, the estate tax exemption was 3.5 million dollars.

Most estate planners thought that Congress would take action in 2009 to set the exemption between 3.5 and 5.0 million dollars. Most planners did not think that Congress would let the complete repeal occur in 2010 because of the loss of tax revenue at a time when the Country has a very large deficit. Congress may still pass a law in 2010 to put a higher exemption in place before next January. Nevertheless, because the estate tax is such a hot political topic, the future is uncertain.

What this may mean to you and your estate plan depends upon your circumstances, how you will be leaving your estate upon your death, and the value of your estate. If the estate tax exemption is allowed to return to one million dollars next January, it will require many married couples to revise their estate plans. If your plan includes a trust with a formula that allocates trust assets among your spouse and children (or other beneficiaries), the estate tax repeal or the possible return to only a one million dollar exemption may drastically alter or eliminate the amount to be left to your spouse, for example. While we hope that Congress takes action to at least restore the estate tax exemption to its 2009 level of 3.5 million dollars, if it does not, then the failure to plan accordingly may have very harsh consequences to many families.

If you would like to review your situation and discuss whether or not you will need to change your estate plan to avoid estate tax liability that may occur if the exemption drops to one million dollars next January, please call your primary estate planning attorney at Mika Meyers Beckett & Jones.

On February 17, 2009, Congress authorized the special COBRA premium reduction in the American Recovery and Reinvestment Act (ARRA). The ARRA allowed assistance eligible individuals (“AEIs”) to purchase COBRA coverage at a reduced premium rate of 35% of standard COBRA rates for a period of nine months. This reduced premium was available only if the individual experienced a COBRA qualifying event that was an involuntary termination and only if the qualifying event occurred between September 1, 2008 and December 31, 2009.

Congress expanded the eligibility window and extended the premium reduction period by passage of the Department of Defense Appropriation Act, 2010. The key provisions of the new law are:

Extended Eligibility Window: The window for eligible treatment has been extended for an additional two months to apply to individuals who have an involuntary termination on or before February 28, 2010.

Extended Premium Reduction Period: The period of reduced premium has been increased by an additional six months, from nine months to 15 months. The total COBRA coverage period remains at 18 months for involuntary terminations of employment.

Clarification of Cut-off Date: The ending date has been simplified so that if the qualifying event (involuntary termination) occurs on or before February 28, 2010, that individual is eligible for the reduced premium even if COBRA coverage does not start until a later date.

Reinstatement of Elections: Assistance eligible individuals (AEIs) who exhausted the nine-month premium reduction period and let their COBRA coverage lapse must be allowed to reinstate (retroactively elect) their COBRA coverage for the additional six-month period at the reduced premium rate. The due date for their payment is the later of February 17, 2010 or the date that is 30 days after the date the COBRA administrator sends them a notice of their new right to pay and reinstate.

Refund/Credit for Excess Payment: For AEIs who have already paid the regular, unreduced premium after exhausting the original nine-month reduction period, the employer must either refund the difference or may credit the excess to successive months of COBRA coverage under rules contained in the original provisions of ARRA.

New Notice Requirements: As with the original provisions of ARRA, new notices must be sent.

Just when you thought you were on top of the 2009 changes to the Family and Medical Leave Act (FMLA), Congress has changed it yet again. On October 28, 2009, President Obama signed the 2010 National Defense Authorization Act (2010 NDAA), which (among many other things) amends the recently-enacted “qualifying exigency” and “care for servicemember” provisions of the FMLA.

Under the original “qualifying exigency” provisions (which became effective earlier this year) eligible employees could take FMLA leave to deal with a variety of problems related to a spouse, parent, son or daughter in the National Guard or Reserves who was called to active duty on short notice. The provisions did not extend to the families of regular military because they were expected to be prepared for deployments as part of their routine. The amendment changes that and expands “qualifying exigency” leave rights to all military families, including those whose spouse, parent, son or daughter is serving in the regular military.

Under the 2008 FMLA amendments, eligible employees are allowed up to 26 weeks of job-protected leave in a 12-month period to care for a family member (spouse, son, daughter, parent, or next of kin) currently in the military who is disabled by a serious injury or illness incurred while on active military duty. The 2010 NDAA now expands the caregiver leave provision to enable eligible employees to care for veterans who are undergoing medical treatment, recuperation or therapy for serious injury or illness that occurred on active duty, provided the leave is taken any time during the five years after the veteran leaves military service.

These changes are effective immediately. Covered employers (private employers with at least 50 employees and all public sector employers) should revise their FMLA policies to reflect these changes and post updated notices to employees about their rights. Please contact any of the employment attorneys at MMBJ if you have questions or need assistance.

The current political and economic climate has resulted in an unprecedented push by federal and state governments towards policies supporting alternative and renewable energy research, production, and distribution. The federal government is enacting new legislation and updating old legislation to stimulate investment in alternative and renewable energy projects through the use of a broad array of tax credits and other incentives. Competition among states to attract new and hopefully lucrative industries in the alternative and renewable energy field has caused states to aggressively pursue developers with a variety of tax credits and business incentives. As a result of these public policy initiatives, developers of alternative and renewable energy projects will likely qualify for some form of tax credit or incentive.

Incentives come in many different shapes and sizes. They generally fall into four categories: (i) tax credits, (ii) loans, (iii) grants, and (iv) tax abatements. Tax credits provide a dollar-for-dollar reduction in the developer’s tax liability. Loan programs provide either up-front loans from public funds or guarantees of private loans. Federal and state grants provide up-front dollars to fund initial development of the projects. At the state and local level, tax abatement programs are available to reduce real and personal property tax liability during the operational stages of the project.

Developers needing an infusion of capital at the initial stage of a project should review loan programs, grant programs, and tax credit programs. Loan and grant programs provide early-stage public funding in order to get the project off the ground. Tax credits can indirectly provide up-front funding for a project by encouraging investors to invest capital into the project at early stages, in exchange for an allocation of tax credits after the project is completed and placed in service. Tax credits and tax abatements can be used to reduce operating costs for the project, thus achieving a greater return to the developer and investors during the operational stages of the project.

Each of the incentives described in this article has its own criteria for approval and its own application process. As a general matter, federal tax credits, loans, and grants are applied for through the specific federal agency which administers the program. Some federal tax credit programs do not require an application, as long as the project is carefully designed to meet the requirements of the tax code and regulations for that particular credit.

State of Michigan incentives often involve approvals at both the state and local levels. The majority of Michigan incentives are administered by the Michigan Economic Development Corporation (“MEDC”) and the Michigan Economic Growth Authority (“MEGA”). Bond programs are administered by the Michigan Strategic Fund (“MSF”). Many municipalities in the State of Michigan (including all of the larger cities in Michigan) have established an economic development office to assist developers with identifying and applying for incentives. Developers should approach their local economic development office and the MEDC as early in the planning stages as possible. The economic development officers at the MEDC and local economic development officers are conversant with the requirements for the various incentives and the political willingness to grant the incentives. They will be able to provide a preliminary idea of which incentives might be available, as a practical matter, for a specific project. The role of economic development officers is to attract projects, and they will aggressively pursue incentives on behalf of projects which they believe are viable and will result in economic growth.

Developers of alternative and renewable energy projects should review possible incentives as early in the planning process as possible. Incentive programs can involve a complex application process and may take as much as six months, or longer, to gain approval. Moreover, some of the programs are subject to a “but for” determination, which requires the developer to show that “but for” approval of the incentives, the project would not be pursued. If a project has already been started before incentives are requested, the project may fail the “but for” test. Advance planning is also critical if the developer intends to sell the tax credits. Depending on the tax credit program, the developer might need to identify an investor, negotiate the investor’s involvement in the project, and draft the proper agreements prior to beginning the project. Putting together the proper team of attorneys and advisors to coordinate the incentives early in the planning process is crucial to obtaining tax credits and incentives.

Identifying and obtaining the available incentives requires creativity and persistence. While tax credit and incentive programs often have specific criteria for approval, creativity and persistence may be needed to convince the governmental bodies approving the incentives that a specific project fits the given criteria. Political considerations may affect the application of the specific criteria to a project.

Although states and their political subdivisions generally will not directly receive the monetary benefit of tax credits and other incentives, municipalities across the country are finding creative methods to use incentives to stimulate activity in the alternative and renewable energy industry. For example, municipalities have been identifying under-utilized vacant land, such as landfills, upon which a developer, or a municipality itself, could place wind turbines. Incentive programs are then used to help fund development of the project. Several states have enacted laws that allow municipalities to issue bonds in order to fund loans to property owners for installation of solar power systems. The loans are repaid over a specific period of years, with incremental tax proceeds, as the taxable value of the property is increased by a pre-determined amount.

A brief description of certain federal, state, and local tax credits and business incentives follows. Please contact Jay Rosloniec if you would like to learn more about any of these programs.

Investment Tax Credit

Administering Agency: United States Internal Revenue Service

Description of Incentive: Federal tax credit equal to 30% of eligible expenditures for solar energy, fuel cell, and small wind turbine projects. Federal tax credit equal to 10% of eligible expenditures for geothermal, microturbine, and combined heat and power projects.

The Americans Recovery and Reinvestment Act of 2009 allows the taxpayer to receive a grant from the U.S. Treasury Department in lieu of the Investment Tax Credit.

General Criteria: Eligible projects involving solar energy, fuel cells, small wind turbines, geothermal systems, microturbines, or combined heat and power must be placed in service on or before December 31, 2016. The project must either be constructed by the taxpayer claiming the credit or be placed in service by the taxpayer.

A taxpayer claiming the Investment Tax Credit may not also claim the Production Tax Credit discussed below.

Renewable Electricity Production Tax Credit

Administering Agency: United States Internal Revenue Service

Description of Incentive: Federal tax credit equal to 2.1 cents per kWh for a period of 10 years for wind, closed-loop biomass, and geothermal projects. Federal tax credit equal to 1.1 cents per kWh for open-loop biomass, landfill gas, municipal solid waste, qualified hydroelectric, marine, and hydrokinetic projects.

The Americans Recovery and Reinvestment Act of 2009 allows the taxpayer to receive a grant from the U.S. Treasury Department in lieu of the Production Tax Credit.

General Criteria: Eligible projects involving wind, closed-loop biomass, geothermal, open-loop biomass, landfill gas, municipal solid waste, qualified hydroelectric, marine, and hydrokinetic projects must be placed in service on or before December 31, 2013. Wind projects must be placed in service on or before December 31, 2012. The production tax credit may be reduced if other federal tax incentives have been granted to the project.

A taxpayer claiming the Renewable Electricity Production Tax Credit may not also claim the Investment Tax Credit discussed above.

Clean Renewable Energy Bonds

Administering Agency: United States Internal Revenue Service

Description of Incentive: Bonds are issued requiring only that the borrower pay back principal. In lieu of interest, the bondholder receives a federal tax credit at a floating rate determined by the United States Internal Revenue Service.

General Criteria: Bonds may be issued by electrical cooperatives, governmental entities and certain lenders for the following projects: wind, closed-loop biomass, geothermal energy projects, open-loop biomass, landfill gas, municipal solid waste, qualified hydroelectric, marine, and hydrokinetic projects.

Accelerated Depreciation

Administering Agency: United States Internal Revenue Service

Description of Incentive: Depreciation periods for depreciable property are reduced to five (5) years for renewable energy technologies and to seven (7) years for biomass technologies. Accelerated depreciation may be taken regardless of any other tax credits claimed or incentives received.

General Criteria: The accelerated depreciation applies to solar fuel cell, microturbine, geothermal electric, small wind, combined heat and power, wind, and biomass projects.

Qualified Green Building and Sustainable Design Project Bonds

Administering Agency: United States Internal Revenue Service

Description of Incentive: Tax exempt bonds.

General Criteria: Must be issued on or before September 30, 2012.

American Recovery and Reinvestment Act (ARRA) Advanced Energy Manufacturing Tax Credit

Administering Agencies: United States Internal Revenue Service and Department of Energy

Description of Incentive: Federal tax credit equal to 30% of investment in qualified property used in a “qualified advanced energy manufacturing project.”

General Criteria: The credit applies to “qualified advanced energy manufacturing projects.” Projects must be submitted to the United States Internal Revenue Service in a competitive bidding process. A “qualified advanced energy project” is a project that (i) re-equips, expands, or establishes a manufacturing facility for the production of energy from renewable resources, production of fuel cells, microturbines, or energy storage systems for electric or hybrid electric motor vehicles, electric grids to support sources of renewable energy, property to capture and sequester carbon dioxide, property to refine or blend renewable fuels or produce energy conservation technologies, or (ii) manufactures new qualified plug-in electric motor vehicles, or other advanced energy property with the intent to reduce greenhouse gas emissions.

ARRA Workforce Training

Administering Agency: Michigan Department of Energy, Labor and Economic Growth

Description of Incentive: Federal grants to provide funds for work force training.

General Criteria: Funds are to be used for research, labor exchange, and job training to train workers for careers in energy efficiency and renewable energy industries.

Department of Energy Loan Guaranty Program

Administering Agency: United States Department of Energy

Description of Incentive: Federal government guarantee of commercial loans.

General Criteria: This program applies to energy efficiency projects, renewable energy projects, and transmission and distribution projects.

ARRA Innovative Technology Loan Guarantee

Administering Agency: United States Department of Energy

Description of Incentive: Federal government payment of the full credit support costs of guarantees issued under the Department of Energy Loan Guaranty Program.

General Criteria: Construction of the project must commence on or before September 30, 2011. Applies to “commercial” and “innovative” technologies in renewable energy projects, electric power transmission systems, and biofuel projects at the pilot or demonstration level.

Smart Investment Grant Program

Administering Agency: United States Department of Energy

Description of Incentive: Federal grants to fund up to 50% of qualified investments.

General Criteria: The qualified investment must be made by electric utility distribution companies, retail distributors, market systems operators, or manufacturers of equipment to enable smart grid technologies and the qualified investment must be made to modernize the nation’s electric delivery network.

Rural Energy for America Program

Administering Agency: United States Department of Agriculture

Description of Incentive: Federal grants, not to exceed 25% of the cost of a project, and federal loan guarantees, not to exceed 75% of the cost of a project.

General Criteria: Grants and loans must be made for energy efficiency improvements and renewable energy systems.

Michigan Next Energy Authority

Administering Agency: The Michigan Next Energy Authority is controlled by an eight member board of directors comprised of the State of Michigan Treasurer, the director of the Michigan Strategic Fund, the directors of the State of Michigan Department of Energy Labor and Economic Growth and Department of Transportation, and four private sector individuals appointed by the Governor.

Description of Incentive: Nonprofit organization providing assistance to alternative and renewable energy businesses to bring new and developing technologies to market and to match alternative and renewable energy businesses with public and private funding sources.

General Criteria: Eligible businesses must be operating in Michigan and be involved in alternative or renewable energy programs.

SmartZones and Business Accelerators

Administering Agency: SmartZones are administered by local educational institutions.

Description of Incentive: SmartZones are 15 geographical locations within Michigan focused on clustering businesses and researchers to foster collaboration between the private sector and the public sector. Business accelerator services within a SmartZone initially are funded with state and local grants and provide office space and laboratory space, business mentoring services, market analysis, venture capital introductions, and a wide variety of other services necessary to transform ideas and concepts into marketable products.

General Criteria: SmartZones are open to any technology-firm, entrepreneur, educational institution, research firm, or any other entity which contributes to the process of transforming ideas and concepts into marketable products.

Renewable Energy Renaissance Zones

Administering Agency: Michigan Strategic Fund

Description of Incentive: Alternative and renewable energy businesses located within a Renewable Energy Renaissance Zone do not pay Michigan business tax, state education tax, personal property tax, real property tax, or local income tax.

General Criteria: Eligible facilities must either (i) create fuel or energy directly from the wind, sun, or a wide variety of biomass based materials, or (ii) focus on research, development, or the manufacture of systems to create energy from alternative or renewable resources.

Alternative Energy Personal Property Tax Exemption

Administering Agency: Michigan Next Energy Authority

Description of Incentive: Personal property tax exemption for personal property designated as “Alternative Energy Personal Property” by the Michigan Next Energy Authority.

General Criteria: Personal property eligible for exemption from personal property tax includes alternative energy systems less than two megawatts, alternative energy vehicles, personal property of an alternative energy technology business, and personal property of any business used solely for the purpose of researching, developing, or manufacturing alternative energy technologies or products. The personal property must not have been used in Michigan previously, must not have previously been subject to exemptions from Michigan personal property tax, and must be certified as “Alternative Energy Personal Property” by the Michigan Next Energy Authority.

Biomass Gasification and Methane Digester Personal Property Tax Exemption

Administering Agencies: Michigan Agricultural Environmental Assurance Program and Michigan Department of Agriculture

Description of Incentive: Personal property tax exemption.

General Criteria: Personal property eligible for exemption from personal property tax includes equipment used to generate electricity or heat from a methane digester system or biomass gasifiers. The equipment must be certified by the Michigan Department of Agriculture and the farm must be certified by the Michigan Agricultural Environmental Assurance Program. The owner of the facility must allow up to two universities to collect information regarding the effectiveness of the system.

Michigan Business Tax Business Activity Credit

Administering Agency: Michigan Next Energy Authority

Description of Incentive: Credit against the Michigan business tax equal to the lesser of (i) the excess of tax liability attributed to “qualified business activity” over a baseline tax liability; or (ii) 10% of the amount by which the “qualified business activity” in Michigan exceeds its “qualified business activity” in Michigan for the 2001 tax year. This tax credit is not refundable.

General Criteria: The taxpayer must be engaged in a “qualified business activity” which includes research, development, or manufacturing of alternative energy systems, alternative energy vehicles, or fuel produced from renewable resources. The “qualified business activity” must be certified by the Michigan Next Energy Authority. Taxpayer’s requesting this tax credit must apply each tax year.

Michigan Business Tax Refundable Payroll Credit

Administering Agency: Michigan Next Energy Authority

Description of Incentive: Credit against the Michigan business tax equal to the amount of the recipient’s qualified payroll. This tax credit is refundable to the extent the recipient’s qualified payroll exceeds its tax liability.

General Criteria: The taxpayer must be involved in alternative energy technologies and be located in the Alternative Energy Zone in Detroit at the Wayne State University Research and Technology Park.

Centers of Energy Excellence Program

Administering Agency: Michigan Strategic Fund

Description of Incentive: Grants from the State of Michigan to promote new and developing energy industry sectors in the State of Michigan.

General Criteria: Grants are awarded as (i) funds, not to exceed 50% of the total project cost, to match funds received from foundations, the federal government, or international investment; (ii) to supplement in-kind contributions from any person or entity other than the State of Michigan; (iii) to accelerate the commercialization of energy technologies or processes; or (iv) to fund workforce development and technology demonstration. The applicant must partner with at least one institution of higher education.

Michigan Emerging Technologies Fund

Administering Agencies: Michigan Strategic Fund and Small Business & Technology Development Center

Description of Incentive: Grants from the State of Michigan to match a portion of federal funding provided to alternative and renewable energy businesses.

General Criteria: The recipient must be a Michigan entity prior to disbursement of grant funds. The recipient may not have more than two SBIR/STTR Phase 2 federal grants within the previous five years and may not receive more than two emerging technology fund grants within any 12 month period.

On Tuesday, February 17, 2009, the President signed the American Recovery & Reinvestment Act of 2009 (the "Act"). The stated purpose of the Act is to preserve and create jobs and promote economic recovery utilizing approximately $790 billion in federal funds for transportation, environmental protection, and other infrastructure, to assist those impacted by the recession, and to stabilize state and local government budgets. Approximately 65% of the total amount, or approximately $507 Billion, is earmarked for federal spending. The balance of the stimulus funds are allocated to tax cuts and other forms of assistance.

As noted in our January Client Alert, the federal investment spending is targeted to a variety of sectors intended to stimulate the economy, including the development of clean and efficient energy, science and technology research, modernization of roads, bridges and transit systems, education spending, lowering health care costs, job retraining and support for unemployed workers, and funding for state and local law enforcement.

The Act includes the following appropriations, which are likely to be of interest to Michigan municipalities:

On Thursday, January 15, 2009, the Democrats introduced an $825 Billion stimulus bill in the House of Representatives. The stimulus bill is called the American Recovery & Reinvestment Act of 2009 and is designed to jumpstart the American economy. The bill contains $275 Billion in tax cuts and $550 Billion in federal investments.

The $550 Billion in federal investments are targeted for a variety of sectors intended to stimulate the economy, including the development of clean and efficient energy, science and technology research, modernization of roads, bridges and transit systems, education spending (on both K-12 and higher education), lowering healthcare costs, job retraining and support for unemployed workers, and funding for state and local law enforcement.

Of particular interest to local municipalities, there is approximately $10 Billion for water, sewer and other local infrastructure investments and approximately $30 Billion for transportation investments. These funds will be distributed through existing programs. $6 Billion is set aside for loans under the State Clean Water Revolving Funds and $2 Billion for loans under the State Drinking Water Revolving Funds. Another $1.5 Billion has been set aside for USDA Rural Development water and sanitary sewer projects. Rural Development will also receive $200 Million to support grants and loans for community facilities in rural areas with populations of less than 20,000. Eligible community facilities include: fire, rescue, and public-safety facilities, vehicles and equipment; educational and cultural facilities, such as schools and libraries; transportation facilities, including street improvements and bus service; and public buildings and improvements, such as community centers.

The stimulus bill gives priority to awards of funds to projects that can be commenced promptly following enactment. For transportation projects, the bill awards 50% of the total funds to projects that can commence within 120 days after enactment of the bill.

While the numbers above represent the entire amount of funds to be distributed by the federal government to all fifty states, USDA Rural Development officials estimate that the amounts of funding received for use in Michigan will at least double the amounts available in the past few years. Department of Environmental Quality officials estimate that Michigan will receive approximately $240 Million in Clean Water Revolving Funds and $68 Million in Drinking Water Revolving Funds.

Congress is rapidly moving ahead with the bill and while there is no assurance that it will be adopted entirely in its existing form, it seems likely that some sort of stimulus plan will be adopted.

The stimulus bill, in whatever form it is adopted, will provide an opportunity to our municipal clients for additional funding of projects which may have been on a “wish” list, but lacked a means of funding. We recommend that each of our clients review their capital improvement plans and community goals to determine if there are projects that would qualify for some portion of assistance from the stimulus bill.

We will continue to monitor the status of the stimulus bill and the resulting funding which we expect will be made available for Michigan municipalities.

If you have questions regarding project eligibility and would like our assistance with the applicable procedures for applying for funds, we encourage you to contact us.

Over the past ten years, the crime of identity theft has exploded and is now the fastest growing crime in the United States. Statistics indicate that a new person becomes the victim of identity theft every two seconds. Identity theft through utility fraud is the second most common form of identity theft behind credit card fraud. In light of these statistics, the Federal Trade Commission (the "FTC") has adopted "Red Flag Rules" which require "creditors" with "covered accounts" to develop, adopt and implement a written identity theft prevention program "to detect, prevent and mitigate identity theft in connection with the opening of a covered account or any existing covered account." The program must be approved and implemented by November 1, 2008.

The federal Fair and Accurate Credit Transactions Act of 2003 ("FACTA") defines a "creditor" as "any person who regularly extends, renews, or continues credit [or] who regularly arranges for the extension, renewal, or continuation of credit." In rules promulgated pursuant to FACTA, the FTC clarified that a "creditor" includes "lenders such as. . .utility companies." Subsequent communications from the FTC indicate that non-profit and governmental entities that defer payments for goods and services should be considered "creditors" for purposes of FACTA.

A "covered account" is defined as "an account that a. . . creditor offers or maintains, primarily for personal, family or household purposes, that involves or is designed to permit multiple payments or transactions, such as a . . .utility account. . .and any other account for which there is a foreseeable risk of identity theft."

While FACTA has been largely ignored by municipalities, recent comments attributed to the FTC indicate that the FTC believes that municipal utilities are "creditors" for purposes of FACTA and therefore must comply with the Red Flag Rules to the extent that the municipalities defer payments for goods and services.¹ For example, a municipality that bases all or a portion of its water and sewer bills upon metered water usage is billing in arrears for the services and in effect, deferring payment.

Since the FTC has suggested that the Red Flag Rules apply to municipal utilities, we recommend that our municipal utility clients adopt a written identity theft prevention program before November 1, 2008.² Prior to adopting such an identity theft prevention program, we recommend our clients review their existing policies and notification procedures which require them to protect certain personal information such as social security numbers, driver's license numbers and state identification card numbers, as required by the Identity Theft Protection Act, Public Act 452 of 2004, as amended, and the Social Security Number Privacy Act, Public Act 454 of 2004, as amended.³

The purpose of an identity theft prevention program as contemplated by the Red Flag Rules is to establish a plan of action to be undertaken in the event that a "red flag" indicator of identity theft occurs on any of the utility's customer accounts. In such an event, the utility must then follow the procedures outlined in the written identity theft prevention program. For instance, if a new utility customer attempts to open an account with inconsistent personal information, e.g., the customer's name on the application does not match the name on their driver's license, or if billing statements sent to an existing customer are repeatedly returned as undeliverable even though service continues to be provided to the service address, then the utility must follow its identity theft prevention program and "raise a red flag" (which may require the utility to contact the customer, freeze the account, etc., depending on the program).

The FTC has repeatedly stressed that identity theft prevention programs should be flexible and that each municipal utility should create an identity theft prevention program that best fits its organizational circumstances. An identity theft prevention program adopted by a municipal utility should take into consideration the utility's customer base, the employees available to monitor the program, the technology available to the utility and other relevant factors. The identity theft prevention program must also contain a training program for employees who are dealing with the covered accounts and an annual report to the utility's governing board summarizing all significant red flag events.

According to the rules, an identity theft prevention program that complies with FACTA must contain policies and procedures to:

Michigan Adopts a Consolidated Planning Statute: The Michigan Planning Enabling Act

On March 13, 2008, the Governor signed into law Public Act 33 of 2008, known as the Michigan Planning Enabling Act (the “Act”). The Act, which takes effect on September 1, 2008, repeals the Municipal Planning Act, the Township Planning Act and the County Planning Act, and replaces them with a single planning enabling act that applies to all municipalities.

In addition to creating a single, consolidated planning act, the Act implements the following principal changes in municipal planning practice and regulation:

The Family Medical Leave Act of 1993 (FMLA) covers all public agencies (State and local government employers) and all private sector employers with at least 50 employees. The FMLA generally entitles eligible employees to take up to 12 work weeks of job-protected leave during a 12-month period for any one or more of the following reasons:

When the employee is unable to work because of a "serious health condition"
To care for the employee's spouse, child or parent who is incapacitated due to a "serious health condition"
For the birth and care of the employee's newborn child; or
For the foster care or adoption placement of a child with the employee.

On January 28, 2008, President Bush signed new legislation which amended the FMLA for the first time. As the result, employers covered by the FMLA must now deal with two new types of leave relating to military service personnel and active duty. Covered employers must also begin to deal with some new, and broader, definitions under the law. These changes will require covered employers to promptly revise and redistribute their written FMLA policies.

Servicemember Family Leave

The first new type of leave, called "servicemember family leave," is effective immediately. It must be granted to any eligible employee who requests such a leave beginning on or after January 28, 2008. Such a leave must be granted to an "eligible employee" who is the spouse, son, daughter, parent or "next of kin" (defined as "nearest blood relative") of a member of the Armed Forces (including a member of the National Guard or Reserves) so the employee can care for the service member who is undergoing inpatient or outpatient medical treatment, recuperation, or therapy, or is otherwise on the temporary disability retired list, because of a "serious injury or illness" incurred during active duty. Such a leave can continue for up to a total of 26 workweeks of FMLA leave during a single, nonrenewable 12-month period (although, after the end of the 12 month period, the employee may again be eligible to use ordinary FMLA leave to spend additional time caring for the injured service member).

An "eligible employee" is determined by the same standards as for other forms of FMLA leave (i.e., at least 12 months of cumulative service with the employer, and at least 1,250 hours of work (or military credit in lieu of work) during the 12 months preceding commencement of the leave). But the definition of "serious illness or injury" is not the same as the definition of "serious health condition" which continues to apply to the previously recognized forms of FMLA leave. "Serious illness or injury" means any condition arising "in the line of duty" which makes the servicemember "medically unfit to perform the duties of the member's office, grade, rank, or rating," which has the potential to be much broader than the concept of "serious health condition." Note that the definition is not limited to combat illnesses or injuries, and that the determination about whether or not a servicemember has a "serious illness or injury" will likely be determined by military authorities, rather than by an employer called upon for leave.

Qualifying Exigency Leave

The second new form of leave entitles an eligible employee whose spouse, son, daughter, or parent is on active military duty, or has been notified of an impending call to active military duty, to take up to 12 workweeks of leave so that the employee can deal with any "qualifying exigency" arising from the call to active military duty. Employers' obligations to provide such leave will not become effective until the Secretary of Labor issues regulations defining the key term "qualifying exigency," which is not currently defined in the law. Based on available information, the definition will likely be extremely broad, and employers may be required to grant leave for an eligible employee to make any sorts of arrangements related to the departure of the service person (e.g., establishing or changing child care, taking care of financial matters, etc.) and even to take care of activities like attending school conferences, paying bills, and generally taking care of daily responsibilities of running a household. Until it issues new regulations, the Department of Labor is encouraging employers to review every leave request carefully and to grant them "liberally" to employees who appear to qualify.

Both new forms of leave can be taken in a single block, or as intermittent or reduced schedule leave spread out over several weeks or months. They are also treated the same as other forms of FMLA leave for purposes of substitution of paid time off benefits for otherwise unpaid leave. Employees taking such leaves are required to provide notice which is reasonable and practical, at least when the need for leave is foreseeable. It is not yet clear how much documentation or certification an employer will be permitted to require in connection with these new forms of leave, pending development of suitable regulations by the Department of Labor.

New FMLA Regulations

On February 11, 2008, the Department of Labor issued a Notice of Proposed Rule Making concerning substantial revisions to the FMLA Regulations adopted in 1995, and invited public comment on issues raised by the two new military types of FMLA leave. The proposed new regulations contain scores of changes, but some of them will almost certainly be revised further before they are made final. We expect to see some final regulations within the next few months, with more changes to follow several months after that.

We encourage all covered employers to promptly modify their FMLA policies to incorporate the new service member leaves; those changes are minimal. We also urge extreme caution in dealing with "qualifying exigency" leave requests until the Department of Labor has issued defining regulations. But until new regulations are issued in "final" form, we think the most efficient course of action for you is to monitor the situation, without spending a lot of time and effort on seminars and articles trying to anticipate the details of impending regulation changes.

For assistance in modifying your FMLA policies or dealing with other FMLA issues, please contact one of our FMLA specialists: David R. Fernstrum (632-8015) or Scott E. Dwyer (632-8033). undefinedundefined

The new Michigan Business Tax ("MBT"), which replaced the Michigan Single Business Tax ("SBT") effective January 1, 2008, provides new planning opportunities and pitfalls for Michigan businesses. Whether the MBT will result in a higher or lower tax burden for your business can only be determined by a calculation specific to your business.