Tax Reform Could Distinguish Between Pass-Through Businesses

In April, the Trump Administration announced a broad outline for tax reform which included proposals to cut the top individual tax rate to 35% and reduce the top business tax rate to 15%.   This reduced business rate would also apply to "pass-through businesses" - the majority of U.S. businesses who report income on their owners' tax returns rather than paying corporate income taxes.

However, Treasury Secretary Steven Mnuchin recently indicated that the reduced pass-through rate may not be available to service companies.

From the Wall Street Journal:

The idea is to create a special tax rate that is equal to or higher than the corporate tax rate but lower than the tax rate that applies to wages. That new rate would apply to pass-through business income but with boundaries to prevent it from being used by people whose income from service businesses closely resembles wages. 

...

Under a system like the one Mr. Mnuchin described, the owners of an accounting partnership would pay the individual tax rate on both their salaries and their partnership distributions. But the owners of a manufacturing partnership would pay the individual tax rate on their salaries and the special, lower rate on their profits.
...

It could be a challenge to define which companies get the lower tax rate Republicans are planning and which owners of companies would continue paying higher individual tax rates on their business income. Creating that distinction would cut against another Republican goal for the tax code: simplification. Possibly affected industries include law, engineering, medicine, finance, architecture and consulting.

Although many details are still lacking from the proposal, such a distinction - if included in the proposed legislation - could have a major impact on closely held businesses. The White House and Republican congressional leaders hope to reveal the full tax reform plan by the end of September.

OSU vs. OSU

Instead of facing off on the athletic fields, Ohio State University and Oklahoma State University are currently engaged in a different contest - a trademark dispute before the United States Patent and Trademark Office.  Earlier this year, Oklahoma State signaled its objection to Ohio State's trademark application seeking to protect the use of the mark "OSU" on shirts, hats, and baseball caps.

From the Columbus Dispatch:

Ohio State University, which already owns a host of trademarks, filed an application in February with the U.S. Patent and Trademark Office, seeking to trademark “OSU,” specifically on clothing and apparel.

But another university that holds the acronym near and dear is stepping in.

Oklahoma State University filed for an extension with the U.S. Patent and Trademark Office, indicating it plans to file a notice of opposition to the trademark request. The office approved that request, granting Oklahoma State until the end of August to file its objection.

These actions are a normal part of the trademark application process. The application timeline includes a period of public notice designed to permit other parties who believe they may have a claim to the mark to object to the mark's registration. 

When an objection is filed, the parties often try to resolve the matter informally through a shared use agreement.  In this case, the universities are expected to reach an settlement which is mutually acceptable to both OSUs.

Trademarks that Disparage, Part II

A previous blog post discussed the United States Supreme Court's consideration of Lee v. Tam, a case involving whether an Asian-American rock band was permitted to register a potentially offensive trademark.  In a 7-0 decision this week, the Court sided with the band.

More from NPR News:

Members of the rock band The Slants have the right to call themselves by a disparaging name, the Supreme Court says, in a ruling that could have broad impact on how the First Amendment is applied in other trademark cases.

The Slants' leader Simon Tam filed a lawsuit after the Patent and Trademark Office kept the band from registering its name and rejected its appeal, citing the Lanham Act, which prohibits any trademark that could "disparage ... or bring ... into contemp[t] or disrepute" any "persons, living or dead," as the court states.

After a federal court agreed with Tam and his bands, the Patent and Trademark Office sued the band to avoid being compelled to register its name as a trademark. On Monday, the Supreme Court sided with The Slants.

"The disparagement clause violates the First Amendment's Free Speech Clause," Justice Samuel Alito wrote in his opinion for the court. Contrary to the Government's contention, trademarks are private, not government speech."

The decision is likely to have an impact on other pending disputes, including challenges to the marks held by the Washington Redskins.

Creativity in Employment Contracts

Seattle Seahawks football player Eddie Lacy recently received a $55,000 employment bonus - not for his performance on the field, but for weighing a required weight at the beginning of training camp.

ESPN.com reported on this and other clauses in the employment contracts of professional athletes, including:

• why Michael Jordan's "love for the game" clause specifically allowing him to play basketball anytime, anywhere;
  
• why Baseball Hall of Famer Rollie Fingers was paid a bonus to grow his famous mustache; and
  
• why English footballer Stefan Schwarz was prohibited from traveling into space.

The takeaway from these unique clauses: when drafting your employment contracts, don't be afraid to think outside the box.  A creative contract may be just what is needed to attract or retain a talented employee. 

Packing Up A Business Entity

New business owners often have an understanding that certain legal formalities must be taken when a business opens - but they may not know that similar formalities apply if and when the business closes. In fact, if a limited liability company ("LLC") or other business entity has ceased operations, it must be formally terminated through a process called dissolution. 

Under Ohio law, a limited liability company ("LLC") must be dissolved if it has fulfilled its purpose or there is a unanimous agreement amongst the members to dissolve the company. A court may also instruct the LLC to wind up its business. As a final step after its affairs are concluded, the LLC and/or member must file a Certificate of Dissolution with the Ohio Secretary of State. 

Depending on the type and purpose of the entity, other actions may need to be taken at the time of dissolution. For example, businesses which are closing may also have certain federal or state tax responsibilities to fulfill before the company is officially out of business.