Monday, December 19, 2011

San Francisco Employers Beware of the Upcoming 2012 Changes

By Allison Yau
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Business owners with employees working in San Francisco, take note: effective January 1, 2012, the San Francisco minimum wage and Health Care Security Ordinance (“HCSO”) Expenditure Rate will increase from their respective 2011 rates. New HCSO regulations will also be implemented at that time.


The San Francisco Health Care Security Ordinance (“HCSO”) requires that covered employers (employers with more than 20 employees and non-profit organizations with 50 or more employees) spend a minimum amount on health care benefits for each of their covered employees. Generally, covered employees are those who work at least eight hours per week in San Francisco and have been employed for more than 90 days. The HCSO Expenditure Rate indicates the minimum amount that an employer must spend for each hour worked by each covered employee. Available options to employers seeking to comply with the HCSO include providing medical, dental, and/or vision insurance; reimbursing employees for their health expenses; various types of medical spending accounts; and the “City Option,” which offers the Healthy San Francisco program (provides affordable health care to uninsured San Francisco residents) and the Medical Reimbursement Account program (allows employees to use their employer’s HCSO contributions toward reimbursements for out of pocket medical expenses).

Minimum Wage Will Be $10.24 Per Hour

The new 2012 minimum wage for all employees performing work in San Francisco, minor or adult, will be $10.24 per hour. This includes temporary and part-time employees who work two or more hours per week. The City of San Francisco adjusts the minimum wage every year to accommodate increases in the regional consumer price index, which “is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services” in a particular region. (United States Department of Labor, Bureau of Labor Statistics). The new 2012 Minimum Wage poster, which must be posted in a visible area for employees to easily read, can be found at: http://sfgsa.org/modules/showdocument.aspx?documentid=8171

HCSO Expenditure Rates Will Be $2.20 or $1.46 Per Hour

The mandated HCSO Expenditure Rates will increase in 2012 for both large and medium sized employers. Large-sized employers (employers with 100 or more employees), will be required to spend $2.20 for each hour worked by each covered employee. Medium-sized employers (employers with 20-99 employees), will be required to spend $1.46 for each hour worked by each covered employee.  Small-sized employers (employers with less than 19 employees), are exempt from this provision.

New HCSO Regulations

The new HCSO regulations include new posting requirements, as well as changes to requirements for reimbursement accounts (“HRAs”) and requirements for businesses imposing a surcharge on customers to cover the costs of the HCSO spending.  First, all covered employers must post at every workplace or jobsite the Official Notice from the Office of Labor Standards Enforcement (“OLSE”) regarding the HCSO. This notice can be found at: http://sfgsa.org/modules/showdocument.aspx?documentid=8221

Second, for businesses which utilize HRAs to satisfy, in whole or in part, the HCSO spending requirement, the following criteria must be met for those contributions to count as health care expenditures:
1. Any HRA funds available at the end of 2011 must roll-over to 2012;
2. The contributions must be reasonably calculated to benefit the employee;
3. The contributions must remain available to the employee for a minimum of twenty-four months from the date of the contribution;
4. The employee must receive a written summary of the contribution within 15 days of the date of the contribution; and
5. Upon separation, employees must be provided with a written summary of their account within 3 days, and the funds must remain available for a minimum of 90 days.

Third, for employers imposing a surcharge on customers to cover, in whole or in part, the costs of the HCSO expenditure requirement, they:
1. […] will be required to report two pieces of data to the OLSE during the annual reporting process: 1) the amount of money collected from the surcharge for employee health care and 2) the amount of money spent on employee health care.
2. If the amount collected from the surcharge is greater than the amount spent on employee health care, [those employers] must irrevocably pay or designate an amount equal to that difference for health care expenditures for [their] employees.

If you are a business owner with employees working in San Francisco, these new updates are especially important for compliance with San Francisco Labor Laws in the New Year. For more information on this topic, feel free to contact Ronnie Gipson at (415) 692-6523 or by email at Gipson@higagipsonllp.com.

Tuesday, December 6, 2011

FAA Reinstates BARR Program

Written By Allison Yau

A December 1, 2011 notice by the Federal Aviation Administration (FAA) to reinstate the Block Aircraft Registration Request (BARR) program to its original reach should have general aviation aircraft owners and operators cheering: all owners and operators, and not just those with a Certified Security Concern, can once again block from public release private data about their plane’s activity. Originally enabled by Congress in 2000, the BARR program allows participants upon request to the FAA to block their N number (an aircraft’s unique registration number) when flying IFR (instrument flight rules: the rules and regulations established by the FAA to govern flight that depends on reference to instruments and electronic signals as opposed to outside visual reference), effectively also blocking any associated data with that number. Associated information includes the aircraft’s altitude, airspeed, destination, and estimated time of arrival.


This reinstatement follows the FAA’s initial proposal on March 4, 2011, to limit the use of the BARR program only to owners and operators providing a Certified Security Concern, established by showing a “Valid Security Concern” or a bona fide business-oriented security concern under Treasury Regulation 1.132-5(m). The proposal defined a “Valid Security Concern” as “a verifiable threat to person, property or company, including a threat of death, kidnapping or serious bodily harm against an individual, a recent history of violent terrorist activity in the geographic area in which the transportation is provided, or a threat against a company.” Qualifying aircraft owners and operators would have been required to annually submit written certification of the continued security concern.

Amidst opposition by the National Business Aviation Association (NBAA), the Aircraft Owners and Pilots Association (AOPA), and other pro-aviation interests, the proposal nevertheless went into effect on August 2, 2011. Chief among the proponents’ objections was that these limitations invaded privacy, posed security risks to those on-board the subject aircrafts, and threatened the United States’ ability to compete in business. In their August 29, 2011, opening brief in the action against the FAA, the NBAA and AOPA argued that the revisions made to the BARR program were unlawful and should be invalidated.

President Obama’s signing of the Transportation, Housing and Urban Development appropriations bill on November 18, 2011, contained a provision to reinstate the BARR program. Following suit, the FAA officially reinstated the program to its original reach. In a letter dated December 1, 2011, from the Department of Justice to the court clerk in the NBAA and AOPA action, the FAA stated that “[e]ffective immediately,” it would “no longer require an owner or operator of general aviation aircraft or of an on-demand air charter aircraft (operating under 14 CFR Part 135) to submit a Certified Security Concern to block that owner or operator’s” N number and associated flight information, excepting data made available to the government.

The FAA is currently developing a permanent policy which will be consistent with the provisions of the recently signed appropriations bill. Meanwhile, in the interim, aircraft owners and operators may submit block requests to the FAA, and the FAA will also continue to block the N numbers of those who have already submitted Certified Safety Concerns. If you are an aircraft owner or operator, it would serve you well to look out for the FAA’s announcement of the permanent policy on the BARR program in the near future.

For more information on this topic, feel free to contact Ronnie R. Gipson Jr., Esq. at (415) 692-6523 or by email at Gipson@higagipsonllp.com.  Ronnie R. Gipson Jr. is an aviation attorney and a founding partner at Higa & Gipson, LLP in San Francisco.

Monday, December 5, 2011

Payroll Taxes & S-Corporations

As the end of the year quickly approaches, business owners’ thoughts will also turn toward end of the year taxes. To assist with preparations for the upcoming tax filings, this month we have a guest blogger, Fiona Doyle from Paychex. Ms. Doyle’s comments below provide useful insights and suggestions that assist S-Corp. owners to properly plan for tax administration and compliance.

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S‐corps are the most common business entity in the United States, with 61.9% of all U.S. corporations electing federal tax treatment under subchapter S. An S-Corporation is a type of business entity that allows income to flow through the corporation without being taxed until it is claimed as income by the shareholder(s). An S-Corporation Shareholder/Owner may take a portion of their income as a distribution, which is subject only to personal income taxes (federal & state withholdings). The remainder of the shareholder’s income must be classified as a “fair and reasonable salary.” This income is subject to all applicable payroll taxes. A shareholder should discuss what amount of their income should be distribution and what amount should be salary with their CPA. If an S-Corp owner reports dividends with no payroll income, the IRS may audit and reclassify distributions as “reasonable compensation,” so it is important that a shareholder seek the advice of tax professional. The monies that are reclassified are subject to FICA and FUTA - plus penalties for late deposits. The IRS may also assess penalties and interest for not filing the appropriate payroll tax returns in a timely manner. With year-end quickly approaching, now is the right time to evaluate whether or not your income has been properly accounted for in 2011. Before the year closes, speak with your tax professional to determine if you need to appropriate any income you’ve taken as salary. If you do, then you will need to process a year-end payroll.

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Thank you to Fiona Doyle for her comments on payroll tax compliance. If you would like to learn more, then please reach out to Fiona Doyle Kelley at 650-624-0777, ext. 54006 or fdoyle@paychex.com.

Whenever, I assist with the formation of a business entity, one of the components that we address is payroll administration. I strongly advise my clients to consider using a payroll service so that they can focus their time on running their business instead of navigating the myriad of ever-changing payroll regulations. If you need assistance with business entity formation, then contact Ronnie Gipson at (415) 692-6523 or Gipson@higagipsonllp.com.