Foley Hoag LLP

SUMMARY

The I.R.S. has recently issued its annual cost-of-living adjustments applicable in 2011 to qualified retirement (pension, profit-sharing, § 401(k), money purchase and stock bonus) plans. Generally, there has been such a low rate of inflation in the nation’s economy that many of these cost-of-living adjustments will remain unchanged.

SUMMARY

As the end of 2010 approaches and we receive numerous inquiries concerning developing hiring plans, I thought you might be especially interested to note some particulars about the Hiring Incentives to Restore Employment Act (the “HIRE Act”) which was enacted earlier this year to stimulate prompt hiring of workers by businesses.

SUMMARY

On October 1, 2009, Representative Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, released discussion draft bills of the Investor Protection Act and the Private Fund Investment Advisers Registration Act.  These bills are part of the financial regulatory reform movement in Congress in response to the recent economic crisis.  In conjunction with the release of the draft bills, on October 6, 2009, the House Financial Services Committee has scheduled a hearing to discuss the creation of a national insurance office, improving investor protections and the regulation of private pools of capital.

SUMMARY

On July 15, 2009, the Obama administration delivered to Congress the Private Fund Investment Advisers Registration Act of 2009 [.pdf] (the “Legislation”). The Legislation would seek to regulate private investment funds, such as hedge funds, private equity funds and venture capital funds, through mandatory federal registration, risk monitoring and disclosure requirements for private investment fund advisers managing assets valued at more than $30 million.

SUMMARY

Massachusetts recently joined 39 other states and the District of Columbia by enacting a version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Most notably, and in contrast to prior law, UPMIFA permits Massachusetts institutions that hold funds exclusively for charitable purposes to tap into endowment funds whose values have depreciated below their “historic dollar values” (i.e., “underwater” endowment funds). The new law, which is effective as of June 30, 2009, also applies to funds held by a trustee for a charitable community trust.

SUMMARY

As a result of a new requirement first implemented in 2008, tax-exempt organizations with gross receipts of $25,000 or less may be required to file IRS Form 990-N, the “e-Postcard.” The e-Postcard must be filed no later than the 15th day of the fifth month following the end of the organization's tax year. For example, an organization whose tax year ends December 31 must submit the e-Postcard by the following May 15.

SUMMARY

Under new regulations effective January 1, 2009, any pass-through entity that maintains an office or engages in business in Massachusetts must withhold tax on a quarterly basis from each member’s share of the entity’s Massachusetts source income, unless either the entity itself is exempt from this requirement or the member timely certifies that it is exempt. This withholding obligation applies regardless of whether the pass-through entity actually makes any distributions to its members.

SUMMARY

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “Act”). The new law is the centerpiece of President Obama’s efforts to create jobs and revive the economy and includes over $787 billion in spending and tax incentives.

In particular, the Act represents a multi-prong approach to stimulating innovation and encouraging investment in the energy and clean technology sectors. It includes new energy-related spending and tax incentives as well as expands existing tax incentives for businesses and individuals. A summary of certain key provisions is provided below.

SUMMARY

It is recommended that estate plans be reviewed every three to five years, and earlier if there has been a change in your personal circumstances or in the estate and gift tax laws. The increase in the federal estate tax exemption as of January 1, 2009—from $2,000,000 to $3,500,000—makes now a good time to review your estate plan, particularly if you are married or your estate plan includes gifts to charitable organizations.

SUMMARY

The Judge overseeing the bankruptcy proceeding of Lehman Brothers Holdings, Inc. and its affiliates (collectively "Lehman Brothers") recently approved Lehman Brothers’ proposed procedure for settlement or assignment of derivative contracts that Lehman Brothers entered into prior to filing for bankruptcy. (Order available at Lehman-Docket.com, Docket # 2257.) Under the procedure, Lehman Brothers will be permitted to terminate or assign all outstanding derivative contracts without obtaining express approval from its counterparties and without seeking individual approval from the court. Counterparties to existing derivative contracts with Lehman Brothers face the possible imminent loss of both the right to terminate the contracts and the right to expressly consent to assignment of the contracts.

SUMMARY

Most public charities organized, operating or soliciting funds in Massachusetts are required to file Form PC with the Massachusetts Attorney General’s Non-Profit Organizations/Public Charities Division within four and one-half months of the end of each fiscal year.  The Form PC requires several attachments, including financial statements for public charities having minimum amounts of gross support and revenue.  The Massachusetts legislature increased the minimum threshold for filing such statements from $100,000 to $200,000.

SUMMARY

The Internal Revenue Service (IRS) has released final instructions for completing the Form 990, the annual information return filed by most non-profit entities, which has undergone its first major redesign in almost 30 years.  The new Form 990 will be phased in over three years, starting with fiscal years beginning on or after January 1, 2008.  The old Form 990 will not be accepted beginning with the 2008 tax year.  Full instructions on the new Form 990 are available on the IRS Web site.

SUMMARY

On October 15, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) adopted an interim temporary final rule (.pdf) (the “Interim Rule” or “Rule 10a-3T) requiring institutional investment managers (those required to file Form 13F) to report information concerning daily short sales of securities. The previous emergency order regarding the filing requirements was due to terminate on October 17, 2008. The Interim Rule will take effect beginning October 18, 2008 and extend until August 1, 2009 unless it is terminated or extended... (continues)

SUMMARY

Borrowers Need to Monitor Whether to Elect Prime Rate rather than LIBOR under Credit Facilities

U.S. Companies that borrow under bank credit facilities that provide for the borrower to elect payment of interest at either a LIBOR-based rate (sometimes called a "Eurodollar" loan) or a Prime Rate-based rate (sometimes called a "Base Rate" loan) need to be aware of a significant development resulting from the recent turmoil in the world’s credit markets...

SUMMARY

On October 7, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) released a statement regarding the expiration of the emergency order (the “Order”) prohibiting persons from short selling in the securities of financial companies.

On Friday, October 3, 2008, the President signed the Emergency Economic Stabilization Act of 2008 (the “Legislation”), aimed at stemming the credit crisis. When the Order was extended, the SEC stated that the Order would expire on the third business day after enactment of the Legislation. Accordingly, the Order will expire at 11:59 p.m. ET on Wednesday, October 8, 2008.

SUMMARY

Foley Hoag LLP’s interdisciplinary team counsels and protects the interests of its clients facing new realities, challenges and risks framed by today’s tumultuous economic and market conditions. By maintaining an active and engaged dialogue with our clients during this period of economic distress, our lawyers are better able to adapt to the changing legal needs of clients affected in the short term. More importantly, our immersion in their businesses and industries enables our lawyers to provide sound, strategic counsel to protect our clients’ interests in the longer term. The Economic Crisis Team delivers forward-thinking advice, focusing on long-standing core, integrated strengths of the firm.

Topics include:

• Financial investigations, enforcement proceedings and litigation
• Federal and state securities regulation
• Deal-making, corporate finance and investment restructuring
• Bankruptcy, corporate reorganization and financial disputes

SUMMARY

1. Prohibition on Short Selling in Financial Companies

On October 1, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) extended the emergency order (the “Order”) prohibiting short selling in the securities of financial companies. The Order was issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934.

The Order will be extended beyond its currently scheduled expiration to allow time for completion of work on the anticipated passage of the Economic Stabilization Act of 2008 (the “Legislation”). The Order will now expire at 11:59 p.m. ET on the third business day after enactment of the Legislation, but in any case no later than 11:59 p.m. ET on Oct. 17, 2008.

2. Requirement of Institutional Investment Managers to Report New Short Sales

On October 1, 2008, the SEC also extended the emergency order (the “Second Order”) requiring institutional investment managers (those required to file a Form 13F) to report information concerning daily short sales of securities. The Second Order was also issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934.

The Second Order will also be extended to 11:59 p.m. ET on Oct. 17, 2008, but the Commission intends that the reporting requirement will continue in effect beyond that date without interruption in the form of an interim final rule. The Commission will seek comments on all aspects of the anticipated rulemaking. The SEC has also now indicated that disclosure of short positions reported under the Second Order will be made only to the SEC. This is a modification of the Second Order and will avoid public disclosure. It is unclear whether public disclosure will be required under any final rule.

SUMMARY

As a follow up to our Foley Adviser on September 19, 2008, we have prepared answers to the following frequently asked questions regarding the Securities and Exchange Commission’s (“SEC” or the “Commission”) emergency order (the “Order”) requiring institutional investment managers to report information concerning daily short sales of securities.

Questions Include:

• What is Form SH?
• Who must file?
• When is the filing required?
• How is the filing made?
• How soon will Form SH information be publicly available?
• What transactions are reportable?
• Are small short sales reportable?
• What must be disclosed on Form SH?
• What about pre-existing short positions?
• What if I increase a pre-existing short position?

SUMMARY

Section 409A is an extremely broad law that covers many arrangements not generally considered deferred compensation, such as stock options, bonus plans, and severance and change in control agreements. In general, 409A governs any arrangement where an employee or consultant has a vested right to compensation in one year that will be paid in a later year, unless the arrangement fits into one of the exemptions to 409A. Arrangements subject to 409A must comply with strict rules as to the time and form of payment, and it is very difficult to make changes to an arrangement once it is in place. Any deferred compensation arrangement that does not comply with 409A will subject the employee or consultant to income tax liability at the time that the right to payment vests (even if there is no right to receive payment at that time), together with a 20% penalty tax on the deferred amount. (continues)

SUMMARY

SEC Issues Emergency Order to Prohibit Short Selling of Financial Stocks to Protect Investors and Markets

On September 19, 2008, the Securities and Exchange Commission (“SEC” or the “Commission”) issued an emergency order (the “Order”) to prohibit short selling in the securities of 799 financial companies (the “Securities”), which are identified in Exhibit A. The Order was issued pursuant to the Commission’s authority under Section 12(k)(2) of the Securities Exchange Act of 1934.

Under the Order, all persons are prohibited from short selling the Securities except for registered market makers, block positioners, or other market makers obligated to quote in the over-the-counter market. The Order will be immediately effective and will terminate at 11:59 p.m. ET on October 2, 2008. The SEC may extend the Order beyond 10 business days if the SEC determines that the continuation of the Order is necessary in the public interest and for the protection of investors, but not for more than 30 calendar days in total duration. (continues...)