|THIS ISSUE'S HEADLINES
The Danger of a WISP
Is Your Business Ready? New RI Law Requires Employers to Provide Paid Sick Leave
New Rules Governing IRS Audits of Tax Partnerships
THE DANGER OF A WISP
For businesses that maintain data on customers or, increasingly, their own employees, the term “WISP” should be familiar. A WISP, or Written Information Security Program, is the document by which an entity spells out the administrative, technical and physical safeguards by which it protects the privacy of the personally identifiable information it stores. Health care entities subject to HIPAA have long-since become accustomed to not merely developing their own WISPs, but requiring the same of any business associate with which they share patient information. Similarly, banking, insurance and financial institutions have for years developed WISPs in response to their industries’ privacy requirements.
Increasingly, however, state laws are expanding privacy requirements beyond the worlds of health care and finance to require the safeguarding of personal information about any resident of the state. (See e.g., the Rhode Island Identity Theft Protection Law or the Illinois Personal Information Protection Act.) By covering all residents of the state, this latest generation of privacy laws typically applies to a business’ employees. Effectively, this means that every business in that state that maintains information on its employees must have a WISP in place to protect that information, and businesses that have not implemented a WISP are playing a risky game.
In a comprehensive essay about WISPs, PLDO Attorney Joel K. Goloskie explains why and how a business seeking to protect itself – both from a potential security breach and from the severity of sanctions and publicity that can accompany such a breach – should be able to demonstrate that it has actively undertaken the key elements of a well-written and tailored WISP. To access the advisory, click The Danger of a WISP. For further information or if you need help with your organization’s WISP, please contact Attorney Goloskie at 401-824-5100 or email email@example.com.
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IS YOUR BUSINESS READY? NEW RI LAW REQUIRES EMPLOYERS TO PROVIDE PAID SICK LEAVE
Rhode Island became the eighth state to pass a paid sick leave law. (R.I. Gen. Laws 28-57-1et seq). The law requires Rhode Island employers with 18 or more employees to provide paid sick and safe leave as of July 1, 2018. For employers with less than 18 employees, the law mandates that employers allow use of unpaid sick leave. At first glance, the law appears to impact only those employers that do not presently offer paid sick leave. A closer look indicates otherwise. Essentially, the new law strips from an employer complete control of the shape of an employee benefit (paid sick time) and moves it into the legal entitlement column. For employers, the message is clear – a once fringe benefit offered by an employer is now a legal entitlement. Whether an employer presently provides paid sick leave or not, now is the time to carefully review and revise existing sick leave policies and implement a policy that will comply with the law.
To help employers better understand and be prepared for the new law, PLDO employment law attorneys William E. O’Gara and Matthew C. Reeber have co-authored an advisory that highlights key elements of the new law including requirements and the allowable purposes as well as other important information. To access the advisory, click New Rhode Island Law Requires Employers to Provide Paid Sick Leave. To contact attorneys O’Gara and Reeber, call 401-824-5100 or email firstname.lastname@example.org or email@example.com.
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NEW RULES GOVERNING IRS AUDITS OF TAX PARTNERSHIPS
Effective January 1, 2018, the IRS has made significant changes in the rules applicable to audits of entities treated as partnerships for tax purposes. This includes both general and limited partnerships as well as many limited liability companies. The longstanding rule that partnerships do not pay federal income taxes at the company level remains largely unchanged. Rather, the partnership files an informational return and partners report their share of income or loss on their personal income tax return.
Under the old rules, the IRS would examine the partnership’s income tax return (Form 1065) and make any adjustments to items of income, expense or credit at the partnership level. However, once an adjustment was made, the IRS would proceed against individual partners who held an interest in the partnership during the year under audit, in order to collect any underpayment of taxes, plus interest and penalties.
Under the new rules, the IRS will still examine the partnership’s income tax return and make any adjustments to items of income, expense or credit at the partnership level. However, once an adjustment is made, the IRS no longer seeks to collect underpayments from individual partners. Instead the IRS will assess and collect any underpayment, as well as interest and penalties, directly from the partnership and not from the individual partners. Perhaps more importantly, this assessment and collection takes place in the year the audit is concluded. If the partners of the partnership have not changed and their respective interests in profits and losses have not changed, application of the new rules should not cause a problem. However, if there are new or different partners or their respective interests have changed in the year the audit is concluded, inequities are likely to result, since the partners who bear the economic burden of the audit adjustments will not be the same as those who reported income or loss in the year the original return was filed. There are some exceptions to the new rules that may be applicable to some businesses.
In his latest advisory, PLDO Partner and veteran business attorney William F. Miller offers some practical advice to business owners on this IRS rules change entitled, New Rules Governing IRS Audits of Tax Partnerships - Inequities May Result if Agreements are not Amended. He notes that since the benefits of both elections can be lost if the elections are not filed in a timely manner, the recommendation is that partnerships and entities treated as partnerships for federal income tax purposes consider amending their partnership and LLC operating agreements to simply reallocate the economic burden of any future audit adjustments to the persons who were partners during the year of the audit, whether or not they are still partners or their partnership interests have changed in the year of the audit adjustment. To speak with Attorney Miller about your organization or for further information on this issue, contact Attorney Miller at 401-824-5100 or email firstname.lastname@example.org.
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