Law & Entrepreneurship News

Hollywood Rejects Top Offer

As the bidding war for Hollywood Video continues between competitors Blockbuster and Movie Gallery, Hollywood’s board is encouraging its shareholders to reject the highest offer, the $14.50 in stock and cash from Blockbuster.

According to The Portland Business Journal, Blockbuster Inc. said that it will pay $1,146.24 cash for each $1,000 worth of Hollywood Entertainment Corp.'s 9.625 percent senior subordinated notes due in 2011. If this bid is successful Blockbuster will hold almost two-thirds of Hollywood's $350 million in debt. However, earlier this month Hollywood's board told its shareholders to reject Blockbuster’s bid while it endorsed that of Movie Gallery’s, $13.25 per share. Although a lower offer Blockbuster’s board fears that a purchase by Blockbuster will be blocked by the FTC for a violation of antitrust laws.

Taxes Are A Year Round Chore For Small Businesses

The Chicago Tribune (2/28/05 Registration Required) reports that small business owners should take time throughout the year to organize finances and to understand the tax code.

The article states that one of the most common tax mistakes a small business owner makes is covering expenses out of personal accounts and failing to account for those expenses come tax time. By obtaining a basic understanding the tax code and organizing finances throughout the year, a small business owner will ensure himself/herself a less stressful tax season.

It is also important for small business owners to understand that a tax professional is only as good as the information that they are provided. Organizing finances will ensure that the small business is taking advantage of every tax benefit afforded it. Also, gaining a basic understanding of the tax code will allow small business owners to implement some tax planning strategies throughout the year to take advantage of deductions and to reduce overall tax liabilities. This little extra effort can pay off with big tax savings come April 15.

Senate to Debate Bankruptcy Bill

The Senate is to begin debates today on legislation that would significantly change the bankruptcy code. 

The bankruptcy bill, sponsored by Sen. Charles Grassley, R-Iowa, would make it more difficult for consumers to file Chapter 7.  The bill would set up a means test to determine whether the individual earned more than their state's median income and could repay some of their debts. If the individual’s income was above a set level they would fall under Chapter 13 and would have to repay some of their debt.

The bill is supported by credit card companies, retailers, and other lenders who feel that consumers abuse the current system by discharging their debt under Chapter 7 when they have the means to pay some of it back.  Opponents of the bill, including consumer advocate groups, feel that the bill would harm low-income families and reward businesses that aggressively market consumer loans.

This bill is much like the one that came up last session. However, it does not currently include a provision aimed at preventing anti-abortion protestors from filing bankruptcy to get out of court-ordered fines.  This provision, included in last session’s bill, was cited as the cause of the bill failing.  Sen. Charles Schumer, D-N.Y., plans to reintroduce the amendment.  Republicans in both houses feel that the bill will easily pass if the amendment is not added.

Arizona Doctors Seek Protection Against Malpractice Suits

In the near future, Arizona patients may be asked to waive their right to sue doctors before they receive medical treatment as a way to cut malpractice costs.  Doctors voiced their concerns regarding the trend of malpractice suits during strategy sessions attended by business leaders and local politicians.  At these sessions, the overwhelming opinion about this trend is that it is causing the country’s health care system to suffer and that it is only getting worse. 

Some of the strategies emphasized at the strategy sessions included doctors lobbying their patients for reform, shifting to a contract law system where patients agree to waive their rights to sue, and paying injured patients over time rather than one lump sum payment. Arizona politicians believe that tort reform is needed to reduce what they call “lawsit abuse”. 

Republican Senator, Jon Kyl, tried to pass federal legislation that would limit lawyer fees to $2,000 per hour, then $10,000 per hour, and all the way up to $20,000 per hour, but the bill failed because it won only 37 votes in the Senate. 

Kyl favors federal efforts to limit awards on punitive damages.  Some states that have limited these awards have experience relief from rising medical malpractice premiums.  These caps have only stunted the growth of premiums, but have not decreased the rates. 

Gambling Expansion Allows Growth in Florida School Districts

Florida voters approved a ballot initiative that authorize the expansion of gambling in some Florida counties, including Miami County in return for a big return for education.  The initiative would authorize Florida counties to hold separate referendums that will let voters decide whether to allow Las –Vegas style slot machines at dog and horse racetracks in South Florida. 

The debate over the gambling expansion is very political.  Florida Governor, Jeb Bush, and other prominent lawmakers in the GOP Legislature are greatly opposed to efforts to broaden gaming in Florida.  Proponents of the gambling expansion are attempting to guarantee that the new slots will provide millions of dollars each year for Florida education. 

Bush is warning voters against this education promise.  He believes that the big casinos are enticing voters with a hollow promise of more education funding.  Bush contends that the true costs are significant and real, which is the potential long-term decay of Florida’s traditional industries and the social fabric of the communities. 

Oregon Court Rules Lost Rebates Legal

The 2001 Oregon Legislature transferred over $100 million to the federal Medicaid reimbursement from the state’s special health account fund.  Some anti-tax critics believe this transfer is a scam, and proponents view it as “creative accounting”.  The transfer had the effect of reducing tax refunds by almost one-third under Oregon’s kicker law.  Under the state’s kicker law, taxpayers are refunded tax dollars that exceed Oregon’s projected revenue.  This depends on if the unexpected revenue surpasses the estimate by 2 percent or more.

Although the transfer has caused a lot of heat from anti-tax critics, the Oregon Supreme Court held that the tax return reduction was legal.  Proponents believe the transfer was the right thing to do because they believed that it never made sense that federal money that was set aside for healthcare to be transferred in the form of tax rebates to taxpayers. 

Oregon lawmakers are still awaiting a Supreme Court holding regarding a proposal that will completely change the state’s budget.  Oregon justices are deciding whether cost-cutting strategies aimed at reforming the state’s pension system in 2003 violated contract rights.  The 2003 legislation reduced the long-term obligations of the Public Employees Retirement Systems by almost $8 million.  However, these savings resulted from cutting anticipated benefits.  The lawsuit was filed by a coalition of anti-tax activists against the state. 

Success Rates Differ Between Minority and Non-Minority Owned Small Businesses

The SBA's Office of Advocacy has released a study that compares the success rates of minority owned small businesses against non-minority owned small businesses. Some highlights from the study are as follows:

-Survival Rates: Between 1997-2001, the small business survival rate for non-minority owned small businesses was 72.6%, whereas the survival rates for Asian and Pacific Islander owned (72.1%), Hispanic-owned (68.8%) American Indian and Native Alaskan owned (67%) and Black-owned (61%) small businesses had lower survival rates.

-Business Expansion Rates: Between 1997-2001, the business expansion rate for non-minority owned small businesses was 27.4%, whereas the business expansion rates for Hispanic-owned (34%), Asian and Pacific Islander-owned (32.1%) and Black-owned (27.8%) small businesses experienced greater success. American Indian and Native Alaskan owned small businesses expansion rates were slightly less than that of non-minority small businesses (25.7%).

-Contraction Rates: Between 1997-2001, 21.1% of non-minority businesses contracted whereas less Hispanic-owned (17.8%) and Black-owned (19.9%) small businesses contracted. The contraction rates for American Indian and Native Alaskan owned (22.4%) and Asian and Pacific Islanders owned (22.9%) small businesses suffered slightly more contraction.

For the full report, please click here. For the Office of Advocacy's summary of the report, please click here.

Small Business Tax Calendar

The IRS has released its 2005 tax calendar for small businesses and the self-employed.

IRS releases its redesigned Form 941

The IRS released a redesigned Form 941 yesterday which will reduce taxpayer compliance burden while decreasing common data-entry errors according to the agency. Form 941, Employer's Quarterly Federal Tax Return, is used by about 6.5 million taxpayers to report wages, tips and other compensation paid as well as Social Security, Medicare, and federal income taxes collected.

The IRS aims to provide taxpayers with simplified deposit reporting and paid preparer identification. Some of the changes include the addition of shading for easier reading, new check-off boxes, and the deletion of a horizontal grid of empty boxes intended for the IRS's use. The new forms also contains a decimal point on every box unlike its predecessor.

WIPO Reports Rise in Cybersquatting

The World Intellectual Property Organization (WIPO) reported 1,117 cases of cybersquatting in 2004, a 6.6% increase from the previous year.  In the late 1990s it became apparent to both squatters and trademark owners alike that the territorial nature of trademark law, and the global nature of the Internet would conflict when it came to domain names.  A "cybersquatter" is someone who uses the registered trademark of another entity and registers it as a domain name.  The domain registered under the name is usually left blank while the cybersquatter waits for the trademark owner's best offer.   An entrepreneurial cybersquatter would have registered an exact tradename, plus several confusingly similar others.   WIPO created the Uniform Domain-Name Dispute Resolution Policy (UDRP) in response to an international cry for alignment of national and international IP rights on the Internet.

Although most disputes originate with companies in the United State, in 2004 WIPO also handled claims of cybersquatting from more than 20 countries around the world.  There are four approved Domain-Name Dispute Resolution Providers, WIPO, The National Arbitration Forum, CPR Institute for Dispute Resolution, and the Asian Domain Name Dispute Resolution Center.  All organizations operate under UPRP Although disputes can be brought to court or arbitration either before or after the determination of the dispute by an approved organization, decisions of UDRP have equivalent effect of a binding international arbitration and as such are likely to be upheld in court. 

80% of WIPO domain name disputes are resolved in favor of the trademark holder. And, WIPO Deputy Director General Francis Gurry feels that, "UDRP has been highly successful in creating a deterrent effect as well as providing trademark holders with an effective international remedy against cybersquatting."