Animal Law
CCLM Law

Recent Court Case Might Not Be Just for the Birds

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By Clark, Campbell, Lancaster & Munson, P.A.

Q: I raise wild birds for sale as pets on my property.  Can I qualify for an agricultural tax exemption for my property?

 A:  In McLendon v. Nikolits, the 4th District Court of Appeal (DCA) recently held that a property owner who engages in aviculture – raising wild birds for sale as pets – can qualify for an agricultural tax classification for the part of their property used for aviculture.  The 4th DCA’s decision may also perhaps be applied to other types of pet breeding, such as dog breeding, and the agricultural tax exemption if they qualify.

Todd and Shire McLendon own a 5-acre parcel located in Palm Beach County, and the McLendons have used the property for aviculture since 2006.  From 2006 through 2012, the Palm Beach County Property Appraiser granted an agricultural tax classification for 4.5 of their acres because of its dual uses for aviculture and cattle grazing.

In 2012, the Property Appraiser denied the agricultural tax classification for the McLendons’ 4.5 acres and issued the tax classification for only 2.25 acres.  The McLendons appealed, and the Value Adjustment Board (VAB) held that 4.5 acres should be given the agricultural classification.

In 2013, the Property Appraiser again denied the agricultural tax classification for the part of the property devoted to aviculture.  The McLendons appealed again, and a special magistrate appointed by the VAB found in favor of the McLendons.  The Property Appraiser appealed to the circuit court, and the Property Appraiser also denied the agricultural classification for 2014.

The Property Appraiser argued that the legislature intended to limit agricultural activities to only those listed in the statute because the legislature included only “poultry” and not “aviculture” in the list of activities that constitute “agricultural purposes” in the statute.

However, the McLendons argued that the legislature did not intend for the list to be exclusive or exhaustive because the legislature used “includes, but is not limited to” in the statute.

The trial court concluded that aviculture was intentionally left out of the statute and that bird-related activities qualifying as agriculture were limited to “poultry.”  The trial court also indicated that allowing the breeding of pets, and birds in particular, to qualify for an agricultural exemption, would open the floodgates and allow many landowners to claim the agricultural exemption for various types of pet breeding thus in turn leading to abuse of the system.

On appeal, the 4th DCA found that “includes, but is not limited to” is not ambiguous, and the 4th DCA found that the term “farm product” is defined in Fla. Stat. § 823.14(3) as “any…animal…useful to humans” under the Florida Right to Farm Act.

Through the use of expert witness affidavits at trial, the McLendons were able to convince the court that aviculture is useful to humans for reasons such as companionship, concern for endangered species, entertainment, education, and scientific purposes.

Accordingly, the 4th DCA reversed the trial court’s decision and held that the McLendons’ portion of the property used for aviculture qualifies for an agricultural tax exemption.  It will be interesting to see how the Polk County Property Appraiser reacts to this recent decision, and unless the Florida legislature closes this loophole, this might be a case for the 2nd DCA and perhaps Florida Supreme Court to decide if there is a conflict between DCA’s.

Labor and Employment
CCLM Law

Non-Compete

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By: Clark, Campbell, Lancaster & Munson, P.A.

Q: Can an employer restrict or prohibit an employee from competing with the employer once the employee’s employment has ended?

Employees, under Florida law, are limited in their ability to compete with their employer while employed by the employer because employees owe their employer a duty of loyalty. However, this duty of loyalty generally ends when an employee’s employment ends, and, upon ending, the employee could potentially compete against their former employer. Accordingly, employers should consider whether it is in their best interest to restrict or even prohibit an employee from competing once their employment ends.

Generally, there are two main types of restrictions employers place on employees to limit their ability to compete. The first is a non-compete restriction, which limits the employee’s ability to participate and compete in the same business of the employer. The second is a non-solicit restriction, which limits the employee’s ability to solicit the employer’s customers, potential customers, employees, and other business relationships. Both restrictions are generally set forth as restrictive covenants in a written agreement between the employer and employee.

Florida’s public policy disfavors restrictive covenants that limit competition or solicitation, so employers must carefully draft such restrictive covenants in order to comply with Florida law. Florida law provides that a restrictive covenant must be in writing and signed by the employee against whom it will be enforced. Further, a restrictive covenant must protect an employer’s legitimate business interest that justifies enforcement of the restrictive covenant. For example, an employee may have access to or obtain knowledge of an employer’s trade secrets or customer lists that are not available to the public. The employer has a legitimate business interest in protecting such information, and such interest may justify the employer restricting its employees’ ability to compete with employer.

Lastly, any restrictive covenant must be reasonable in terms of geographic scope, line of business, and time. Generally, a restrictive covenant should limit the employee’s ability to compete in the geographic region that the employer operates in and where the employee is employed or works. Additionally, a restrictive covenant should limit the employee’s ability to compete in businesses actively engaged in by the employer. Finally, the length of time the employee is prevented from competing must be “reasonable.” A reasonable time period, as determined under Florida law, varies depending on the role of the employee and the legitimate business interest the employer is trying to protect.

As such, while an employer is able to restrict or even prohibit competition or solicitation from its former employees, any such restrictions must be reasonable and must comply with all of the requirements of Florida law.

 

Elder Law Article
Kevin Albaum

Easier Access to Special Needs Trusts Finally Arrives for Disabled Individuals

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By: Kevin R. Albaum, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

A bill known as the Special Needs Trust Fairness Act (the “Act”) has been working its way through the legislative process for a couple years now.  Finally, on December 17, 2016, President Obama signed the Act into Federal Law. The law became effective immediately.

A first party special needs trust is a special type of trust created and funded with a disabled person’s assets in order to maintain eligibility for means based government benefits such as Medicaid and Supplemental Security Income (“SSI”).  While a first party special needs trust has restrictions on how the money in the trust may be used, it can generally be used for the benefit of the disabled individual. The trust can be used to purchase most items for the beneficiary as long as the purchase of such items does not cause the person to lose eligibility for their government benefits by accumulating too many countable assets under Medicaid and SSI rules.  However, the trust’s funds cannot be used to purchase food, pay for routine shelter costs like rent, mortgage, basic utilities, or to purchase items for someone other than the trust beneficiary.

The Act was designed to revise the prior law requiring individuals with disabilities to use a parent, grandparent, guardian, or court of competent jurisdiction to create a first party special needs trust.  Under the old law, a person could be disabled and still be competent to create a trust (such as a victim of an accident or a blind individual), but this individual still would not be able to establish the trust without the assistance of a third party.  Under the new Act, individuals with disabilities, who have the requisite level of capacity, can now create a first party special needs trust for themselves rather than depending on others to do so for them.

Special needs trusts exist because the federal government decided that they do not want to penalize disabled individuals by requiring them to spend down their limited assets on health care and essential living expenses before they can become eligible to receive government benefits to help pay for the disabled individual’s health care and essential living expenses. Once the trust is implemented and funded with a disabled individual’s assets, the individual can immediately apply for or become eligible to receive governmental benefits and will be able to continue to use the trust for their personal benefit during their lifetime.  Preserving assets in a special needs trust allows a disabled individual an incredible opportunity to extend the use of the trust assets over their lifetime without preventing them from obtaining and receiving governmental benefits.

It’s important to consult a legal professional with experience in elder law when considering creating and funding a special needs trust to ensure governmental benefits are preserved.

Kevin Albaum is an Elder Law Attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland.  Questions can be submitted to thelaw@cclmlaw.com.

Corporate Law Article
Dan Rich

PLANNING AHEAD: Does my limited liability company really need an operating agreement?

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An operating agreement serves as an instruction manual dictating the governance and operation of your limited liability company, or LLC. The purpose of an operating agreement is to: (i) preserve the limited liability status of your entity; (ii) specify rights and obligations between members; (iii) provide the necessary structure, accounting and tax provisions; (iv) identify policies in the event of disputes, the death or divorce of a member; and (v) set out the organizational governance for the LLC.

Currently, if there is no operating agreement, Florida law states that an LLC is subject to the default provisions provided for under Chapter 605, Florida Statutes. The risk of relying upon the default provisions in Chapter 605 is that these standard, default provisions may not align with the goals you have for your LLC or the agreement between the members.

To avoid relying upon the default provisions of Florida Statutes, I highly recommend that new business owners allocate time prior to the beginning of their LLCs existence to adequately prepare and draft an operating agreement. A clear and unambiguous agreement will help provide concise policies for distributing profits and losses, establishing a management structure, defining appropriate voting control and decision procedures, as well as resolving unforeseen disputes among members. Clear procedures will only further assist in the smooth operation and growth of an LLC. Such policies are also beneficial for planned and unexpected challenges, and typically can eliminate any confusion or ambiguity which may arise if relying upon Chapter 605.

Like its members, each LLC is unique, with each newly created LLC having its own set of specific goals and objectives that its members would like to accomplish. A good operating agreement should be structured to align with the ideals and objectives of the members of the LLC. Certain essential terms, including the following, should be included in all operating agreements:

  • Specifications regarding ownership percent or interest;
  • The rights and responsibilities of each member;
  • How to distribute profits and losses;
  • Voting rights (i.e. voting and non-voting membership interests; majority, supermajority or unanimous decisions);
  • Management hierarchy (i.e. appointment and removal of managers);
  • Termination, or dissolution, procedures;
  • Dispute resolution provisions;
  • Transfer restrictions;
  • Guidelines and parameters for borrowing money; and
  • How to remove an unruly director.

Business owners may draft and implement their own operating agreements; however, given that an operating agreement is an important legal contract that binds the members and the governance of the LLC, it is best to consult with an attorney who has experience in formation of business entities.

Dan Rich is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland.  Questions can be submitted to thelaw@cclmlaw.com.

Corporate Law Article
CCLM Law

When Does a Hobby Become a Business?

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By: Clark, Campbell, Lancaster & Munson, P.A.

Do you have a hobby that has become profitable on eBay, Etsy, or social media? If so, the IRS may consider your hobby a business, and certain income tax consequences may result.

Q: What is the difference between a hobby and a business?

The IRS has provided the following nine factors a taxpayer should consider:

  1. Is the activity carried on in a businesslike manner?
  2. Does the time and effort put into the activity indicate an intent to make a profit?
  3. Does the taxpayer depend on the income from the activity?
  4. Are the losses from the activity beyond the taxpayer’s control?
  5. Has the taxpayer made changes to improve profitability?
  6. Does the taxpayer have the knowledge to carry the activity as a successful business?
  7. Has the taxpayer made a profit from similar activities in the past?
  8. Does the activity make a profit in some years?
  9. Does the taxpayer expect to make a profit in the future due to an appreciation of the assets used in the activity?

Overall, the key issue is whether a taxpayer treats the activity as a business and whether the taxpayer has an expectation of profit from the activity.

Q: If my hobby produces income, is it considered a business?

Not necessarily. A hobby can produce income even though the taxpayer does not have an expectation to make a profit. For example, a taxpayer enjoys painting swans on the weekends and frequently posts pictures of her paintings on social media. Taxpayer’s friend offers to buy a painting for $100. Taxpayer usually does not sell her paintings, but decides to take the $100. Taxpayer likely has a hobby because the taxpayer does not have an expectation to make a profit when she paints. However, if the taxpayer were to advertise her paintings for sale on social media, then the taxpayer may have a business.

Q: What are the tax consequences of a hobby and a business?

Regardless of whether the taxpayer has a hobby or a business, the taxpayer must report any income received. Therefore, in our example above, the taxpayer should report the $100 as income. A taxpayer may deduct the ordinary and necessary expenses from a hobby or business, but a taxpayer may not deduct a loss from a hobby. In our example above, assume the taxpayer spent $150 on painting supplies. If the taxpayer has a hobby, then the taxpayer may only deduct up to $100 on painting supplies as ordinary and necessary expenses because she received only $100 of income, and may not deduct a loss of $50. If the taxpayer has a business, then the taxpayer may deduct the full $150, which will result in a $50 loss.

Generally, the IRS is reluctant to find that a hobby qualifies as a business since a business may deduct losses. However, if a taxpayer treats the hobby as a business, such as maintaining a separate bank account and budget, forming a business plan, and keeping books and records, then it is more likely the IRS will find that the hobby qualifies as a business.

Litigation Law
CCLM Law

Clearing the Mist: A Brief Glance into the Breadth of Florida’s Medical Marijuana Amendment

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By: Clark, Campbell, Lancaster & Munson, P.A.

Q: What type of medical conditions can be treated by medical marijuana in Florida?

A: On November 8, 2016, more than 71 percent of Florida voters approved Amendment 2, Florida’s medical marijuana amendment. While it is clear that a majority of Florida voters support, at least in a limited capacity, the legalization of medical marijuana, what remains unclear, among many other issues, is how broadly the amendment will apply, and what type of medical conditions it will cover? The answers to these questions, and others, will most likely not be revealed for many months and years as the amendment is implemented; however, we can look to the text of the amendment itself, as well as to other states that have implemented similar laws, to get a glimpse of the breadth of its application.

Florida’s medical marijuana amendment allows an individual who is diagnosed with certain enumerated debilitating medical conditions, such as cancer, epilepsy, Crohn’s disease, or (perhaps most importantly) “other debilitating medical conditions of the same kind or class”, to use marijuana for medicinal purposes, if a physician believes the medical use of marijuana for such condition would outweigh the potential health risk for the patient. The inclusion of “other debilitating medication conditions” broadens the scope and applicability of the amendment, and provides Florida’s doctors with substantial discretion to determine those medical conditions that apply, and those that do not.

Other states, such as Illinois and Alaska, have defined debilitating medical conditions to include conditions such as rheumatoid arthritis, severe fibromyalgia, and Tourette’s syndrome, and have extended the term’s application to certain symptoms, such as chronic pain or severe nausea.  While Florida’s Department of Health will likely enumerate rules and guidelines regarding the determination of “debilitating medical condition”, the Department is limited in its rule making authority by the discretion the amendment affords to physicians to determine when the use of medical marijuana outweighs any potential health risks.  Consequently, although the application of the amendment will become clearer in the coming months, its breadth, while limited, is currently unknown, and Florida’s physicians will play a significant role in determining how the amendment will apply and who can partake in medical marijuana.

Elder Law Article
Kevin Albaum

Proactive Planning for Senior Medicaid Programs Makes the Process Easier and Saves Money

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By: Kevin R. Albaum, Esq.
Clark, Campbell, Lancaster & Munson, P.A.

Medicaid programs are often available to senior citizens in Florida to help pay for home care, assisted living, and nursing home expenses.  However, there are complex rules regarding eligibility to qualify for these Medicaid programs.  Knowing the eligibility rules of these programs prior to needing to apply is helpful, not only for the individual or couple, but also for the attorney that often assists with legal planning to preserve assets for a spouse or family.  Regardless of the urgency for the need for senior care, taking the time to confer with an elder law attorney helps seniors and their families understand what Medicaid programs are available, who qualifies for them and why an individual may qualify for some programs and not others.

Q. When is it recommended to meet with an elder law attorney to discuss Medicaid issues and planning?

While personal situations differ, below are two examples of common situations when a person may consider contacting an elder law attorney to discuss Medicaid needs.

Example Client #1:  My husband and I are both in our sixties and we know we may need Medicaid in the future.  Could we meet to learn more about the available Medicaid programs that may help us pay for any future assisted living or nursing home care costs?  In this situation, I generally meet with individuals to discuss, assess, and plan their current situation and their future health care and financial needs.  We also look to identify potential future roadblocks to obtaining Medicaid benefits and we further explain the programs that potentially might be available based on the current and future situation.   Finally, we discuss and analyze the “what ifs” such as the event of an unforeseen crisis and the need to become eligible for appropriate benefits as quickly as possible.

Example Client #2:  My 90-year-old dad is out of money and he has dementia.  He is in a nursing home and he needs financial assistance as soon as possible.  Can you help me get Medicaid benefits for Dad?  When I receive calls like this example, not only are the family and lawyer dealing with the same complex legal subject matter as the client in Example 1, but we also are dealing with a loved one who is either already in or is in the process of moving to a nursing home.  Additionally, due to the high cost of care and lack of available funds to pay for care, we now have a built-in deadline to complete any necessary legal planning and to resolve any unexpected disqualifying issues.  In this type of “crisis” scenario, becoming eligible for benefits is still possible; however, the ability to proactively plan and the options for planning are often more limited than they might have been a few years prior to the crisis.

Proactively planning, not only often saves clients time but also can reduce the future costs of senior care and legal expenses.

Kevin Albaum is an attorney in the Elder Law Practice at Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@cclmlaw.com.

Real Estate Law Article
Dan Rich

Common Areas and the Role That Your Association Can Play in Prohibiting Guest Access

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By: Dan Rich, Esquire
Clark, Campbell, Lancaster & Munson, P.A.

Q: Can my homeowners’ association prohibit guests from using the clubhouse or swimming pool?

A: November brings with it crisp air, the smell of turkey, and jokes about how the palm trees never lose their leaves. However, November also means that many people will start flocking to their Florida residences to escape the frigid north.

In many instances, these homes are in residential communities controlled by a homeowners’ or condominium association.  Among other things, associations are responsible for the management of common areas within the community.  Under Florida law, a common area is defined as all real property within a community that is owned or leased by the governing association.  Examples of common recreational areas include tennis courts, clubhouses and swimming pools.

The only way to know exactly what rules apply to the use of such common areas is to review the applicable provisions of your community’s governing documents regarding guests and visitors.  The governing documents (which usually include a Declaration of Covenants Conditions and Restrictions, Declaration of Condominium and Rules and Regulations) are where you should look first to determine what rights your guests and visitors have to use any common recreational areas.  Some associations may limit use of common recreational areas to homeowners or unit owners and prohibit guests’ usage altogether. Other associations might allow guests to use common recreational areas only if accompanied by a homeowner or unit owner.  Some associations may allow non-owners to use the common recreational areas only after obtaining a guest pass or signing into a log book.

Florida’s warm weather offers the ability to escape the cold Northern weather and enjoy outdoor recreational areas during winter months.  However, before planning your next pool party, it is advisable to consult your community’s governing documents in order to know how many people you can include on your guest list.

The December 1st edition of “The Law” will cover proactive planning for senior Medicaid Programs.

Questions can be submitted online to thelaw@cclmlaw.com

Tax Law Article
CCLM Law

Federal Historic Tax Credit

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By: Clark, Campbell, Lancaster & Munson, P.A.

 The Federal Historic Tax Credit, currently at 20%, is a form of public policy to encourage the preservation and rehabilitation of older buildings. Before the Federal Historic Tax Credit, there was no financial incentive to restore or rehabilitate older buildings. In fact, it was more financially beneficial to demolish such buildings so that the owner could take advantage of a deduction related to their demolition.

Q:        What are the general requirements for the Federal Historic Tax Credit?

The building must be a certified historic structure. A certified historic structure is any building which is either: (1) listed in the National Register of Historic Places, or (2) located in a registered historic district and certified as being of historical significance to the district.

The building must be placed in service before the beginning of the rehabilitation. The placed in service date generally determines which taxable year the credit may be allowed. The placed in service date is when the appropriate rehabilitation has been completed whereby occupancy of the building would be allowed. If the building is still in service or occupied during the rehabilitation, the placed in service date will be the rehabilitation project completion date.

The building must be substantially rehabilitated. The Historic Tax Credit is not available to owners or lessees who make minor restorations to a building. Instead, the rehabilitation of the building must be substantial. The substantial rehabilitation tests a 24 month period, which is selected by the owner or lessee, whereby the rehabilitation expenditures must exceed the greater of $5,000 or the adjusted basis of the property, whichever amount is greater. The substantial rehabilitation test does not require all rehabilitation work to be completed within this 24 month period. The 24 month period is simply a window to determine whether the rehabilitation is truly substantial.

Q: Can a lessee take advantage of the Federal Historic Tax Credit?

A lessee may claim the credit if the lessee has incurred costs to substantially rehabilitate the historic building. However, there is an additional requirement regarding the term of the lease. If a lessee wishes to claim the credit, the lease term must exceed 39 years for nonresidential real property and exceed 27.5 years for residential rental real property.

The Federal Historic Tax Credit has been one of the most successful programs to revitalize communities, increase property values, and save historic buildings that may otherwise be destroyed.  Notably, recent legislation has been introduced to increase the Federal Historic Tax Credit from 20% to 30%.

The November 17th edition of “The Law” will discuss social media and the law.

Litigation Law
CCLM Law

Watch Out for Arbitration Clauses in the Terms of Service for your Mobile Apps

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By: Clark, Campbell, Lancaster & Munson, P.A.

Q:  I recently downloaded a mobile app without reading the Terms of Service. What concerns should I have?

A: Although each set of Terms of Service will have its own unique issues, a common concern is what would happen if there is a dispute between the user and developer of the mobile app. A growing number of companies, including Uber and Pokémon Go, require the dispute to be resolved through arbitration according to their Terms of Service.

Arbitration is the process where a dispute between the parties will be resolved outside of the courtroom by a third party, the arbitrator. Although arbitration is conducted outside of the courtroom, it is not necessarily a form of mediation. The arbitration process is actually adversarial much like traditional litigation – one party will be deemed the “winner” and the other party will be the “loser” upon resolution of the dispute.

Some of the advantages of arbitration are as follows:

(1) Flexibility. Unlike traditional litigation, the parties to the dispute are often able to schedule arbitration at their convenience, including evenings and weekends. In contrast, with traditional litigation, the courts generally have overcrowded calendars, whereby the parties have to schedule trial whenever the court has availability.

(2) Simplicity. Discovery is the process where the parties to a dispute obtain information from one another. In arbitration, the scope of discovery is often determined by the parties or by the arbitrator. Unlike traditional litigation, which requires a strict procedural process for discovery, arbitration often results in the discovery phase being simplified or completely bypassed.

(3) Expertise. If effectively chosen, arbitrators tend to be more experienced and skilled in the particular subject matter at the heart of the dispute compared to a judge or jury in traditional litigation.

(4) Potentially Cheaper. Due to the simplification of the discovery phase and the potential for a quick resolution of the dispute, the arbitration process may be cheaper, but this is not guaranteed.

Some of the disadvantages of arbitration are as follows:

(1) Limited Recourse. In arbitration, a party’s ability to successfully appeal an arbitrator’s decision is extremely limited. An arbitration clause will often provide that the arbitrator’s decision is final and binding upon the parties, even if the resolution is unfair. In traditional litigation, a party generally has the option to appeal a court’s decision.

(2) Lack of Information. Since the discovery process is usually simplified or bypassed in arbitration, the parties may discover after the arbitrator’s decision that vital information to the dispute could have been obtained through traditional forms of discovery, such as depositions.

(3) Upfront Costs. In arbitration, the costs are often substantial from the outset, which may foreclose an early settlement to the dispute.

(4) Limitation on Class Actions. An arbitration clause may prevent a party from joining a class action against the other party.

I accepted the Terms of Service for a mobile app and now realize there is an arbitration clause with which I do not agree.  Is there anything that I can do?

Depending on the Terms of Service, a user may have the opportunity to opt out of an arbitration clause so long as the user provides adequate notice. For example, in Pokémon Go, the user may opt out of the arbitration clause if the user provides written notice within 30 days from the date the user accepted Pokémon Go’s Terms of Service. Further, a user may be able to seek remedy in the courts that the arbitration clause is unconscionable, but generally arbitration clauses are looked upon favorably by the courts. Due to the implications of arbitration, it is important for a user of a mobile app to read, or at the very least, skim over the Terms of Service before clicking “I accept.”

The October 20th edition of “The Law” will discuss so-called “vulnerable road user” hit-and-run laws.