It’s Baaaaack!! Governor Granholm proposes new tax
package including expanding sales tax on services

Despite a resounding and embarrassing defeat several years ago when the legislature first passed then repealed a sales tax on services, Governor Granholm has dusted off that idea as a way to balance the budget for 2010. Her proposal to reduce the sales tax to 5.5% and impose it on most services was softened by her promise to eliminate the Michigan Business Tax surcharge over the next two years.

While democrats claim the new service tax would raise $900 million, the Senate Fiscal Agency estimates the tax would actually yield more than $1.3 billion in new tax revenue. The largest segment of the tax ($324 million) would come from vanity services such as hair care, drycleaning, car washing, manicures, spa services and other personal services. $170.9 million would be raised from taxing tickets to spectator sports, fitness center memberships, and activities such as golfing, camping, skiing, bowling, etc., while $150 million would be derived from taxing movies, cable, satellite and other information services. Professional services would also account for $174.2 million in new revenue as legal, accounting, consulting and architecture fees would be taxed.

The new tax would not apply to health care and social assistance, education, new construction, real estate commissions, insurance commissions and services directly connected to business operations.

The tax increases are part of the Governor’s $47.1 billion budget plan that avoided spending cuts for public education, local government, universities or community colleges. If the law took effect, state workers and teachers would be required to pay more toward their pensions as of October 1. Despite the administration’s claims of belt tightening and prudent spending, the proposed budget is 8.3% higher than the current budget.

Business groups generally were disappointed in her proposal, stating that imposing a $554 million sales tax increase on working families during a recession is not the way to help Michigan recover. For the governor’s budget to work, about $500 million in federal recovery assistance must be included, a sum which still needs congressional approval before being distributed.

Others argue that her claim of reducing the sales tax by .005% is actually smoke and mirrors. The effective sales tax rate will still approximate 6% as it is impossible to impose a 5.5% tax on a $1.00 sale. While the threshold for imposing the 6th penny on a $1.00 sale may be adjusted up or down slightly, it is unlikely the effective rate will yield significant savings to retail purchasers.

Your association is part of the business coalition which is monitoring the progress of this proposal and attempting to educate the legislature as to why we should be exempt from this tax. We encourage you to contact your local legislators and explain how the collection and remittance of this tax affects your pricing and costs for compliance.

The Economy...Things are getting better....Aren’t they?

By Donn Eurich, Executive Director

Our Democratic political leaders tell us things are getting better, the recession is over and prosperity lies directly ahead. Our Republican leaders point to even higher unemployment, uncontrolled government spending, failed economic incentives and claim things are going to get worse before they improve. Who is right? Maybe we should rely on actual economic indicators instead of politician’s promises.

Economic indicators will tell the true story right? Steadfast, unquestioned, indisputable facts and figures from our government. Well, lets take a look at some of those statistics and see what story they tell us:

> Retail & Food sales for December, 2009, seasonally adjusted; down 0.3%, from November, but 5.4% above December of 2008. I think overall, that’s good news.

> December 2009 gasoline station sales were up 33.6% from December 2009. That’s good news, right? Well, maybe, does that number represent actual gallons sold or inflated revenue due to per gallon price increases?

> Real Gross Domestic Product (GDP), which represents the output of goods and services produced by labor and property located in the U.S. increased at an annual rate of 2.2% in the third quarter of 2009, when compared to the second quarter of 2009. Of course, in the second quarter, Real GDP decreased 0.7%. Growth is good, but aren=t we simply gaining back what was previously lost?

> Taxes on corporate income increased $15.1 billion in the third quarter, compared with an increase of $35.6 billion in the second. Profits after adjustments increased $117.3 billion in the third quarter compared with an $8.2 billion increase in the second. That’s probably okay, right? Well, don’t forget that dividends, much of which supports retirees and small investors, decreased $6.1 billion in the third quarter, after decreasing $62.1 billion in the second. Oh, so government is taking money from small investors to make business pay more taxes.

> Sales of new, one-family homes declined 7.6% below November, 2009 sales and is 8.6% below the December, 2008 sales level. There is currently an 8.1 month supply of homes for sale at the current sales rate. Hmm. This can’t be good. Housing starts are always a good indicator of economic health. Wages and salaries increased $16.1 in November, compared with an increase of $3.2 billion in October. Goods producing industries and manufacturing payrolls also increased in November, after declining in October. More disposable income for workers. That has to be good!

There are hundreds of economic indicators which measure different components of the economy, including production, employment, housing and income to name a few. If any analyst selectively picks the indicators which support the trend they claim is occurring, a convincing argument can be made. Unfortunately, as shown above, most economic indicators are inconsistent in the story they tell. Therein lies the quandary of our current economic state. While one would like to believe there is a pent up demand for goods, services and equipment, the lack of revenue growth does not justify increasing your spending at this time. With few indicators pointing toward an immediate economic turnaround, prudent spending, expense management and creative marketing will remain the priorities for the foreseeable future.

The ADA Amendments Act of 2008--
First Major Overhaul to the ADA Promises New Challenges For Employers

Larry R. Jensen

On September 25, 2008, President George W. Bush signed into law the ADA Amendments Act of 2008 (“ADAAA”). The ADAAA significantly amends the Americans with Disabilities Act of 1990 (“ADA”), which was signed into law by former President George H.W. Bush.

The original ADA was intended to “provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities” The ADAAA, which becomes effective January 1, 2009, clarifies Congress’ intent to “reinstate a broad scope of protection” available under the ADA and “broadly” construe the definition of “disability” which, according to proponents of the ADAAA, became far too restrictive in determining those individuals covered.

There can be no doubt that the ADAAA significantly expands the definition of “disability” for purposes of ADA coverage, making it far more inclusive. In doing so, the ADAAA specifically reverses several United States Supreme Court rulings. Considering the increased numbers of those that will now be included as “disabled” under the ADA, employers will most certainly be forced to spend more time and resources on compliance. Employers will also be required to defend ADA claims that previously would have been dismissed early in the adversarial process.

Unified Carrier Registration Program

The 2005 Transportation Reauthorization Act, called SAFETEA-LU, eliminated the Single State Registration System (SSRS). SSRS was a fee-based permit program that applied to all interstate for-hire trucking companies.

In place of SSRS, Congress mandated that USDOT/FMCSA establish the Unified Carrier Registration program. UCR differs from SSRS in that it applies to ALL interstate commercial transportation using vehicles that meet the definition in Section 390.5 of the Federal Motor Carrier Safety Regulations. It applies to for-hire, private, and for-hire exempt carriers, including farmers and agricultural operations. It also applies to leasing companies, freight forwarders, and brokers.

Persons subject to UCR must register each calendar year, starting in 2007. Below is information explaining how to register for 2008.

Questions about the program should be directed to the Michigan Public Service Commission at 517-241-6030. You can also register on line at
www.ucr.in.gov.

Registering Instructions
2008 Registration Form

Expansion of “Substantially Limits” and “Major Life Activities” Definitions

The definition of “disability” under the ADA remains the same--- a physical or mental impairment that substantially limits one or more major life activities of such individual; a record of such an impairment; or being regarded as having such an impairment. However, notable provisions of the ADAAA significantly expand definitions of terms such as “substantially limits,” “major life activities,” and “being regarded as having such an impairment.”

Under the ADAAA, “substantially limits” means “materially restricts,” and the new law specifically directs the Equal Employment Opportunity Commission (“EEOC”) to promulgate less restrictive rules that would provide broader coverage. In addition, “major life activities” under the new law include, but are not limited to:

· Caring for oneself,
· Performing manual tasks,
· Seeing,
· Hearing,
· Eating,
· Sleeping,
· Walking,
· Standing,
· Lifting,
· Bending,
· Speaking
· Breathing,
· Learning,
· Reading,
· Concentrating,
· Thinking,
· Communicating, and
· Working.

Finally, “major life activities” also include the operation of “major bodily functions,” including but not limited to functions of the immune system; normal cell growth; digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive functions.

By expanding the definition of “substantially limited,” the ADAAA overturns the Supreme Court’s decision in Toyota Motor Mfg. Co. of Kentucky v. Williams (2002), which held that courts should apply a rigid standard in determining whether an individual with an impairment is “substantially limited” in a major life activity and, therefore, “disabled” under the ADA for purposes of alleging unlawful employment discrimination.

Changes to “Regarded as Disabled” Definition

The ADAAA specifically addresses the “regarded as disabled” prong of the ADA statute. Under the ADAAA, “regarded as having such an impairment” now places in a protected status an individual who has been subjected to a prohibited action because of “an actual or perceived physical or mental impairment, whether or not the impairment limits or is perceived to limit a major life activity.” By eliminating the “substantially limited in a major life activity” threshold for “regarded as” claims, the ADAAA greatly expands the scope of the ADA’s protections. Regarded as claims, however, will continue to exclude “transitory and minor” impairments, and Congress clarified this category to include situations where the “actual or expected duration [of the impairment] is six months or less.”

In regard to accommodations, employers are only required to provide reasonable accommodations to those individuals that can demonstrate an actual impairment that substantially limits a major life activity, or have a record of an actual impairment. Employers need not provide accommodations for individuals only “regarded as” having an impairment.

Elimination of the “Mitigating Factors” Defense

Significantly, the determination as to whether an impairment substantially limits a major life activity under the ADA must be determined without regard to any “mitigating factors” such as prescriptive medicines or equipment (except for ordinary eyeglasses or contact lenses) that would improve the effects of the disability.

Subsequent to enactment of the ADA, Supreme Court decisions significantly narrowed the definition of “disability.” Proponents of the ADAAA argued that judicial interpretation of whether an individual has a disability has become so rigid that individuals with health conditions such as epilepsy, muscular dystrophy, cancer, diabetes, and cerebral palsy were falling outside the protections of the ADA due to “mitigating factors.” As of January 1, 2009, the ADAAA effectively eliminates the “mitigating factors” defense.

Congress found the United States Supreme Court’s 1999 rulings in Sutton v. United Airlines, Murphy v. United Parcel Service, and Albertson’s Inc. v. Kirkingburg to be contrary to the original intent of the ADA. In these cases, the Court considered “mitigating measures” that would assist an individual in controlling an impairment in determining whether an individual is “disabled” within the meaning of the ADA. Under the ADAAA, whether an individual has a “disability” must be determined without reference to the ameliorative effects of mitigating measures. Specifically, those mitigating measures include: medication, medical supplies, equipment, or appliances, low-vision devices, prosthetics (including limbs and devices, hearing aids and cochlear or other hearing implants), mobility devices, or oxygen therapy equipment and supplies.

Given the ubiquitousness of lifelong medications for depression, anxiety, hypertension, diabetes, and a plethora of other chronic conditions, reviewing these conditions in their “unmedicated” or “unmitigated” will create a vast new class of persons falling under the category of “disabled” for ADA analysis.
Omitted from the ADAAA’s bar on consideration of mitigating measures are ordinary eyeglasses or contact lenses that fully correct visual acuity or eliminate refractive error. Employees with corrected vision, without more, will continue to fall outside of the ADA’s protections. Qualification standards or tests based on uncorrected vision are not permitted, unless uncorrected vision is shown to be job-related and consistent with business necessity.

Conclusion

Unquestionably, the ADAAA stands to greatly increase the scope of the ADA. With Supreme Court precedent being overturned, and definitions of “disabled” expanding, an increase in litigation is imminent. Employers should be careful in navigating these changes, and work with counsel to implement effective strategies to avoid liability.