Month: October 2015

The Birth of a Non-Profit (Part I): Long Road to Tax-Exemption

Important fact: Being a non-profit organization does not automatically make you exempt from taxes. Another important fact: Receiving exemption from federal income taxes can be a long and arduous process. Most non-profits will want to undertake the process anyway, because without that coveted tax-exempt status, donations aren’t tax-deductible and, let’s be honest, the whole point of being a non-profit is kind of defeated. It’s advisable for a new non-profit to submit its application for exemption within the first two years of its existence. In fact, if it submits the application more than 27 months after it was organized, it will have some explaining to do (literally – there’s a special form for it). However, putting the application together in a non-profit’s early days can be challenging. The infamous Form 1023, the IRS’s application for recognition of federal tax-exemption, is a bear of a form. The IRS wants to know everything about the organization, and in great detail. The final application package can easily be an inch thick. To help you prepare yourself for the process, here are my top three issues you need to think about before you call your attorney to prepare Form 1023: Mission and Activities: The IRS obviously wants to know the purpose of your organization. You need to get very specific here. Think about your big-picture goals, who you want to help, what you want...

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Let’s Be Clear: The Importance of Carefully Worded Contracts

A brief news item in the Washington Post caught my eye recently. The US Supreme Court was hearing arguments in a case involving DirecTV, to decide whether the parties were bound to arbitration, as stated in the DirecTV form contract. The case involves substantive issues related to the Federal Arbitration Act, but what was interesting to me was the fact that, ultimately, the case can be traced back to a poorly written contract. There are, in fact, scores of cases in which courts are asked to interpret ambiguous contracts, together with a substantial body of law related to contract interpretation. You’d think we’d know better by now. But I still regularly receive contracts for review that are vague, unclear, and inconsistent. Having a lawyer review the contracts you sign as a business owner (and you sign a lot of them) may not seem like the highest legal priority. Many contracts are relatively easy to read and outwardly pose no noticeable problems. But if a business relationship goes south and the parties’ performance under a contract comes into dispute, it’s the little details – the often-ignored “boilerplate,” for example – that can make the biggest difference. Thus DirecTV ended up before the Supreme Court, arguing about its arbitration clause. A good contract lawyer will make sure that all the provisions in a contract are clear and don’t contradict each other....

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Understanding the TPP: Investor-State Dispute Settlement

Last week, we discussed data exclusivity for biologics and why it nearly derailed the Trans-Pacific Partnership (TPP). This week, we get even more wonky to explain another controversial feature of the TPP: investor-state dispute settlement (or ISDS). And yes, this one is important for health, too. ISDS is a system under which multinational corporations (or MNCs) are allowed to sue foreign governments directly if the MNCs believe that the governments have violated the MNCs’ property rights. ISDS is intended to protect the investments of MNCs (i.e., the “investors” in ISDS) against over-reaching governments (i.e., the “states”). This, in turn, is meant to increase the flow of investments across international borders. ISDS is a creation of international investment treaties and trade agreements (it is currently in some 3,000 international treaties, including the TPP), but it is a departure from the system established by the World Trade Organization. Under the WTO rules, if an MNC has a dispute with a foreign government, it has to ask its home government to bring a formal government-to-government complaint before the WTO. Under ISDS, the home government is largely left out of the process. ISDS cases are brought before an international tribunal, and there is no appeals process. The clearest cut (and probably least controversial) example of ISDS would be a case where a government nationalizes an industry and seizes a foreign company’s factory; the...

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Understanding the TPP: Data Exclusivity for Biologics

On Monday morning, the United States and 11 other countries announced that they had reached agreement on the Trans-Pacific Partnership, an international trade agreement that has been under negotiation for more than five years. It’s a sweeping agreement, rumored to be hundreds of pages long. (Rumored, because the agreement drafts have been confidential, and the final agreement has not been released.) Last Sunday night, with an agreement near at hand, it was reported that two last issues were gumming up the works; one was about dairy, and the other was about “data exclusivity for biologics.” I put those four words in quotes because for most people, they probably sound like mumbo-jumbo. In fact, they’re quite important for health care. So to help you sound insanely smart at the water cooler this week, here’s an explanation of what data exclusivity for biologics is and why it almost derailed the TPP. First of all, biologics (shorthand for “biological products”) are medical therapies made from biological sources. Biologics are at the cutting-edge of medical innovation, and many of the most promising new therapies are biologics. They include, among other things, vaccines, gene therapies, blood components, and tissues. Biologics are more complex than conventional “small molecule” drugs and are therefore more expensive to develop and manufacture (and, of course, to purchase). “Biosimilars” are essentially the generic versions of biologics; however, biologics are not...

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Individual Accountability According to the DOJ

The US Supreme Court may say that corporations are people – but let’s be honest, corporations are made up of people (actual human ones), and corporate actions are the result of the decisions and actions of individuals. It can be frustrating and disillusioning to see corporations “punished” (meaning fined) for misdeeds without any consequences to the individuals behind the misdeeds (see the fallout from the financial crisis, as just one example). U.S. Deputy Attorney General Sally Quillian Yates gets it. In a Department of Justice memo released on September 9, she summarizes the importance of individual accountability: “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.” Recognizing the difficulty of pursuing individuals for corporate misconduct, the DOJ has developed the following measures to be incorporated into current and future civil and criminal investigations of corporate wrongdoing: For a corporation to receive any “credit” for its cooperation in an investigation (a mitigating factor in the final decision), it has to disclose all relevant facts about individual misconduct, including misconduct by top executives. Both criminal and civil investigations should...

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