Several weeks ago, I shared a poem written by Emily Perl Kingsley entitled, “Welcome to Holland.” (click here to read the “Holland” Reflections blog post) The poem reflects Kingsley’s experience of raising a child with a disability to help people who have not shared that unique experience to understand it and in some small way imagine how it would feel.

A recent experience
Based on the overwhelming response to my previous post and the poem, I thought it would be appropriate to share a recent experience I had with my son, Casey, who is autistic. Casey recently spent several days with me at our Suttons Bay home after the Fourth of July weekend. As often happens during the summer months, when balancing two separate homes and office locations in Farmington and Suttons Bay, my wife had returned downstate with the other two boys after the holiday for their summer job and sports camp commitments. This left Casey and me on our own. Although the summer months result in a lot of activity at my firm’s Suttons Bay office, including client meetings and work to do, Casey and I were able to take some time off together.

Casey’s “list of things to do”
One of the items that is consistently on Casey’s “list of things to do” when we are together up north is to take a day and go kayaking on one of the local rivers or lakes. One Saturday morning, we packed our provisions for the day and headed over to the Putt and Paddle at the The River in Glen Arbor, Michigan (www.theriverglenarbor.com) and met Mike, the owner, to outfit ourselves with a kayak for the day’s trip. We chose a trip down the Crystal River and Mike and his crew took good care of us in driving us to the “drop spot” for a several-hour journey down the river.

While a lot of what I anticipated on our trip, of course, happened, in most cases, right on queue, (i.e., dropping items like our lunch in the water, me getting a workout pushing the kayak over the sandbars and getting sunburned in all the spots I missed putting sunscreen on) I experienced another in what has been a long series of “Holland moments” with Casey as we paddled down the river.

“Who knows this stuff?”
Casey proceeded to give me a dissertation on the types of trees, plants and vegetation we passed by; recited facts on when the area had been first settled and where the people originated from who moved there; and how, before that, he identified the Indian tribes that used the river and related several stories he had read in various books about the history of Leelanau County. As I listened to my son talk, I thought to myself, “Who knows this stuff?” Then it occurred to me. Casey does!

The pizza ritual
We finished our trip with the ritual of eating Shrimp Alfredo Pizza at Riverfront Pizza (www.riverfrontpizza.com) and laughed about our lunch that got wet, and that we had to run after our kayak as it floated away after sliding down a steep hill after we portaged the kayak across a country road during the course of our trip. At the end of our day, Casey, once again, proclaimed as he often does that, “This was the best day of my life.“

It is these experiences that remind me that Casey not only is a young man with special needs, but also a person with extraordinary and special talents.

Enjoy your time with your families and friends this summer.
Remember, whatever disappointments you may experience in your vacation that was supposed to take you to your version of “Italy,” that sometimes the experiences you have in “Holland” are even more special and meaningful.

Dan A. Penning

…there are still protective measures that businesses and individuals can take to attempt to limit their exposure to liability if a child is injured….

Michigan Supreme Court: Parental Waivers are Unenforceable

Previously, we informed you of a Michigan Court of Appeals decision from 2008, which held that a parent’s waiver of liability for a child’s personal injuries is ineffective. On June 18, 2010, the Michigan Supreme Court decided that the Court of Appeals reached the correct conclusion: parental waivers are unenforceable. The Court reasoned that parental waivers are an attempt to contractually prohibit a minor from filing a lawsuit. Since parents cannot legally contract on behalf of their children, such waivers cannot be enforced.

While the Supreme Court decision solidifies concerns over heightened liability for commercial recreation establishments, schools, and churches, it does not prevent the legislature from crafting a law that specifically authorizes the enforcement of parental waivers. In fact, a bill is currently pending in the Michigan House of Representatives that would allow a parent or guardian of a minor who participates in a recreational activity to sign a written waiver releasing a person (the sponsor or organizer of the activity, or the owner or lessee of the property) from liability for resulting injuries. The bill would authorize parents or guardians to sign the waivers in advance of the activity. It is unknown at this time, however, if and when the bill will become law.

For now, we are operating under the Supreme Court decision; but there are still protective measures that businesses and individuals can take to attempt to limit their exposure to liability if a child is injured. First, to reiterate our advice from our prior email blast, establishments and individuals should act prudently, maintain adequate insurance, and continue use of pre-injury waivers (while at the same time understanding the potential ineffectiveness of those waivers). Also, some establishments may want to investigate the suitability of contracts that provide for the parents themselves to “indemnify” (or reimburse) the establishment for any losses that arise from the injuries that a child suffers while participating in the activity at the establishment. While parents cannot contract for their children, they can enter contractual commitments of their own. An indemnification agreement would essentially have a parent agreeing that, “If my child is injured while participating in your activity – and if that injury leads to a claim against you – I will reimburse you for the cost of that claim.” While not nearly as clean or as risk free as a release, such an agreement would at least provide one additional tool to use in defense of an injury claim.

For additional information, feel free to contact Wright Penning & Beamer.

These days it’s hard to listen to the radio, watch television or go on-line without being inundated by ads pitching the latest and greatest do-it-yourself, on-line, estate plan documents: who needs those money grubbing lawyers anyway? One thing all of these pitches have in common is the assurance that the forms are legally valid and binding. Truth be told, “legally valid” is not a tough threshold to meet. If the person signing the Will (or trust, or, you name it) has the requisite mental capacity under the laws of the state where the document is being signed, and the document is signed, witnessed, or notarized in accordance with the laws of the state, it is legally valid. Legal validity, however, is only part of the story. Imagine the shock years down the road when it is discovered that an estate plan put in place by well meaning parents, intending to provide for each other and their children upon their disability and eventual deaths, does nothing of the sort.

I recently had the opportunity to help a young couple with very small children, where one spouse was facing a life threatening illness. They were referred to me to review their revocable living trust. I was under the impression that it had been drafted by another lawyer, and, therefore, my initial review was not clouded or prejudiced in any way. As I went through the document I was appalled at what I perceived to be the utter incompetence of a fellow practitioner, and, quite frankly, dumfounded as to why and how any attorney could pass something like this off on unsuspecting clients. The document was grossly deficient in a number of particulars, and, more importantly, would not have accomplished the desired result of providing for the surviving spouse and children upon the disability or death of one of the parents. It was then that I learned that in their haste to insure that the surviving spouse and children would be provided for, the couple turned not to a lawyer, but to one of the popular on-line sites for their estate planning needs, which included a revocable living trust (for which they paid a fairly sizeable sum I might add).

To enumerate and explain the deficiencies in the document would exceed the space allowed here, so I’ll only touch upon three, specifically:

1. form
2. concept, and
3. substance.

First, from the standpoint of form, although touted by the website to be a Michigan specific document, the terminology used was not consistent with, or reflective of, Michigan law. This past April 1, 2010, the Michigan Trust Code went into effect, changing many aspects of Michigan trust law. Those changes had not found their way into the document.

Second, the document was premised upon property law concepts that are not followed in Michigan. Admittedly, this is where the explanation can get technical and complicated, so I’ll convey only the basics. Insofar as property ownership between a husband and wife is concerned, 40 states follow concepts derived from, and based upon, English common law. There are 10 states, however, that characterize property owned by a husband and wife pursuant to concepts that can be traced to French and Spanish civil law. Those states are said to be “community property” states. And, even within these groupings of common law and community property law jurisdictions, there are many variations. The salient fact remains, however, that property owned by a husband and wife is treated differently in community property and common law jurisdictions. Michigan is not a community property state. Yet, this document, although touted to be a Michigan specific document, employed community property terminology and concepts.

Lastly, there are many reasons why people need estate plans, and trusts in particular, ranging from tax savings to probate avoidance. For people with children, the primary need for a trust is to provide for the children upon the death or incapacity of one or both parents. Without a trust, minor children will receive their inheritance when they turn 18; all of it. Because that is rarely a good idea, trusts are the means of providing a method for holding property and administering it for the benefit of the children according to a detailed plan of distribution determined by the parents, in advance. The trust document I was asked to review contained none of these provisions. Although this couple had a number of children, upon the death of the second spouse to die, the trust assets would simply be held for distribution to each child as he or she turned 18. The document contained no provisions for the administration and distribution of the trust property for the care of the children while they were young.

Was this a legally valid and binding trust? It was. Would this trust have fulfilled the intentions and desires of this young couple and the needs of their family? Not even close. The problem is that they had no way of knowing that. For users of these on-line documents, it will be years or decades before the ultimate beneficiaries will learn just how bad the documents are. Merely filling in the blanks on a form is no substitute for the expertise of an experienced estate planning attorney. There is a reason why we dedicate our working lives and energy doing what we do.

Dan A. Penning

Wright Penning & Beamer is pleased to announce that Dan A. Penning has been named a FIVE STAR Wealth Manager by HOUR Detroit magazine in its June, 2010 issue.

As detailed below, more than 11,000 wealth managers practice accounting, business planning, estate planning, financial planning, insurance and investments in the metropolitan Detroit area. Out of the 11,000 wealth managers, only 686 of the top-scoring wealth managers were named a FIVE STAR Wealth Manager for 2010. Out of the 686 wealth managers, only 50 attorneys were included in the list and Penning was named as 1 of the 50 attorneys.

The following is an excerpt from the article accompanying the naming of the FIVE STAR Wealth Managers in HOUR Detroit magazine and reprinted with permission:

” . . . Well over half of the consumer responses in the Detroit area indicated it is difficult to find a wealth manager they trust and rely on. Wealth managers, broadly defined, are those individuals who help you manage your financial world and/or implement aspects of your financial strategies. Common examples of wealth managers are financial advisers, life insurance agents, accountants, tax advisors, attorneys, etc. With more than 11,000 wealth managers in the Detroit area, how do you find someone who listens to you, represents your interests and operates with an emphasis on integrity and service? HOUR Detroit magazine can help. The magazine formed a partnership with Crescendo Business Services to find out which wealth managers scored highest in overall satisfaction.

The Selection Process

Crescendo administered a survey, by mail and phone, to approximately 1 in 5 high-net-worth households within the Detroit area. An additional 4,200 surveys were sent to financial services industry professionals.

On the surveys, recipients were asked to evaluate only wealth managers whom they knew through personal experience, and to evaluate them based upon nine criteria: customer service, integrity, knowledge/ expertise, communication, value for fee charged, meeting of financial objectives, post-sale service, quality of recommendations and overall satisfaction.

Both positive and negative evaluations were included in the scoring. Only wealth managers with five years of experience in the financial services industry were considered. . .

Then, before finalizing the list, wealth managers were reviewed by a blue ribbon panel. The blue ribbon panel was comprised of individuals from within the financial services industry. Although panelist comments were incorporated into the final score, safeguards were built into the review process to reduce the ability of panel members to influence the composition of the final list on the basis of company affiliation.

An Elite Award

The resulting list of 2010 FIVE STAR Wealth Managers is an elite group, representing less than 7 percent of the wealth managers in the Detroit area. Only 686 of the top-scoring wealth managers made this year’s list. . . . ”

Penning offers his experience and expertise in estate, business and cottage law planning to Wright Penning & Beamer’s northern Michigan clients through our offices located in the historic “Train Depot” in Suttons Bay, Michigan.

We were doubly blessed in January, 1995 with twin boys. Both weighed in at 40 pounds. One was blond and one was dark-haired. There it was – our family complete – three boys under 2 1/2 years of age. Do you remember the poem, what are little boys made of? “Snails, tails and puppy dog tails.” Our lives were busy with diapers, bottles, and watching in amazement how our world went from one to three. When our oldest son asked the very next week, after they were home from the hospital, “When can they go back?” I looked at him blurried from little sleep and said lovingly, “No, sweetheart, they are here to stay.”

I knew something was not right about the dark-haired precious little boy we named Casey, after a great uncle. When the twins were developing, the devastating news at 3 1/2 years of age – autism. What is this? Our precious preschooler – this could not be. So, the doctor visits began, and school therapists, along with out-of-pocket expenses.

The most difficult issue with this diagnosis is that every doctor and every therapist has a different treatment. We tried medications, supplements, diets, listening therapies, a moving bed, light therapy, occupational therapy, speech and language psychologists and psychiatrists. The list went on and on. Most of these were not covered by insurance. It really is hard to put a price tag on love. I really understand how parents, when given a diagnosis of autism, will try anything, but every child with autism is different. This is hard for friends and family to understand. My passion and prayer for all families that have this burden to care for, is that one day there will be a cure for autism.

I found that I had to lean on faith. It is not easy. They estimated in 2006 that a child with autism with medical costs alone can run $35,000 per year for the first five years of life. So, you learn to make sacrifices and choices. Even today, now that Casey is 15 1/2, I pray for peace and that Casey’s talents come shining through. I pray this child can leave a mark on this world. I pray for God’s mercy and grace. I hope on in faith.

Twenty states now mandate some insurance coverage for autism screening and/or treatment. Michigan is pushing for this along with some lawmakers. It would be a great benefit for these families if this passes. (See article from Detroit Free Press appended below.) One thing for certain, autism is a very costly diagnosis and goes way beyond the means of caring, loving parents.

Dan A. Penning specializes in helping families with wills, trust for autism and other mental health issues. Please visit this very dedicated father who has first-hand experience with autism.

Dori Penning

An article about autism insurance from the Detroit Free Press which appeared on June 6th, 2010: Lack of health coverage for autism divides Michiganders

Lack of health coverage for autism divides Michiganders

BY ROBIN ERB
FREE PRESS MEDICAL WRITER

Posted June 6, 2010

What she really wants is to be just Mom, but that’s nearly impossible when your child’s diagnosis is autism.

It means Rita Douglas is like so many other Michigan parents who have taken on roles as occupational and physical therapist, speech pathologist, behavioral therapist and psychologist, professionals whose expertise can make critical differences in the lives of their autistic children, but whose costs can top $100 an hour.

And in Michigan, insurers generally don’t cover treatment costs.

“There are all kinds of sad stories about parents who mortgaged homes to get treatment for their children,” says Marn Myers, president and CEO of the Judson Center in Royal Oak, which offers services to families with autistic children. “It’s just devastating for families.”

A proposed change in state law would require insurance companies to cover diagnosis and treatment for autism spectrum disorder. Opponents warn that the mandate could increase insurance premiums; supporters say the increase would be less than 1%, and would make a world of difference for families affected by autism.

State Sen. Randy Richardville, R-Monroe, vice-chairman of the Economic Development and Regulatory Reform Committee, has scheduled informational hearings, partly in response to two bills that have passed the state House but must be considered by the Senate.

Meanwhile, the fight over costs has wound through the courts, too. Blue Cross Blue Shield of Michigan has settled two cases — one as recently as last week — with families who asked the courts to force the insurer to pay for at least part of the costs for past behavioral therapy for their autistic children.

It’s not that Blue Cross didn’t want to cover the costs for autism treatments; in fact, it offers an option to employers to buy that coverage, said Helen Stojic, spokeswoman for Michigan’s largest insurer. To keep plans affordable, insurers need to offer flexibility rather than meet state mandates, she argued.

The debate brings into focus the exorbitant costs for treatment and the lengths to which families will go to pay them — draining retirement plans and college funds, selling homes and moving out-of-state to find insurers who routinely cover such costs.

A 2006 study that attempted to calculate societal costs for an autistic person estimated that medical costs alone are about $35,000 a year for the first five years of life.

For the Douglas family in Westland, their son Jacob’s diagnosis when he was 2 1/2 meant immediate and profound changes.

Rita Douglas, a sports medicine therapist, gave up a $40,000-plus a year job to make sure appointments were met and Jacob had round-the-clock care. Therapy at the Hope Center at Beaumont Children’s Hospital eventually helped him speak, but it also wiped out the family’s savings.

“There have been years we’ve spent over $20,000 from out of pocket,” she said.

As for the prospect of relaxing on a beach somewhere this summer with a brainless bit of reading?

Douglas laughed: “Riiight.”

Rather, she’ll spend the days slogging through therapy manuals and providing what care she can for Jacob, now 11 years old, even though she knows it’s experts who can make the most difference.

In an otherwise upbeat conversation recently, her voice abruptly caught. She and her husband Scott, a warranty analyst who recently found a new job after being out of work for most of last year, will have to forgo a trip for their 20th anniversary next year.

“And we think ahead to retirement,” she added. “Both of us are in the 40-and-up club, and when does that come? We don’t know whether we’ll ever be able to afford to even retire.”
Changing behavior

Autism is little understood; its cause and cure have been evasive.

It’s estimated that 1 in 110 children have autism — most of them boys — but it’s unclear whether the prevalence is on the rise or if its rise is because it’s being better identified in children who would have gone undiagnosed years ago.

One of the most widely accepted therapies is applied behavior analysis. It rewards performance for what might seem like the most tedious tasks for most children. But the clock is ticking; this kind of therapy is most effective when children are young. It means understanding what is happening, or rather not happening, inside an autistic mind.

Typically, developing kids are like sponges, soaking up what’s around them and instinctively learning, in part, by mimicking what they see. Even infants search for faces, reacting to the smiles and coos.

An autistic child doesn’t have that same social learning instinct.

Jim and Amy Youngblood of Highland knew something was wrong when their son, Ben, was just an infant. He didn’t respond to people in the room: “He’d literally look through people,” Jim Youngblood recalled. He banged the doors on cupboards relentlessly. Rather than playing with a toy car, he was fixated on its spinning wheels so much so that he went into an inconsolable rage if his parents tried to distract him.

At 1 1/2, Ben was diagnosed with autism.

As the Youngbloods struggled with how to help their son, they were stunned once again: Behavioral therapy — the best and possibly only hope that Ben would one day be able to speak and, they were told, maybe even be semi-independent — would not be covered by their medical insurance.

“You’re being told in one breath that … there’s hope and, even if things aren’t going to be perfect, they can be manageable. But then it’s, ‘By the way, it’s going to be extraordinarily expensive so it might be out of your reach,’ ” Youngblood said.

These days, Youngblood refers to his family’s “burn rate” when he talks of the family income.

“My daughter’s college fund is gone. We went from being responsible and well-prepared, and now we’re just living on the edge,” he said.

He wants to be clear: Therapy was critical; his son can talk these days, though there’s much more to do. The family is still meeting its bills, and so what if there hasn’t been a lot of money for new clothes and such?

“We’re … going to be OK,” he said. “But we have given up a lot, and we’ve burned through a couple of hundred thousand dollars.”

Insurers and opponents of the legislation have noted that there’s no sure-shot therapy. Autistic children can range from high- to low-functioning, and what therapies work for some — whether behavioral, music and art, or even horse-back riding — won’t for others.

But the unknown is precisely why it’s so maddening and overwhelming, said Peggy Meador, of Troy, whose 9-year-old daughter, Maribel, is autistic.

“You think, ‘Maybe if you get though this, this will be all she needs’ or ‘If we get through that, this will be all she needs.’ But it’s never ending,” she said.
Making sacrifices

In Lambertville, 9-year-old Jarret Breznai must go without expensive occupational and speech and language therapy.

His parents long ago burned through their savings, and Ann Breznai gave up her full-time job as a travel agent to be with her son. They don’t have cell phones and cable TV, and she has been driving the same car for more than a decade.

She spends the days devouring anything she can find on autism, comparing therapies, and checking free and low-price community programs to see what might help meet Jarret’s needs for occupational and speech and language therapy.

The Breznais are placing their hopes in inexpensive programs through the local YMCA — sculpture, swimming, rock-climbing — and a therapy horse named Lexi who — at just $20 an hour — is about as cheap as it comes.

Like many children with autism, Jarret is hyper-sensitive to certain senses like touch and sound. But after a year, he can place his face underwater, and he can put on the rock-climbing helmet that used to send him into a panic.

“It’s amazing,” Breznai said.

Such stories don’t surprise Pamela Lemerand, project director at the Autism Collaborative Center at Eastern Michigan University, where she knows that even the center’s low-cost services — just $65 an hour compared with some that top $100 — are still out of reach for some families.

“Even poor people can go into an emergency room and get service, but in this instance, your child is out of luck.”

Contact ROBIN ERB: 313-222-2708 or rerb@freepress.com

From Lee Flaherty…..

By the time you receive this email, I will be basking in sunny Arizona while attending a conference related to one of my volunteer interests. (Well, maybe not “basking.” The temperature is expected to exceed 100°!) As virtually all of us volunteer in some capacity at one time or another, I thought a review of what expenses we volunteers can claim as tax deductions might be helpful.

I’ll set this in the context of a real-life example. Some of you still make periodic trips down to the Gulf Coast to help with post-Hurricane Katrina recovery efforts. If you are going down as a volunteer with a charity and your out-of-pocket expenses are not reimbursed, then your travel expenses and possible other expenses can be deducted as long as they are properly documented. This is true whether you’re a laborer building houses, or a board member attending meetings.

In any case, only expenses directly related to your volunteer service may be deducted. Typical examples are the cost of transportation, meals and lodging. (Sorry, probably no deduction for the admission to Dolly World on the way through Tennessee, or the cost of replacing your cell phone after you accidentally drop it into fresh cement.) If you purchase items such as food or building materials for the charity you are working with, then those items are generally deductible, too.

Under no circumstances, however, may you deduct the value of your services. Your 40 hours spent hanging drywall may save the charity considerable expense, but that’s not a gift for which Uncle Sam is willing to give you a tax break.

In order to be deductible, your expenses must be reasonable, and there can be no significant element of personal pleasure associated with them. This doesn’t mean you can’t take a day to relax in the course of a week spent building homes, but the element of pleasure must be minor when contrasted with the importance or duration of your charitable service. (There is, unfortunately, no bright-line rule on how to measure when that element of personal pleasure ceases to be minor!)

As you would expect, you must maintain careful records of your expenses. If you intend to deduct your mileage (this year’s charity rate for vehicle mileage is $.14 per mile), then you must keep a detailed mileage log. If you prefer instead to deduct your actual cost of gas, then you must keep receipts. If a receipt’s charitable purpose is not clear, then describe that purpose right on the receipt.

If an expense exceeds $250, then you must get a written acknowledgment or receipt from your charity. The acknowledgment should describe the expense incurred and state whether the charity provided you with any goods or services in return. If you did receive goods or services, then the receipt needs to give a good-faith estimate of their value.

We Americans are extraordinary in our willingness to give of our time and our money. That generosity of spirit is one of the many things that make our country exceptional. Continue to volunteer wherever you can, but don’t miss the opportunity to take advantage any tax deductions that may become available to you as a result!

Lee Flaherty
Wright Penning & Beamer

Oil and Gas Leases: What Northern Michigan Landowners Should Know

Recently, many of my firm’s clients who own multiple acres of land in northern Michigan have been contacted by petroleum company representatives and offered oil and gas rights leases for their land. While many of these companies are reputable and offer fairly standard terms in their leases, they are generally trying to secure leases that are most favorable to them. The landowner should be aware of provisions that can be included to protect their investment and maximize the owner’s financial return.

Know What Your Oil and Gas Rights are Worth

Most oil and gas leases propose two financial benefits. The first is the oil and gas lease price per acre. Recently, one major oil and gas company paid up to $5,000.00 per acre for what they had determined to be land located strategically close to what the company believed would be a very fertile and productive natural gas field. While not all landowners will be fortunate enough to garner that type of lease price, it is not unusual for companies to make initial offers at a fraction of the amount they are willing to pay to lease a landowners oil and gas rights. Rarely is the first offer the best offer they are willing to make.

The second financial benefit is the “royalty” to be paid by the oil and gas company in the event their exploration results in the installation of an active well to extract oil or gas. Recently, oil and gas companies negotiated oil and gas leases for thousands of acres of state lands and agreed to pay the state royalties at a rate of 1/6th of the gross revenue resulting from an active well. As a result, landowners should not agree to anything less than the State of Michigan was able to negotiate for its royalty rate. I recently reviewed an oil and gas lease for a client that proposed a 1/10th royalty rate which we easily negotiated to the more favorable 1/6th rate being paid to the State.

Avoid Deduction of “Post Production Costs” From Royalties

Many proposed oil and gas leases will include provisions allowing an oil and gas company to deduct a portion of the company’s “post production costs” (PPCs) which essentially is simply a practice of the companies lowering their overhead and increasing their profits by passing overhead costs on to the landowner to be deducted from royalties. Landowners should be careful to make sure their royalties are to be paid off the gross revenue from a well with nothing other than a proportionate share of applicable government taxes being deducted from the royalty payment.

Require the Inclusion of a “Pugh Clause” in the Lease

A “Pugh Clause” protects the landowner by requiring the oil and gas company to release certain land subject to the lease after termination of the lease term that has not been pooled into the land subject to the royalty payment in the event an active well results from the lease and exploration. For example, an oil and gas company may only pool an apportion of the leased land for royalty purposes and without a Pugh Clause, the companies in some instances can tie up the entire parcel subject to the lease even though they are only paying royalties on a portion of the land.

There are other concerns that also should be addressed and included in the lease to protect the landowner including where the placement of well will be allowed, where facilities can be constructed on the landowners property and provisions specifying that the companies must restore the land to its original condition after completing various activities on the land.

Be Prepared

There has been a significant increase in the oil and gas activity in northern Michigan in the last six months. Oftentimes the oil and gas leases are presented in a fast and furious fashion. Don’t be afraid to take your time and carefully consider any proposed lease and determine whether there are other companies also interested in the oil and gas rights to your land. A little competition never hurts the process. Also, seeking the advice and input of a qualified attorney to protect your rights as the landowner is also recommended.

Dan A. Penning

The Patient Protection and Affordable Care Act was enacted in March of 2010. One of the first provisions to go into effect from the Act is the small business health care tax credit. The purpose of the credit is to encourage small businesses to offer health insurance coverage to their employees for the first time or maintain coverage they have, and to help small businesses that employ primarily low- to moderate-income employees.

The IRS touts “three simple steps,” which can be found at http://www.irs.gov/pub/irs-utl/3_simple_steps.pdf, to determine if you qualify for credit in the 2010 tax year:

1. Determine your total number of employees (not including owners or family members),
2. Calculate the average annual wages of employees (not including owners or family members), and
3. You pay at least half the insurance premium for employees at the single coverage rate.

If for 2010, your total number of employees is less than 25, the average annual wages is less than $50,000, and you satisfy #3, the credit is likely available to you. The maximum credit, which goes to employers with 10 or fewer full-time equivalent employees and annual average wages of $25,000 or less, is 35 percent of premiums paid by eligible small business and 25 percent of premiums paid by eligible tax-exempt organizations.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return. For tax-exempt organizations, the IRS will issue further instructions on how to claim the credit.

Dan A. Penning

Speed Traps and the 85th Percentile

How are speed limits set in the first place?
A Michigan State Police Lieutenant made news recently when he confirmed publicly a fact many have long suspected: in many places throughout the state, speed limits are set artificially low. Speed limits that are too low result in speeding tickets which equate to revenue for cash strapped local units of government. This assessment was then confirmed by a local police chief whose jurisdiction includes a stretch of one of the most heavily traveled roads in the state. As the road crosses into his city, the speed limit drops to a point that, as he admits, likely cannot be justified. The city has no intention of raising the speed limit, however, because of the revenue it generates for the city. A state lawmaker believes that the problem of artificially low speed limits has gotten so out of hand that he has introduced legislation that will force local communities to correct speed limits that are set too low. The question then becomes, how are speed limits set in the first place?

Justified on the basis of public safety
The right to set speed limits is an exercise of the police power of the state and is therefore justified on the basis of public safety. Speed limits are intended to reflect a reasonable and safe speed that will facilitate the safe and orderly flow of traffic under normal conditions. Research has shown that the majority of motorists operate their vehicles in a safe and reasonable manner, hence, traffic laws and speed limits that reflect the behavior of the majority of motorists are the most successful. The inverse is also true: traffic laws and speed limits that arbitrarily restrict the majority of motorists encourage violations, lack public support and rarely achieve the desired result. Speed limits are not to be set based upon unreasoned opinion but upon thorough traffic engineering studies. Those studies include an analysis of such factors as the number and types of accidents that have occurred, the number of cars traveling the road, their speeds, the presence of pedestrians, the physical condition of the road surface, hills, curves, number of lanes, driveways, intersections, and so on.

A certain speed is intuitive to the majority of motorists
The primary method for establishing a proper, realistic and safe speed is something known as the 85th percentile. The 85th percentile speed is the top speed at which 85% of motorists will drive on any given road at any given time without regard for slower traffic congestion or weather. The 85th percentile speed is the speed that most motorists consider safe and reasonable, pretty much without regard for the posted speed. In fact, research has shown that artificially raising the posted speed above the 85th percentile does not necessarily result in faster speeds, just as artificially lowering the posted speed below the 85th percentile does not necessarily result in lower speeds. It is not really a conscious decision to drive at a certain speed but one that is intuitive to the majority of motorists.

Established traffic engineering practices
Michigan law provides that all traffic control devices placed anywhere in the state must conform to the national standards set forth in the Manual on Uniform Traffic Control Devices and must be placed in accordance with a written traffic control order. This includes the setting of speed limits and speed limit signs. Sections of the Manual provide that speed limits are to be set based upon traffic engineering studies made in accordance with established traffic engineering practices. Further, speed limits should be within 5 mph of the 85th percentile speed.

Unrealistic speed limits are not followed
While realistic speed limits are generally followed, unrealistic speed limits are not. Absent strict, continuous, and visible enforcement, artificially low speed limits will be ignored. And any adherence that does result is limited to the immediate time and immediate area of the enforcement (i.e., speed traps). If you find yourself getting a ticket in an area where the posted speed limit just doesn’t seem to make sense, you might consider asking the municipality for a copy of the traffic control order and the engineering studies upon which the speed limit was based. If the speed limit is not within 5 mph of the 85th percentile speed, and, no other unique and distinguishing factors exist, you just might have a defense. You might also want to keep an eye on the pending legislation.

Dan A. Penning

The New Michigan Statewide Smoking Ban: How it Affects Us

On May 1, 2010, the “Dr. Ron Davis Smoke-Free Air Law” went into effect in Michigan. Smoking is now banned in most public buildings in Michigan and in outdoor areas where food or beverages are served, such as restaurant patios and porches.

There are a few exemptions to the new law. Individuals still may smoke in cigar bars, tobacco specialty retail stores, and on the gaming floors of Detroit’s casinos. The exemption for the casinos is automatic. Cigar bars and tobacco specialty retail stores, on the other hand, must meet certain requirements and file an affidavit with the Michigan Department of Community Health by June 1, 2010, in order to be exempted. Tribal casinos are not covered by the new law, so their operators are free to permit smoking wherever they like.

Most any other indoor space used by the general public is subject to the ban, even bingo halls, private clubs, and the indoor common areas of multi-unit apartment buildings and condominium buildings. Some examples of the places in which smoking is now prohibited are hotel/motel guest rooms, malls, restaurants, arenas, concert halls, and places of employment that are not otherwise exempted.

Owners and operators of spaces covered by the smoking ban are required to take several steps in order to comply with the new law. Briefly, those steps are:

1. Post “no smoking” signs or the international “no smoking” symbol at each entrance and in each area where smoking is prohibited.
2. Remove ashtrays and smoking paraphernalia from areas where smoking is prohibited.
3. Ask people who are smoking in smoke-free areas to stop smoking.
4. Refuse service to those who are smoking in violation of the law, and ask them to leave if they refuse to comply.

More information, including “no smoking” signs and affidavits for exemption, can be found at www.michigan.gov/smokefreelaw.

Dan A. Penning