Business Report's Legal Trends & Insights for Business - November 2022

LEGAL TRENDS

COMPLEX TAX CODE IS IMPEDIMENT TO STARTING A BUSINESS IN LOUISIANA

There are many reasons to start or expand a business in Louisiana— from our inland waterways and proximity to the Gulf of Mexico and Mississippi River to our natural resources—to our hard-working labor force and distinctive culture. The biggest impediment to start ing or expanding a business, however, remains our complex tax code and system of administration. We have come a long way, but we still have a long way to go.

The years leading up to 2016 saw Louisiana facing persistent funding short falls, often resulting in one or more mid-year budget cuts. Beginning in 2015, the Louisiana Legislature used the blunt instruments of tax increases and suspend ing tax exemptions to address the state’s budget shortfalls.

In 2015, the Louisiana Legislature suspended exemptions for business utili ties. In its 2016 (first) special session, the Legislature (i) increased by 1% the aggregate state sales/use tax rate, bringing it to 5%; and (ii) suspended many other exemptions businesses rely on as a critical part of their planning and budgeting processes. But the complexity of our sales/use tax system (where the overall rate is comprised of five separate statutory levies of varying percent ages) made the legislation confusing and unwieldy. Exemptions were suspended for each statutory levy in some cases, but only in some for others. The suspen sion periods varied, too. A complicated tax system was made more complicated, and businesses found it difficult to wade through the morass of legislative changes to determine the impacts on their operations or bottom lines. Even the state agency charged with administering taxes had difficulty interpreting the legislation.

Great strides have been made recently to remove the complexities in Louisiana’s tax system and increase competitiveness. Louisiana voters amended the state’s constitution in 2021 to make needed changes to the corporate income and franchise tax system. And while voters did not approve an amend ment to centralize the sales/use tax collection system—the biggest impediment to Louisiana’s business climate rankings—resolve to do so has only increased. Even so, many complexities remain.

Advantous Law was formed to provide counsel on all aspects of state/local tax law and to help businesses sort through the complexities. We analyze cur rent and proposed law for impacts to your businesses. We assist during audits and with administrative disputes for all taxes the state and local governments levy. We represent taxpayers before the Louisiana Board of Tax Appeals and state courts, and assist with refunds and other administrative matters. In all our work, we pay particular attention to the often confusing, but always strict pro cedural laws to ensure that our clients’ rights are protected. Our attorneys have more than 50 years combined experience in this area, and we are well-versed in the complexities of Louisiana’s tax system and are deeply involved in efforts to change them. We are happy to discuss your legal tax needs.

ABOUT THE AUTHOR

Jason R. Brown is Managing Partner of Advantous Law LLC and heads the firm’s Tax Controversy, Appeals and Disputes practice. He has more than 20 years of experience repre senting business taxpayers of all sizes in tax planning and controversy matters, including complex litigation. His work extends to all taxes imposed and administered by the state of Louisiana and its local governments, including corporate income/franchise; sales/use; property; severance; and excise taxes. He has particular and significant experience in the thorny area of tax procedural law and is a frequent writer and presenter on state and local tax topics.

504 Spanish Town Road • Baton Rouge, LA 70802 225.246.2069 • advantouslaw.com

Jason R. Brown

THE BEST TIME TO REVIEW YOUR CORPORATION’S ORGANIZATIONAL DOCUMENTS IS NOW

Among the obligations of most corporate boards of directors is the require ment to conduct a periodic review of their company’s organizational docu ments. Given the rapid rise in the use of remote board meetings, as well as recent changes to the Delaware General Corporation Law (DGCL), now is a perfect time to revisit and strengthen these critical documents. This effort can pro vide for greater flexibility and clarity relating to shareholder meetings, board actions, and other corporate actions, including the following

OFFICER EXCULPATION

Effective August 1, 2022, the DGCL was amended to allow corporations to adopt officer exculpation provisions in their articles of incorporation. This change allows corporations to protect covered officers from personal liability for monetary damages for claims of breach of the fiduciary duty of care. Importantly, this change does not al low for the exculpation of officers from any action by or in the right of the corporation, such as derivative litigation, including claims for breaches of the fiduciary duty of loy alty. While amending articles of incorporation to allow for the exculpation of officers does require shareholder approval, boards may want to consider making this change.

REMOTE OR VIRTUAL MEETINGS

Shareholder Meetings : For most businesses, remote communications are now a fact of life. State laws vary, however, with respect to virtual shareholder meetings. Companies must ensure that state law and their own corporate bylaws permit virtual meetings. Boards should also review other bylaw provisions relating to meeting loca tion, notice, procedures, quorum, adjournment, and recordholder lists to confirm that such provisions allow for—or at a minimum, do not preclude—the virtual format.

Board Meetings: Although the organizational documents of many companies may expressly permit telephonic meetings, boards should confirm that their bylaws provide maxi mum flexibility to conduct meetings in a wide variety of videoconferencing and other remotecommunication formats. Also worth considering—allowing the option to submit approvals by written consent, including via email or other electronic means of communication.

EXCLUSIVE FORUM PROVISIONS

Boards should consider whether to adopt an exclusive forum provision. Traditional exclusive forum provisions generally require derivative actions and other intracorpo rate disputes of a company to be litigated exclusively in the state or federal courts of a specific state (typically, their state of incorporation or the state of their principal place of business). These provisions seek to avoid the cost and uncertainty of parallel litiga tion, the risk of inconsistent outcomes, and the potential for one state’s laws to be mis interpreted by other states’ courts. For Delaware corporations, they also provide for the resolution of intracorporate disputes by the courts most experienced in handling cor porate law issues. Delaware corporations, as well as corporations in certain states that have adopted the Model Business Corporation Act (MBCA), are permitted under state corporate law to include an exclusive forum provision in their governing documents.

Alexandra Layfield is a partner at Jones Walker and co-leader of the firm’s corporate, securities and executive compensation team. She counsels public and private companies on transactional matters, primarily in the areas of corporate finance, securities law, general corporate law, and corporate governance, as well as mergers and acquisitions.

Katherine Herbert is an associate in the Jones Walker Corporate Practice Group. Her practice focuses on assisting public and private company clients with a variety of corporate matters, including stock and asset mergers and acquisitions transactions, conversions, consolidations, dispositions, internal reorganizations/restructurings, and private equity transactions.

445 North Bld.,

(From left) Alexandra Layfield and Katherine Herbert

WHAT LOUISIANA COMPANIES NEED TO KNOW ABOUT CRYPTOCURRENCY AND DIGITAL TRANSACTIONS

Talk of bitcoin and cryptocurrency has been unavoidable in recent years. What should Louisiana businesses understand to play in this new sandbox?

First, the American Law Institute (ALI) and the Uniform Law Commission (ULC) have approved amendments to the Uniform Commercial Code (UCC) governing business transactions which will make con trol of digital assets simpler and more intuitive. As a “uniform law,” it needs to be adopted by state legislatures so this will not be effective in Louisiana for a while.

The new Article 12 introduces and defines “Controllable Electronic Records,” or CERs, which include cryptocurrency, non-fungible tokens (NFTs), and general electronic contracts. There are separate categories for electronic payment intan gibles and electronic accounts, and the amendments also define and allow for use of “electronic money” (basically a government-created cryptocurrency).

The amendments expand the definition of “control” (from previous UCC Articles) that now applies to CERs, electronic money, and other electronic records. The concept of control allows for the use of systems to designate to a specific person exclusive rights to a digital asset, such as the benefits of ownership (think of title to your car).

These systems recognize ownership through control, and allow the “owner” to assign control over a digital asset to a third party (a sale) or to a secured lender (a security interest), similar to holding a security interest by possession of tangible personal property.

Second, Louisiana’s Office of Financial Institutions (OFI) now requires virtual currency businesses to hold a license. The OFI anticipates publication of the proposed rule this fall with an effective date of July 1, 2023. Current information is available on the OFI website.

Aimed at financial institutions, the proposed rule contains some routine ad ministrative items and adds definitions for previously undefined terms, including “Unfair or Deceptive Act or Practice” and “Unsafe or Unsound Act or Practice.” Failure to provide required disclosures under the new proposed rule would automatically be an unfair or deceptive act or practice for purposes of enforce ment actions. However, the proposed rule does not identify the specific required disclosures beyond providing that they should be “proper disclosures to persons and individuals who use the licensee’s products or services.” In addition, the rule allows the Commissioner to determine the time and form of such disclosures via policy in the future.

Businesses or individuals who currently or will soon operate a virtual cur rency business with Louisiana residents will want to review the proposed rule and prepare to apply once the application process opens through the Nationwide Multistate Licensing System (NMLS) on January 1, 2023. Initial application costs are $5,000 per license and $750 per registration. Licensure applications and registration notices submitted by April 1, 2023 will be approved, conditionally ap proved, or denied by OFI by June 30, 2023.

ABOUT THE AUTHORS

Amy Greenwood-Field is a member (partner) in McGlinchey’s Washington, DC office. She is a nationally recognized leader on Nationwide Multistate Licensing System & Registry (NMLS) compliance who analyzes financial institutions and FinTech business models for regulatory requirements.

Marshall Grodner is a member (partner) in McGlinchey’s Baton Rouge office who focuses on commercial and secured transactions, commercial real estate, opinions, and gaming law. Marshall was an observer to the drafting committee for the 2022 UCC Amendments and is a member of the Louisiana State Law Institute’s UCC Committee. He chairs the ABA’s Commercial Finance Committee and Real Property Litigation and Ethics Group.

301 Main St., Suite 1400 • Baton Rouge, LA 70801 225.383.9000 • mcglinchey.com

(From left) Marshall Grodner and Amy Greenwood-Field

EMPLOYMENT-BASED IMMIGRATION

Employers interested in hiring immigrants may apply for employment-based visas and green cards on their behalf. Both permanent and temporary visas are available. With a few exceptions for very high skilled workers, most employment-based immigration visas must be filed by an employer.

GREEN CARDS

Per U.S. law, 140,000 green cards are available each year for immigrants in five employment-based preferences. These include:

• 1st preference: Immigrants of “extraordinary ability,” such as outstanding professors and researchers, multinational executives, and managers.

• 2nd preference: Immigrants with advanced degrees or those who demonstrate exceptional ability in science, arts, or business.

• 3rd preference: Skilled workers (immigrants performing skilled labor, requiring at least two years of experience) or professional workers (those who hold at least a baccalaureate degree) and other workers (immigrants performing unskilled labor).

• 4th preference: Special Immigrants such as religious workers, international organization employees, and children who cannot be reunited with a parent because of abuse, abandonment or neglect.

• 5th preference: Immigrant investors who invest between $500,000 and $1,000,000 in a U.S. commercial enterprise that creates at least 10 new full-time jobs for U.S. citizens and legal immigrants.

VISAS

The U.S. also offers temporary worker visas for immigrants who want to enter the country for employment for a fixed amount of time. Available options include:

• H-1B Specialty Occupations and Fashion Models: The H1B visa is for immigrant workers in a specialty occupation that requires a bachelor’s degree or higher in a specialty field.

• L-1A Intracompany Transferee Executive: This visa classification enables a U.S. employer to transfer an executive from one of its foreign offices to an office in the U.S. It also enables a foreign company that does not yet have an affiliated U.S. office to send an executive to the U.S. to establish one.

• L-1B Intracompany Transferee Specialized Knowledge: The L-1B classification enables a U.S. employer to transfer a professional employee with specialized knowledge of the organization’s interests from an affiliated foreign office to a U.S. office. It also enables a foreign company that does not yet have an affiliated U.S. office to send a specialized knowledge employee to the U.S. to help establish one.

• O-1 Individuals with Extraordinary Ability or Achievement: This is for the individual with extraordinary ability in the sciences, arts, education, business, or athletics, or who has a demonstrated record of extraordinary achievement in the motion picture or television industry and has been recognized nationally or internationally for those achievements.

• P-1 Athlete, Artist, Entertainer: This is for artists, entertainers, and athletes who wish to compete in a specific event in the U.S.

Employment-based immigration is more in-depth and complex than family-based immigration matters. One mistake could mean reapplying or even rejection.

ABOUT THE AUTHOR

Paul “Woody” Scott has called Baton Rouge his home for the last 20 years. He practices immigra tion law, criminal defense, and injury law, and has built the biggest immigration practice in the city. He was the first deportation defense attorney in Baton Rouge and has expanded his practice to in clude criminal defense and serious personal injury. Scott has experience with high profile cases and is frequently featured in the news media for quotes and insight on legal issues.

10636 Linkwood Court • Baton Rouge, LA 70810 225.400.9976 • pwscottlaw.com

Paul ‘Woody’ Scott

A LEGAL EDUCATION CAN PROVIDE MANY PATHS OUTSIDE THE COURTROOM

Many people with law degrees have gone on to work in areas such as human resources, technology, entertainment, and health care, to name a few. With emerging industries such as cannabis or the everevolving sports world, and the need for diversity and inclusion, many companies benefit from having someone with a legal education on the team. Finding the right law school that opens the doors to these many avenues is vital because a solid foundation is key to building a successful career.

HERE ARE FIVE REASONS TO CONSIDER GETTING A LEGAL EDUCATION:

• Lawyers are transformational change agents and frontline soldiers for the jus tice system. They represent individuals who need access to the justice system, as well as corporate clients. The district attorneys for East Baton Rouge, West Baton Rouge, Iberville, Pointe Coupee, East Feliciana, and West Feliciana parishes are Southern University Law Center alumni.

• Lawyers are well-paid professionals with specialized knowledge that gives them the ability to earn compensation that exceeds the average salaries of non-lawyers. The average salary of lawyers in the U.S. is $144,230 and the average Louisiana lawyer salary is $105,490.

• Legal education provides opportunities for law students to learn transferable skills and gain career opportunities in non-traditional areas such as: compli ance and ethics; corporate governance and responsibility; data privacy and security; cybersecurity; government affairs and government relations; HR management; Diversity, Equity & Inclusion; employee benefits; insurance and risk management; intellectual property, technology, and licensing; regulatory affairs, and many others.

• Lawyers are leaders in society. They become judges, legislators, corporate leaders, and community leaders. Many alumni of the Southern University Law Center become lawyer leaders.

• Legal education is a broad and comprehensive educational and intellectual experience. Law school exposes students to varying viewpoints, strategic thinking, and externships or legal clinics that provide practical experiential educational opportunities. Seventy-one of the 213 state district court judges in Louisiana graduated from the Southern University Law Center.

The Southern University Law Center is one of several great law schools in Baton Rouge and the surrounding area. For the past 75 years, it has provided access and opportunities to a diverse group of students from underrepresented racial, ethnic, and socio-economic groups to obtain a high-quality legal education. SULC students leave the Law Center with the skills necessary for the practice of law and for positions of leadership in society.

ABOUT THE AUTHOR

John K. Pierre has devoted his career to molding lawyer leaders and being a champion of innovation. He serves as a transformational change agent and inspiration to legal professionals and thought leaders around the globe. He has earned numerous awards for his leadership, innovative strategy, and tireless efforts within the legal and profes sional realm. Hampton University, the Baton Rouge Bar Association, and the Louisiana Legislative Black Caucus are just a few of the organizations that have bestowed honors upon Pierre throughout his career.

2 Roosevelt Steptoe St. • Baton Rouge, LA 70813 225.465.5700 • jpierre@sulc.edu

Chancellor John Pierre