Many family business owners aspire to see their enterprises thrive for generations but often overlook the critical planning required. Others lack the expertise to integrate business and tax decisions into a cohesive succession plan. In these cases, family businesses rely on expert legal counsel for guidance.
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Most of us who have attended a university or made a donation to a favorite charity have received an invitation to enter into a charitable gift annuity contract (CGA) to support the organization. But many lawyers who practice in the estate planning field are unfamiliar with the CGAs, despite their popularity with so many charities. Maybe that is because with the CGA there is nothing for the practicing lawyer to draft. Or maybe it is because unlike charitable remainder annuity trusts (CRATs) and charitable remainder unitrusts (CRUTs), you will find no mention of the CGA in the Internal Revenue Code, except for one mention in connection with debt-financed property for unrelated business taxable income purposes. But a CGA can be a valuable tool for clients interested both in maintaining an income stream for themselves or others and helping their favorite charity.
A typical CRAT pays income to one or more noncharitable beneficiaries for a life or lives, with the remainder eventually passing to charity. Similarly, the gift annuity pays a fixed annuity to one or more individuals for life, but there is no trust. Instead, the gift annuity is paid to the annuitant directly by the charity from its general assets and the transaction is treated for charitable deduction purposes as a bargain sale—a part gift, part sale.
In bargain sales, the donor transfers cash or property to a charity in exchange for consideration worth less than the cash or property transferred. The excess of the fair market value of the transferred property over the consideration received from the charity is deductible as a charitable contribution. If appreciated property is contributed for the annuity, the donor pays tax on the sale portion and can deduct the gift portion. With a gift annuity, the donor transfers cash or property to a charity in exchange for the charity’s unsecured promise to pay a fixed annuity to the donor or another individual for life. The excess of the value contributed over the actuarial value of the annuity received in exchange is deductible as a charitable contribution. If appreciated property is used to purchase the gift annuity, gain is also recognized on the sale portion, but the gain is spread out over the lifetime of the annuitant if the donor is the annuitant.
Although CRATs and CRUTs can’t be administered economically for less than $100,000 or $200,000, CGAs are issued by many charities for as little as $5,000 or $10,000 because there is no trust to administer. CGA donors contemplating a gift annuity should keep in mind that the annuitant is simply an unsecured creditor of the charity, so consideration of the financial health of the charity is important.
Most charities issue gift annuities at age-based maximum rates suggested by the American Council on Gift Annuities (ACGA). This century-old organization sets recommended maximum annuity rates which change from time to time depending on market economic conditions and are structured so that if the charity has a large enough annuity pool to spread the mortality risk, about half of each annuity should on average be left for the charity at the end of the annuitant’s life.
What benefits besides the fixed annuity does the CGA donor receive? First, the donor receives an income tax charitable deduction for the excess of the fair market value of the annuity over the amount of cash or property transferred to the charity in exchange for the annuity. The value of the retained annuity is determined by IRS actuarial tables which assume an interest rate (the so-called 7520 rate or Charitable Monthly Federal Rate) which varies from month to month. The second benefit the donor receives is that a portion of the gift is generally income-tax free, just as it would be with a commercial annuity. The portion of each annuity payment which is a nontaxable return of basis is larger when the gift is made with cash than when the gift is made with appreciated property.
Let’s consider a gift annuity purchased by a 75-year-old donor. Assume that the gift is made in January 2024, using the IRS January interest rate of 5.2 percent, and further assume that the payments are made quarterly at the end of each quarter.
In the first example, we have a donor who contributes $100,000 in cash for a gift annuity with her favorite charity. The current ACGA maximum suggested annuity rate for a donor aged 75 is seven percent, so the donor’s annual annuity would be $7,000 per year. According to IRS tables, the annuity is worth $60,737. Subtracting that from $100,000 gives us the charitable deduction of $39,263.
CLICK HERE to read the full article, which was originally published in ALI CLE’s The Practical Lawyer.
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There are people who believe that zombies will take over the world one day. Today, however, digital information rules the world. In the United States and many other industrialized nations, almost all non-verbal communications (as well as notes and transcriptions of verbal communications) are now stored, transmitted, and processed in a digital format. Data centers are the palace in which that digital information resides.
A data center is a highly specialized, secure facility designed to provide a safe, dependable, and controlled environment for the fast, reliable, and uninterrupted storage, processing, management, and transmission of digital data. Data from a source located outside of the data center is transmitted to and from the data center building through a fiber optic cable (a “fiber”),2 which is a specific type of conduit that transmits data in the form of light pulses over long distances. Within the data center, data may be stored and/or processed before being transmitted to other users, storers, or processors located at the same or another data center.
From the outside, a data center looks like a nondescript industrial building or an office building with darkened windows. On the inside, it is filled with an extensive array of computing and networking infrastructure, including cables, racks, servers, storage systems, networking equipment, power sources, and coolers. The often-chaotic arrangement of cables and wires within a data center masks the sophistication of the underlying network architecture and the complexity of the computing equipment housed therein.
Data centers are designed to accomplish three primary objectives.3 The first of these objectives is to minimize the time that it takes to store, transmit, and process the digital information to, from, and inside of the data center. Within the industry, this concept is referred to as “latency” and is measured by the time it takes the computing equipment to respond to a user’s request. The longer it takes for the data to be transmitted, the higher the latency. Even the slightest of delays, measured in small fractions of a second, may be long enough to render information valueless (e.g., to a stock trader who needs real-time information).4 Time delays also reduce productivity and efficiency because users must wait for the information to be uploaded before they can act upon it. Those readers who are old enough to recall accessing the internet through a telephone line can attest to the greater productivity that is achieved through today’s much faster ethernet and wireless connections.
The second principal objective of a data center is to enable digital data to be transmitted and processed seamlessly, without any kind of interruption. To achieve this continuity, many data centers employ backup arrangements for one or more of their critical systems, such as electrical power, network distribution, connectivity, data storage, fire suppression, and security. Data centers are evaluated by the number and strength of their backup systems, referred to within the data center industry as “redundancy.”5
The third principal objective of a data center is to provide a secure facility to ensure that the confidentiality and integrity of the data is maintained. This security is not only highly desirable but also mandatory in many instances. Numerous companies must comply with strict data protection and privacy regulations applicable to their respective industries (e.g., Health Insurance Portability and Accountability Act (HIPAA) and Payment Card Industry Data Security Standard (PCI DSS)).6
To ensure the security of a data center facility, a combination of physical and electronic measures is instituted to restrict access to the data center. Some data centers conduct extensive background checks and use biometric measurements for admittance. The data is also protected electronically through encryption, firewalls, monitoring, and other preventative security systems.7 In single-tenant facilities, if the information is particularly sensitive, a data center tenant may prohibit access by non-approved personnel even in an emergency. In the most restrictive data center leases, a property owner may not be allowed to access certain areas of the tenant’s space except in specified and limited types of emergencies.
Missed your chance to attend Current Developments in Employment Law 2024? Interested in learning more about artificial intelligence? Check out ALI CLE’s upcoming webcast, AI Issues for Employment Lawyers: Is the Sky Falling?, on August 28, 2024!
Data centers house massive amounts of computing equipment and computing infrastructure which operate continuously and require a constant (and cool) temperature to avoid overheating, which has the potential to disrupt computing operations. Besides latency and redundancy, a key data center measurement is its information technology (IT) load. The IT load measures the total electrical power demand of the IT equipment and systems within the data center, as distinguished from other electrical components within the data center, such as lights and cooling equipment.8 A data center developer needs to know the average expected IT load and the maximum IT load of the facility in order to design and construct the facility’s architecture and infrastructure (e.g., cooling elements and overall power) that would most efficiently and satisfactorily support the IT load.9
Measuring the IT load does not stop once the data center has been completed. A data center operator10 will continuously monitor the IT load to ensure that the cooling system and other infrastructure is providing the necessary support to the computing system. This continued monitoring helps ensure that the vast resources within the data center are allocated in a way that maximizes the efficiency and reliability of the data center.11
The electrical power required for the IT load and the supporting infrastructure make data centers more ravenous consumers of electricity than other real estate product types. For example, a typical office building will use an average of 13.6 watts of power per square foot,12 but a data center will rarely use fewer than 100 watts of power per square foot. Many data centers will use several hundred watts of power per square foot.13
Data centers are often categorized based upon the maximum level of power that they are able to provide. A data center deployment located in a shared facility may consume just a few kilowatts (KW) of power.14 In contrast, a large data center deployment may use tens or hundreds of megawatts (MW) of power.15 Regardless of the size of a data center, effective management of the electrical power is crucial to a data center’s successful operations.
CLICK HERE to read the full article, which was originally published in ALI CLE’s The Practical Real Estate Lawyer.
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Dive in to an in-depth exploration of statutory and regulatory updates, compliance and enforcement strategies, water quality standards, and emerging issues in water pollution control.
This course, co-sponsored by the Environmental Law Institute, offers a unique opportunity to engage with the content that drives national water management policies and to network with key stakeholders in the field. You’ll gain valuable insights that can directly impact your practice and your clients.
Examine the latest legal developments and regulatory frameworks, and gain crucial insights and tools to navigate this complex field effectively.
Our faculty of top practitioners, public interest advocates, scientists, and senior EPA officials will discuss the latest developments in water law. Faculty will provide in-depth legal analyses, policy perspectives, and insights on the challenges environmental attorneys and related professionals in water law are facing today.
Get comprehensive information and real-world solutions to navigate these complexities as they cover topics such as:
Introduction and enforcement of the Clean Water Act
401 certification
WOTUS, Sackett v. EPA (Sackett II), and rule making
Environmental justice and the Clean Water Act
The Colorado River negotiation
Interactions between the CWA and other laws
The interrelationship between climate change and water resources
With so much going on in water law, you won’t want to miss this year’s program. Through incisive, balanced discussions from subject-matter experts, we’re covering everything from PFAS to 401 certification to climate change.
Be part of the conversation! Join us via live webcast for this in-depth course and learn about not only recent programmatic, litigation, and regulatory developments affecting the protection of the nation’s waterways and wetlands, but also the larger, emerging issues that will strongly influence water law and practice in the years to come.
Don’t miss this unique program! With a collegial approach and balanced discussions, you will come away informed and ready to handle the next clean water issue in your practice.
Join us for our upcoming program, Clean Water Act 2024: Law and Regulation, via live webcast on October 17-18, 2024! To learn more about this program and to register for the live webcast, click here.
“Drones are coming. Lots of them. They are fun and useful. But their ability to pry, spy, crash, and drop things poses real risks. Free-for-all drone use threatens air traffic, people and things on the ground, and even national security.” 1
Several industries are using unmanned aircraft systems, popularly known as drones, to support their business activities. Construction managers and surveyors use drones and specialized software to map construction sites,2 railroad and pipeline routes, and to monitor construction activities. Agricultural interests use drones to monitor crops for disease and adequate irrigation and also to apply insecticides and fertilizers. Realtors regularly use drones to enhance marketing of properties. Insurance adjusters and inspectors use them to investigate damage and to ascertain continued compliance with safety standards. They have become a regular tool of television stations supplementing ground-based and helicopter coverage of news stories. As the Federal Aviation Administration (FAA) gradually develops regulatory criteria for beyond-line-of-sight use, drones are taking on bigger roles in the inspection of pipelines, electric transmission lines, and railroads. Law enforcement agencies regularly use them for surveillance, hot pursuit, search and rescue, and monitoring riots and demonstrations.3 E-commerce vendors continue to work on package delivery drone systems. For lawyers, drones not only facilitate certain law-practice activities, but they also involve operators who need legal counseling and representation.
Join us in Washington, D.C., for ALI CLE’s upcoming program, Clean Water Act 2024: Law and Regulation. Attend in-person or live via webcast on October 17-18, 2024. Learn more about the program and stay in touch for program updates here!
The typical civilian drone is a quadcopter powered by rechargeable lithium-ion batteries, weighing about three pounds, costing from $600 to $12,000 depending mostly on camera quality and flexibility. A quadcopter has four rotors and flies more or less like a helicopter, able to hover, take off and land vertically, and maneuver sideways and backwards as well as forward. The Chinese firm DJI controls 70 percent of the market for small quadcopters with its Mini, Air, Mavic, and Inspire models.4 None of these vehicles of this class has endurance greater than 35 or 40 minutes, a characteristic that constrains their utility for some applications. Their top speeds rarely exceed 30 or 40 knots and their ceilings (maximum altitude) are around 1,000 feet above ground level. A few more expensive models, costing tens of thousands of dollars, are marketed for specialized functions requiring greater endurance and range. They typically are fixed wing configurations.
All of the commercially useful models carry high-quality cameras, as good as or better than the latest iPhone camera, and sophisticated control and navigation electronics that permit them to hover in place, orbit around a target selected by the operator, and return on command to a spot defined by longitude and latitude coordinates recorded when they take off.
They are flown by an operator standing on the ground using a small console with a video screen and joysticks. Higher end models also can follow an object selected by tapping on the operator screen and perform other maneuvers likely to produce captivating video. Full-motion video of HD quality and still images can be streamed in flight and/or saved on a memory chip. They typically use unlicensed frequency bands such as Wi-Fi for both the control link and for video feed. They know where they are over the ground by integrating inputs from GPS and photographic sensors.
Drone Law
Regulations promulgated by the FAA govern drone operation. They are contained primarily in Part 107 of the Federal Aviation Regulations,5 supplemented by Part 48 relating to registration of aircraft.6
Part 107 covers small drones—those weighing more than 0.55 pounds and less than 55 pounds. These “UAS,” as the FAA calls them, must be registered,7 and may be flown only by persons having remote pilot certificates.8 Remote pilot certificates are issued to persons who pass an online test of relevant aeronautical, regulatory, and meteorological knowledge. The test is roughly equivalent to a private pilot test, though considerably easier.
Drones may be flown only within the line of sight of the operator or a separate observer communicating with the operator9 and can be flown at night only if they have anti-collision lighting systems.10 They may not be flown over people unless they meet certain design requirements11 and may not be flown higher than 400 feet above ground level.12 Special limitations apply to operations near airports.13 Recreational, as opposed to commercial, drone operations by drones weighing less than 0.55 pounds are subject to a more lenient set of registration and pilot-licensing rules.14
Interested in learning more about the use of technology and artificial intelligence? Stay in touch for updates and check out ALI CLE’s webcast, Smart Contracts? Using Generative AI for Legal Drafting, on September 19, 2024!
The FAA is still developing its regulations for operations beyond line of visual sight (BVLOS). Such operations are believed to be safe only if conducted within a comprehensive radio-controlled airspace management system: an “Unmanned Aircraft System Traffic Management (UTM) system.” UAS operators would be responsible for managing their operations safely within UTM constraints. Communication and coordination would occur through a “distributed network of highly automated systems via application programming interfaces (API), and not between pilots and air traffic controllers via voice.”15 The FAA’s Aviation Rulemaking Committee released its final report on BVLOS operations by drones on May 10, 2022.16 The agency published a Request for Comments in the Federal Register on May 25, 2023.17 The Federal Communications Commission (FCC) has proposed to open the 5030-5091 MHz band for communications associated with drone airspace management.18
To facilitate migration of drones into the National Airspace System, the FAA requires that all drones that operate after September 2023 be equipped with specialized transponders similar to, but different from, the ADS-B transponders already required on most manned aircraft.19 The drone transponders must broadcast drone identification and position information at one-second intervals. These signals are expected to be received and processed by a collection of private sector airspace management entities certified by the FAA.20
Airworthiness certification is required for drones weighing more than 55 pounds, automated fleet operations, drone flight beyond the range of visual line of sight, or sustained flight over people. Airworthiness certification is an elaborate process requiring testing and FAA approval of design and performance details,21 although the agency is offering streamlined airworthiness approval for some complete drone systems.22
State and local regulation is preempted except when it relates to traditional tort categories or unique local conditions.23 Nevertheless, attempts by municipalities are common. States are preempted from regulating aviation activities in the national airspace because the United States Congress has occupied the regulation of national airspace field. Uncertainty persists, however, on the lower limits of federal airspace.24
The FAA has issued guidance on preemption.25 Preempted state laws include regulations: (i) restricting flight altitudes or flight paths in order to protect the safety of individuals and property on the ground or aircraft passengers; (ii) designating “highways” or “routes” for UAS; (iii) regulating the selling or leasing UAS-related air rights above roadways; (iv) establishing a licensing scheme for UAS pilots; and (v) mandating safety-related equipment such as geo-fencing.
CLICK HERE to read the full article, which was originally published in ALI CLE’s The Practical Lawyer.
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