REPORT FROM COUNSEL

FALL 2005 ISSUE

BUSINESSES BEWARE: SENDING UNSOLICITED FAX ADVERTISEMENTS COULD BE COSTLY

By Jeffrey L. Rehmeyer, II and Candie L. Myers

Beginning on January 9, 2006, the Federal Communications Commission (FCC) will begin enforcing regulations, which make it unlawful to send an unsolicited advertisement to a facsimile machine without the prior written permission of the recipient. The current FCC standard permits businesses to send unsolicited faxes to clients or customers with whom the advertiser has an existing business relationship. However, the new regulations require advertisers to obtain prior written permission from both new and existing customers/clients. The sender of the fax must be clearly identified in either the top or bottom margin of each page or on the first page of the fax. Also, the sender's telephone number and the date and time the fax is sent must be included.

The penalties for sending unsolicited fax advertisements are severe. Through a private suit in state court, recipients of unlawful faxes can recover the actual monetary loss that resulted from the violation or up to $500 in damages for each violation, whichever is greater. State Courts also reserve the right to triple the damages for offenders who willingly or knowingly committed the violation. Additional remedies for disgruntled recipients include filing a complaint with the FCC, which has the authority to issue citations and fines against businesses for violations and suspected violations of the prohibition against unsolicited faxes. Individuals, however, will need to provide documentation of the unsolicited fax such as copies of the fax received. Complaints regarding unsolicited faxes can also be filed with a local consumer protection office or the Pennsylvania Attorney General's Office.

Although the FCC has delayed implementing the new regulations until January of 2006, it is imperative that businesses act now to avoid future violations. Simple steps such as faxing existing and prospective customers/clients consent forms now and modifying data collection procedures to obtain written consent at the time fax numbers are acquired will reduce the burden of implementing the changes once the new FCC regulations are in effect.

CGA has an extensive business/corporate law department and is committed to ensuring that our business and corporate clients remain well informed of and in compliance with new regulations. In the interest of doing so, we have created a complimentary facsimile form in compliance with FCC regulations. You can request a copy of the facsimile consent form via e-mail or phone by contacting Rick Hansberry at rhansberry@cgalaw.com or (717) 848-4900 extension 111. If you have any questions concerning the new FCC regulations, please contact Attorney Jeffrey Rehmeyer at (717) 848-4900 extension 115.

CAREFUL! NEW RULE AFFECTS THE DISPOSAL OF CONSUMER CREDIT INFORMATION

In the Fair and Accurate Credit Transactions Act of 2003 (FACTA), Congress required the adoption of rules for the proper disposal of consumer report information and records. The legislation was prompted by the growing risk of consumer fraud and related problems, including identity theft, that arise from the improper disposal of consumer information for which there is no longer a business need or purpose. FACTA and the rule stemming from it are meant to make it tougher for dumpster divers and miners of computer data to profit from sloppy disposal methods.

The Federal Trade Commission's Disposal Rule went into effect June 1, 2005, but affected businesses will have six months from that time to come into compliance. After that, failure to comply could trigger a range of civil enforcement actions by the Government or affected consumers.

While there is room for interpretation of the Disposal Rule's meaning, and how it should be applied as circumstances change, the Rule's essential standard is all in one sentence:

Any person who maintains or otherwise possesses consumer information for a business purpose must properly dispose of such information by taking reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal.

What Is Covered?

Consumer information covered by the Rule means any record about an individual, in any form, that is a consumer report or is derived from a consumer report. The definition includes a compilation of such records. If the information does not in some fashion identify individuals, however, such as information in aggregate form, the Disposal Rule does not apply. The obvious ways in which individuals may be identified are names, Social Security numbers, driver's license numbers, telephone numbers, physical addresses, and e-mail addresses. But even pieces of information that, by themselves, do not identify someone can, in combination, be regarded as identifying information.

Who Is Covered?

The Rule was intentionally written broadly to apply essentially to any "person" maintaining or possessing consumer information other than an individual who has obtained his own consumer report. Some entities that commonly obtain consumer credit information include consumer reporting agencies, lenders, insurers, employers, landlords, government agencies, mortgage brokers, financial institutions, and automobile dealers. This is far from an exhaustive list. If an entity can obtain a consumer report for one or more of the business purposes mentioned in the Fair Credit Reporting Act, it is safe to assume that the entity and the information it obtained are subject to the Disposal Rule. Disposal and records management companies also fall under the Rule.

Reasonable Measures

The Rule uses the flexible term "reasonable measures" to describe the duty regarding disposal because perfect destruction of consumer information in every instance is unattainable. Variables that may be taken into account include the sensitivity of the information, the nature and size of the entity's operations, the costs and benefits of different disposal methods, and ongoing changes in technologies. It is also noteworthy that the concept of "disposal" also covers the sale, donation, or transfer of any medium on which consumer information is stored.

The Rule provides a nonexhaustive set of examples of "reasonable measures." To prevent the reading or reconstruction of records in paper form, policies should be adopted, and their implementation monitored, for the burning, pulverizing, or shredding of such papers. The same approach is advisable for policies on destruction or erasure of electronic media. Since simply deleting information stored on a computer is usually insufficient to safeguard the information, use of some low-tech methods of destruction on some high-tech methods of storing information may be in order. For example, the Federal Trade Commission has suggested, at least for small businesses, the nearly cost-free method of disposing of electronic media by smashing the material with a hammer.

A covered person's due diligence also should extend outside the office when disposal of information is contracted out to a provider of such a service. One of the "reasonable measures" mentioned in the Rule refers to taking steps to determine the competency and integrity of the disposal company, such as reviewing an independent audit of the company, getting references, requiring that the company be certified by a trade association, or reviewing and evaluating the disposal company's policies and procedures on information security.

FIRM UPDATES

New Hire

Benjamin L. Pratt joined CGA in June, 2005. Ben practices in the areas of Employment & Labor Law, Construction Law and Municipal Representation. He focuses on representing employers in collective bargaining, assists school districts and private employers in all employee matters and provides guidance to contractors and subcontractors in construction trade issues.

Professional Development

Timothy J. Bupp completed his graduate degree L.LM in Taxation at the Temple University Beasley School of Law. Mr. Bupp is one of four CGA attorneys with this advanced degree.

Andrew M. Paxton recently attended a seminar--Advanced Techniques in 1031 Like-Kind Exchanges. This program discussed progressive strategies for deferring capitol gains taxes and depreciation recapture on investment real estate and like kind assets.

Gary M. Gilbert and Jon C. Countess recently attended seminars regarding identity theft. Discussion included a forecast for corporate losses, preventive strategies and the outlook for this increasingly legislated issue.

Events and Speaking Engagements

Lawrence V. Young will speak at the Pennsylvania Bar Institute's 10th Annual Bankruptcy Institute on Tuesday, September 27, 2005. The program will focus specifically on provisions of the New Bankruptcy Law.

Anne E. Zerbe will speak at two workshops on Employment Law & Benefits on September 20 and 21, 2005. Anne's presentation, "Protect Your Company; Protect Yourself" will include useful updates on employment law issues for employers and HR professionals, regardless of company size.

Benjamin L. Pratt presented two programs to the Keystone Chapter of the American Builders and Contractors Association. The first, "Picketing, Handbilling, Salting & Other Union Tactics" acquainted participants with fundamentals needed to deal with organized labor campaigns. The second program, "Prevailing Wage, Tips and Suggestions When Dealing with the Bureau of Labor Law Compliance" provided attendees with practical tips for dealing with the the increasing scrutiny of BLLC audits.

For more information on attending upcoming programs or regarding any firm announcement, please contact Nikki A. Rovito, Director of Marketing at (717) 848-4900, ext. 139.

GIFTING AS AN ESTATE PLANNING TOOL

By Timothy J. Bupp

It is well recognized that there is no substitute for good estate planning. Preparing a will, a durable power of attorney, and a living will are among the most important things that a person can do to protect their families and safeguard the value of their estates.

Less talked about, but equally advisable for many people, is the use of gifts during one's lifetime as a method for estate planning. Apart from the intangible benefits that flow from the fact that, as the saying goes, it is more blessed to give than to receive, gifting can have very beneficial tax, estate planning, and elder law planning effects.

Gifts reduce the size of the donor's estate that will be subject to court administration, thereby cutting probate costs and potential estate tax liability. Gifting also can provide savings on income taxes where income-producing property is given by an individual in a high income tax bracket to someone in a lower tax bracket.

Gifts do not trigger income tax liability for the recipient. However, the original cost, or basis, of the gift remains for the recipient what it was for the donor. As a result, if the recipient later sells the property, he generally will owe capital gains tax on the difference between the donor's basis and the sales price.

As for the gift tax, the starting point to consider is that the federal Government levies the tax on transfers of real or personal property made during the giver's lifetime where something of similar value is not received in return. For tax purposes, the dollar value of a gift is the fair market value of the property when it is given, less the fair market value of anything received in return. The donor is liable for any gift tax that is due, but if the donor does not pay the tax the donee becomes personally liable.

An annual exclusion of up to $11,000 is available for transfers to other persons without payment of the federal gift tax. Rather than pay the gift tax on gifts over $11,000, the donor can choose to exempt as much as $1 million in gifts above this exclusion over his lifetime. The donor does not need to file a federal gift tax return for gift amounts less than $11,000. Because the exclusion amount is per donee, any one donor actually can make gifts in a large total amount, without incurring a gift tax, by giving to many different recipients. For a married couple, the annual exclusion is $22,000 per donee.

There is also an unlimited marital deduction provision in the federal gift tax law, such that no gift tax is due, and no return need be filed, for gifts between spouses in any amount. Also excluded from the gift tax are amounts paid by a donor to a qualified educational institution for another's tuition, or to a health-care provider for someone's medical services. Gifts to qualified charitable, religious, and educational entities, government agencies, and many organizations with tax-free status are not subject to the gift tax.

This article merely introduces some of the benefits of incorporating a gifting program into one's estate planning. Estate planning techniques and tax laws are complex. For more information on the advantages of gifting and for all of your estate planning needs, contact the attorneys of CGA Law Firm.

PROTECTING YOUR HOME INVESTMENT--LET YOUR TITLE INSURANCE DO THE JOB

By Frank H. Countess

When someone buys a home, in addition to the land, bricks and wood, the buyer purchases the legal title to the property. If the title is defective, it could result in serious financial loss to the purchaser.

Title insurance protects the purchaser by ensuring that the title is free of judgements, liens, unpaid taxes, leases, fraudulent conveyances and other encumbrances. It protects against these and other untold hazards that may not surface until long after the purchase transaction has been completed, including a forged deed that transfers no title to the property, previously undisclosed heirs with claims against the property and legal documents executed under an invalid or expired power of attorney.

One important point for purchaser's to be aware of is that standard title insurance is issued in the amount of the purchase price of the home. Usually, it is the responsibility of the homeowner to purchase additional coverage as the property value increases over time. In today's housing market this is particularly relevant. Property values fluctuate with supply and demand and also as improvements are made to a home.

CGA real estate attorneys recommend a higher standard of title insurance to our clients; one that increases in value over time to provide greater coverage as the value of the property appreciates. This provides the homeowner with added peace of mind and relieves the burden of purchasing additional co-insurance. It is one way that CGA real estate attorneys protect their clients' interests and investment.

We want to make sure that the purchase of your home does not become a legal nightmare. For more information on the benefits of premier title insurance and other real estate concerns, please contact our law offices at (717) 848-4900.

RETIREMENT GUIDE FOR SMALL BUSINESSES

The Internal Revenue Service has created a free CD-ROM that is designed to help small businesses establish and maintain retirement plans for employees. Sections on setting up contributions, investments, and distributions have information not only from the IRS, but also from the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and the Social Security Administration. Some of the contents of the CD-ROM include:

* Rules for traditional and Roth IRAs, as well as other retirement plans;

* Investing your IRA;

* Publications and forms;

* Retirement calculator;

* Video clips on retirement planning;

* Frequently asked questions;

* Research material on IRAs; and

* Links to more retirement information on government websites.

You can order the CD-ROM online at www.irs.gov/retirement or call toll-free 800-829-3676 and request Publication 4395.