REAL PROPERTY EARTHQUAKE TAX RELIEF

The State of Alaska authorizes municipalities to offer tax relief for disasters affection real property owners.

The Matsu Borough and Anchorage have extended tax relief provisions for Disasters.  The Matsu Borough’s relief extends to “fires and natural disasters.”  In contrast Anchorage limits its relief to only “Fires.”

In both instances the relief extends only to homeowners of residential property.  The damage must exceed one half of the property value before the event.  You will need specific evidence to support your claim as provided in the ordinance.

The Matsu Borough requires you to file your claim within 60 days of the event.  In contrast Anchorage allows homeowners 120 days to file a claim.

If you or someone you know has suffered substantial earthquake damage, they should apply for real property tax relief.  However, time is running out quickly on claims arising from November’s earthquake.

 

Alaska Bar Assoc. — Bankruptcy Section

We just spoke at the Alaska Bar Association — Bankruptcy Section on the issue of the Alaska usury statute.  We had less than two hour notice to prepare for the presentation.  The materials are available at the Bar Office.

The attendees seemed surprised to learn that the Cox v. Cooper decision actually doesn’t have very wide sweeping effect.  There are seven state statutes that exempt whole classes of creditors and transactions from the decision.  Two Federal acts also limit the decisions scope:  The Banking Act of 1864 and the Depository Institutions and Deregulation and Monetary Control Act of 1980.  These two acts exempt all federal banks and state banks that compete against federal banks from state regulation.  Add to that the Marquette National Bank v. First of Omaha Service Corp. and Smiley v. Citibank decisions and all interest and fees for banks are exempt from state regulation.

The Cox v. Cooper decision only concerns local Alaska credit between private parties.  The sky is not falling.  Even though the creditors bar insists that it is.  I wonder how much money the local and national banks will pay in fees for amicus briefs on a local issue with no bearing on their operations?  Indeed, regulating hard money lenders could actually send more business to the banks.

Thank you for the invite, Michelle Boutin, Chair of the Alaska Bar Association — Bankruptcy Law Section.

 

Standard for Review of Trial Court Action

A superior court abuses its discretion by making a decision that is arbitrary, capricious, manifestly unreasonable, or . . . stem[s] from an improper motive.  The court uses the clearly erroneous standard when reviewing factual findings, including findings regarding a party’s income, imputation of income, and voluntary underemployment.   Factual findings are clearly erroneous when, after reviewing the record as a whole,  the court is  left with a definite and firm conviction that a mistake has been made.    The court reviews a superior court’s interpretation of the civil rules and the Alaska Constitution de novo.

Based upon this standard the Supreme court reversed a superior court ruling ordering the state to certify a ballot initiative on Set netting.

Alaska Fisheries Conservation Alliance.  sp-7073 Set Netters Ballot Initiative

 

Alaska School Funding Formula Approved.

sp-7075 School Funding Formula

The State’s local school funding formula requires a local government to

make a contribution to fund its local school district. The superior court held that this

required local contribution is an unconstitutional dedication of a “state tax or license.”

But the minutes of the constitutional convention and the historical context of those

proceedings suggest that the delegates intended that local communities and the State

would share responsibility for their local schools. And those proceedings also indicate

that the delegates did not intend for state-local cooperative programs like the school

funding formula to be included in the term “state tax or license.” These factors

distinguish this case from previous cases.

 

Anchorage Platting Board Appointment

Dear Clayton Walker, Jr.,

Congratulations!  Your reappointment for the Platting Board has been approved by the Assembly for another three years, extending to October 14, 2018.

Attached is the Assembly Memorandum No. AM 617-2015.

Thank you so much for your time, dedication and service!  You are greatly appreciated!

Sandy Johnson

Municipality of Anchorage — Clayton Walker, Jr.Current Planning

 

 

1099-C Tax on Debt Forgiveness

Foreclosure SaleThe federal tax code taxes debt forgiveness.  The tax code also requires those forgiving debts to file information returns to the IRS, using form 1099-C. So, you lose your house in a foreclosure sale and the bank sends a 1099-C for the loss they take on the house.    Many taxpayers and tax preparers simply include the debt forgiveness in the taxpayers return as income.   However, there are many exceptions to taxation.  Some of the most common are:

  1. Gifts, bequests, devises and inheritances that forgive debts;
  2. Qualified Student Loan forgiveness plans;
  3. Cash basis taxpayers with debt that would qualify as a business deduction;
  4. Price reductions after a purchase;
  5. Required business debts;
  6. Bankruptcy discharged debts;
  7. Forgiveness when insolvent.

If you don’t file your return timely, the IRS may file a substitute for return for you.  When the IRS prepares a return they won’t know if an exception applies.  The IRS will  tax you on the full amount reported.  To address the matter you need to file a corrected return where the IRS substitute was filed.

If you don’t report the income on your return it will probably be audited.  The IRS auditors have been adding huge tax bills to peoples return on this issue.  You use form 982 to claim your exemption from tax for debt forgiveness.  The IRS auditor may reject the claim of exemption.  To get relief from the bill you may have to file an appeal.  The time for filing an appeal to Tax Court is very short.  The advantage of tax court is that you don’t have to pay the tax to sue for a refund.   If your return was prepared without considering your exemptions we could assist in amending your returns.   For help in addressing amended returns, tax audits and appeals, give us a call.

Alaska Overtime — Professional Employee Exemption Doesn’t Cover Pilots

Alaska Overtime law requires covered employers to pay overtime to covered employees.  One exemption to the overtime law is the Professional Employee Exemption.  The old Alaska exemption was not the same as the Federal Exemption and was particularly vague.  The Alaska Supreme Court provided guidance on interpreting the old statute in Dayhoff v. Temsco Helicopters, Inc.,  848 P.2d 1367, 1371 (Alaska 1993).  In Dayhoff the court provided a four-part test to define whether an employee was an exempt professional.  Under Dayoff, an employee was an exempt professional if:

  1. the employee’s primary duty is to perform work requiring knowledge of advanced type,
  2. the work requires consistent exercise of discretion,
  3. the work [is] predominantly intellectual and varied, and
  4. the work [is] compensated on a fee basis.”

Under this test commercial pilots were exempt employees.  This position was previously affirmed in  Era Aviation, Inc. v. Lindfors,17 P.3d 40 (Alaska 2000). It was also the opinion other states had reached. Paul v. Petroleum Equip. Tools Co., 708 F.2d 168 (5th Cir. 1983); Kitty Hawk Air Cargo, Inc. v. Chao, 304 F. Supp. 2d 897 (N.D. Tex. 2004).  But these cases preceded the amendment to 29 C.F.R. § 541.301 in 2004.

The Alaska legislature amended the Alaska Overtime law (Alaska Wage and Hour Act) in 2005.  The legislature adopt the federal definition of this exemption.  However, the federal code of federal regulation implementing the federal definition was itself amended in 2004.  The new federal regulation restricted the exemption to employees in “professions where specialized academic training is a standard prerequisite.”   29 C.F.R. § 541.301(d) (2014).

Since the 2004 amendment of 29 C.F.R. § 541.301(d), every federal court considering whether pilots fall within the professional exemption has concluded that they do not, because commercial piloting does not require specialized academic training as a standard prerequisite. In Pignataro v. Port Authority, the Third Circuit Court of Appeals upheld a trial court’s determination that helicopter pilots did not qualify for the professional exemption under the Fair Labor Standards Act. The appellate court acknowledged the significant credentials required to become a Port Authority helicopter pilot: 2,000 hours of flying time, a commercial helicopter pilot certificate, a second class medical certificate, knowledge of the FAA’s rules and regulations, and a high school diploma or GED. But critically, none of those credentials involved the attainment of an advanced academic degree — the “pilots’ knowledge and skills were acquired through experience and supervised training as opposed to intellectual, academic instruction.” For this reason, the court concluded that the pilots were “not ‘learned professionals’ and . . . not exempt from the provisions of the [Fair Labor Standards Act].

Alaska Pilots are not exempt employees from the Overtime laws.  Accordingly, they are entitled to time and a half for any hours over 8 in a day or 40 in a week.  How many other professions don’t require specialized academic training as a standard perquisite?

Alaska Pilots Earn Overtime
Jerome Hoffman 2015.

No. 6966 S-14864/14883 Moody v. Royal Wolf Lodge

 

 

 

 

 

 

 

Purchased Property at Foreclosure Sale

Foreclosure SaleForeclosure Sale — Buyer’s Perspective

When people buy property at Foreclosure sales they often find that the house came with former owners still occupying the house.  How do you get them out?  In Alaska, you the new owner, must file an ejectment action, not a Forcible Entry and Detainer (FED) action.  The cases are substantially similar.  However, the FED matter provides very short statutory deadlines that normally is faster.  It is the wrong type of action and will likely slow the process.

 

 

Important Issues in Foreclosure Sales

There are two significant issues that resolve these matters.  First, does the buyer qualify as a Bona Fide Purchaser or just a purchaser.  When the sale is to a BFP the sale may only be set aside if the sale itself is Void.  If the purchaser fails to qualify for BFP status then a court may set aside the sale for any voidable reason.

Bona Fide Purchaser — Beware of Void Sales

Bona Fide Purchasers are third parties, wholly unrelated to the seller.  They are purchasers that buy at the sale without notice of any defenses to the sale.  Sometimes BFP is described as one that has an empty head and a white heart.  The court protects these from all but the following six categories of sale problems:

  1. The foreclosing party never had the power of sale conferred on them.
  2. The debtor was not in default.
  3. The debt was fully paid before foreclosure.
  4. The time and place of sale was never published.
  5. The price was so inadequate that it shocks the conscience.
  6. The foreclosure sale  proceeded despite a court order staying the sale, including an automatic bankruptcy stay.

If the sale is to the creditor in an offset bid, or to any party related to the creditor the sale may be subject to almost any attack that a debtor might find that would sound like it created an inequitable result.

Bank RESPA Violations

The recent changes in the Federal Real Estate Settlement Procedures Act, 12 U.S.C. 2605 (RESPA) have given rise to a host of new claims that the banks failure to follow RESPA regulations should invalidate sales.  The regulations at 12 CFR 1024.41 gave rise to HUD letter 2013-10.  Some debtors claim the banks violation of the regulations renders sales void.  However, 12 U.S.C. 2605(f) only provides for a private right of action.  The remedies are also limited to money damages, and costs against the loan servicer.  There are no provisions providing for voiding a sale or a right of action against a BFP.  The statute also addresses the scope of intended preemption — which they limit to only preemption of any conflicting state law notice periods.

The RESPA regulations creates many complicating requirements.  The proof issue on some elements are subject to factual interpretation.  Matters with subjective facts generally aren’t resolved short of trial.  For example, creditors can’t take action after a timely and qualified request is received until it is resolved.  A request is qualified if it has all the information necessary to evaluate the request.  These two issues are fact intensive and subject to a fact finder’s consideration of reasonableness in the creditor’s interpretation.   Debtors are using these issues to avoid tendering property when the bank buys the property.

Post Foreclosure Sale Representation

An Alaska Superior Court today joined both Alabama and Michigan courts in holding that RESPA violations do not state an adequate reason to find a sale void.  Coleman v. BAC Servicing, 104 So. 3d 195, 201 (Ala. Civ. App. 2012) Servantes v. Caliber Home Loans, Inc. 2014 U.S. Dist LEXIS 170667 (E.D. Mich., Dec. 10, 2014).  The debtor has an obligation to bring a preforeclosure action to  enjoin a sale and cannot void the sale later.  Wells Fargo Home Mort., Inc. v. Neal, 398 Md. 705, 922 A.2d 538 (2007); Lacy-McKinney v. Taylor, Bean & Whitaker Mort. Corp., 937 N.E.2d 853, 864 (Ind. Ct. App. 2010); Campbell v. Bank of Am., N.A., 141 So. 3ed 492 (Ala. Civ. App. 2012).

A BFP is entitled to possession as against any other person.  A.S. 34.20.090(b).  The trustee’s deed is conclusive evidence of sale compliance in a suit between a BFP and the prior owner. Id., Bauman v. Day, 892 P.2d 817 (Alaska 1995).

Real estate foreclosures, from either the debtor or creditor’s side, can be complicated by many things.  Having a lawyer in your corner to help navigate these issues is always helpful.  Our clients today were grateful for the outcome in their matter.  At the end of the day, the facts marshaled for our client, the legal research extending across the nation and our written and oral presentation skills delivered.