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1. Jobs Act Reduces Tax-Exempt Leasing, But Offers
Potential Alternative Structures
For many large ticket lessors, the American Job Creation Act of 2004, Public Law No:
108-357 (Act) may as well have been called the Tax-Exempt Leasing
Repeal Legislation. President Bush signed the legislation into law
on October 22, 2004, and reduced lessor' volume in tax-exempt
leasing by about $15 billion to $18 billion per year. For background
of the change, see: New Treasury Proposal Would Crush Leasing to
Tax-Exempt Entities,
Business Leasing News (Feb. 2004) and sections 847 through 849 of
the Act. The sections begin on page 492 of the
Conference Report's
[pdf 1.3mb]
legislative
language. To explain relevant aspects
of the Act for lessors, this
article places heavy reliance on the summary of the Act
prepared by the staff of the
Joint Committee on Taxation.
The Act includes important retroactive provisions that reform
the tax treatment of certain leasing arrangements. It also limits
deductions on property leased to governments and other tax-exempt
entities. The provisions in the Act generally follow the provisions
in the House bill we described in a recent BLN article entitled:
As $155B Tax Bill Passes House, Leasing Tapped to
Cover Its Costs, Business Leasing News
(July 2004), except that the Act:
Expands the
definition of tax-exempt entities to include certain Indian tribal
governments,
Applies a
recovery period of 125 percent of a lease term to leases of certain
intangibles, and
Adds an
additional requirement that must be satisfied to avoid the
application of rules similar to the passive loss rules to a lease to
a tax-exempt entity.
Modification of Recovery Period
The Act modifies the recovery period for qualified
technological equipment (QTE), computer software, and section
197 intangibles leased to a
tax-exempt entity. The recovery period extends for the longer of (1)
the property's assigned class life (useful life in the case of
computer software, amortization period in the case of
intangibles), or (2) 125 percent of
the lease term. This modification will not apply to certain
short-term leases, including the short-term leases of QTE described
below. See: Leasing 101: What is a "QTE Lease
Transaction"?, Business Leasing News (Feb.
2003).
Redefining a Lease Term
The Act establishes a minimum cost recovery period of 125
percent of the lease term in the case of leases of tax-exempt use
property. It provides that the lease term includes all service
contracts and other similar arrangements that follow a lease of
property to a tax-exempt entity and relate to the same transaction
(or series of transactions) as the lease.
*Tip: Service
contracts and other similar arrangements include arrangements in
which "services" are provided in connection with the property in
exchange for fees that repay the lessor's capital investment in the
property. The Act does not appear to restrict the use of service
contracts alone (without any link to a lease).
The Act will not limit certain QTE lease deductions if a QTE
lease to a tax-exempt entity satisfies the present-law 5-year
short-term lease exception for leases of QTE. The Act further
provides that the lease term does not include any option for the
lessee to renew or extend the lease for up to 24 months. To qualify
for this lease extension, the rents paid during the renewal or
extension must be based upon fair market value rental determined
at the time of the renewal or extension.
Deduction Limitation
When a lessor/taxpayer leases property to a tax-exempt
entity, the lessor/taxpayer may not claim deductions from the lease
transaction in a taxable year in excess of the lessor's/taxpayer's
gross income from the lease for that taxable year unless the
transaction satisfies specific requirements described below.
Deductions related to a lease of tax-exempt use
property:
Include any
depreciation or amortization expense, maintenance expense, taxes or
the cost of acquiring an interest in, or lease of, the leased
property,
Apply to
interest that is properly allocated to tax-exempt use property,
including interest on any borrowing by a related person where the
lessor uses the proceeds to acquire an interest in the property,
whether or not the borrowing is secured by the leased property or
any other property, and
Carry forward
to the following taxable year to the extent disallowed in the
current year.
The lessor/taxpayer may deduct previously disallowed
deductions and losses when the lessor/taxpayer completely disposes
of its interest in the property.
Certain Leased Property Not Subject to
Limitations
The deduction limitations do not apply to property leased to
a tax-exempt party if the lease satisfies all of the four
requirements described below. In addition, the lessor/taxpayer must
always acquire and retain significant and genuine attributes of an
owner of the property, including the benefits and burdens of
ownership. The requirements are generally stated as
follows:
(1) Limit Monetization of Obligations. The tax-exempt
lessee does not monetize its lease obligations in an amount that
exceeds 20 percent of the taxpayer's adjusted basis in the leased
property at the inception of the lease.
*Term to Know: Monetization
refers to a set-aside, or expected set-aside, that benefits the
taxpayer or any lender, or benefits the tax-exempt lessee in order
to satisfy the lessee's obligations or options under the lease.
A lessor may be able to mitigate credit risk and still
not violate the monetization requirement if it can
demonstrate that the credit risk demands greater protection for the
lessor regardless of the type of lease. In such cases the tax-exempt
entity may, subject to authorizing Treasury regulations, monetize
its lease obligations or options in an amount that ranges from 20
percent to 50 percent of the lessor/taxpayer's adjusted basis in the
leased property.
(2) Maintain Equity Investment. The lessor/taxpayer
makes and maintains a substantial equity investment in the leased
property. The tests require that the lessor/taxpayer:
Make an
unconditional, at-risk equity investment in the property of at least
20 percent of the taxpayer's adjusted basis in the leased property
from the inception of the lease (and does not shift the risk of loss
in the value of the property to another person without suffering a
corresponding reduction in the at-risk amount);
Maintain such
equity investment throughout the lease term (unless the lease term
is 5 years or less); and
Expect , at all
times during the lease term, the fair market value of the property
at the end of the lease term to equal at least 20 percent of such
adjusted basis of the property (unless the lease term is 5 years or
less).
*Tip: While
these tests vary somewhat from the tax guidelines under Rev. Proc.
2001-28, they seem to mirror the conceptual thinking that requires
true lessors to make and to maintain during the lease term an
at-risk investment with a value of at least 20 percent of the
original cost of the leased property. See: Leasing 101: What are the
"Tax Guidelines" and
"Revenue Procedure 2001-28"? Business Leasing News (March 2003). Note that
lease transactions with certain circular cash flows or protected
equity investments (that is, where minimal or no equity risk exists)
will fail this requirement without regard to the amount of a
tax-exempt lessee's monetization of its lease obligations or
options. For example, a lease will likely fail to meet this test if
a lessee makes a loan to the lessor/taxpayer or lender that is, in
turn, deployed in the lease transaction in place of their own funds.
See: Conference
Report
[pdf 1.3mb]
at page 492.
(3) Lessee Retains Minimal Risk. In the case of a
lease of more than 5 years, the tax-exempt lessee does not bear more
than a minimal risk of loss except under a lease with term of 5
years or less. Generally, a lessee accepts the risk of loss as
follows:
Minimal (acceptable) risk of loss
retained if the lessee is
obligated to (i) pay rent and insurance premiums, (ii) maintain the
leased property, (iii) perform other similar conventional
obligations of a net lease, and (iv) according to the legislative
history, respond to unexpected events such as paying stipulated loss
value to the lessor/taxpayer upon a casualty loss or a material
default by the tax-exempt lessee.
Excessive (unacceptable) risk of loss requirement
not adversely affected if a
lessee agrees to provide put options, residual value guarantees,
residual value insurance or service contracts.
(4) No Purchase Option Other Than At Fair Market Value.
Generally, a tax-exempt lessee must not have an option to
purchase leased property for any purchase price other than the fair
market value of the property determined at the time of
exercise.
*Tip: This
requirement does not apply to property with a class life of seven
years or less or to any fixed-wing aircraft or vessel. It requires a
real economic risk on the lessee's and lessor's part that neither
can quantify until the lessee exercises its purchase option. This
provision may impair budgeting and planning of a tax-exempt entity
and severely limit its interest in this type of lease
transaction.
TRAC Clauses Unaffected
The deduction limitation provision will not alter the
treatment of any qualified motor vehicle operating agreement within
the meaning of section 7701(h) of the
Code. In the case of any such agreement, the second and third
requirements provided by this provision (relating to taxpayer equity
investment and tax-exempt lessee risk of loss, respectively) will be
applied without regard to any terminal rental adjustment clause
(TRAC).
Effective Dates
The new tax-exempt entity provisions will be effective for
leases entered into after March 12, 2004, but the Act provides some
exceptions to the general effective date:
The provision will not apply to property located in the
United States that is subject to a lease with respect to which a
formal application (1) was submitted for approval to the Federal
Transit Administration (FTA)-an agency of the Department of
Transportation-after June 30, 2003, and before March 13, 2004, (2)
is approved by the FTA before January 1, 2006, and (3) includes a
description and the fair market value of such
property.
*Action Item: For
any pending deal with the FTA, the parties must act immediately to
obtain approvals, if feasible, by year's
end to avoid the limitations of the Act.
The provisions relating to coordination with the
like-kind exchange (see memorandum at the end of this article) and
involuntary conversion rules are effective with respect to property
that is exchanged or converted after the date of
enactment.
The provisions relating to section 197 Indian
tribal governments are effective for leases entered into after
October 3, 2004.
*Technical Point: Legislative history indicates the Act does not affect or
alter the scope of tax law applicable to transactions entered into
prior to the effective date of these provisions.
While the Act fundamentally alters large ticket leases of
tax-exempt property, lessors will need to study the extremely
complex provisions of the Act before raising the white flag.
Nonetheless, the Act will turn the page in the leasing industry's
story to yet another new chapter on tax-exempt leasing. Despite all
of its restrictions, the Act leaves open the potential for
structuring new deals that demonstrate real economic risk and reward
for lessors beyond the impact of tax benefits. For a more detailed
treatment of this subject, see:
"American Jobs Creation Act of 2004"
Re: New Tax Provisions for Leases to Tax-Exempt
Entities.
Thanks to our Patton Boggs LLP tax
partner, George Schutzer, for drafting the
memorandum that I used when writing this article and editing my
work. Feel free to e-mail George or me
for further information
or assistance.
2.
Credit Analysts Search for Hidden Financial Risk
Risk management has become the watchword of credit analysts
following the alleged wrongdoing of Enron Corp., other corporate
accounting scandals and serious media questioning of off-balance
sheet leasing. One trade credit insurer, Altrius Trade Credit
Insurance, recently published its "10 Hiding Places For Business Credit Risk," Risk Management Forum (Sept. 2004) for the purpose of helping
credit analysts spot unseen debt.
Here are five tasks or inquiries of the 10 mentioned by the
insurer, enhanced for leasing and lending, that may prove fertile
ground for argument or valid credit due diligence.
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Capitalization. Evaluate how the lessee
or borrower capitalizes its company and what access it maintains,
or can obtain, to capital. Determine the sources, cost and
structures of its capital and the interaction, if any, of the
capital providers with your proposed lease or loan
transactions.
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Managing Leverage with New Forms of Debt.
Review various convertible debt instruments, mezzanine debt or
other alternative types of leverage to measure their impact on
ratios in debt arrangements of the company, the interaction, if
any, of these transactions with your proposed lease or loan, and
the extent to which these alternative forms of leverage may or may
not count as equity. Apply industry or agreed debt/equity ratios
to test how your proposed lessee or borrower manages debt. See
article 5 below: Leasing 101: What is a
"Debt-Equity Ratio"?.
-
Off-Balance
Sheet Transactions. Determine whether operating leases should
be treated as capital leases or whether capital leases should be
treated as operating leases.
*Comment: Altrius misses
the boat on this point. The thrust of this diligence does not seem
to be to second-guess the characterization of a lease, but to read,
understand and incorporate into credit analysis the liabilities, if
any, associated with off-balance sheet leases. Few lenders or
lessors overlook this issue although the off-balance sheet treatment
of leases remains controversial. See: Is Off-Balance Sheet Leasing on Its Last
Legs?, Business Leasing News (Oct. 2004).
-
Financial Engineering with SPE's and
JV's. Find out whether companies set up their related
entities to assist in financing to customers and the impact on the
parent's balance sheet. Check whether your customer has properly
applied an Interpretation by the Financial Accounting Standard
Board (FASB) commonly called FIN 46(R) (Interpretation 46(R),
Consolidation of Variable Interest Entities (revised December
2003)-an interpretation of ARB No. 51). See: FIN 46R Clarifies Off-Balance Sheet Issues,
Business Leasing News (Feb. 2004).
-
Revenue Recognition and
Measurement. Review the timing of when the prospective
borrower or lessee books revenue. Inquire whether the customer
recognizes revenue too soon or too late and whether the amounts
that should be recognized have been accurately reported in the
customer's financial statements. For internationally active
companies, assess how currency fluctuations affect earnings. Check
if swap transactions overstate revenue and add no unrealized
value. Stay tuned to changes of FASB's accounting guidance on
revenue recognition. See: Leasing 101: What is "Revenue Recognition"?,
Business Leasing News (May 2004).
*Tip: Credit risk analysis
seems to contain elements of art and science. It requires knowledge
and experience to do it well. Whether you consider 5 factors or 50
factors in evaluating a lessee or borrower credit risk, stay current
with changes in accounting principles and business structures to get
the most bang out of your credit due diligence buck. That way, if a
lessee or borrower that provides you financial information is hiding
financial irregularities, you will have a good shot at finding
them.
3.
Congress Doles Out
$138 Billion in Tax Benefits in Jobs Creation Act of 2004
When Congress passed the
American Job Creation Act of 2004, Public Law No: 108-357 (Act), it made such substantial and important tax changes that the bill rivaled amendments made nearly two decades ago in the Internal Revenue Code of 1986 (IRC). Signed by President Bush on October 22, 2004, the bill contains about $138 billion in new tax breaks for businesses, farmers and individuals, including a new tax deduction for certain manufacturers. It repeals the FSC/ETI regime, institutes about $95 billion in taxes and penalties, makes around 274 IRC amendments (44 or so of which take effect immediately), and includes approximately 60 revenue raisers in a 650-page
Conference Report
[pdf 1.3mb]
explaining legislative language. It simplifies international taxation, retains increased small business deductions for two more years and boosts tax shelter penalties.
Due to the 650-page length of the Act, BLN cannot describe all of the provisions that may affect your business. However, to help you evaluate some key parts of the law, lawyers of Patton Boggs LLP have prepared the following memoranda:
-
A Summary of The American Jobs Creation Act of 2004 — key
provisions of the Act described in five pages; includes summaries of the replacement of the FSC/ETI program with reduced tax rates for manufacturers, other international tax law simplification and benefits, and a brief summary of other business and farming tax benefits.
American Jobs Creation Act Alert - S Corporation Reform and Simplification Provisions Related to Community
Banks — new comprehensive changes to the current law on S-corporations, including the increase in the permissible number of shareholders from 75 to 100 and relaxation of tax filing and retirement account rules.
American Jobs Creation Act Provisions on Charitable Deductions — new provisions change how a taxpayer determines the allowable deductions for donations of vehicles, patents and other intellectual property and new requirements for noncash gifts to charity.
New Tax Act and Attorneys Fees — describes provisions intended to ensure that plaintiffs who win awards or settlements in certain civil rights cases and other lawsuits not pay income tax on parts of the
recovery that are applied to pay court costs and attorneys fees.
Tax Shelter Legislation — new and reinforced rules concerning tax shelter formation and reporting requirements.
Deferred Compensation Overhaul — changes to rules on deferred compensation affecting senior management and other employees.
*Warning:
The Act makes comprehensive changes to almost every significant area of income tax law. While these summaries will certainly provide a good start, as lessors and lenders, borrowers and lessees, you should consider not only the impact of the Act on your own tax positions, but also the effect on your existing and future transactions.
I would like to thank,
George Schutzer, for editing this article and taking a leading role in writing the memos described above.
4.
Case & Comment: Jobs Act
Ends Sutherland Lumber Aircraft Deductions
The
Job Creation Act of 2004,
Public Law No: 108-357 (Act) (see
Article 1
and Article 3
above), legislatively terminated the ruling in the case of
Sutherland Lumber-Southwest v. Commissioner of the
Internal Revenue Service, 114 T.C. 197 (2000), aff’d 255
F.3d 495 (8th Cir. 2001). In essence, the Act ended most federal tax
deductions that companies have taken based on the Sutherland
Lumber case. The deductions arise from the cost of
maintaining and operating corporate aircraft related to the use of
corporate aircraft by employees for personal reasons.
Background: Selected
executives often use corporate aircraft for personal use as a fringe
benefit. Such personal use includes traveling with their families on
vacations, taking trips to outside board meetings and attending
charity functions. Executives generally receive some income
attributable to this fringe benefit under a formula called the
Standard Industry Fare Level (SIFL) rates (that is, cents-per-mile
rates and terminal charges). See:
Treas. Reg. 1.61-21(g)(5).
However, the costs to operate and maintain the aircraft can
far exceed the income imputed to the executive. Conversely, it is
possible that an employee will derive income greater than the actual
operating costs of the aircraft.
In the Sutherland Lumber case,
Sutherland, as the taxpayer, used its corporate aircraft primarily
for business travel as described in
section 162(a)(2). Occasionally,
certain employees also used the aircraft for vacation flights.
Sutherland calculated and reported the amount of imputed income for
the employees’ vacation flights according to SIFL rates. Although
these valuations were significantly less than the cost of providing
the vacation flights, Sutherland deducted the full cost of the
flights. The IRS disallowed Sutherland’s deductions for the amount
of the expenses for the vacation flights that exceeded the amount
Sutherland treated as compensation and as wages to the employees.
The Sutherland Lumber case tested the amount of
deductions that a company could take with respect to non-trade or
business flights. For more background on the controversy, see:
Taxing Corporate Aircraft Use,
By Roy Whitehead, Pam Spikes, and Marilyn Clarkson,
The CPA
Journal (May 2003).
Issue:
Could the IRS deny the deductions taken by
Sutherland based on
section 274(a)
of the Internal Revenue Code of 1986 (IRC)? Section 274 denies
deductions not sufficiently related to a taxpayer's trade or
business (that is, an otherwise allowable expenditures such as using
a corporate jet, incurred in providing entertainment, will not be
deductible).
Outcome: Rebuffing the IRS,
the Tax Court held that the disallowance provisions of section
274(a) were inapplicable because "section 274(e) was intended to
except certain categories of deduction from the effect of section
274." 114 T.C. 197, 203 (2000). In supporting the Tax Court
decision, the Court of Appeals in Sutherland Lumber
concurred and permitted the corporate taxpayer, Sutherland, under
section 274 of the IRC, to fully deduct the aircraft maintenance
expenses incurred in connection with the executive fringe benefit of
using the company jet. After the case, the IRS had little chance to
win its point and
decided not pursue the
issue in tax court.
Impact of the Act: For the
period starting with the Sutherland Lumber decision,
the deductions flowed smoothly for fringe benefits like those
enjoyed by Sutherland. However, section 907 of the Act legislatively
reversed the decision in Sutherland Lumber effective
October 22, 2004. The Act stops deductibility of such corporate
expenses when an executive uses the corporate aircraft for
entertainment, amusement, recreational activities or facilities
unless the activity directly relates to the taxpayer’s trade or
business. The Act left in tact other deductions for personal use of
corporate aircraft such as attending outside board meetings.
Employers will now be able to deduct expenses for directors, 10
percent (or more) owners of public or private companies and certain
significant officers such as the president, CFO and controller
only to the extent that such personnel receive taxable income
for the fringe benefit. Employers will not be able to deduct more
than their cost even if the employee receives more income than the
employer’s cost.
*Comment:
Because the Act applies to deductions for
operating expenses and depreciation, as an owner or user of
corporate aircraft you should consider limiting personal use of
qualifying corporate jets, especially in the first few years of
taking bonus depreciation, or at least computing the real after-tax
cost of such use. It’s likely that the reduction in bonus
depreciation attributable to personal use of the company’s jet could
result in a very stiff cost to the shareholders, far beyond any
compensation taken by the high-flying executive. Although this
change will not affect aircraft operators who do not use their
aircraft for personal reasons, the Act will affect all other
operators by imposing complex requirements on determining which
aircraft expenses may be deductible. For more on this topic, see:
New
Law Changes Aircraft Fringe Benefit Taxation - Requires Planning To
Maximize Savings For Future Years,
by Advocate
Consulting (Oct. 26, 2004).
Thanks to our tax partner,
George Schutzer, for
editing this article.
5.
Leasing 101: What is a "Debt-Equity Ratio"?
In an era where legacy airlines have sky-high debt,
the debt-equity ratio plays an important role in evaluating
financial controls and statements. In the simplest sense, a
debt-equity ratio provides one indication of how a company is
handling its money. For airlines like Delta Air Lines, which came
perilously close to bankruptcy last month, its ratio looks pretty
grim.
The debt-equity ratio (also called the
leverage ratio or debt-to-equity ratio) generally means the number you
derive by dividing total shareholder equity by total liabilities. Stated
differently, it is the relationship between the total loan amount owed to the
lender(s) and the invested capital of the owner(s) or company's leverage
calculated by dividing long-term debt (debt with a maturity of over a year) by
common shareholders' equity.
A low ratio often indicates that a
company can handle more debt. Conversely, a high ratio shows that
the debtor should stop borrowing or reduce debt. For example, if a
company owes lenders of all types $10 million and it has shareholder
equity of $4,000,000, it has a ratio of 2.50 ($10MM/$4MM). To put
the concept in context, in September 2004, JetBlue Airways had a
debt equity ratio of about 2.26 and Southwest Airlines had a ratio
of about 0.95.
Acceptable ratios differ depending on the industry
and transaction, and the business model of the lender (that is, a high-risk
finance company may accept a higher ratio than a conservative money-center
bank). As a general rule, industrial companies have debt/equity ratios ranging
from 0.5 to 1.5. A real estate transaction may have a high ratio. For example, a
building purchased for $100,000 with $20,000 cash and an $80,000 mortgage would
have a
debt-equity ratio of 4:1 ($80,000/$20,000).
The existence of a debt-to-equity ratio or
leverage is not always bad. It often forms an important part of a viable investment or debt management strategy. It can increase the shareholders’ return on their investment, provide a borrower with tax advantages from deducting interest and enable more capital investment in a business. However leverage is, in any case, a key indicator of financial health and the ability of a company to manage its liabilities.
6.
BLN Briefs: Merrill’s Positive Deal Trends Review; Aircraft Brokers and Air Carriers Beware of DOT
Merrill Lynch Issues Positive Trend Review
Summarizing key elements of its October 7, 2004, conference entitled "State of the Capital Markets," Merrill Lynch Capital shared some mixed news affecting equipment finance. As a result of "[l]ow borrowing costs, modest capital spending, and conservative growth initiatives," corporations now maintain record high levels of cash on hand. They have not used that cash to make significant new capital expenditures. Companies have now absorbed capital expenditures made during the "bubble years." Going forward, Merrill Lynch Capital sees a fundamental shift in the growth of the
gross domestic product (GDP) to companies (and away from consumers), including increased spending on equipment and software in the "post stimulus economy." For more information, see:
"Transaction Trend Review - **Special Edition**" (Oct. 2004) by the Corporate Finance Group of Merrill Lynch Capital and "Uncertain Outlook - Despite Piles of Cash, Businesses Get Stingy About Spending, The Wall Street Journal (S.W. Ed.), Page A:1, Col. 5 (Oct. 11, 2004).
Air Charter Brokers and Air Carriers Beware of DOT Enforcement
The Department of Transportation (DOT) put air charter brokers on notice that they may not hold themselves out as providing or arranging for air transportation without appropriate authority from the DOT. Otherwise, the DOT can and will impose civil penalties.
On October 8, 2004, the DOT published its
"Notice on the Role of Air Charter Brokers in Arranging Air Transportation" (FR Doc 04-23268 (Oct. 18, 2004). This guidance warns brokers that soliciting and directly contacting charter customers for air transportation may constitute common carriage requiring "economic authority" from the DOT (and an FAA permit). Civil penalties may be imposed up to $25,000 per violation per day. Enforcement actions could result from a failure of the broker to have proper authority to hold itself out as a principal or otherwise engage in air transportation as a common carrier. In addition, a broker that owns or leases an aircraft, sells charter flights on the aircraft and places the aircraft on the operating certificates of the licensed carrier has committed an unfair and deceptive practice or unfair method of competition in violation of
49 U.S.C. 41712. (p. 2). In addition, an air carrier under whose certificate the broker is selling transportation that knows or has reason to know of the broker's unlawful conduct is also engaged in an unfair and deceptive practice of unfair method of competition and will also face enforcement action. The DOT Notice follows a series of Consent Orders issued by the DOT in the last year in which brokers and air carriers have agreed to cease and desist their unlawful holding out activities and pay a hefty civil penalty for their violations. As an example of many enforcement actions in the last year, see:
Calypso Airline, Inc., Docket No. 2004-16943-29 (Aug. 12, 2004).
*Warning:
Air charter brokers without appropriate authority from the DOT should not hold out their services in any way that might create a false impression that they are the air carrier providing the transportation. Lessors and lenders should familiarize themselves with the DOT Notice and perform due diligence with respect to non-air carrier companies involved in providing air transportation services.
Thanks to my colleague, Greg Walden, a former Chief Counsel of the FAA, for editing this BLN Brief.
7.
Reader Feedback;
Recent Publications; Training Offered
Reader Feedback
Referring to the October edition of BLN,
one reader e-mailed: "We have spoken in the past and I wanted to tell you how much I enjoyed your recent newsletter, especially the article on Federal leasing."
I would like to sincerely thank the many readers of BLN who made the effort to visit with me at the Annual Convention of the ELA and express praise for BLN.
Here are some examples of a few comments.
One person who attended my true lease seminar at ELA began clapping when I introduced myself as the founder of BLN, and shouted, "BLN is a great newsletter; he does a great job."
Another person thanked me when we rode an elevator together for my "contribution to the leasing industry."
A lawyer shared that, although she did not know how she got the newsletter, she felt it was important to read it before her clients asked her about subjects covered in BLN. Finally,
one senior executive of a large bank leasing company confirmed
what he said a year ago - to keep up the fine work on BLN and that he regularly distributes all or part of BLN to his team and others in the marketing and other business areas.
While attending the Annual Convention of the ELA,
I received this e-mail about my book, Business Leasing For Dummies, which remains available: "David, I am halfway through your book. Just wanted to let you know that it has been immensely valuable already. Many things are truly coming together and I swear I feel 5 times more comfortable discussing leasing benefits and concepts now than I did before. I will e-mail when I’m finished if I have any questions. Thanks again. Hope the ELA meeting is going well."
Thanks so much for your support. If you have ideas for topics or other comments and suggestions, just click on my name in BLN, and send me an e-mail or call at the number set out below under my name.
Remember, we practice what we write and we would like you to think of Patton Boggs LLP to serve as your legal counsel, making available to you all of our resources, including the knowledge and insight we have gained from publishing BLN for 35 consecutive months!
Recent Publications
Here are two feature articles I wrote that were published in August 2004:
Beating True Lease Challenges: A Lessor’s Guide to Structuring and Defending True Leases,
LNJ Leasing Newsletter, by David G. Mayer (August 2004).
Bankruptcy Court Provides Guidance on True Leasing of Software , ELA ‘s
Equipment Leasing Today, by David G. Mayer (August 2004).
Training - Substance the Easy Way!
To help improve your business operations, deal processing and risk management, I offer private training seminars tailored to your specific needs at your designated location. My interactive and informative training includes topics I cover in BLN. I customize the format and content for your specific training needs - no canned programs.
After one of my private training sessions, here’s what one of the company’s senior managers said: "David, thanks again for an excellent presentation. You helped us tackle a complex, but important topic. Your expertise is first-rate and you are an excellent teacher to boot—that’s a rare combination."
Feel free to call me at (214) 758-1545 to discuss the possibilities.
8. About Patton Boggs LLP and My Practice
About Patton Boggs LLP and My Law Practice
I am a part of the Patton Boggs LLP Business Transactions Group in our Dallas office. Patton Boggs LLP is a law firm of about 400 lawyers located globally in multiple locations. The firm has extensive capabilities in over 50 distinct areas of legal practice that include leasing, secured transactions, personal property financing, securitizations, syndications, power project regulatory, development and finance disciplines, mezzanine financing, bankruptcy, real estate, public policy, litigation, intellectual property and technology law, and much more.
The leasing and secured transaction practices regularly involve the buying, selling, financing and leasing of real and personal property of all kinds, including business aircraft, energy, facility, production, power plant, technology and health care assets. We also structure, negotiate and close secured transactions of all kinds, tax-exempt and federal leasing arrangements, and corporate and portfolio acquisitions, among a full range of financing and acquisition transactions. Despite the improving economy, we continue to assist our clients with troubled deals and bankruptcies, including repossessions, lift stay actions, true lease contests, deficiency litigation, workouts and forbearance arrangements.
If I, or any other lawyer at Patton Boggs LLP, can help you with your legal or business challenges, feel free to call me at (214) 758-1545 or e-mail me at
dmayer@pattonboggs.com for information about any of these areas or the many others available at Patton Boggs LLP, or to discuss anything I have written in Business Leasing News. We welcome the opportunity to build a relationship with you!
A Message From the Founder,
David G. Mayer
Freedom From Want
My wife, Anne, and I recently visited the Norman Rockwell Museum nestled in the bursting fall colors of Stockbridge, Massachusetts. There we experienced the thrill of seeing one famous painting after another by Norman Rockwell. One of his works painted in 1943 is entitled "Freedom From Want." As described in Norman Rockwell’s Faith of America, by Fred Bauer, Artabras (1980), the painting depicts "the flavor, strength, and love of the American Family like few others. What is more traditional about our way of life than coming together at a familiar time, in a familiar place, to reminisce with parents and grandparents kids, grandkids, aunts, (and) uncles…in one happy cacophony of clattering dishes …that lasts long in to the night?" See pages 109-110.
At this time of year, not everyone is free from want. Indeed, this time of year begins the season of giving – of thanksgiving for what we have like the family in Rockwell’s painting. But, for many of us, we should also think about giving to others in need, so at least for the moment they too can have freedom from want.
In Habitat World (Sept. 2004), the magazine of Habitat for Humanities, the organization offered "10 Tips on Giving Wisely" that seemed instructive at this season.
*Tip : Consider these five tips that I take from Habitat’s suggestions to help others in need:
Plan for giving. Start thinking about charities, philanthropic causes and activities that inspire you to give to others and plan to do so in your budget.
Obtain information about these charities, causes and activities with the understanding that the IRS grants tax exemptions to 83 nonprofit organizations each day. A million such organizations operate across America today.
Keep records and
obtain official receipts for your gifts, noting that recent tax law changes will require more detailed record-keeping next year, in addition to requirements that already exist.
Volunteer your time and skills if you prefer, especially if you don’t have the financial resources to contribute money. Remember that you can also give personal belongings in good condition to appropriate charities or organizations.
Say "no" to those who ask for help but don’t fit your criteria or about which you lack sufficient information to validate the agency or organization and its purposes.
I am thankful for many positive experiences in business and in my personal life this year. Think about your own reasons for being thankful and make an effort, in your own way, to help others to have freedom from want. Have a great November and wonderful Thanksgiving.
Thanks to the BLN Staff
I extend a special thank you to my editors at Patton Boggs LLP for their comments on this edition, Atwood Jeter, a real estate/wind power associate, Margaret Anderson, Adrian McCoy
and Sheila McCoy, our great BLN staff, and our primary web site review partner,
Jeff Turner. The technical team, consisting in part of George Barber and Winston Jackson, provides you the easy-to-use e-mail navigation and artistic appearance of BLN. Claire Campbell, our Chief Librarian in Dallas, provides research for BLN.
All the
best,
David
David G.
Mayer
Founder
Business Leasing News
Patton Boggs LLP
2001 Ross Avenue
Suite 3000
Dallas, Texas 75201
(214) 758-1545 (phone)
(214) 758-1550 (fax)
E-Mail:
dmayer@pattonboggs.com
© David G. Mayer 2005
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