Tag Archives: taxes

Counting The “Pros” To Pro Bono Work: Law Firm Gift Giving & Tax Write-Offs

It’s the season for giving. But, instead of wrapping something under the tree, consider giving the gift of time.

Pro Bono. Three words that—in this economic uncertainty—no lawyer wants to hear.

Or maybe they do?

Pro bono is essentially providing legal services to poor, marginalized, or at-risk individuals, groups, and communities without pay in order to serve a higher purpose—the provision of justice.

Some say pro bono work is altruistic and therefore difficult to incentivize among attorneys. Economists at Princeton University, however, may disagree with this statement after a recent study.

“Molly Crockett, a psychologist at the University of Oxford in the United Kingdom, combined the classic psychological and economics tools for probing altruism: pain and money,” writes John Bohannan for Science magazine.

The scientist’s task? To find out who many electric shocks would be dolled out—and to whom—when money was at stake.

The pain given via electrode was deemed “mildly painful, but not intolerable.” And the price tags of each shock varied, from $0.15 to $15.

The randomly chosen “decider” in the trial was given a choice of number of shocks for money, and the shocks were either to the decided, themselves, or to another participant—although the decider always got the money.

Although we as society would like to believe that people would be willing to give up some sort of gain, financial or intrinsic, to avoid the distress of hurting somebody else, this idea has yet to be supported by previous scientific research, points out Bohannon.

In fact, the opposite result has been proven time and time again, as far back as the 1960s with Stanley Milgram, whose psychology experiments are some of the best known and widely discussed.

In 1961, Milgram sought to test our obedience to authority figures. He was motivated, in part, by the behavior of Nazi war criminals, many of whom were facing trial at that time, such as the infamous Adolf Eichmann.

Subjects in Milgram’s experiment were instructed to give a series of escalating electric shocks to an unidentified person in another room. The shocks ranged from 15 volts to 450 volts. Although the subjects were separated, they could communicate between the walls. Participants dolling the shocks could hear the (faked) reactions of their counterparts, which included screaming, banging on the wall, and complaints of heart conditions. After a while, the participant would hear nothing on the other side of the wall. Throughout the experiment, the subjects were not threatened or yelled at, rather, they were given stern and consistent instructions not to stop administering the volts.

So did they?

A (no pun intended) shocking 65 percent of the subjects followed orders and administered the final—and seemingly fatal—450-volt electric shock to the person in the next room.

But today, it finally seems possible that altruism—or at least incentivizing it within people—can exist.

In the more recent study, the results show that while participants did not like the pain of receiving a shock (they were willing to make about $0.30 less money per shock on average to receive fewer of them) people were willing to lose twice that amount, $0.60 per shock, to hurt an anonymous other less. The full results can be found online in the Proceedings of the National Academy of Sciences.

Fifty years later, society can sigh in relief that people are more altruistic than they first seemed in Milgram’s portrayal.

For lawyers, however, Pro Bono work is not actually altruistic. On the contrary, it can provide law firms with many profitable opportunities, among them:

  • Networking opportunities for lawyers
  • A chance to bolster a lawyer or firm’s reputation
  • Enhancing a positive firm culture of team-building
  • Boosting staff morale
  • Fundraising opportunity for a firm working with charities or other endownments
  • Enhancing skills and experience of younger lawyers
  • Providing leadership opportunities for younger lawyers
  • Attracting paying clients through high-profile pro-bono work
  • Attracting young talent who value a Pro Bono, idealistic firm culture

And, in the end, Pro Bono work is at tax write-off for law firms.

The Internal Revenue Service (IRS) writes about tax deductions for pro bono legal services:

“Although you cannot deduct the value of your time or services, you can deduct the expenses you incur while donating your services to a qualified organization.” 

Lahle Wolfe, About.com Guide, answers all your questions about similar tax deductions She writes:

“Before listing the types of expenses you may be able to deduct, they need to meet two IRS qualifications:

  1. The expense be incurred as a requirement in order to perform the service for the organization; and
  2. The services must primarily benefit the charity and not the taxpayer (but both can benefit.)

Examples of expenses you may be able to deduct, or partially deduct, include: cost of supplies needed to provide or perform the service that directly benefited the charity; travel expenses; and other direct expenses.”

Therefore, by serving those in need—including your own self-interests—your firm can get the deductions it needs. With ample online guidance about tax write-offs for pro bono work, there’s no excuse for not offering these services to your community.

It’s the season for giving, so sign-up to give pro bono work this holiday. Do it for both the philanthropy and the profit-seeking it inspires.

-WB

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Beefalos, Tigons, and the Hybrid Lawyer

Ever heard of the Beefalo? Tigon? Coydog? Pumapard (yes, that’s a real animal).

Since the mind-1800s, men have played god by creating hybrid animal crosses, such as the aforementioned: Beefalo (bison and domestic cattle), Tigon (tiger and lion), Coydog (coyote and a dog) and Pumapard (Puma and leopard).

It turns out that certain animal pairs are better together than alone. For example, in1847, the first zubron was born—a hybrid of domestic cattle and wisent (type of bison). Zubron are known to survive in harsh weather conditions and are amazingly strong. This is one of the reasons why they have been discussed as a more durable and efficient replacement for cattle.

Next, the “curly-hair-dog” or Mangalitsa is a highly specialized Hungarian breed created in 1833. This wooly pig that resembles a boar certainly won’t win any beauty pageants, but it does produce tasty, high-quality meat.

Some hybrid experiments were not as successful. The Zeedonk (Zebra and donkey), for example, Zorse (zebra and horse), Zebrule (zebra and mule), and Zony (zebra and pony) will likely never replace the real things. Zebroids, which look like horses with zebraesque stripes, in particular, are difficult to handle.

But different types of animals aren’t just genetic crosses. Sometimes they’re also socially compatible.

The Dallas Zoo recently added a Labrador retriever puppy into the cheetah cub den. Zoologists believe the pup will have a calming influence over the cats as they grow up in captivity.

Humans, too, experience beneficial hybridization. Certain combinations of seemingly unrelated skills can create the ideal career option.

Take, for instance, the lawyer-CPA.

“I think an accounting background gives somebody the opportunity to take a more global approach to the representation of a business,” says Stephen Kantor, who is both a CPA and a partner at the law firm Samuels Yoelin Kantor Seymour & Spinrad LLP.

He explains, “I stick to the law, although a lot of what I do involves accounting.” From the perspective of an attorney, Kantor is confident that a CPA designation provides additional insight into the industry of law.

And, with new tax legislation up for debate in Congress, it’s time lawyers brush up on their tax code.

The Ways and Means Committee plans to pass legislation that will rewrite the tax code this fall. The implications are significant for big business, especially those large corporations sheltered under a non-profit designation, reports Bloomberg Businessweek.

Sports leagues are specifically under fire. And, with football season just beginning, lawmakers have leaguers justifiably concerned.

Your firm’s biggest clients may have much at stake. So, if you’re not yet involved, it’s time to contact a group called the Business Coalition for Fair Competition, which has petitiond Congress for a more leveled playing field between companies paying income taxes and their competitors hiding as nonprofits.

The organization’s president, John Palatiello, said to Bloomberg, “There’s no question that there are significant revenue implications to this debate,” Palatiello said. Revenue that your lawyer-CPA hybrid should add up and mark down in your firm’s playbook and account book.

Hybridization has reached attorneys.

It’s time to find a lawyer with a ledger. If you can’t, create one. Send your lawyers back to school and your firm may be the first to develop the ever-allusive Cabbit (a mythical cat-rabbit), which—let’s face it—has enough cuteness to reap huge rewards.

-WB

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It’s A Good Time to Review Immigration Compliance

The Obama administration has cracked down on firms hiring improperly documented workers.  Approximately 1,000 companies have been notified they are to be audited for such possible hiring practices, per a Numbers USA report earlier this month.  (See link below.)  Since October of last year, the number of firms audited for I-9 compliance has totalled 2,338. (In addition to companies being fined for evading taxes or engaging in identity theft, improperly documented personnel have been let go from such places of employment.)

Last year, the U.S. Immigration and Customs Enforcement (ICE) levied a stiff penalty on clothing retailer Abercrombie & Fitch. The “better wear” firm faced a $1,047.110 fine settlement for violations of the Immigration and Nationality Act “related to an employer’s obligation to verify the employment eligibility of its workers” per the government website.

The fine was in settlement of a 2008 Form I-9 inspection of the chain’s retail stores in Michigan.  Most of the deficiencies were apparently technology-related.  The stores’ electronic I-9 verification system had some major glitches, but there was no case of any administrative staffer “knowing” that these hires had taken place.

As per the ICE site, “The company was fully cooperative during the investigation and no instances of the knowing hire of unauthorized aliens were discovered. Since the initial inspection, Abercrombie & Fitch has taken measures to revise its immigration compliance program, and has begun to implement new procedures to prevent future violations of federal immigration laws.”

Basically, companies have begun to take very seriously the filling out of form I-9 by each individual who is hired. 
“Employers are required to fill out and retain” these forms, as per the government site.

In a bid to safeguard the nation’s workplace for lawful workforce applicants, ICE has tweaked its approach and will be focusing mainly on employers suspected of knowingly hiring illegal workers. And, to that effect, they’ve been getting busy.  In 2009, ICE’s site mentions that they brought a record number of civil and criminal penalties against such employers.   This might be a good time to counsel your clients to scour their hiring protocol to ensure they are compliant.

To read the Numbers USA report, go here:

http://www.numbersusa.com/content/news/june-16-2011/1000-more-companies-be-audited-ice-possibly-hiring-illegal-aliens.html

To read more on the Abercrombie & Fitch fine, see the US Immigration and Customs Enforcement press release here: http://www.ice.gov/news/releases/1009/100928detroit.htm

To explore how you or your client can self-audit for the I-9 compliance, check out the Center of Competitive Management’s audio conference, here. (They offer a money-back guarantee.): http://www.c4cm.com/hr/i-9-selfaudit-in-14-steps-or-less.htm

-EM

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