Steve Lewicky

by Steve Lewicky

Maryland Tax Changes

The Maryland General Assembly ended its annual legislative session earlier this month. Here is a quick summary of important changes to the state’s tax code:

Increased income taxes for high earners

Beginning in Tax Year 2025, personal income tax rates were increased to 6.25% on income above $500,000, and to 6.5% on income above $1 million.  In addition, a 2% tax surcharge will be imposed on capital gains received by taxpayers earning over $350,000 per year.  Taxpayers earning above $200,000 per year also will have the value of their personal deductions phase out depending on the level of taxable income above that threshold.

Sales tax on data services and IT services

For transactions on and after July 1, 2025, there will be a 3% sales tax on technology and data services, and related party transactions. Further guidance on the application of this new tax is expected from the Maryland Comptroller during June 2025.

No change to estate tax exemption

A proposed reduction of the Maryland estate tax exemption, from $5 million to $2 million, was not enacted.  The Maryland estate tax exemption remains at $5 million.

Increases to government fees and excise taxes

A number of government fees will increase, effective July 1, 2025, including: The vehicle emissions inspection fee will increase from $14 to $30; The cannabis sales tax will increase from 9% to 12%; The vehicle excise tax will increase from 6% to 6.5%; The sports betting tax will increase from 15% to 20%.

by Steve Lewicky

Federal Employment Law: Key Takeaways from Attorney Steve Lewicky

In this recent interview, attorney Steve Lewicky joins Brian Kuhn, Certified Financial Planner at Wealth Enhancement Group, to discuss the latest developments in federal employment law. From court rulings that impact thousands of probationary federal employees to the implications for government contractors facing early termination, this conversation is packed with insights for federal workers navigating uncertain times. Watch the full video below and read on for a detailed summary of the key takeaways.

Watch the full interview on YouTube

Federal Employment Law: Key Takeaways from Attorney Steve Lewicky

About the Speaker

Steve Lewicky is an attorney in Maryland focusing on business law, litigation, and federal employment matters. His firm, located in Howard County, Maryland, regularly advises government employees and contractors on their legal rights.

What’s Happening Right Now in Federal Employment Law?

According to Lewicky, his firm is fielding an influx of calls from both current and former government employees, as well as federal contractors, in light of recent developments. Two major federal court cases—one in Maryland and another in the Northern District of California—have resulted in temporary restraining orders preventing the mass termination of probationary federal employees.

The Maryland Case: A Turning Point

The Maryland recently ruled that the government cannot terminate large numbers of probationary employees without due process—specifically, without providing a performance-related reason or advance notice. Thousands of employees have received notices placing them on administrative leave or informing them of termination, but the court issued an emergency injunction due to the procedures that were employed.

The court ordered that employees be reinstated immediately, and the government was required to submit a written status report confirming compliance.

Can the Government Still Lay Off Federal Employees?

Yes, but only if proper procedures are followed.

Unlike private-sector employment—which is generally “at-will”—federal employment involves more protections. Government employees cannot be terminated arbitrarily, and different rules apply depending on whether someone is a probationary employee or not.

• Probationary Employees: Limited appeal rights. The probationary period may last 1–2 years and can apply to new positions even if the person has served in government for years.
• Non-Probationary Employees: Protected by the Merit Systems Protection Board (MSPB), which allows them to appeal terminations, request reinstatement, back pay, and in some cases, attorney’s fees.

Lewicky emphasized that even probationary employees have some appeal rights, and recent rulings show that courts are scrutinizing how terminations are being handled.

Reduction in Force (RIF): Another Legal Consideration

The government may conduct a reduction in force for budgetary or organizational reasons, but there are also strict rules:

• Advance notice must be given.
• Affected employees must be informed of job placement options.
• In some cases, states must be notified to offer support to displaced workers.

Again, Lewicky stressed that while RIFs are legal, failing to follow the proper process can make the actions unlawful.

What About Federal Contractors and Subcontractors?

Federal contractors are also facing increased uncertainty. While every contract is different, most contain a “termination for convenience” clause allowing the government to end the contract at any time—even if performance has been adequate.

However, when this happens:

• Contractors must cease work immediately.
• Contractors must document all costs associated with the wind-down.
• The government must compensate for incurred costs and unpaid work completed.

Lewicky noted that contractors should seek legal counsel immediately upon receiving a termination notice due to the complex and strict timeline involved in appealing or negotiating a fair settlement.

Legal Support and Consultations

Steve Lewicky’s firm offers initial consultations, either via Zoom or in person, to help federal employees and contractors understand their rights and options. They’re currently speaking with a high volume of individuals affected by these changes and are available to assist with legal strategy and appeals.

Conclusion

If you’re a federal employee or government contractor navigating recent changes, it’s more important than ever to understand your rights and the proper legal procedures. These recent court rulings show that the government must follow specific rules, even in times of large-scale employment changes. Whether you’re facing termination, administrative leave, or contract wind-down, speaking with an experienced federal employment attorney can help protect your interests.

 

by Steve Lewicky

Trump Administration Seeks to Void Union Contracts for a Large Portion of the Federal Workforce

On Thursday, March 27, 2025, President Trump issued an executive order seeking to end union representation for a large portion of the federal workforce. Later that day, eight federal agencies brought suit against unions representing a large swath of federal employees, seeking a court order declaring all existing union contracts between those unions and the plaintiff government agencies to be void, in light of the executive order.

In this lawsuit (U.S. Dept. of Defense, et al, v. American Federation of Government Employees, AFL-CIO, District 10, et al, W. Dist. Tex., Case No. 6:25-cv-00119), the Government asserts that a top priority of the Trump Administration since taking office has been “to improve the efficiency and efficacy of the federal workforce, and to promote the national security of the United States,” and goes on to allege that “[u]nfortunately…departments and agencies have been hamstrung…by restrictive terms of collective bargaining agreements” with government employee unions.” The government then argues that “inflexible [collective bargaining agreements] obstruct presidential and agency head capacity to ensure accountability and improve performance.”

Government employees at some core national security agencies, such as the FBI, CIA, NSA and U.S. Secret Service, have always been excluded from the right to unionize that was granted by Congress in the Federal Service Labor-Management Relations Act in 1978. Since the late 1970s, however, federal employees outside of those few exempted agencies have had the right to join unions and to engage in collective bargaining (though not the right to strike or to bargain over pay levels). Congress included in the 1978 statue flexibility for a future president to exclude employees of agencies beyond the FBI, CIA, NSA and Secret Service from the right to collectively bargain through unions, but only if the president makes a determination that an agency or department outside of the FBI, CIA, NSA or Secret Service has, as one of its “primary functions,” intelligence, counterintelligence, investigative or national security work that would be incompatible with permitting collective bargaining by its workforce. The statute does not define the terms “national security work” or “investigative work.”

In the new lawsuit, the Administration seeks to take away union and collective bargaining rights from employees at a broad range of agencies, including not only the Defense Department and the Department of Homeland Security, but also the Departments of Agriculture, Housing and Urban Development, Justice, Veterans Affairs and the EPA and Social Security Administration.  Notably, none of President Trump’s predecessors since the late 1970s have made such a finding for these other agencies, nor did President Trump do so during his first term.

The new executive order excludes police and firefighter unions from its scope, even though these functions would seem to fit within activities associated with national security. Commentators have noted that these law enforcement unions were the only federal employee unions that endorsed the candidacy of President Trump during the 2024 election campaign.

The Government filed its lawsuit in the Western District of Texas, Waco Division, which is one of the handful of federal courthouses across the country that has only a single judge — a Trump appointee. In Federal District Courts with more than a single judge, judges are assigned to new cases based on random blind assignment to protect against “court-shopping” by plaintiffs.  In single-judge Federal courthouses, there is no uncertainty about which judge will be assigned to a newly filed case, since there is only a single judge to assign.

The combined acts of declaring a large portion of the federal workforce to be ineligible for union representation, and then seeking a court order to void all contracts between those employees’ unions and the Government, carry a strong odor of union-busting. Government employee unions have been at the forefront of bringing lawsuits during the first months of the Trump Administration to challenge the legality of a large number of Administration actions. Elections have consequences, however, and one of these is to place in power a new Administration that can exercise discretion granted by Congress in previously enacted statutes. It will be interesting to see what level of review and scrutiny the federal court in Texas (and appellate courts) give to this executive order, and specifically the President’s determination that some agencies with core functions that seem to be outside the national security space are, in fact, performing national security work or investigative work.

by Steve Lewicky

Structuring the Purchase or Sale of a Business: Asset Sale vs. Stock Sale

There are three ways to structure the purchase or sale of a business: As a sale of a corporation’s stock or of a limited liability company’s member interests (generically referred to as a “stock sale”), as a sale of some or all of the company’s assets, or through a merger.  Each of these approaches offer its own advantages and considerations for Buyers and Sellers, including tax implications, liability exposure, and the relative complexity of the transaction.  Liability exposure can be a very important consideration, but in this article I will be discussing only the tax implications of selecting between an asset sale and a stock sale.

Tax Advantages to Buyers in an Asset Sale

Beyond gaining protection from assuming the liabilities of the acquired business, a significant benefit for the Buyer in an asset sale is the ability to step up the tax basis of acquired assets to their fair market value. This can yield substantial and ongoing financial benefit to the Buyer. The stepped-up basis mechanism allows Buyers to reset the tax basis of acquired assets to their purchase price, rather than inheriting the Seller’s existing tax basis. As an example, let’s consider a piece of manufacturing equipment:

In a stock purchase, if the original owner purchased the equipment for $200,000, claimed $150,000 in accumulated depreciation, and the equipment at the time of the acquisition has a fair market value of $120,000, the Buyer would inherit a tax basis of $50,000 ($200,000 – $150,000), would have limited future depreciation deductions, and would have a potential taxable gain of $70,000 if the asset is later sold at its $120,000 fair market value.  In an asset purchase, however, the Buyer would receive a new tax basis of $120,000 (the current fair market value), would gain access to fresh depreciation deductions calculated from the stepped-up basis, would minimize or eliminate taxable gain on any future sale at fair market value, and would generate higher annual tax deductions, thereby improving cash flow.  Stepped-up basis extends across various asset categories, including physical assets (buildings, equipment, and furnishings), intangible assets (patents, trademarks, and customer relationships), and goodwill.

For corporations in the 21% corporate tax bracket, the tax savings from stepped-up basis can be substantial. If a transaction includes $500,000 in stepped-up basis, the Buyer could realize tax savings of $105,000 over time, through increased depreciation deductions. These tax advantages often influence acquisition negotiations, since Buyers may be willing to pay a premium for assets due to the long-term tax benefits of stepped-up basis. This benefit has to be weighed against the Seller’s potential need for a higher purchase price to offset its increased tax burden in an asset sale.

Another benefit for the Buyer in an asset sale are opportunities for enhanced depreciation and amortization deductions, thanks to the step-up in basis. Depreciation applies to tangible assets such as buildings, equipment, and vehicles, while amortization applies to intangible assets (patents, customer relationships) and goodwill. Both mechanisms allow companies to deduct the cost of assets over their prescribed useful lives, reducing taxable income and generating tax savings.  As an example, let’s consider a transaction involving manufacturing equipment valued at $500,000, customer relationships valued at $250,000, and a commercial building valued at $1,000,000.  In a stock purchase, the Buyer will inherit the Seller’s existing tax basis. If the Seller has already claimed significant depreciation, the Buyer’s future deductions would then be limited. For instance, if the equipment has a depreciated basis of $100,000, the Buyer could only claim future depreciation on that amount, even though the Buyer presumably paid market value for the equipment in the acquisition transaction.  In an asset purchase, however, the Buyer can claim depreciation and amortization based on the full fair market value of the assets.  In the above example, the manufacturing equipment (valued at $500,000, with a 7-year depreciation schedule), would have annual depreciation of about $71,428, with an annual tax savings of about $15,000 at a 21% corporate tax rate.  That would be a tax savings over the depreciation period of $105,000.  The customer relationships (valued at $250,000 in this example, with a 15-year amortization schedule), would result in an annual amortization of $16,667, and annual tax savings (at a 21% corporate rate) of $3,500, for a total tax savings over the amortization period of $52,500.  The commercial building (valued at $1,000,000 in this example, with a 39-year depreciation schedule), would have annual depreciation of about $25,641, yielding annual tax savings of $5,285 at a 21% corporate rate, resulting in aggregate tax savings over the depreciation period of $210,000.

The tax code may provide further opportunities to accelerate these benefits through its bonus depreciation provisions. Current tax law allows for 100% first-year bonus depreciation on many qualifying assets, enabling immediate write-off of their entire cost. While this provision doesn’t apply to buildings or to most intangibles, it can significantly accelerate tax benefits for eligible assets.

The parties may state, in their purchase-sale agreement, an agreed upon allocation of the purchase price, which can affect the timing of tax benefits. Buyers often benefit from allocating more of the purchase price to assets with shorter recovery periods.  Any agreed-to allocation must be reasonable and supportable, however, in order to pass muster with the IRS.

Enhanced depreciation and amortization can create temporary differences between book and tax income, resulting in deferred tax liabilities. These enhanced deductions represent a significant financial advantage of asset purchases, often justifying higher purchase prices or providing additional negotiating leverage. The present value of accelerated tax savings can materially improve the Buyer’s return on investment and provide additional cash flow for debt service or business reinvestment.

Another significant financial advantage to an asset purchase is the ability to amortize goodwill for tax purposes. This is not available in a stock purchase. Goodwill emerges when a Buyer pays more than the fair market value of identifiable assets, reflecting the additional value attributed to intangible factors such as brand reputation, customer relationships, employee expertise, market position, and potential synergies. This premium often represents a significant portion of the purchase price in business acquisitions. Goodwill can be amortized over a 15-year period, generating substantial tax savings for the acquiring company.

If a Buyer acquires a business for $5 million, but the identifiable assets have a fair market value of $3.5 million. The $1.5 million difference represents goodwill. The tax treatment of this goodwill varies dramatically between asset and stock purchases. In a stock purchase transaction, the Buyer receives no tax benefit from the goodwill premium. While the goodwill is recognized for accounting purposes, it cannot be amortized for tax purposes, resulting in no tax deductions over the life of the asset. In an asset purchase transaction, however, the tax treatment can be far more advantageous. In the above example where there is $1.5 million in goodwill, there would be an annual amortization deduction of $100,000 ($1.5 million over 15 years), which would yield annual tax savings of $21,000 at a 21% corporate tax rate, and total tax savings over 15-year period of $315,000.  This tax treatment not only converts what otherwise would be a non-deductible purchase premium into tax-deductible amortization over the amortization period, but also allows companies to forecast tax benefits with certainty. The present value of goodwill amortization tax savings often justifies paying a higher purchase price.

To secure these tax benefits, Buyers must ensure that the allocation to goodwill stated in the purchase-sale agreement is reasonable and supportable, is based on proper valuations, documented in the purchase agreement, and is reported consistently on tax returns. While tax treatment allows for straight-line amortization, accounting rules require periodic impairment testing, which requires separate tracking systems, deferred tax accounting, regular monitoring and reporting, and compliance with tax and accounting requirements.

The goodwill amortization benefit represents one of the most compelling reasons Buyers generally prefer asset purchase structures. The ability to generate substantial tax savings over a 15-year period often influences both deal structure and purchase price negotiations.

Advantages to Sellers in an Asset Sale

Although the asset sale structure generally favors Buyers, Sellers potentially can receive a higher purchase price in an asset sale, to offset tax implications, and an asset sale gives a Seller the ability to retain particular assets or intellectual property.  If some but not all of the business assets are sold, then the Seller has the option of continuing to operate with its retained assets (if not prohibited from doing so in the purchase-sale agreement), and the Seller may have some flexibility in handling remaining liabilities of the business.

Tax Advantages to Sellers in a Stock Sale

Stock sales typically provide Sellers in corporate acquisitions with more favorable tax treatment than do asset sales, and Sellers therefore often prefer this transaction structure. Tax advantages come in the form of lower effective tax rates and simplified tax treatment. The fundamental tax benefit of a stock sale lies in its single-level taxation at preferential capital gains rates. When corporate shareholders sell their stock, they pay tax only once, on the difference between the sale price and their basis in the stock. Current federal long-term capital gains rates max out at 20%, but with additional state taxes that vary by state. Let’s take the example of a C-Corporation sale with a sale price of $5 million, and a tax basis of $3 million, resulting in a capital gain of $2 million.  With an asset sale, this transaction would result in double taxation.  First, the C-Corporation would recognize the $2 million gain that would be taxed at the federal corporate tax rate of 21%, resulting in a corporate tax liability of $420,000, and net proceeds to the corporation after this tax of $4.58 million.  Thereafter, if or when the proceeds are distributed to shareholders, the federal capital gains rate of 20% will be applied to this $4.58 million, resulting in shareholder tax liability of $916,000.  The combined tax burden at both levels of taxation in this example would be $1.08 million, resulting in an effective tax rate on the gain of about 67%.

The same transaction structured as a stock sale would result in a single level of taxation at the shareholder level.  In the above example, the $2 million gain would be taxed at the 20% federal capital gains rate for a total tax liability of $400,000, for an effective tax rate on the gain of 20%.  In this example, there would be a tax savings for the Seller of $935,000, comparing the tax sale scenario to the asset sale scenario.

Capital gains rates present a substantial advantage over ordinary income tax rates, of course. While ordinary income tax rates can reach 37% at the federal level, long-term federal capital gains rates are typically 20% for high-income Sellers, with additional state tax rates varying by jurisdiction. To secure capital gains treatment, stock must be held for more than one year to qualify for long-term capital gains rates, the transaction must represent a genuine sale or exchange of a capital asset, the Seller must maintain proper documentation of their basis in the stock, and the sale must be properly structured and executed.

C-Corporations benefit most dramatically from stock sale treatment, as a stock sale eliminates the double taxation inherent in the C-Corporation structure. The avoidance of corporate-level taxation represents a pure tax savings that flows directly to shareholders’ bottom line. The above example considered a C-Corporation, but tax treatment depends on entity type.

S-Corporations also benefit from stock sale treatment, though the advantage is more nuanced. While S-Corporations generally avoid double taxation even in asset sales, stock sale treatment ensures the entire gain receives capital gains treatment, rather than having portions potentially taxed as ordinary income depending on the character of underlying assets.

Limited Liability Companies and partnerships, when selling membership interests or partnership interests, typically receive treatment similar to stock sales, providing comparable tax benefits to their owners — but asset sales for partnerships may result in ordinary income treatment for certain assets, and there may be complexity in allocating gain among partners.

In addition to having advantage in applicable rates of taxation, stock sales also eliminate concerns about depreciation recapture that may occur in asset sales, where equipment and machinery gains may be taxed as ordinary income, real estate depreciation may be recaptured at 25% rates, and other asset classes may trigger different tax rates.  Stock sales also eliminate the need to characterize gain on an asset-by-asset basis, thereby reducing complexity in state tax compliance, simplifying tax reporting and compliance, and providing greater certainty in tax outcome.  Stock sales also can avoid multiple state tax filing requirements, reduce exposure to state transfer taxes, and simplify compliance across jurisdictions.

Advantages to Buyers in a Stock Sale

While the stock sale structure typically favors Sellers, a stock sale gives the Buyer a simpler transaction structure, with fewer formal requirements, along with automatic transfer of contracts, licenses, and permits.  There is no need to retitle individual assets, as there would be in an asset sale.  A simpler transaction structure results in reduced transaction costs and complexity.  A stock sale also allows seamless continuation of business operations, preserves existing contracts and relationships of the business, maintains existing permits and licenses, and retains the corporate entity and tax attributes.

 

Section 338(h)(10) Election

In some circumstances, Section 338(h)(10) of the Internal Revenue Code provides a sophisticated mechanism that allows C-Corporations to combine the legal benefits of a stock sale with the tax advantages of an asset sale. This election represents a hybrid approach, where the transaction is legally executed as a stock purchase while being treated as an asset purchase for federal tax purposes. To qualify for this election, the purchasing entity must be a corporation (not an individual or partnership), the Buyer must acquire at least 80% of the target company’s stock in a taxable purchase, the target must be either an S corporation or a subsidiary member of a consolidated group, and both Buyer and Seller must formally agree to make the election.

When a Section 338(h)(10) election is made, the transaction is treated as a hypothetical asset sale followed by a liquidation of the target company. The target company is deemed to have sold all its assets to a new corporation at fair market value, and the Buyer receives a stepped-up tax basis in the acquired assets. For S corporations, shareholders experience a single level of taxation. The transaction avoids double taxation typically associated with C corporation asset sales.

The Buyer obtains stepped-up basis in assets for enhanced depreciation and amortization, benefits from the legal simplicity of a stock acquisition, avoids need to transfer individual assets or obtain third-party consents, and preserves valuable contracts and permits that might be non-transferable.  The Seller achieves potentially higher purchase price due to the Buyer’s tax benefits, maintains transaction efficiency of stock sale, avoids the complications of an asset-by-asset transfer, and might receive more favorable overall tax treatment compared to straight asset sale.  The election process involves specific timing and procedural requirements, however.  The election must be filed by the 15th day of the 9th month following the acquisition month, requires formal agreement between Buyer and Seller, and is irrevocable once made.  In addition, the purchase price must be allocated among assets according to IRS rules.

While potentially advantageous, a Section 338(h)(10) election may result in state tax treatment that differs from federal treatment, and there are complex valuation and allocation requirements.  The election may result in higher taxes for the Seller when compared to a straight stock sale.

Summary

The choice between an asset sale and a stock sale requires careful consideration of a number of factors, including the tax implications discussed above, as well as liability exposure, transaction complexity, and circumstances that may be applicable to the particular business involved. Asset sales generally favor Buyers due to tax benefits and for reasons of risk management, and stock sales often appeal to Sellers due to tax efficiency and transaction simplicity. The optimal structure depends on the specific circumstances of the transaction and the priorities of the parties.

The availability of Section 338(h)(10) elections adds another layer of sophistication to the structure decision, potentially offering a beneficial hybrid approach that combines the advantages of both asset and stock sales. However, this option requires careful analysis and consideration of all parties’ circumstances and objectives.

 

None of the information provided in this article constitutes legal advice or tax advice.  Every situation is different and should be thoroughly reviewed by and discussed with your legal and tax advisors. Please do not rely on the contents of this article as the basis for making decisions regarding your particular situation.  If you are contemplating the purchase or sale of a business in the State of Maryland, Lewicky, O’Connor, Hunt & Meiser stands ready to provide legal support for your contemplated transaction.

 

 

by Steve Lewicky

Maryland Law Requires Compensation Transparency In Job Postings & Allows Employees To Discuss Their Compensation With Fellow Employees

Effective on and after October 1, 2024, Maryland has updated its Equal Pay for Equal Work Law.  The revised statute contains important requirements for companies that employ people in the State of Maryland.

Disclosure of Compensation

Employers may not prohibit their employees in Maryland from inquiring about, discussing, or disclosing their compensation, or the compensation of another employee. Employers cannot take adverse employment action against an employee for asking a fellow employee about compensation, or for disclosing his or her own compensation to others. The law does not require an employee to disclose his or her compensation to anyone, nor does it permit an employee to disclose compensation information to a competitor of the employer.

If an employer knew or reasonably should have known that its actions violate the above requirements, an affected employee can sue the employer for injunctive relief and to recover up to two times the amount of actual damages suffered as a result of the violation. If the employee prevails in the suit, the court is required to also award to the employee a reasonable amount of attorneys’ fees incurred by the employee in bringing the successful legal action. An employee may bring a lawsuit on behalf of the employee and other employees similarly situated. Lawsuits to enforce these provisions may be brought up to three years after the end of an employee’s employment by the company.

Publication of Rates of Compensation in Job Postings; Prohibition Against Requiring Job Applicants to Reveal Past Compensation History

Employers are required to include in all job postings (internal or public), for positions that will physically perform work within the State of Maryland, the compensation range for the position and a general description of benefits or any other compensation offered for the position. An employer may not retaliate against (or refuse to interview or hire) an applicant because the applicant declines to provide his or her compensation history, or asks for the compensation rangeinformation that the employer is required to publish. Only after the employer has made an initial offer of employment (including an offer of compensation) may the employer then seek information about an applicant’s compensation history in order to evaluate whether to negotiate a higher compensation offer based on that history.

Violations of this part of the law may be enforced by the Maryland Commissioner of Labor through the issuance of orders compelling compliance, and at the discretion of the Commissioner also by imposing monetary fines for violations occurring after a first violation.

Equal Pay

Maryland employers are prohibited from paying compensation to employees of one gender at a lower rate than paid to other employees, if they work in the same Maryland county and if they perform work of comparable character. This does not necessarily mean that employees of different genders with similar jobs cannot be paid different rates of compensation in all circumstances. Differences in compensation rates may be permissible if based on a non-discriminatory seniority or merit system, or if the jobs require different abilities or skill sets, or have different duties. Differences in rates of compensation also may be allowed if there are non-discriminatory distinctions between the employees, such as in levels of education, training or experience.  An employer that is paying a wage in violation of these provisions is not permitted to reduce another employee’s compensation to comply with these requirements.

If an employer knew or reasonably should have known that its actions violate the above requirements, an affected employee can sue the employer for injunctive relief and to recover the difference between the compensation paid to employees of one gender and the compensation paid to employees of another gender. Here, again, if the employee prevails in the suit, the court is required to award a reasonable amount of attorneys’ fees to the employee.

 

by Steve Lewicky

If You Have An Ownership Interest In A Business, You May Be Required To Register Your Ownership With The Federal Government

Congress passed the Corporate Transparency Act in 2021, establishing an affirmative reporting requirement if you hold a “beneficial ownership interest” (“BOI”) in many types of companies. Exempt from this reporting requirement are ownership interests held in publicly traded companies, nonprofit organizations, and certain large operating companies. This new federal government reporting requirement is often referred to by the acronym “FinCEN.”  The government has created a BOI e–filing website where owners of companies can satisfy the reporting requirement by uploading their ownership information: https://boiefiling.fincen.gov.This federal government reporting requirement is separate and distinct from any filing requirements your company may have with state governments or tax authorities.

Companies established before 2024 have until the end of 2024 to file their BOI report. Acompany established during 2024 must file its BOI report within 90 calendar days after receiving (from the state of its incorporation or organization) actual or public notice that the company’s creation or registration is effective. After 2024, the registration period will shrink to 30 days aftera new entity’s creation.

More information about the reporting requirements under FinCEN can be found athttps://www.fincen.gov/boi, with an FAQ page at https://www.fincen.gov/boi-faqs#B_1

Also, be aware that scammers sometimes send out letters or emails that purport to be from the “United States Business Regulation Department,” or something similar, asking the recipient to pay them a filing fee under the Corporate Transparency Act, or be subject to severe penalties or imprisonment for noncompliance. These letters and emails are a scam. Actual reporting under FinCEN is free and is done through the https://boiefiling.fincen.gov website.

by Steve Lewicky

Operating a Church or Religious Organization in Maryland and Handling Disputes

Religious organizations in Maryland, including churches, synagogues, and mosques, are typically structured as “religious corporations,” which is a special category of corporation that has been authorized by the State of Maryland. Certain hierarchical religious denominations, such as the Roman Catholic Church, the United Methodist Church, the United Presbyterian Church, and the Episcopal Church, have their own unique treatment under the Maryland Corporations Code.  All other churches, religious societies, or congregations – regardless of sect, order or denomination — are subject to the provisions that I will summarize below.

To form a religious corporation, the adult members of the organization must elect at least four trustees to manage the affairs of the religious organization and prepare a written plan for the governance of the organization.  Among other things, this plan document has to set forth the time and manner for the election and succession of trustees, and the qualifications for individuals to be eligible to vote in elections, and to be elected to office in the organization.  It must then be acknowledged by a majority of the trustees.  Once the written plan is in place, the trustees have to file articles of incorporation with the State of Maryland in order to establish the religious corporation, and the articles of incorporation must contain the written plan of the organization, in addition to other required information.

Once the religious corporation is established with the State of Maryland, the board of trustees manages the worldly functions of the organization, leaving theological matters and pastoral duties to the clergy or to the members themselves.  The trustees manage the financial activities and assets of the organization in a similar manner as a for-profit corporation’s board of directors manages a business corporation.  It is important to understand that it is the trustees (acting as a board) that own and manage all of the organization’s property and assets – not the clergy.  However, unless the written plan provides otherwise, the senior minister of the church also serves as one of the trustees of the religious corporation, in addition to those trustees that were elected by the congregation.

Many of the same types of issues and disputes that confront for-profit corporations can also arise in a religious corporation, but in addition, religious corporations often seek advice in three areas that are somewhat unique to this sphere: (1) disputes over how elections are organized or held within the religious organization, (2) controversies over hiring or dismissing clergy, and (3) members of the congregation wishing to leave and form another church, synagogue, or mosque.

Disputes over congregation elections always have unique facts, but a central issue in such a dispute often is determination of who the members of the organization are that are permitted to cast ballots in an election.  Although the statute mandates that the written plan set forth the qualifications for individuals to be eligible to vote in elections and to be elected to office in the organization, many plans are vague on this point.  That can lead to uncertainty as to which of two or more rival church membership rosters of eligible voters is correct.  The statute requires that, if a contest arises over the voting rights or the fair conduct of an election, those questions must be submitted to arbitration by a panel of three arbitrators, to be selected in accordance with the statute, who are members of neighboring churches of the same religious persuasion. There is no appeal from the decision of this three-arbitrator panel.

Controversies over hiring or dismissing members of the clergy are governed by the written plan of the organization, but as in the case of elections, some written plans lack precision on how this is to be done.  Sometimes factions in the congregation are pitted against each other for or against the retention of a particular member of the clergy, and depending on the terms of the plan, this can lead to a decision by the board of trustees, or in some cases to a contested election of the congregation.

When members of a congregation decide to break off and form a new congregation, the act of leaving one congregation is relatively straightforward, but disputes can arise over ownership of real property or financial resources.  Although the statute specifically allows members of a congregation to separate and form a new congregation, that does not mean that the splinter group will have any right to take real property or financial resources of the original organization with them.

Our firm can answer questions and provide legal guidance to churches, synagogues, mosques and other religious organizations related to their governance, legal rights and obligations.  We also can assist those who wish to form a new religious organization, whether resulting from a division of an existing congregation or as a completely new organization.  Please contact us at [email protected] or (410) 489-1996.

by Steve Lewicky

Due Diligence in the Purchase or Sale of a Maryland Business

The term “Due Diligence” refers to a process by which someone contemplating the purchase of  a business investigates that business in connection with the anticipated transaction. The seller in the transaction also may engage in some amount of seller-side due diligence when a sale is contemplated, though the seller’s efforts are typically far more limited than the buyer’s efforts, since the seller already has detailed knowledge about the finances and operations of its own company.  The potential buyer’s due diligence efforts often are coordinated by an attorney representing the buyer, but it is common and advisable for the buyer to form a team of accountants, managers, consultants and sometimes outside experts, to participate with the attorney in the due diligence process.  The scope of due diligence is dependent on the particular company and situation, but the goal must be to gather enough information about the acquisition target to make informed decisions about the contemplated transaction.

Due diligence is intended to identify problems with an acquisition target and the risks associated with going through with a transaction, but should also involve evaluation of the positive attributes of a contemplated transaction.  If the acquiring company is interested in purchasing another company in order to fit a particular need or enter a new business area, then one area of due diligence should be to focus on whether the contemplated addition meets this need, and to what degree the desired outcome will be achieved by the transaction.

Comprehensively discussing all aspects of due diligence would fill an entire book, and this article is not intended to cover all aspects of an adequate due diligence process. Questions of scope and depth of due diligence depend on the particular transaction, on the nature of the seller’s operations and financial condition, and on the contemplated transaction terms. A central consideration in determining the extent of due diligence is thinking through the allocation of risk between buyer and seller. Both sides of a transaction will weigh the amount of risk each is willing to take, and a number of things will go into that assessment, including the sale price and the nature and strength of representations and warranties that will be included in the transaction documents.  For example, a buyer might insist on a lower purchase price – all things considered – if its opportunity to conduct thorough due diligence is limited, and may be willing to pay more for a company if it is able to thoroughly conduct extensive due diligence.  Likewise, the negotiated sale price may depend, in part, on whether the buyer receives strong and extensive contractual representations and warranties in the purchase contract. The converse also is true, from the seller’s perspective.

The nature of due diligence in a particular transaction is also strongly influenced by whether the deal is structured to be an asset sale, stock sale, merger, or sale of LLC member interests. The scope also depends upon whether the transaction is structured to have all due diligence completed prior to the parties signing the transaction documents with a simultaneous closing of the transaction, or to have the transaction documents signed first, followed by continued due diligence prior to closing to verify the accuracy of representations and the satisfaction of conditions for closing.

In the course of conducting due diligence, the buyer side of the transaction typically will issue an often-lengthy list of documents and data that it wishes to review, and also will seek access to the seller’s management, accountants, and perhaps key third parties.  The produced documents and data are reviewed by the buyer’s due diligence team, which under almost all circumstance should contain buyer representatives in the areas of legal, accounting, and business operations.  Within the legal area, often a senior attorney in a law firm representing the buyer will organize and coordinate the due diligence efforts, with less-senior attorneys and/or paralegals in the law firm doing much of the legal work. A similar allocation of workload also is often used with outside accounting firms representing the buyer for the accounting aspects of the due diligence review.

Purchasing or selling a business is not a simple process, even when the buyer and seller are relatively small companies.  Acquiring a $1 million company is far less complicated than acquiring a $100 million company, of course, but I am sometimes surprised when the contemplated buyer or seller of a small- or mid-size company discusses a potential acquisition with me and has an expectation that its attorney can quickly read through a few documents and thereby adequately cover all the bases.  In fact, even the simplest acquisitions of small companies require a significant amount of legal and accounting work. Having said this, there can be wide variations in cost depending on many factors, including the size and complexity of the acquisition target, the transaction terms, and selection of the right law firm to thoroughly perform all legal work necessary in an acquisition while still keeping costs manageable.

If you are contemplating the purchase or sale of a Maryland business, whether through asset sale, stock sale, or transfer of limited liability company member interests, our firm has the background and skills necessary to guide you through this process.  Please contact Lewicky, O’Connor, Hunt & Meiser at (410) 489-1996 or [email protected].

by Steve Lewicky

Property Line Disputes, Adverse Possession, and Prescriptive Easements

Adjoining property owners sometimes dispute the location of their property line or property boundary – or discover that a neighboring structure extends across their property line. Neighbors also can find themselves in a dispute over easements, rights-of-way, or claims of trespass or nuisance.  These controversies can take many forms, but in the suburban areas that are prevalent in central Maryland they often arise because of the misplacement of a fence, wall, trees, or shrubbery — or occasionally even a building being constructed on the wrong side of a property line.  Neighbors also sometimes assert claims of nuisance or trespass when water run-off, or other water sources, are artificially diverted from one property onto another, or when noxious odors or noise from one property disturbs neighboring properties.

Our firm regularly assists clients in property line disputes.  We help property owners obtain a survey to establish the exact location of a property line, and when necessary we also bring legal action to establish clear ownership of property, or to eject someone else from a client’s property. We also represent clients in nuisance and trespass disputes.

One interesting aspect of property line disputes – well-known to lawyers but often unknown to property owners – is that a person can obtain legal title to real property simply by occupying that property for long enough – if the circumstances are right. Although relatively rare, this legal concept – called “adverse possession” – can have important ramifications if a fence, wall or building has been in place long enough to bring the doctrine into play.

There are a number of elements that need to be present for adverse possession to apply, and this article is not a comprehensive discussion of the law in this area.  In brief summary, to acquire ownership of property through adverse possession the person claiming ownership must be in actual possession of the parcel of property, and this possession has to be “notorious,” “exclusive,” and “hostile” to the record owner on the title of the property.  All of these are legal terms of art that have been defined through past judicial decisions.  The possession of the property must be under a claim of title or ownership, and in Maryland it must be continuous for at least twenty years.  (Other states have different time periods for adverse possession).  The party claiming adverse possession must prove all of these elements to a court in order to gain tile of property by adverse possession.

In addition to claiming outright ownership of property through adverse possession, it is also possible to be granted what is called a “prescriptive easement,” if the claimant has exercised transit rights across a property for a sufficiently long period.  The elements for establishing a prescriptive easement are very similar to the elements for adverse possession, except the concept of the use being “exclusive” is different when it comes to easements.  Easements may exist not only for the physical transit across land by people, animals or vehicles, but also for structures such as wires or pipes, above or below ground.

If you find yourself in a dispute with another property owner about the location of your property line, or regarding claims of easement, trespass or nuisance, I would welcome the opportunity to answer your questions and provide advice in these areas.  Please contact me at [email protected] or (410) 489-1996.

by Steve Lewicky

Mechanic’s Liens Help Contractors and Sub-Contractors Get Paid

In Maryland, a mechanic’s lien statute gives contractors and subcontractors a powerful tool to obtain payment for materials and services.  A mechanic’s lien is a means by which a person or company that provides labor or materials on a construction project can place a lien against improved real property, for the value of the unpaid labor or materials – but only if the requirements of the mechanic’s lien statute are strictly adhered to.

Maryland’s mechanic’s lien statute is complicated, and there are some important aspects to this legal remedy that contractors and subcontractors should always keep in mind: Any person or company that furnishes work or materials to a construction project under a contract potentially may establish a mechanic’s lien.  Contractors, subcontractors and suppliers all can claim such a lien, regardless of whether they have a contract directly with the owner of the property, as long as the particular labor was performed for or about the subject building, and as long as the particular materials were for the subject building project.

A mechanic’s lien is only available for certain types of construction projects, however. Newly constructed buildings are subject to mechanic’s liens, though what exactly constitutes a “building” is sometimes an issue, because not every type of structure on land constitutes a building for these purposes.  For construction projects that involve repair or renovation of existing buildings, a mechanic’s lien is only available if the project involves the repair, re-building or improvement of the building to the extent of 15% of its value.  Condominium units and the common elements of condominiums are also subject to mechanic’s liens, but special notice requirements apply to condominiums.

A very important aspect of Maryland mechanic’s liens is a requirement to give written notice of an intention to seek a lien, in some circumstances, and strict time limitations apply to giving notice and bringing suit.

Anyone seeking a mechanic’s lien who does not have a direct contractual relationship with the property owner – for example, subcontractors, and in many cases material suppliers – must comply with notice provisions set forth in the mechanic’s lien statute.  When this type of notice is required, it must be mailed by the lien claimant to the property owner within 120 days after the claimant performed the work or furnished the materials.  There are a lot of nuances regarding when this 120-day period begins to run, and many court cases addressing this issue.

Separate and apart from giving any required notice of an intention to claim a mechanic’s lien, the actual petition seeking to establish the mechanic’s lien must be filed in the appropriate Circuit Court no later than 180 days after the work has been finished or the materials furnished.  The correct parties must be named as defendants in the suit, and there are detailed requirements for what must be included in the petition that is filed with the court.

After a petition is filed with the court, there is a two-step process by which the court first reviews the papers that have been filed, and holds an initial show-cause process and proceeding to determine if there is sufficient cause to establish an interim mechanic’s lien.  The court typically will set a bond for entry of an interim lien.  If an interim lien is established, then in a second stage the court will hold a trial on the merits of whether the mechanic’s lien should continue thereafter, until satisfied.  At any time after a petition to establish a mechanics lien is filed, the property owner can file a petition to have the property released from the lien upon the filing of a bond sufficient to protect the lien claimant.  Once a lien is established, the lien claimant then has one year to file a petition to enforce the lien.

Mechanic’s liens can be a very powerful means for contractors, subcontractors and suppliers to ensure payment, but they are complicated.  The Maryland mechanic’s lien statute differs from those of other states, and very strict time limitations apply to Maryland mechanic’s lien claims.

If you are a contractor, subcontractor or supplier seeking payment for labor or materials provided in Maryland, or if you are a Maryland property owner that has received notice that someone intends to assert a mechanic’s lien against your property, or has already petitioned the court for a mechanic’s lien, our firm can answer your questions and provide legal guidance.  We have the depth of experience to provide detailed guidance related to Maryland mechanic’s liens, the Maryland trust fund statute, the Maryland Prompt Payment Act, and the Maryland Little Miller Act.  Please contact us at [email protected] or (410) 489-1996.