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by lohmlaw

Maryland Inheritance Tax on Domestic Partners

If you live in Maryland and are in a long-term committed relationship, you may be surprised to learn that any inheritance you receive from your partner is subject to a 10% Maryland inheritance tax – unless you marry or become registered domestic partners.

The Process of Becoming Registered Domestic Partners

In Maryland, two people may become registered domestic partners if: (1) both persons are over the age of 18 (2) neither is the domestic partner of any other person, (3) they are not married, and (4) they are in a committed relationship with each other.

If one registered domestic partner dies without a will, then the surviving partner is treated the same as a surviving spouse:

• Having priority to serve as the Personal Representative
• Being entitled to the spousal allowance (currently $10,000)
• And inheriting the same share of the decedent’s probate estate as a spouse would

The surviving domestic partner is exempt from Maryland inheritance tax, whether the decedent died with or without a will.

If You Decide to End Your Partnership

You can terminate a registered domestic partnership in the following ways:

• Through mutual consent
• By one party, so long as you provide a copy to the other domestic partner
• By abandonment of one party for a period of at least six months without contact
• By marriage of one or more of the parties
• Or by death of one or more of the parties

Unilateral termination and termination through mutual consent take effect six months after the date of filing, while termination for the other reasons listed above takes effect immediately.

If a declaration of domestic partnership is not on file with the Register of Wills, then a surviving domestic partner may still be exempt from inheritance tax on jointly held real property that is a principal residence.

If you are in a Maryland domestic partnership, contact the attorneys at Lewicky, O’Connor, Hunt & Meiser, LLC to discuss your options.

by Lisa White

You Failed to Appear in Court After Being Served with a Lawsuit – Now What?

If you are served with a writ of summons or other documents related to a lawsuit in which you are named as a party to the lawsuit, it is very important that you file a responsive paper with the court within the time period established by law for doing so. Do not delay, or ignore this type of legal paper. Prompt consultation with an attorney is strongly advised. The deadline for filing a responsive paper with the court after receiving delivery of a writ of summons or other court papers depends on the situation, but any such deadline will probably be stated on the face of the writ of summons document.

If you do not file a responsive paper with the court prior to the deadline for doing so, the court can enter an “Order of Default” and/or a “Judgment of Default.”  The District Court of Maryland, the Circuit Courts in Maryland, and the U.S. District Court for the District of Maryland, all have different filing deadlines and differing rules and standards for what happens when a defendant fails to make a timely appearance in a lawsuit. This article briefly and generally summarizes this topic, but the rules are complicated and the potential harm from non-compliance can be substantial, so you should promptly contact an attorney for representation and assistance.

District Court of Maryland

The Maryland Rules of Civil Procedure provide that a defendant named in a District Court of Maryland lawsuit must file a Notice of Intention to Defend within a specified time period after being served. If a defendant fails to file a Notice of Intention to Defend, then the court may assess liability against the defendant on the scheduled trial date.  If a defendant fails to file a Notice of Intention to Defend, the court may enter judgment against the defendant for the full amount of damages claimed in the Complaint if the court is satisfied with the information stated in the complaint and the complaint is property signed as an affidavit under oath by the plaintiff.  Sometimes the District Court will find that a complaint sets forth sufficient information for the entry of judgment against the defendant as far as liability is concerned, but will hold an evidentiary hearing only as to the question of the amount of monetary damages to be awarded. Defendants should file a Notice of Intention to Defend within the time period set forth in the writ of summons for doing so. Even if that deadline is missed, a defendant should still file a Notice of Intention to Defend prior to the scheduled trial date, or at the latest should appear on the scheduled trial date and submit a Notice of Intention to Defend to the court at that time.

Maryland Circuit Courts

In the Maryland Circuit Courts, a defendant that fails to file an Answer or other responsive pleading within the specified time for doing so may have an Order of Default against the defendant.  An Order of Default may thereafter be vacated by the court if the defendant appears before the court within a set time period and states good cause for why the filing deadline was missed. If the Order of Default is not vacated, the court thereafter may enter a Judgment of Default against the defendant in the full amount claimed by the plaintiff in the complaint.

In the District Court of Maryland and in Maryland Circuit Courts there are specific deadlines that must be adhered to in order to preserve a litigant’s right to present a defense and avoid entry of judgment by default. If you find yourself in this situation, contact an attorney to advise you on the best course of action.

None of the information provided in this article constitutes legal advice. Every situation is different and should be thoroughly reviewed by and discussed with your legal advisors. The above general summary is not a comprehensive discussion of the subject matter, nor is it applicable to states or jurisdictions outside of the State of Maryland. Please do not rely on the contents of this article as a basis for making decisions regarding your particular situation.

by Samantha Chan

I was placed on a PIP by my employer—Now what do I do?

You’ve just been placed on a Performance Improvement Plan (commonly known as a “PIP”). Take a deep breath. While it may be framed as a supportive tool to help you improve, a PIP can be an employer’s first step in building a paper trail to justify termination of employment. That doesn’t mean you’re powerless, but it does mean you need to act strategically and quickly.

Maryland is an at-will employment state, which means that your employer can terminate your employment at any time without cause (unless the reason is discriminatory or retaliatory). You may wish to consult an employment attorney to evaluate whether you have a viable legal claim, but strong documentation is essential if you decide to pursue a wrongful termination case. Below are a few steps to take if you are placed on a PIP.

1. Read the PIP Carefully.

• Identify all measurable goals, deadlines, and names of supervisors—add them to your calendar or task list immediately.
• Look for missing benchmarks. Has your employer defined what counts as “improved” or “successful”?
• Document unclear or impossible expectations now. That record could be key if you’re later terminated for failing to meet them.

2. Request a Clarification Meeting (In Writing)

• In may circumstances, it may be a good idea to schedule a meeting to clarify deliverables, timelines, and support.
• After such a meeting, follow up with a summary email to document what was discussed and agreed upon.

3. Start a File and Document

• Save a copy of the PIP and related emails to your personal device or cloud storage.
• Maintain a dated log of all meetings, feedback, and deliverables and preserve time-stamped evidence (e.g., emails and proof of submitted work).
• Retain past performance reviews, awards, or praise that contradict the claims in the PIP.

4. Stay Professional: Every Interaction Counts

• Write every message as if it could be used in court. Avoid sarcasm, jokes, or emotional reactions.
• Document every request for support, training, or resources, and your employer’s response (or lack thereof).

5. Update Your Resume and Build Your Backup Plan

• Quietly update your resume and LinkedIn profile. You do not have to wait until the PIP ends to start looking for a new job.
• Back up your non-proprietary work samples (e.g., templates, spreadsheets, or charts you created) that highlight your skills and could be useful in future roles — but don’t download or retain any documents that contain company proprietary information or trade secrets.

6. Before Signing Anything, Talk to a Lawyer

• If you’re offered a resignation agreement, severance package, or reference letter, you do not have to sign on the spot. You may ask for time to review and negotiate if needed.
• Get all promises in writing, including any agreement to serve as a reference or provide severance.
• Consult an employment attorney with your thorough documentation in hand.

by Anthony Kratz

Is It Time to Update Your Estate Plan?

Life is constantly changing—and as your life evolves, your estate plan should keep up.

Whether you’re newly married, recently divorced, welcoming a new child, beginning retirement or grieving the loss of a loved one, major life events can have a significant impact on your estate planning needs. These milestones often shift your priorities and relationships, which is why it is important to make sure your estate documents reflect your current wishes and circumstances.

Beyond family changes, financial and geographical shifts also play a big role. Have you moved to a new state? Has your income or overall wealth changed substantially? These types of changes may affect the validity or effectiveness of your current plan. For instance, moving to a new state might mean adding a statutory power of attorney or updating your other documents.  A substantial change in your wealth may mean adding advanced provisions to your plan — like those related to generation-skipping transfer taxes.

Even if your situation seems unchanged, it’s wise to review your estate plan about every five years. Laws change, tax rules shift, and your personal goals might evolve. A quick check-in with your estate planning attorney can give you peace of mind and help ensure your current documents continue to serve you and your loved ones as intended.

Key Documents to Review

When reviewing your estate plan, consider looking at the following:

• Last Will and Testament – Does it still reflect your current wishes for asset distribution?
• Revocable Living Trust – Are your trustees, beneficiaries, and instructions up to date?
• Durable Power of Attorney – Are your chosen agent and successor agents still the best people for the job?
• Advanced Healthcare Directive (or Living Will) – Do your documents reflect your current medical wishes and designate the right decision-makers?
• Beneficiary Designations – Have you reviewed retirement accounts, life insurance policies, and payable-on-death (POD) accounts?

Take the Next Step

If it’s been a while since you last updated your estate plan—or if you’ve recently experienced a major life event—now is the perfect time to review your documents. Consult with a qualified estate planning attorney to ensure your plan continues to meet your needs.

by Steve Lewicky

Courts order reinstatement of federal employees, but the Administration moves forward with future reduction in force plans

It’s a stressful and confusing time for federal employees. In recent days, two U.S. District Court judges – one in Maryland and the other in California – issued sweeping nationwide injunctions compelling the Government to pause employee terminations and to reinstate a large number of recently terminated federal employees. In both cases, the courts found that recent terminations of probationary employees were unlawful because they were undertaken by the Office of Personnel Management (#OPM) (the government’s human resources office) and not by the federal agencies where the employees actually worked, and because the Government did not adhere to notice and timing requirements.

In the Maryland case, Maryland v. U.S. Dept. of Agriculture, et al, U.S. Dist. Ct. Md., Case No. 1:25-cv-00748, Judge James Bredar entered a Temporary Restraining Order (#TRO) on March 13, 2025, ordering the covered cabinet agencies to reinstate all employees, throughout the United States, who were previously employed by the covered agencies and were “purportedly terminated” by the Government on or after January 20, 2025.  Eighteen U.S. Government agencies and departments are covered by this TRO. The covered agencies were also ordered to undertake no further reductions in force (#RIFs), “whether formally labeled as such or not,” except in compliance with notice requirements established by federal statute and regulations. In order ensure compliance by the Government, Judge Bredar ordered the government agencies and departments to submit a detailed status report to the court by mid-day next Monday, March 17, setting forth the number of employees reinstated by the Government, broken down by agency. The court also scheduled a hearing for March 26, to determine whether a longer-duration preliminary injunction will be entered. The TRO does not prohibit the Government “from conducting lawful terminations of probationary federal employees – whether pursuant to a proper RIF or else for cause, on the basis of good-faith, individualized determinations,” but may not do so “as part of a mass termination.”

In a 56 page memorandum opinion accompanying the TRO, Judge Bredar noted that, under Title 5 of the Code of Federal Regulations (CFR), civil service employees are considered to be under probationary status during the first year or two of their employment, and a probationary employee may lawfully be terminated if his or her work performance or conduct fails to demonstrate fitness or qualification for continued employment, or for reasons based on conditions arising prior to his or her employment. If the Government decides to terminate a probationary employee, however, Title 5 of the CFR requires the Government to notify the employee in writing as to why the decision to terminate was made, including a statement of the agency’s conclusions as to the inadequacies of the employee’s performance or conduct. The only other way properly to terminate a probationary civil service employee is as part of a reduction in force (RIF) – but federal statutes and regulations establish detailed procedures that must be followed by federal agencies when conducting a RIF.  The Title 5 regulations include a requirement that, when conducting a RIF, an agency follow certain retention preferences that are set forth in Title 5 of the U.S. Code, which create priorities such as by length of service, military service preferences, and performance ratings. The regulations also require, in a RIF, that the agency establish “competitive areas” in which employees compete for retention, and rank employees for intention based on the retention factors discussed above.  In most circumstances, an agency conducting a RIF must provide employees at least sixty days written notice before termination, and even in extraordinary circumstances must provide thirty days prior written notice. For larger scale RIFs, notice also must be provided to affected states, so that state governments have an opportunity to carry out “rapid response activities” to assist dislocated employees in obtaining new employment.

Judge Bredar noted that, on February 11 and 12, various agencies of the U.S. Government terminated large numbers of probationary employees, with further terminations occurring in the weeks thereafter. The court determined that these terminations were not based upon qualifications or performance, noting that the termination notices did not even cursorily identify any issues with the individual’s performance, but instead explained that the termination was “in the public interest” or “due to the priorities of the current administration.”  The court found that the Government’s actions reflected that these terminations were in fact RIFs – but did not adhere to statutory RIF requirements.

The TRO issued by Maryland federal court was broadly consistent with a TRO entered at almost the same time by the U.S. District Court for the Northern District of California, which ordered the Government to pause firings and to reinstate probationary employees at six government agencies.  Earlier, on March 5, a similar decision was handed down by the Merit Systems Protection Board (#MSPB), ordering reinstatement of probationary employees that were terminated at the U.S. Department of Agriculture.

As of the time of this post, it appears that at least some agencies are moving forward with reinstatement and payment of back pay in response to the court orders, but it is not clear if all covered agencies are doing so.  More clarity should be forthcoming on Monday, March 17.

The two TROs are being appealed by the Government, and issuance of a TRO does not necessarily mean that the same relief will be granted by the court later at the preliminary injunction stage, or after a trial on the merits.  Beyond the possibility that these TROs may be overturned on appeal or modified by the issuing courts at the preliminary injunction stage, it’s also important to recognize that the legal reasoning set forth in these two emergency orders does not preclude the Government from reducing the size of the federal workforce using the RIF procedures set forth in federal law.  The Government just needs to follow the rules, procedures and timetables that are mandatory in RIFs. News outlets have reported in recent days that agencies have already been given guidance by OPM to plan for RIFs, so presumably the agencies and OPM intend to pursue RIFs down the road even if the firings of probationary employees during late February and early March are reversed due to the Government’s failure to comply with RIF requirements when taking those actions.

by Elizabeth Bowery

Starting a New Business: Drafting Governing Documents

Once business founders decide on the type of business entity to establish (for example, a limited liability company, corporation, partnership, etc.), specific “governing” documents need to be prepared for the new company. In Maryland, a limited liability company must file articles of organization with the Maryland Department of Assessments and Taxation to establish the entity, and in many cases will also wish to have a written Operating Agreement (though Maryland law does not require a written Operating Agreement). Similarly, a new corporation must file Articles of Incorporation to come into existence and must also have corporate Bylaws. Shareholder or “Buy-Sell” Agreements also are sometimes a good idea, especially in closely held corporations.  Partnerships often benefit from having a written Partnership Agreement. For more details on each entity type and their requirements, see my previous article, “Starting a New Business: Deciding the Type of Business Entity to Establish.”

Founders may be tempted to prepare governing documents without legal counsel, using forms or template documents found on the Internet. Despite the time and financial pressure to move quickly and efficiently, the legal issues involved in forming a new entity and putting it on the right path can be more complicated than they first appear. Investing in qualified legal support early on can provide significant benefits by both creating governing documents that protect the interests of all owners or shareholders and establishing a foundation for good governance moving forward. Below are a few things that should be considered for inclusion in most limited liability company operating agreements. These same concepts may apply in a written partnership agreement or in a corporate shareholders’ agreement, as well.

Protecting the Business Owners’ Interests If a Dispute Arises

An Operating Agreement for a limited liability company that has more than a single member should include provisions that safeguard the members’ interests if disputes arise. A poorly drafted “disputes” provision might remain unnoticed until a conflict arises but then cause real difficulty when the members try to determine their legal rights, methods of dispute resolution, and available remedies. For example, a “generic” Operating Agreement template may provide for an equal division of assets among three members upon dissolution if a dispute arises, which is unlikely to be fair or equitable if one of the three members contributed significantly more time and capital to the venture (or under any number of other circumstances). A well thought out and drafted agreement would include a provision for dispute resolution that protects the interests of all members.

Protecting the Company’s Interests If a Dispute Arises

An Operating Agreement can also be tailored to provide flexibility for the company’s growth while minimizing unnecessary risk. At the outset of a business venture, optimism often abounds, which can lead members to give short shrift to clauses that address membership changes. For example, the members might overlook boilerplate provisions regarding restrictions on transferring membership interests, leaving the business vulnerable to unwanted external interference by a third party. Or, if a member decides to exit the company, the remaining members may find it difficult to quickly raise the necessary capital to buy out the departing member’s interest. To prevent this, a carefully drafted agreement can provide a right of first refusal, giving the remaining members the opportunity to buy out the exiting member’s interest before it can be sold to a third party and establish flexible payment terms to purchase the departing member’s interest over time.

Consult a Business Lawyer to Customize Your Governing Documents

Drafting governing documents is one of the most important steps in building and protecting a business. As business lawyers, we assist business owners at every stage of ownership, offering guidance in selecting the best entity, drafting customized governing documents, and providing ongoing business counsel. We can help you navigate legal complexities so you can focus on growing your business.

by Steve Lewicky

Government Employees Receiving Notices of Termination: Now What?

Our firm has been contacted in recent days by many US Government employees that have received letters informing them that their employment will be terminated “for cause” in thirty days. Most of these have been accompanied by separate letters putting the employee on administrative leave for the intervening thirty days. Situations vary by agency, by status of the employee, and by other factors, but in all cases it’s important for these employees to understand their rights.

US Government employment is not “at will” – the type of employment relationship that is common in the private sector.  Termination of government employment is subject to and controlled by federal statutes that establish Civil Service employment protections. If a federal employee is terminated or disciplined without cause or reason, those employment actions may be appealed to the Merit Systems Protection Board (MSPB), an independent agency of the government. The Merit Systems Protection Board hears appeals when the government takes adverse employment actions like removals and terminations, suspensions of more than 14 days in length, reductions in pay or grade, or performance-based employment actions. It can award remedies that include back pay accruing after the date of termination, reinstatement in the position, and sometimes reimbursement of attorneys’ fees.

An employee’s appeal rights are greatly affected by whether they are still in a probationary period.  The government can remove a probationary employee subject only to limited rights of appeal.  Outside of probationary periods, government employees have broad rights of appeal from a termination or removal decision.

While some agencies appear to be terminating large numbers of employees at the same time by alleging “cause” for removal, some agencies may also try to reduce head count using established workforce reduction programs, such as: (a) voluntary separation incentive payments (VSIPs), (b) voluntary early retirement  authority (VERA), or involuntary separations by a reduction in force (RIF).  Agencies also appear, in some cases, to be attempting to reduce their workforce by reassigning employees to a different office location, often at great distance, and then terminating employment if the employee refuses to relocate.

Federal employees receiving an offer of voluntary separation incentive payments (VSIPs) and/or an offer of voluntary early retirement (VERA) should closely examine the proposed terms of these offers, and will benefit from having legal counsel review any such proposals.  Reductions in force (RIFs) can only be undertaken in conformance with government regulations on RIFs, and the government should be held to these requirements.

Lewicky, O’Connor, Hunt & Meiser helps current and former US Government employees navigate the current upheavals in federal employment.  Every person’s situation is different, but in most cases it is very important for a government employee receiving notice of termination or of other adverse employment action to promptly provide a written objection response to the agency, and to file an appeal to the Merit Systems Protection Board within the fixed time period for doing so. We guide our clients in taking these steps. Equally important, recent government actions and pronouncements suggest that the government may be contemplating employment actions that are not in compliance with applicable laws. This makes it even more important to have legal counsel to analyze and explain new or unprecedented developments, as the occur.

by Steve Lewicky

You received a stop-work order from the Government – What do you do next?

The Trump Administration, during its first weeks in office, has suspended or terminated a large number of federal contracts, and an even larger number of contracts may now be at risk of suspension or termination. The General Services Administration (GSA) also has been taking steps to terminate leases for government offices and facilities. Government contractors need to understand their rights in this challenging environment.

Procurement contracts are subject to the Federal Acquisition Regulations (the “FAR”), and almost always include standard FAR clauses that allow the Government to terminate or freeze the contract for the Government’s own convenience, without any default by the contractor.

A stop-work order is a written order from the contracting officer that requires a contractor to stop all or part of the work on a government contract for ninety days (or longer, if the parties agree to an extension). A contractor receiving a stop-work order has to immediately comply with the terms of the order, and take reasonable steps to mitigate costs related to the work covered by the order. If the stop-work order is not canceled within ninety days, the contracting officer will either cancel the stop work order or terminate the contract. After the stop-work order is cancelled or expires, the contractor then has thirty days to request an equitable adjustment or submit a claim for payment for costs incurred based on the stop-work order. If the contract is terminated, the contractor is entitled to reasonable costs in any termination settlement agreement.

A contracting officer also may suspend work and freeze a contractor’s performance on a procurement contract. Suspensions of work can suspend, delay, or interrupt all or part of the work for a period of time that is determined by the contracting officer. A suspension of work order may be in writing, but does not have to be. If a contracting officer constructively suspends work without a written suspension order, it is important for the contractor to memorialize the suspension in writing to the Government within a short period following the onset of the suspension.

When terminating a contract for its convenience, the Government has to provide written notice to the contractor that the termination is for convenience, and the notice must state the effective date of the termination. Although the Government cannot act in bad faith in making a decision to terminate a contract for convenience, it is a very high burden for the contractor to overcome a legal presumption that the Government took its action in good faith.

Even if the contractor does not allege bad faith by the Government in exercising its right to termination, the contractor still has a right to receive fair compensation for work performed and for preparations made for the terminated portions of the contract, including a reasonable allowance for profit. To pursue a remedy, the contractor must submit a “termination settlement proposal” within one year of the effective date of termination – unless an extension is granted by the contracting officer. The parties will then try to negotiate the terms of a termination settlement, which may include reasonable profit for work that has been completed. Contracting officers have discretion to take fairness considerations into account in settlement negotiations, but a termination settlement agreement must adhere to cost principles and procedures set forth in FAR Part 31. If the parties are unable to reach agreement, then the contracting officer will issue a final decision, which can be appealed to the agency’s contract review board or to the U.S. Court of Federal Claims.

The Contract Disputes Act establishes the process by which contract disputes are resolved with the Government. Under this law, a contractor must submit a claim, in writing, to the contracting officer within six (6) years after accrual of the claim. The written claim must demand payment of a sum certain – which in some circumstances is a surprisingly difficult exercise. Claims exceeding $100,000 must be certified by an individual authorized to bind the contractor. Under most circumstances, the contracting officer has sixty days to issue a final decision on a filed claim — unless the contracting officer notifies the contractor within those sixty days of a different time period for issuing the decision. The contracting officer’s decision can be appealed to the particular agency’s appeal board within ninety days, or to the U.S. Court of Federal Claims within twelve months. If the contracting officer fails to issue a final decision within sixty days (or within such other time period the contracting officer previously established), the claim is considered to be a “deemed denial,” allowing the contractor to appeal the denial.

Separate and distinct from procurement contracts are grants and cooperative agreements by which government agencies make awards to non-governmental entities. These grants and agreements are referred to collectively as “federal financial assistance,” and are governed by Subparts A through F of 2 C.F.R. § 200. “Grants’ do not anticipate substantial involvement of a Government agency to carry out the activity in the agreement, while “cooperative agreements” have agency involvement.

Government grant officers can only terminate a federal financial assistance award for convenience if the terms and conditions of the award permit termination for convenience, and if the “award no longer effectuates the program goals or agency priorities.” Costs associated with a termination or suspension are only allowable if the federal executive agency expressly authorizes them in the notice of termination or notice of suspension. However, suspension costs or post-termination costs are allowable if the arise from financial obligations which were properly incurred by the recipient or subrecipient before the effective date of suspension or termination, and not in anticipation of it; and if the costs would be allowable if the award was not suspended or expired normally at the end of the period of performance in which the termination takes effect. Recipients are typically entitled to termination settlement costs that the recipient is unable to discontinue after the termination date. Each agency has its own process for making objection to terminations of a financial assistance award, and for hearings and appeals

If faced with an actual or anticipated government contract termination, federal contractors need to take these steps:

• Fully understand the contract terms. It is important to understand the type of contract involved, and the contract’s exact terms. This provides the groundwork for how to dispute the Government’s action, or any delay in payment.
• Document termination costs. It’s also very important to obtain and maintain detailed documentation of all costs arising from a contract termination, suspension, or stop-work order – or from delays in payment. A government contractor is going to have to demonstrate to the contracting officer all costs arising from the Government’s action.
• Give clear written notice to the contracting officer. A contractor hit with an adverse action should immediately notify the contracting officer, in writing, that the government contractor believes a stop-work order or suspension of work has given rise to costs, and that the contractor intends to seek and award of those costs in the form of a contract claim, once the suspension ends, the stop-work order is lifted, or the Government formally terminates the contract.
• Follow all required procedures when filing a claim or appeal, and meet all deadlines. The relevant claim submission process and/or appeals process has to be complied with rigorously, including all filing deadlines. Typically, a claim for a stop-work order must be submitted within thirty days of cancelation or expiration of the order.

by Lisa White

Are Federal Employees at a Fork in the Road? Know Your Rights.

Federal civil service employees, or career employees of the U.S. federal government, have the constitutional right not to be deprived of property without due process. In the employment context, this means civil service employees are entitled to an opportunity to respond prior to termination of employment decisions, and may resort to post-termination administrative proceedings to challenge an employment termination. Due process provides a government employee the right to notice, and a meaningful opportunity to be heard.
Prohibited Personnel Actions
A legal framework exists to ensure that no federal employee is removed from their job, suspended for more than 14 days, is reduced in pay or in grade, or is furloughed for 30 days or less — without 30 days’ notice from the agency and a reasonable time to respond to the notice. Adverse actions that do not comply with these requirements can be appealed to the Merit Systems Protection Board.
Discrimination
Federal employees cannot be discriminated against on the basis of race, color, religion, sex, national origin, age, disability, genetic information, pregnancy, or childbirth, nor retaliated against for engaging in a protected activity as defined in Title VII of the Civil Rights Act, the Age Discrimination in Employment Act (ADEA), the Equal Pay Act, or the Rehabilitation Act. Discrimination in employment based on a protection afforded under these statutes or others is appealable to the Equal Employment Opportunity Commission, subject to specific filing deadlines.
Federal employees have the right to appeal adverse personnel decisions or discriminatory actions taken against them by the Government. First, one must determine their status as an employee. Federal law defines an employee as an individual in the competitive civil service who is not in their probationary period, or who has completed one year of continuous service, or “an individual in the excepted service . . . who has completed 2 years of current continuous service in the same or similar positions in an Executive agency under other than a temporary appointment limited to 2 years or less.”
There are some instances where a probationary Federal employee can appeal a termination decision when a Federal government agency takes adverse action against them, but generally, probationary employees do not have the full protections that non-probationary federal employees have.
None of the information provided in this article constitutes legal advice. Every situation is different and should be thoroughly reviewed by and discussed with your legal advisors. Please do not rely on the contents of this article as the basis for making decisions regarding your particular situation. If you are facing an adverse Government employment action or employment discrimination, and reside in the State of Maryland, Lewicky, O’Connor, Hunt & Meiser stands ready to provide legal support to you.

by Steve Lewicky

Tax Considerations When Buying or Selling a Business in Maryland

When structuring the purchase or sale of a business in Maryland, one of the most important tax considerations is a choice between structuring the transaction as a stock sale or an asset sale.  This decision has been covered at greater length in another article that I recently authored, but in very brief summary:  A stock sale is typically the structure preferred by sellers, since a seller typically pays the capital gains tax rate on a stock sale, and the buyer retains the existing tax basis in assets.  An asset sale is generally preferred by buyers, as asset sales provide a step-up in basis for depreciation purposes.  This article will review other tax issues, beyond the “stock sale v. asset sale” question.

Bulk Sales Tax

Maryland applies a 6% tax to tangible personal property that is included in a business sale.  The Bulk Sales Tax applies to furniture and fixtures, computer software, business records, customer lists, and non-capitalized goods and supplies.  There are exemptions from application of the Maryland Bulk Sales Tax, including the following:

The “Resale Inventory Exemption” exempts from Bulk Sales tax tangible personal property that was purchased for purposes of resale.  To benefit from this exemption, a seller must have maintained documentation demonstrating that the subject inventory was held exclusively for resale.  The seller also must obtain a resale certificate from the purchaser.

The “Manufacturing Equipment Exemption” exempts from Bulk Sales tax manufacturing equipment and machinery that is used directly in the production process, and that passes a “used directly” test that is established under Maryland state tax regulations.

The “Motor Vehicle and Transportation Equipment Exemption” exempts sales of vehicles and transportation equipment that are required by the State of Maryland to be titled and registered.  These are instead subject to excise taxation under the Maryland Transportation Code.

Some types of “Occasional Sales” also are exempt from Bulk Sales taxation, if they are casual and isolated sales that the company does not regularly engage in as part of the business.  These must be one-time or isolated transactions that are undertaken no more than three times in any twelve-month period.

The “Affiliated Entity Transfer Exemption” may except from Bulk Sales taxation certain transfers that are between two entities that have common ownership at a level of 80% or greater, as long as the common ownership continues for at least two years after the transfer.

To support any or all of the above exemptions from Bulk Sales taxation, the company must maintain contemporaneous documentation supporting the exemption(s), such as copies of written agreements specifying the exempt assets, as well as resale or exemption certificates where applicable. Failure to properly document exemptions can result in assessment of the tax, with interest and penalties, along with personal liability for responsible parties.

Sales and Use Tax

Maryland has a Sales and Use Tax that may apply to transfers of tangible personal property in the sale of a business. Maryland law provides several potential exemptions from these taxes, which may apply when there is a sale of an entire business.

The sale of an entire business or of a complete business division may qualify for exemption if the sale encompass all or substantially all of the business assets, the assets are sold as a going concern, and the purchaser continues the same type of business operation following the transaction.  The following asset classes remain subject to sales and use taxation, however, even if the transaction as a whole is exempt: (1) inventory not held for resale, (2) office equipment and supplies, (3) non-production equipment, and (4) consumable supplies.

The statute also provides an exemption for casual and isolated sales, which may apply to the sale of an entire business when the transaction is properly structured. To benefit from this exemption, the sale transaction may not be of a type that is regularly engaged in by the seller, and it must be infrequent and not part of a series of sales.  The seller must not be regularly engaged in the business of selling similar items. No more than three sales may occur within a twelve-month period, and the exemption applies only to sellers not otherwise required to hold a Maryland sales tax license.

Maryland law also provides an exemption for some statutory mergers, consolidations, and other types of qualifying corporate reorganizations.  To qualify under this exception, the transaction must qualify as a tax-free reorganization under IRC § 368, must be between qualifying business entities, and proper documentation of the reorganization must be maintained.

Real Property Transfer and Recordation Taxes

If the sale or purchase of a Maryland business includes the transfer of real property, then a county or local Transfer and Recordation Tax will apply, based on the amount of consideration paid for the real property in the transaction.  Maryland appellate courts have recently made clear that Transfer and Recordation Taxes are not to be based upon the value of any intangible business assets transferred in the transaction, or on Goodwill, or on the value of transferred business licenses.  This makes proper allocation of the purchase price between real and intangible property an important part of any purchase and sale agreement, where real property is a component of the transaction.

Summary

Careful tax planning in Maryland business sales transaction can yield significant savings for both parties. During the due diligence process prior to consummation of a business sale, it is important for the due diligence team to review past tax returns and filings, to ensure compliance with bulk sales requirements, and to assess any transfer tax obligations.  It is good practice to model the tax impact of different deal structuring options, and to consider both parties’ tax objectives during negotiations.  It’s also important to comply with bulk sales notice and payment requirements, where applicable to a particular transaction. The optimal structure and transaction terms depend on specific circumstances of a particular transaction, and may require balancing competing tax 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.