New requirements to report punitive damages
The change in the 1997 federal instructions for reporting punitive damages on federal tax form 1099-MISC may affect attorneys or their clients. The federal change also applies to California information reporting. All punitive damages, even those related to physical injury or physical sickness, are required to be reported on form 1099-MISC.
For information reporting purposes, the change applies for punitive damage payments made after Aug. 20, 1996.
Revenue Code §104(a)(2) has been modified to clarify the taxability of punitive damage payments related to personal physical injury or physical sickness. California Income Tax Law § 17131 follows the federal law.
Punitive damages have always been taxable, but those related to physical injury or illness typically were not reported on information returns in the past.
According to the state Franchise Tax Board, punitive damages as well as damages awarded in non-physical injury cases do not qualify as compensation for injury or sickness. Punitive damages are a penalty based on misconduct. Therefore, all punitive damages, even those related to physical injury or sickness, are included in gross income and must be reported in accordance with 1099 information reporting requirements.
Information returns are required to be filed annually with the Franchise Tax Board and Internal Revenue Service. Individuals, partnerships, corporations or other organizations engaged in a trade or business in California may have a requirement to report payments made in the course of their business.
Payments reportable on form 1099-MISC include payments of $600 or more for all punitive damages, any damages for non-physical injuries or sickness and any other taxable damages.
Payments made to corporations (other than payments for medical/health services) are not reportable.
Further information about reporting requirements is available from the state Franchise Tax Board, 916/845-6304, and the IRS, 304/263-8700.
Litigation magazine focuses on cyberlaw
The fall edition of "California Litigation," a publication of the State Barís Litigation Section, focuses on cyberlaw. As technology advances and use of the Internet expands, cyberlaw issues will increasingly affect not only litigators, but many other legal practitioners as well. The topic is particularly timely because of a recent U.S. Supreme Court decision on a case raising questions about the scope of free speech rights on the Internet.
The articles, written by some of Californiaís leading attorneys, cover a broad range of legal topics: evidentiary issues; legal tools available on the Internet; attorney-client privilege and e-mail and other electronic communication; and personal jurisdiction and the Internet. A judicial opinion offers a perspective on the admissibility of computer simulation evidence.
Copies of this special edition will be sent free to all members of the Litigation Section. For information on receiving a copy and on joining the section, call 415/561-8846.
MCLE rules changed Sept. 1
Four changes to the MCLE rules took effect Sept. 1, affecting both providers and attorneys. The rule changes are generally "housekeeping" in nature. They are:
For more information and a complete set of new rules, contact the State Bar Office of Certification, 415/241-2100.
Courts seek publisher for California Official Reports
A five-year contract will be awarded to publish the California Official Reports of the decisions of the Supreme Court, the Courts of Appeal, and the appellate departments of the stateís superior courts.
Interested parties are invited to submit publication proposals by Nov. 13. Copies of the RFP may be obtained by calling 415/396-9555.
Board to meet Dec. 12-13 at San Francisco offices
The State Bar Board of Governors will hold its next regular meeting Dec. 12-13 at its San Francisco office at 555 Franklin St.
Committees will meet Friday, Dec. 12, and the full board will meet Saturday at 9 a.m.
The agenda will be available from the secretary, 415/561-8200, or online at www.calbar.org.
Appointees sought for JNE Commission
Applications for appointment to the 1998 Judicial Nominees Evaluation (JNE) Commission are available.
Active California attorneys, former members of the judiciary and members of the public are eligible for appointment by the State Bar Board of Governors.
The JNE Commission evaluates all candidates under consideration for judicial appointment by the governor. It does not nominate or appoint judges, but investigates candidates for judicial appointment while maintaining a code of strict confidentiality.
The attorney members serving on the commission shall be active members of the State Bar in good standing. Particular consideration will be given to attorney applicants who have substantial litigation, trial and/or appellate experience.
The commission membership also may include one or more former members of the judiciary, with preference for those with appellate backgrounds.
New commissioners must be available to attend a two-day orientation meeting in January 1998 and must be able to commit at least 35-40 hours each month, or approximately 55 working days per year.
This time commitment includes 20-24 meeting days and 20-35 days to complete assignments.
The commissionís meetings generally are monthly, lasting one or two days (Friday and Saturday) and alternate between San Francisco and Los Angeles. At least one meeting in the spring will be three days.
Interested individuals may request an application from the barís appointments office at 555 Franklin St., San Francisco 94102-4498; 415/561-8855 or 213/765-1585.
Commissioners serve terms of approximately one year and may serve up to three consecutive terms.
The terms of the 1998 JNE Commission will begin Jan. 1.
The application deadline is Oct. 17.
Mandatory fee arbitration rules are changed
The State Bar board of governors voted to amend the guidelines, minimum standards and forms for mandatory fee arbitration.
The revisions, which reflect changes in the law, enable the bar to enforce mediated agreements which refund fees and/or costs to a client.
The rule changes require attorneys to notify clients of the right to arbitrate through the mandatory fee arbitration program before initiating arbitration through another forum, and parties will have the right to disqualify a mediator as well as an arbitrator upon request.