As a commercial litigator for over 35 years, I have seen countless scenarios in which people who were once intimate business associates end up suing each other over real or perceived breaches, thefts, or betrayals. Accusations and recriminations get hurled back and forth, and personal relationships are often ruined even as the business disputes are ultimately resolved. This is one of the reasons why this type of litigation is known as “business divorce.” Most painful for all involved is the subset of lawsuits between family members involving the “family business” or transfers of real property.  It is often the case in such family disputes that agreements were made, and understandings reached, but never memorialized in signed documents. Many such transactions go forward based on express or implied promises to do something in the future in consideration for the transfer of the business interests or real property, and when those promises are broken, the person who agreed to the transfer in reliance on those promises is left looking for a way to recover what they lost. In addition to suffering financial harm, the injured party is often rendered brokenhearted by the promissor’s greed, abandonment, or duplicity. Generally speaking, without a written agreement, the injured party cannot sue the promissor for breach of contract. However, that person may be able to recover ownership of the transferred business interest or real property through the equitable remedy of a constructive trust. As the courts have explained, a constructive trust is not a trust at all in the substantive sense of the word. It is a remedial device created by the courts to compel a person who holds legal title to property subject to an equitable duty to convey to another, to do so because he would be unjustly enriched if he were permitted to retain the property. As the Fourth Department has succinctly explained, “The defendant is not compelled to convey the property because he is a trustee; he is a trustee because the court determines that he has an equitable duty to convey it.” In other words, an individual cannot go to an estates lawyer and have a constructive trust prepared to document the transaction after the fact. Rather, that individual must commence an action seeking the imposition of a constructive trust upon the business interest or real property in the hands of the person to whom that business interest or property was transferred. A constructive trust may be imposed by the court where the plaintiff proves a confidential or fiduciary relationship, a promise (express or implied), a transfer made in reliance on that promise, and unjust enrichment. However, because a constructive trust is an equitable remedy, the courts do not rigidly apply those elements, but instead use them as flexible guidelines. The scope of the constructive trust doctrine is broad, and as the Court of Appeals has held, “the Court does not restrict itself by describing all the specific forms of inequitable holding which will move it to grant relief, but rather reserves freedom to apply this remedy to whatever knavery human ingenuity can invent.” The key to proving the right to a constructive trust is evidence establishing the confidential relationship, “which triggers the equitable considerations leading to the imposition of a constructive trust.” Where the record evidence indicates that a relationship of trust and confidence existed between the parties, “the defendant must be charged with an obligation not to abuse” that trust and confidence. The New York courts have regularly found that a trusting relationship such as that between a father and daughter qualifies as a confidential relationship under New York law. Of course, there would be no need for a constructive trust in the absence of a transfer of property, and thus the next question is whether the transfer was made in reliance on an express or implied promise. The case law reveals numerous circumstances in which a parent transferred property to a child, or a spouse transferred property to his spouse, and subsequently sought to recover that property through the imposition of a constructive trust.  In such circumstances, the plaintiff often alleges that they made the transfer in reliance on an understanding, or an express or implied promise, that the defendant would, in exchange for the transfer, provide financial assistance to, or care for, the plaintiff, or reconvey the property to the plaintiff upon his request. In most such cases, the defendant is compelled to deny any such understanding or promise, and there is no writing memorializing that understanding or promise. Nevertheless, the courts consistently hold that in such family settings, a promise may be implied or inferred from the transaction itself. In fact, the courts have held that when a transfer of real property is made in the context, and in furtherance of a parent’s confidential and trusting relationship with their child, it is not unnatural that the understanding was not reduced to a writing, and, indeed, that the absence of a formal writing “grew out of that very confidence and trust, and was occasioned by it.” Lastly, because the purpose of the constructive trust remedy is to prevent unjust enrichment, the plaintiff must prove that the defendant was enriched at the plaintiff’s expense, and that it is against equity and good conscience to permit him to retain that benefit. However, the plaintiff need not prove that they suffered a loss corresponding to the gain received by the defendant. Moreover, a finding of unjust enrichment does not require proof of a wrongful act by the one enriched, and “innocent” parties may frequently be unjustly enriched. A constructive trust will be imposed even if the transferee fully intended to perform his promise at the time of the transfer, because the subsequent abuse of a confidential relationship “constitutes a sufficient fraud to call upon the remedial powers of a court of equity.” The courts will find unjust enrichment through a realistic determination “based on a broad view of the human setting involved,” and, most importantly, the courts hold that the conveyance or transaction giving rise to the unjust enrichment “should be interpreted ‘not literally or irrespective of its setting, but sensibly and broadly with all its human implications’.” Given these broad maxims, a constructive trust case is often fact-intensive and requires significant pretrial discovery, and, in particular, thorough depositions of the parties. The imposition of a constructive trust may not fully mend the plaintiff’s broken heart, but it should result in the reversal of the property transfer that led to the defendant’s unjust enrichment and the restoration of that property to the plaintiff. Thomas F. Knab is a Partner in Underberg & Kessler’s Litigation Practice Group. He focuses his practice on commercial litigation, business and corporate disputes, and construction and real estate litigation. Tom can be reached at tknab@underbergkessler.com. Reprinted with permission from The Daily Record and available as a PDF file here.

We are excited to announce that our Canandaigua office is now located at 11 North Street, Suite 300, Canandaigua, NY 14424. We are located minutes from historic downtown Canandaigua and the picturesque resort area in an attractive campus-style office setting, just off the corner of NYS Rt. 332 and North Street. When visiting our new location, you will find ample parking directly in front of the entrance. Our phone number remains the same at 585.258.2800.

In a recent article published in the Rochester Business Journal, Underberg & Kessler real estate and commercial lending attorney, Andrew M. Washburn, provided insight on New York State’s impending ban on gas appliances.  In “New York’s All-Electric Buildings Act takes effect in 2026: Are we ready for the switch?”  Andrew described the goals of the All-Electric Buildings Act (AEBA), the legal challenges to the Act, and the impact on the local real estate and construction industry. The AEBA prohibits the installation of fossil fuel equipment/hookups in new buildings, starting in 2026 for buildings of up to seven stories and 2029 for larger buildings. Andrew has been tracking the state’s gas appliance ban for several years and frequently speaks to trade associations and community organizations on the topic. He stated that it stems from legislation in 2019 called the New York State Climate Leadership and Community Protection Act, whose main goal is reducing New York’s greenhouse gas emissions and shifting the state’s energy to renewable sources. However, the AEBA is facing legal challenges, including a Federal lawsuit in the Northern District of NY (Mulhern Gas Co. v. Rodriguez, 1:23-cv-01267), where the Plaintiffs assert that a federal statute, the Energy Policy and Conservation Act, preempts any state or local regulations on energy consumption by appliances, and thus negates the All-Electric Building Act. The result of the lawsuit could have a big impact on the real estate and construction industry. Andrew explained, “Some of the developers are concerned about construction delays based off of the availability of the new equipment they’ll need, rising costs and ultimately increased utility expenses,” He noted that increased construction costs and delays may further exacerbate the region’s current housing inventory shortage. “I think a lot of people generally think that the goals of the All-Electric Buildings Act are noble, however, the time frame and implementation are the main concerns.” Andrew M. Washburn is an attorney in UK's Real Estate & Finance and Commercial Lending Practice Groups. He can be reached at awashburn@underbergkessler.com or 585.258.2885. Reprinted with permission from Rochester Business Journal. To view the full article, click here.

Congratulations to Patrick L. Cusato for being selected to The Daily Record's 2024 Power 20 Real Estate Law list for the third year in a row. The Power 20 list showcases power players in the Western New York legal community who are recognized as leaders in their area of practice. “The people on this list help clients navigate complex transaction processes to help fulfill their personal dreams or organizational goals. Their job has been made even more difficult over the past two years. At the same time as the COVID-19 pandemic was changing the way the entire real estate transaction process worked, the real estate market was getting turned on its head. These attorneys continued to serve their clients admirably while navigating new ways of doing business thanks to restrictions that limited or halted face-to-face meetings," stated Ben Jacobs, Associate Publisher and Editor of The Daily Record. Pat focuses his practice on commercial and residential real estate, mortgage banking, and tax credit development and finance projects, and affordable housing transactions. In addition to serving as Underberg & Kessler’s Managing Partner, he serves as the Real Estate & Finance Practice Group Chair, a member of the Executive and 401K Committees, and is the Financial Management Partner for the Firm. A strong proponent of being active in community and industry groups, Pat is an Executive Board member of the Mortgage Bankers Association, Executive Board member of the Bishop Sheen Ecumenical Housing Foundation, past President and past Chair of the Foundation's annual fundraising gala, and past Chair and current member of the Monroe County Bar Association Real Estate Section. He also serves as the Vice President of the Board of Directors of the Lakefront Soccer Club and President of the Board of Directors of the Sports Association of Webster, Inc. Pat has been recognized in the 2013-2024 editions of The Best Lawyers in America® for his work in Real Estate Law and he has also been selected as an Upstate New York Super Lawyers honoree from 2007-2010 and 2021-2023. He has been recognized by The Daily Record in the Power 20 in Real Estate Law list in 2022 and 2023, and he was the recipient of The Daily Record's Leaders in Law Award in 2018, honoring attorneys who have shown dedication to the legal profession and tireless commitment to the community. Pat is also a recipient of the 2009 Rochester Business Journal's "Forty Under 40" award.

Underberg & Kessler labor & employment attorneys, Paul F. Keneally and Ryan T. Biesenbach, were featured in a recent article published in the Rochester Business Journal. The article, “How companies can mitigate litigation risk, from tech and otherwise,” discusses what kinds of litigation risks are most prevalent currently and what steps companies can take to guard against them. “The non-compete is a particularly interesting category right now because the federal government, through primarily the Federal Trade Commission, has indicated that they’re very much interested in greatly restricting or if not banning non-competes and cutting back even non-solicitation agreements that are maybe included or an alternative to the non competes,” Paul stated. Another area the firm is watching is related to the recent amendment to the New York State Human Rights Law that became effective February 15 and increased the statute of limitations for all forms of discrimination from one to three years. “I think it’s going to create a pretty big uptick in Division of Human Rights cases going forward,” added Ryan. Paul provided tips for businesses to avoid employment-related litigation, including reading publications and blogs (written by employment attorneys) to stay on top of ever-changing laws and having a dedicated human resources person and counsel. “The area of employment law has just reached a point where I think it’s overly difficult for most employers – meaning like the owner of the company – to do it on their own,” said Paul, about staying abreast of litigation risks. “They have to find someone who specializes in it.” Reprinted with permission from Rochester Business Journal. To view the full article, click here.

A new federal law taking effect in 2024 and a proposed New York State law will both require certain business entities to file reports providing information on the beneficial ownership of the entity. Frequently asked questions regarding both laws are answered below: Corporate Transparency Act: Q: What agency monitors this federal law? A: Reports will be made to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). Q: Who will be required to make reports under this law? A: Corporations and LLCs, in addition to various other business entities. There are twenty-three categories of entities that are exempt from the reporting requirement. Examples of entities that are not required include banks, credit unions, and tax-exempt entities registered with the IRS. Q: What is a “beneficial owner”? A: A beneficial owner is an individual with substantive control over the company, owning or controlling at least 25% of the ownership interest. Q: Where will the data be stored? A: FinCEN will store the reported information in a secure non-public database. Q: When is this law effective? A: January 1, 2024. Companies created before January 1, 2024, will have until January 1, 2025, to file their initial reports. Companies created on or after January 1, 2024, will have 30 days to file their initial reports. Q: What will happen if my company does not follow this law? A: There may be civil and criminal penalties for violations, including a fine of up to $10,000. New York State LLC Transparency Act: As of the date of this article, the New York State LLC Transparency Act has not been signed into law by Governor Hochul. We will continue to monitor developments and keep you informed as the legislation progresses and any changes to the proposed law. The questions and answers below are based upon the proposed law, so remain subject to change. Q: Who will be required to make reports under this New York law? A: Only limited liability companies are required to report their owners. Q: When will this law come into effect? A: The NYS legislature passed the Act in June 2023 and Governor Hochul is expected to sign the Act into law. The law would become effective one year after it is signed. Companies formed on or before the effective date of the Act would be required to file their reports by January 1, 2025. Companies formed after the effective date will have 30 days to file their reports. Q: Can my business use the same report we filed for the federal Corporate Transparency Act? A: Yes, a reporting company may satisfy its disclosure requirements by submitting a copy of the report it submitted to FinCEN pursuant to the Corporate Transparency Act. Q: Where will the data be stored? A: In a publicly available database. Certain personal and identifying information will be kept confidential, except for the purposes of law enforcement or as otherwise required to be disclosed pursuant to a court order. What Should Companies Do to Prepare? These Acts will bring significant new reporting and monitoring burdens that will impact many businesses. Understanding your obligations and staying informed will be essential in navigating this regulatory landscape. For existing entities. Review your current business structure in consultation with your attorney to confirm your understanding of these new laws and to create a plan for filing the proper paperwork. For any new entity formed after January 1, 2024, you should consult with your attorney to ensure the new filing requirements are completed as part of the entity formation process. As noted above, we will be monitoring the progress, implementation, and compliance challenges of these new requirements. Please contact Joshua B. Beisker or any of our Corporate & Business attorneys with questions at (585) 258-2800 or visit underbergkessler.com.

With the proliferation of electronic health records, medical providers are facing new challenges in the form of phishing and ransomware attacks and other cyber threats. Indeed, the U.S. Department of Health and Human Services (HHS), Office for Civil Rights (OCR) has been active recently in settling multiple matters involving cybersecurity breaches and attacks. Q: What Is Phishing and Are Medical Providers at Risk? A: Phishing occur when a third-party impersonates a legitimate organization via email or other electronic means, which entices the person to whom the communication is directed to click a link within the email or otherwise allow the third-party to gain access to or steal sensitive information. Phishing is the most common type of cyberattack likely to result in a data breach and cause major financial implications for health care organizations. For example, on December 7, 2023, OCR announced a settlement related to a cybersecurity breach that affected almost 35,000 patients in Louisiana. The subject of the investigation was the Lafourche Medical Group (Lafourche), which provides emergency and occupational services, and laboratory testing. Lafourche was the victim of a phishing attack involving electronic protected health information (PHI). Lafourche reported the breach to HHS on May 28, 2021, advising that a third-party had gained access to an email account which contained PHI. OCR investigated and found that Lafourche failed to conduct a risk analysis to identify potential threats or vulnerabilities in its system that could allow for access to PHI. Risk analysis is required under the Health Insurance Portability and Accountability Act (HIPAA). The government also determined that Lafourche failed to implement any policies or procedures to review its electronic system activity to safeguard against cyberattacks. As part of the settlement, Lafourche agreed to pay $480,000 and implement a corrective action plan to establish security measures, develop written policies and procedures to comply with HIPAA, and provide training to staff on HIPAA requirements. Q: What Is Ransomware and Are There Any Recent HIPAA/OCR Settlements? A: HHS defines ransomware as “type of malware (malicious software) distinct from other malware,” which “attempts to deny access to a user’s data, usually by encrypting the data with a key known only to the hacker who deployed the malware, until a ransom is paid.” Ransomware attacks can be costly for medical providers, as well as result in a breach of HIPAA when disclosure of PHI is implicated. In October, OCR settled a matter with Doctors’ Management Services (DMS), a Massachusetts-based medical management company. On December 24, 2018, DMS identified unauthorized access to its network that occurred over one year prior, on April 1, 2017. DMS waited nearly four months after discovery to report the breach to HHS, in April 2019. In its investigation, the government found that DMS failed to analyze and ascertain the potential risks and vulnerabilities to PHI maintained within the organization. OCR also found that DMS failed to monitor its activity to guard against a cyberattack, and that the provider neglected to implement policies and procedures to ensure compliance with the HIPAA Security Rule. Pursuant to its settlement with OCR, DMS agreed to pay $100,000 to implement a corrective action plan, implement a risk management plan, develop policies and procedures to comply with the Privacy and Security Rules, and provide training to its employees on HIPAA rules and compliance. Q: Has HHS Developed Any Steps to Assist Providers with Compliance? A: Yes, on December 6, 2023, HHS released a concept paper, which outlines its cybersecurity strategy for the health care industry. The paper amplifies the National Cybersecurity Strategy outlined by President Biden and focuses on strengthening resilience for medical providers and patients threatened by cyberattacks. The December 2023 concept paper outlines four primary actions, including: (1) publishing health care and public health sector cybersecurity performance goals to help institutions implement high-impact cybersecurity practices; (2) providing resources to financially incentivize and implement cybersecurity practices; (3) implementing an agency-wide strategy to support greater enforcement of cybersecurity standards and accountability; and (4) expanding the “one-stop shop” within HHS for health care sector cybersecurity and developing the Administration for Strategic Preparedness and Response’s coordination role as a “one-stop shop” for health care cybersecurity. Q: How Can I Work Toward Compliance With HIPAA Rules While Ensuring My Networks Are Secure? A: Start by reviewing current policies and consulting with your IT security provider and attorney to ensure ongoing compliance with HIPAA Privacy and Security Rules. Protect your organization by assessing which assets are vulnerable, implementing appropriate security measures, establishing a regular review process, developing written policies for preventing a breach of PHI, and designing and implementing appropriate training for all staff. Q: What Should I Do if I Discover a Cybersecurity Attack or Breach? A: If a breach is discovered, you should consult with your IT services and security provider to secure the network and identify and address any vulnerabilities. You should consult with your attorney as soon as possible to discuss whether unsecured PHI was compromised and, if so, whether a breach report requirement is triggered under HIPAA. Reprinted with permission from the February/March 2024 issue of The Bulletin from the Monroe County Medical Society and available as a PDF file here. Ericka B. Elliott is an attorney in Underberg & Kessler LLP’s Health Care and Litigation Practice Groups. She can be reached at eelliott@underbergkessler.com or 585.258.2830.

The new consumer protection law that amends and clarifies New York’s existing credit card surcharge law (NYS GBS § 518) went into effect on February 11, 2024.  The NYS Division of Consumer Protection (“DCP”) assists aggrieved consumers in the marketplace and the New York State Attorney General and local governments will have the authority to enforce the credit card surcharge law. The law, signed by Governor Hochul on December 13, 2023, provides greater transparency and protections for consumers by: Limiting credit card surcharges to the amount charged to the business by the credit card company; and Requiring businesses to post before checkout: the total price of an item or service inclusive of the credit card surcharge; or a two-tiered pricing option, which requires the credit card price to be posted alongside the cash price. The following practices and examples comply with the law’s credit card surcharge notice requirements: DO: The business lists the higher credit card price next to a lower cash price. The business lists the credit card price for items and services, then lets customers know they will receive a discount for using cash. The business changes all prices to the credit card price. DON’T: The business posts a sign on the door and at the register stating an additional 3.9% surcharge will apply for credit card purchases. “This business has a 4% cash discount incentive built into all pricing. Any purchases made with a credit or debit card will not receive the cash discount and an adjustment in cost will be displayed on your receipt.” A convenience fee, service fee, administration fee, non-cash adjustment, technology fee, processing fee, etc., is charged to credit card users and added as a separate line item on a customer receipt. The price tag of an item shows “$10.00, + 4% if paying with a credit card.” NOTE: This law does not apply to debit cards. The law will permit local governments to join in the enforcement of this law, providing consumers with additional resources for compliance and providing local governments with broader opportunities to promote consumer protections for their citizens. If there are any issues related to credit card pricing at the register, DCP encourages consumers to: File a complaint with DCP to receive a refund of any excess fees paid to a merchant in New York State, or File a complaint with the Attorney General or participating local governments for enforcement of a merchant you believe violated the law. If you have any questions regarding the law, please contact our Corporate & Business team at 585-258-2800 or email info@underbergkessler.com

We are pleased to announce that Leah Tarantino Cintineo has been appointed as chair of the Litigation department. Cintineo, who is the Family Law Practice Group leader, represents clients in divorce and post-divorce matters, pre-nuptial agreements, high conflict child custody litigation, and child support litigation. She also has years of experience handling divorce matters involving businesses, complex financial issues, and extensive marital estates, as well as preparing QDROs for the division of retirement assets at the completion of a divorce. Cintineo is active in community and industry groups as a member of the New York State Bar Association and its Matrimonial and Family Law Section, the Monroe County Bar Association and its Family Law Section and is a member of the 7th Judicial District Attorney Grievance Committee. She is also a member of the Greater Rochester Association of Women Attorneys (GRAWA), a member of the Collaborative Law Association of the Rochester Area (CLARA), and a member of the Ontario County Bar Association, where she recently was President of the Association. In addition, Cintineo served for eight years on the Society for the Protection and Care of Children Board of Directors, including two years as Board Chair. A graduate of Albany Law School, Cintineo has been selected as an Upstate New York Super Lawyers Rising Stars honoree from 2016-2023, she was the 2022 recipient of The Daily Record and Rochester Business Journal's Legal Excellence Award for Pro Bono Excellence and is a past recipient of the Rochester Business Journal’s "Forty Under 40" Award. Cintineo was named to both the 2022 and 2023 Daily Record's Power 20 in Family Law lists, and she was the 2017 recipient of the Honorable Michael F. Dillon Attorneys for Children Award for her work advocating for children in court proceedings. In 2016, Cintineo was named a finalist for the Rochester Business Alliance ATHENA Young Professional Award.

The United States Department of Labor has issued a final rule, effective March 11, 2024, governing the analysis of whether a worker is an independent contractor or an employee. The rule adopts a six-factor, “totality-of-the-circumstances” analysis of the potential employer/worker relationship and is similar to the test already used by the New York State Department of Labor. All of the circumstances are analyzed as a matter of whether as an “economic reality,” the worker is economically dependent on the potential employer for work or is independently running his or her own business. Crucially, it must be understood that each Department of Labor will most likely use an employee friendly approach in applying all of the factors, which are equal in weight as to the ultimate decision. The six factors are: Opportunity for profit or loss depending on managerial skill; Investments by the worker and the potential employer; Degree of permanence of the work relationship; Nature and degree of control; Extent to which the work performed is an integral part of the potential employer’s business; and Skill and initiative. Given the factors and mindset, there are many workers wrongfully classified as independent contractors, and therefore tax withholding has not occurred, workers’ compensation and disability insurance premiums are unpaid, and New York State paid sick leave has not been provided, among other issues. Employers should therefore immediately audit their independent contractor relationships with Paul F. Keneally or another member of the Underberg & Kessler Labor & Employment Law Practice Group. If you have any questions regarding the final rule, please call Paul at (585) 258-2882 or email pkeneally@underbergkessler.com.

On November 30, 2023, the United States Environmental Protection Agency (“EPA”) issued proposed Lead and Copper Rule Improvements (“LCRI”) that will require the removal of all lead pipes from municipal water systems within 10 years. The rule is a draft and will be subject to public comments and potential revisions. However, if the rule is finalized, according to EPA it will cost an estimated $45 billion. External estimates by third parties put the cost of removing and replacing lead pipes from municipal water systems in excess of $115 billion.   Lead pipes supplying drinking water have been regulated by the Safe Drinking Water Act (“SDWA”) since 1975.  In 1986, amendments to the SDWA prohibited lead pipes in drinking water systems. The rule was amended in 1991 requiring removal of lead service lines when testing revealed that lead in water systems exceeded 15 parts per billion (“ppb”). EPA has made addressing lead pipe systems a priority after drinking water in Flint, Michigan was contaminated with lead. Lead impacts in drinking water occurred after the city switched its water source, causing lead pipes to corrode.    The proposed rule is a result of environmental groups legal action against the 2021 amendments to the LCRI. Last December, EPA decided to drop defense of the rule and promised to strengthen the rule by the fall 2024. This parallels other “sue-and-settle” challenges to environmental agency action brought by environmental groups in recent years in which EPA concedes challenges to existing or proposed rules and settles by making extensive concessions to litigious environmental groups.   In announcing the rule, EPA Administrator Michael Reagan said that “[t]his is a public health concern that has unfortunately spanned generations and an issue that has disproportionately affected low-income communities. Our proposed improvements are a major advancement.” Additionally, EPA points to potential cognitive issues and health problems that may occur if excessive levels of lead exist in lead lines. Although lead pipes have been prohibited since the 1980s there are estimated to be about 9.2 million lead service lines in the United States.    In addition to required replacement of lead pipes from the water mains in the street to houses, the rule has other components to address lead in water lines. The rule reduces the action level for lead pipes from 15 ppb down to 10 ppb for municipal testing and action to improve lead levels. The rule also changes the lead testing procedure so municipalities will have to sample the first draw and 5th liter from the tap to determine if water sitting in lead pipes has been impacted by lead. Significantly, the rule also requires municipalities to complete inventories of lead service lines by October 2024. The rule also prohibits municipalities from partially replacing lead service lines.   As anticipated, environmental advocates, some of whom sued EPA over the prior version, are praising the new rule. The Natural Resources Defense Council, Senior Strategic Director Erik Olson called the rule “a ray of hope that we are approaching the day when every family can trust that the water from their kitchen tap is safe, regardless of how much money they have or their zip code.” Mona Hanna-Attisha, a Michigan State University professor and pediatrician that helped research the Flint water crisis said “[i] am overjoyed on behalf of kids everywhere-kids in Flint, in Newark, Chicago, Milwaukee, Washington DC and Jackson and places we know of and don’t know of.”   The Association of Metropolitan Water Agencies (“AMWA”) said its members “are committed to providing clean and safe drinking water to all Americans” but noted that removing lead pipes required cooperation between water systems and homeowners, as well as adequate state and federal funding and technical expertise. CEO Tom Dobbins said “AMWA urges EPA to focus on providing drinking water systems with the resources and tools necessary to achieve this ambitious goal, and working toward eliminating the real barriers that exist for many utilities.”   Although there has been pressure on EPA to require removal of lead pipes since the Flint, Michigan water crisis, the scope and cost has been a considerable obstacle. EPA’s announcement points to funding from the Bipartisan Infrastructure Law which dedicated $15 billion for lead pipe removal. While the proposed rule does not require municipal water systems to remove lead service lines on private property, to access the grant money the municipalities must remove both public and private lead lines. EPA also points to another $11.7 billion in drinking water funding that is available to states under the Drinking Water State Revolving Fund that can be used for this purpose.   Despite EPA’s reference to funding sources, the AMWA cautioned that requiring all lead service lines to be replaced “would represent a massive unfunded mandate.” Further, that if municipalities do not receive funding under the infrastructure law it “would likely have to turn to increased customer rates.” Similarly, former EPA officials such as Brent Fewell, a Deputy Assistant EPA Administrator during the George W. Bush administration, noted that “[a]bsent more resources, it’s unrealistic and a pipe dream to think that removal of all lead service lines will be accomplished in 10 years. While it’s a laudable goal, the LCRI’s deadline is simply too aggressive with the current level of funding and technical assistance available to communities.”    While some cities such as Newark, New Jersey, have made progress replacing lead pipes in the water system, the nation’s largest cities face substantial challenges meeting the ambitious proposal.  Large cities such as New York and Chicago are estimated to have more lead pipes than any other areas. Based on the level of work required, the LCRI exemptions for the 10 year deadline may be applied for water systems that must replace more than 10,000 lead service lines per year.   In whatever form the final LCRI rule takes following public comments and adoption by EPA, the rule is likely to be one of the most expensive regulatory actions ever mandated by the federal government. There is little doubt that the aggressive schedule will cause financial hardship to municipal water systems and increased costs to water users.    George S. Van Nest  is a Partner in Underberg & Kessler LLP’s Litigation  Practice Group and Chair of the firm’s Environmental  Practice Group. He focuses his practice in the areas of environmental law, development, construction, and commercial litigation. George can be reached at gvannest@underbergkessler.com . Reprinted with permission from The Daily Record  and available as a PDF file here .

The IRS and the New York State Department of Taxation recently announced the 2024 exemption and exclusion amounts related to Federal Estate Tax, Federal Annual Gift Tax Exclusion Amounts, and New York State Estate Tax: Federal Estate Tax Exemption Amount 2024 $13,610,000.00 per person ($27,220,000.00 for a U.S. married couple) Federal Annual Gift Tax Exclusion Amount 2024 $18,000.00 per U.S. client ($36,000.00 for a U.S. couple) New York State Basic Exclusion Amount 2024 $6,940,000 per person The 2024 exemption and exclusion amounts are at a record-setting high, providing perhaps the most favorable tax environment to date for tax planning. The continued increase to the federal estate tax exemption and gift exclusion amounts provides estate planners and clients with added planning options. Individuals looking to make lifetime gifts should consider fully utilizing their annual gift tax exclusion, and individuals who are projected to be above the federal estate tax exemption, should consider utilizing their lifetime gift tax exclusion before it is too late. Regarding annual gifts, a U.S. individual can gift up to $18,000.00 per donee in 2024. So, if a U.S. couple has four children, they can gift up to $144,000.00 tax free. Annual gifting can be a highly effective strategy to reduce the taxable estate of a person who is projected to have an estate greater than the federal estate tax exemption. Regarding lifetime gifts, while the federal estate tax exemption is at a record high, the 2017 Tax Cuts and Jobs Act included a sunset provision, which will revert the federal estate tax exemption back to where it was prior to its passage. The anticipated post 2025 federal estate tax exemption, adjusted for inflation, is expected to be somewhere around $7,000,000.00 come January 1, 2026. Consequently, in 2026, each U.S. individual is set to lose at least $6,000,000.00 of exemption. So, for high-net worth U.S. citizens, now is the time to consider making substantial lifetime gifts utilizing their unified credit toward the currently record high federal estate tax exemption. Failing to do so may result in substantial federal estate taxes, which could be as high as 40%. Further, large gifts made prior to 2026 will not be subject to IRS “clawback,” so this is a true “use it or lose it” scenario. New York State has not yet released the anticipated post 2025 state estate tax exemption, adjusted for inflation, but historically, the New York State amount has equaled or been less than the federal estate tax exemption amount. Need Help with Tax Exemptions and Exclusions? Underberg & Kessler’s Estates & Trusts attorneys can work with you to formulate the best estate planning strategy to meet your goals and to take advantage of your options. For more information, contact Joshua B. Beisker at jbeisker@underbergkessler.com or 585-258-2879.