Council Members Present

Edward M. Deron
Anthony J. Caputo
Sherill Siebert
Jay A. Kennedy
Charles M. Lax
Michael O. Love
Shirley A. Kaigler
Trevor T. Wetherington

Ronald T. Charlebois, Business Entities
Mary Jo Larson, Employee Benefits
George H. Runstadler, III, Estates & Trusts
Jess A. Bahs, Practice & Procedures
John M. Neberle, State & Local

Eric M. Nemeth
Henry P. Lee
Thomas J. Kenny
David B. Deutsch
Steve Z. Ettinger

Eric T. Weiss, ex officio, Past Council Chairperson

The meeting was called to order at 9:02 a.m. by Council Chairperson Edward M. Deron.

A. MINUTES.

The minutes of the previous meeting of the Council had been previously distributed. Various comments were received pertaining to prior minutes. Those comments will be incorporated therein. There being no other comments, on motion duly made by Sherill Siebert and seconded by George Runstadler to accept the minutes as amended, the motion was unanimously carried.

B. TREASURER'S REPORT.

Former Treasurer, Sherill Siebert, submitted a final report reconciling the Taxation Section's records with the State Bar of Michigan's records. A copy of that reconciliation is attached to these minutes. It was noted by Ed Deron that the Taxation Section earned approximately $12,000 for the year ended September 30, 2002 and should be commended.

Ed Deron next reported that although Eric Nemeth was not present, his report had been circulated to Council Members. A copy of the Treasurer's Report is also attached to these minutes. Ed noted that the report reflects the collection of $6,000 from Standard Federal Bank by Tony Caputo for the outstanding $1,000 sponsorship fee for the 2002 Summer Tax Conference and the $5,000 sponsorship fee for the upcoming 2003 Summer Tax Conference. Also reflected in the report were expenses totaling to date $7,648, which principally represented $6,195 in costs attributable to the Michigan Tax Lawyer.

C. COUNCIL ACTIVITIES.

Ed Deron asked for reports and was advised as follows:

1. After Hours Tax Law Series. Ed Deron first reported that the next after hours tax program is scheduled for Tuesday, January 21. The program topic is "Hot Topics for Partnerships, S Corporations, and LLCs." The speakers at that program will be Bill Acker, Gordon Goldie, and Dean Rocheleau.

Shirley Kaigler reported that the program for February 18 will consider valuation discounts, gift tax reporting issues, and requirements for operating pass through entities. A final program for the year has been set, and the topic will be an "Overview of Essential Qualified Retirement Plan Documents." The program is scheduled for March 18, and the speakers at that program will be Chuck Lax and Gary M. Remer.

Next, Shirley reported that she was considering topics and speakers for the 2003/2004 year. Suggestions for speakers and topics were solicited.

Finally, Shirley reported that the October, 2002 program was very well attended and that the Section should be commended for sponsoring and publicizing these programs.

2. Summer Tax Conference. Tony Caputo again confirmed that we had received $6,000 from Standard Federal Bank for last year's and this year's Conference sponsorship. This year the Conference is scheduled for June 27 and June 28, 2003 at the Double JJ Resort near Muskegon, Michigan. Tony next reported that he was having difficulty obtaining a speaker from the Michigan Department of Treasury. Due to the change in Administration and the fact that June Summers-Haas had left the Department of Treasury, he had been unable to find a suitable replacement. Sherill Siebert indicated that June Summers-Haas had joined her law firm and might still be interested and available to provide a presentation on state taxes. This suggestion was supported by John Neberle and other Council Members.

Tony next indicated that he had recently secured a prominent national speaker on exempt organizations to complete the program. Finally, Tony indicated that the brochure for the program was in its final stages of completion and as soon as a commitment can be received from all of the speakers on their participation, it would be finalized and then mailed.

Henry Lee was absent and did not submit a report with respect to the Summer Tax Conference of 2004.

3. Tax Court Luncheon. Although not present, Tom Kenny in a written report advised that Judge Laro indicated that he may be available for a Tax Court Luncheon on Monday, March 24, 2003. Details would be finalized within the next 30 days. At this point the Tax Court docket is very short and as such Judge Laro was not able to commit to a specific date.

4. Directory. Trevor Wetherington first reported that he had recently begun to review the old directory with a view towards content for the new directory. Also, he reported he would be working on locating a sponsor. Mike Love offered to assist Trevor since Mike had been involved with the printing of the last directory. Also, Mike reported that the sponsor of the last directory, National City Bank, would not likely be interested in a future sponsorship.

5. Michigan Bar Journal. No written report was submitted by Tom Kenny with respect to the Michigan Bar Journal.

6. Michigan Tax Lawyer. Neither David Deutsch nor Steve Ettinger was present. David Deutsch did however submit a written report which summarized the status of the 2003 Winter edition.

Ron Charlebois will be submitting one long article and one short article from the Business Entities Committee. Mary Jo Larson will be submitting one long article from the Employee Benefits Committee. Additionally, David had received one short article from Sebastian V. Grassi relating to estate plan issues and a commitment from Joel Tuoriniemi from Michigan Tech University for one short article. All of the articles must be received by January 15, 2003 to make the deadline. Furthermore, David reported he had also received a commitment for a short article from Christopher J. Pardi relating to employee benefits for the upcoming 2003 Summer Edition.

7. Annual Meeting. Ed Deron reported that this year's Annual Meeting would take place in Lansing and not in Detroit. The prior rotation that had been utilized by the State Bar would have placed the program in Detroit for this year; however, the entire program is being reorganized. This years program will be limited to a one and one-half days and take place on Thursday, September 11, and Friday, September 12, 2003. The Tax Section's program would take place on the morning of September 12.

Tentatively, the program has been set to provide for a Council Meeting from 8:00 a.m. to 9:00 a.m. The Council Meeting would be followed by a Business Meeting from 9:30 a.m. to 10:30 a.m. The Business Meeting would then be followed by a program that would run from 10:30 a.m. to 11:45 a.m.

Next, Jay Kennedy reported that he was working on the program for the Annual Meeting. He indicated that obtaining a well known national speaker on federal tax issues would be difficult and probably unrewarding due to the location of the Annual Meeting in Lansing. Instead it was Jay's suggestion that the program focus on state tax issues. Again, it was noted however that due to the reorganization of the Department of Treasury and the new Administration, it might be difficult to gain access to anyone at the highest level for the program. John Neberle here suggested that he would attempt to contact the new State Treasurer, Jay B. Rising; and if at all possible, coordinate with Mr. Rising, the Department of Treasury's participation in a State and Local Committee meeting, the Summer Tax Conference, and next years Annual Meeting.

Ed Deron next reported that while some Sections would continue to hold meetings and programs in conjunction with the Annual Meeting of the State Bar, others have opted not to participate.

8. Internet. Mike Love reported that the transition of responsibility from Trevor Wetherington had been completed. Mike noted that updated information would be needed with respect to the Summer Tax Conference. Additionally, it was his suggestion that we regularly post minutes of prior Meetings of the Tax Council and Treasurer Reports. Furthermore, he solicited suggestions for links to other worthwhile web sites.

Mike next suggested that the Section include on its web site articles from the Michigan Tax Lawyer. Although it may not be appropriate to print all articles, there may be a benefit in printing selected articles from time to time. Furthermore, Mike recommended that we attempt to include on the web site an updated calendar of Section events.

Finally, Mike reported that there are two ways to access the web site. The first is through the State Bar of Michigan web site. The second, however, is to access it directly through the Section of Taxation's domain name, www.michigantax.org. It was noted by Mike that the registration of that domain name would soon expire and that with the approval of the Tax Council, it would be renewed for a fee of $35. That approval was given.

9. Federal and State Tax Legislation. Ed Deron reported that although Tom Kenny was not present, his written report addressed various legislative activities. In lieu of reading Tom Kenny's report, John Neberle suggested that as part of his State and Local Committee report he would have an extensive state legislation update and would likely cover the same topics. As such, the report was deferred to John Neberle.

10. Membership Outreach Coordinator. Steve Ettinger was not present and provided no written report.

11. Commissioner's Advisory Group. Ed Deron indicated that not only had no Commissioner's Advisory Group meetings occurred, the position of Revenue Commissioner has been eliminated by Public Act 657 of 2002. It remains to be seen whether new Advisory Groups will be formed under the direction of the State Treasurer.

D. COMMITTEE REPORTS.

1. Business Entities. Ron Charlebois reported that his committee would be submitting the featured article for the next edition of the Michigan Tax Lawyer. That edition will be published shortly.

Next, Ron reported that a meeting is planned for late February or early March and the topic will be "Collection of Taxes by the IRS and States from LLCs." No speaker has been confirmed, and Ron requested suggestions from the Council Members.

2. Employee Benefits. Mary Jo Larson reported that the last meeting of her committee took place on Thursday, November 1, 2002, at the Red Run Golf Club. Paul T. Shultz, Director of Employee Plans Division, Rulings & Examinations, TE/GE, Internal Revenue Service, spoke on "What's Happening and What's New at IRS'sEmployee Plans Division." In large part, Mr. Shultz' presentation was devoted to the Determination Letter Program and Voluntary Compliance Program. This was a joint event held with the Michigan Employee Benefits Conference with 61 attendees.

Mary Jo next reported that she had had discussions with Bob Architect, Senior Law Specialist, Employee Plans Division, TE/GE, Internal Revenue Service, about speaking on Section 403(b) and Section 457(b) plans at the committee's next meeting. A time and place for the meeting will be confirmed.

3. Estates & Trusts. George Runstadler first reported that he was attempting to compile a current e-mail address list for all members of his committee. To date he has had difficulty locating an existing list. Mike Love indicated that he still possessed and old list from his earlier committee chairpersonship and would make that available to George. Trevor Wetherington also indicated that Jan Baggett had a complete e-mail list of Tax Section Members, although it needed to be updated by comparing it to the most recent list provided by the State Bar of Michigan. As such, it was suggested that George contact Jan for that list.

Next, George reported that two meetings were in the planning stages. The first meeting would likely occur in late March and deal with the impact of the Supreme Court decision in the Craft case on estate planning and estate tax liability. A second meeting was being planned to deal with the current status of the federal estate tax itself. At this time, it is unclear whether the Bush Administration will attempt to accelerate the elimination of federal estate taxes. In any event, it was noted that in 2004 the exemption equivalent amount increases to $1,500,000, which will continue to have an important effect on estate tax planning. It was also noted that great uncertainty remained concerning the impact on the phase out and elimination of the federal estate tax state death tax credit with respect to the State of Michigan.

4. Practice & Procedures. A brief discussion occurred concerning the recent Supreme Court decision on the enforcement of a summons against KPMG on its participation and its clients' participation in tax shelters. This also precipitated a further discussion on our roles as attorneys in advising clients concerning issues of confidentiality and privilege with respect to tax shelters.

Jess Bahs reported that no committee meeting was held during the fall. He did however indicate that a winter meeting would be planned. Also, he is considering coordinating with Tom Kenny a program that would be held in conjunction with the upcoming Tax Court Luncheon. Jess observed that many of the participants in the Tax Court Luncheon would likely be interested in a Practice & Procedures program.

A further recommendation was made that the Practice & Procedures Committee consider a joint meeting with Estates and Trusts on valuation issues. George Gregory has made inquiry with various local IRS personnel as to their interest and availability. It was agreed based upon numerous recent reported valuation decisions, that this topic would have broad appeal.

5. State & Local. John M. Neberle first reported that the State & Local Committee had held their last meeting on November 14, 2002 at the offices of Raymond & Prokop, PC in Southfield, Michigan. The guest speaker was Professor Michael J. McIntyre of Wayne State University. Professor McIntyre's presentation principally addressed how Michigan taxes should be reformed in light of the looming State deficit. In Professor McIntyre's view, the State should (i) cut expenditures; (ii) replace the SBT tax with a business income tax that has a minimum tax component and is levied using a worldwide unitary basis measured by financial accounting income, rather than federal taxable income; (iii) base personal income taxes on inflation indexed graduated rates; and (iv) uncap property tax assessments.

John next submitted an extensive report updating Michigan tax legislation, Michigan tax administrative guidance and Michigan judicial tax decisions. A compendium of the tax bills passed prior to December 31, 2002 as prepared by Carolyn H. Andrews is attached to these minutes.

Finally, John reported that he would attempt to schedule a meeting for February or March and would try to secure participation of the new State Treasurer, Jay B. Rising, at that meeting.

E. OTHER REPORTS.

Probate & Estate Planning Liaison. Ed Deron indicated that although George Gregory was not present, he had submitted a written report. That report described highlights of the Probate & Estate Planning Council Meeting of December 14, 2002.

George first reported that with respect to the Uniform Principal and Income Act, the Michigan Bankers Association noted that proposed Section 104 (the power to adjust) increases the burden on trustees. In particular: (i) it creates new grounds for conflicts between income and principal beneficiaries; (ii) trustees would often like to create a truce in such situations; (iii) an unitrust safe harbor provision could be understood by both sets of beneficiaries; and (iv) proposed Section 104 without a safe harbor would impose problems on lay trustees as well as professional fiduciaries. Furthermore, they indicated that it was their belief that scriveners can draft around the proposed Uniform Principal and Income Act, however, banks do not have that flexibility. He observed that this appears to put the Michigan Bankers Association and the Probate & Estate Planning Council on the opposite sides of the issue. While both sides appear to want Section 104 in the Uniform Principal and Income Act, they are both quite firm in their positions. The Probate & Estate Planing Council drafted a suggestion based on a dollar limitation. This was based on their understanding that bankers were objecting for small estates. It appears that bankers object to a Uniform Principal and Income Act without a safe harbor provision for trustees for all estates. The Probate & Estate Planning Council then authorized the hiring of Becky Bechler as a lobbyist in connection with the Uniform Principal and Income Act.

F. OLD BUSINESS.

Ed Deron reported that the old Taxation Section copy machine still had not been sold. As such, if anyone is interested, Ed or Jan Baggett should be advised. There is some possibility that Jim Novis may acquire it. If not, Jan has advised that she would be willing to store it in her basement temporarily.

Chuck Lax indicated that the State of Michigan Lobbying Activities Report was due January 31, 2003. In that report the Section must include expenditures incurred on behalf of public officials. Chuck observed that probably the only expenditures that may have occurred would have been for speakers appearing at committee events. In the event that this occurred, the activity, the speaker, and the amount should be reported to Chuck.

H. NEW BUSINESS.

Ed Deron first reported that he had received copies of the minutes from the October17, 2002 Meeting of the National Association of Tax Sections attended by Sherill Siebert. The minutes were extensive, and anyone desiring a copy can contact Ed directly.

Ed next reported that he had received a letter concerning the First Michigan Conference on Racial and Ethnic Fairness in the Legal System in conjunction with the Fifteenth Annual Meeting of the National Consortium on Racial and Ethnic Fairness in the Courts. From April 10 through April 12 the State Bar of Michigan Open Justice Commission will host this conference. The letter principally solicits support from the different Sections. The letter requested endorsements, participation, financial commitments, etc. It was agreed that the Taxation Section Council would endorse the conference and market it to the membership of the Taxation Section.

Next, Ed reported he had received an inquiry concerning the Section's participation in pro bono legal services. This inquiry requested the completion of a questionnaire for any pro bono services that had been performed. Ed indicated that anyone engaged in pro bono legal services should contact him.

Ed then reported he had received a letter from the Professional Education Systems Institute in Eau Claire, Wisconsin indicating their desire to "rent" a mailing list of our Members for a future seminar. Ed believed that they would pay 20 cents per name for each Member. It appeared that they were also soliciting the Probate & Estate Planning Section and the Elder Law Section for their membership. Eric Weiss and Mike Love both commented that in the past the Taxation Section had rejected other inquiries. Inasmuch as there was no support among the Council Members at this time, Ed indicated that the organization would be informed that we were not interested. Instead, however it was suggested that this organization could purchase or even be given space in an upcoming edition of the Michigan Tax Lawyer to publicize such a program.

John Neberle reported that the Michigan Chamber of Commerce is considering the establishment of a tax court for the State of Michigan. The prospects for its implementation however are uncertain. John indicated that he is serving on a committee to consider its implementation. Ed Deron asked John to continue to apprise the Taxation Section of the progress of this endeavor.

Finally, Ed Deron reported that the next scheduled meeting of the Taxation Section will occur on March 12 at 9:00 a.m. at the Double Tree Hotel in Novi, Michigan.

There being no further business, a motion to adjourn was made by George Runstadler and seconded by Eric Weiss. After unanimous consent, the meeting was adjourned at 10:45 a.m.

Respectfully submitted,

Charles M. Lax
Secretary

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