Michigan Developments
Eric Rule,
Director of Governmental Affairs

Lawmakers return to work on September 3, 2003. Here’s a look at some of the retail-related issues that are likely to come up in the fall.

Streamlined sales tax project moves ahead
Efforts to bring Michigan into compliance with the Streamlined Sales and Use Tax Agreement will resume this fall. The agreement is an essential first step toward making it possible to collect interstate sales tax on remote (catalog and Internet) sales.

Minority Leader Dianne Byrum (D-Onondaga) will spearhead a task force, with representatives from MRA and the Michigan Chamber of Commerce, to talk strategy. The relevant bills, currently in draft stage, are likely to be introduced in the upcoming fall session.

The agreement needs at least 10 states, accounting for at least 20 percent of the population of states that impose a sales tax, to enact the provisions of the agreement before the issue can be brought before Congress. With the enactment of such provisions in North Carolina in July, that threshold has been met. Now, the process moves to the project’s Governing Board, which must certify whether each state complies with the agreement.

MRA has long been active in the effort to simplify sales tax and to allow collection of sales tax on remote sales. Although Michigan’s compliance with the agreement is not necessary to meet the threshold goal, proponents of the project want to have Michigan on board because it would be one of the largest states to enact the legislation.

Task force eyes pharmacy assessment fee
A plan to increase dispensing fees as part of a pharmacy assessment surcharge at Michigan pharmacies could raise federal matching dollars, after which a portion would be refunded to the pharmacy.

Pharmacies with a large number of Medicaid customers stand to do well under such a plan, while pharmacies with few Medicaid customers could pay an unfair share of the burden.

The plan is likely to receive attention this fall. A task force, on which MRA is represented, will meet soon to examine how to make this plan as fair as possible for the greatest number of people affected by it. MRA will seek to ensure that any such plan will impact retail pharmacies as evenly and favorably as possible.

Land use council issues final report
The final report of the Michigan Land Use Leadership Council was published in August. The council was charged with studying and identifying trends, causes and consequences of urban sprawl. It also provided recommendations to the governor and the legislature designed to minimize the negative effects of current and projected land use patterns on Michigan’s environment and economy.

It grouped its findings under four categories: urban revitalization; land resource-based industries; planning and development regulation; and infrastructure and community services.

The council’s report has been characterized as consisting of “more carrots and less sticks”—that is, offering more incentives than punitive measures to meet its goals. Among other things, it recommends incentives to encourage retailers to stay or locate in urban centers and favors the development of housing above existing retail in downtown and suburban areas.

As the Governor’s Office reviews and acts on the recommendations of the council, MRA will be involved to assure that the concerns of retailers are represented in any legislation based on the council’s recommendations.

Electronics recycling program on tap
The environmental danger of disposing of computer monitors, televisions and other electronic equipment in landfills has prompted interest at the state and federal level in banning the disposal of certain electronic products in landfills, to be accompanied by an electronics recycling program. Governor Granholm has told the Department of Environmental Quality that some form of electronics recycling program will happen, probably next summer.

Any plan for recycling electronics is sure to impact retailers who sell them. MRA strongly opposes retailer take-back programs. A fairer and more manageable program might involve retailers collecting a fee at the time of purchase, which would go to fund a recycling program managed or overseen by the state.

MRA is part of a stakeholders group that will begin meeting this fall to examine how Michigan can fund a system to manage electronics recycling in a manner that is fair to retailers.

Update from Washington
James Goldberg,
MRA Washington Counsel

Unsolicited faxes off, then on again
The Federal Communications Commission caused excitement during a usually slow time in Washington when it issued a rule just before the July 4 holiday that closed a long-standing exemption from the agency’s ban on sending unsolicited fax advertisements.

Claiming that it erred when the rules were first issued a decade ago, the FCC said businesses would no longer be allowed to send unsolicited fax ads to individuals with whom they have had a prior business relationship.

The rule change, which was scheduled to go into effect on August 25, would require that any business wishing to send a customer a fax for the purpose of trying to sell a product or service first obtain the customer’s written permission to send a fax sent to his or her machine.

The permission could be provided in a multi-use document, such as a customer’s sales invoice or receipt or credit account statement, as long as a separate signature is obtained.

Then, after protests from MRA’s Washington office and many national associations, the FCC, in a somewhat surprising reversal of its reversal, announced in mid-August that it was suspending the effective date of the fax ad ban until January 1, 2005.

The FCC notice, however, made it clear that the agency was only backing away from the effective date of its new rule, not changing its mind on its basic premise.

Lawyers seek record-high settlement fees
The lawyers who secured the recent $3 billion settlement from Visa and MasterCard in one of the largest antitrust cases ever are seeking $609 million in legal fees, plus another $18 million in expense reimbursement. That’s about 18 percent of the settlement, which would be a record for class action antitrust claims.

The lawyers worked without compensation since 1995 when the litigation was commenced by Wal-Mart and The Limited, who alleged that the credit card issuers violated antitrust laws by requiring retailers to honor their debit cards at rates far in excess of usual fees for bank debit card transactions.

The judge who supervised the case must approve the legal fee request and, while he may reduce the award, the legal team that secured the settlement will still get a hefty payday.

The balance of the $3 billion fund will be paid out to retailers who accepted Visa and MasterCard debit cards. The per-retailer payout may be small—one expert has estimated it at about 10 percent of actual damages—but the larger benefit has already been felt, as the credit card issuers have reduced merchant fees for their debit cards when customer PIN identification is utilized.

IRS looking at reinsurance companies
MRA’s Washington Office was represented at a recent Internal Revenue Service meeting called to hear feedback on a 2002 notice that focused on producer-owned reinsurance companies (PORC), which the IRS feels may constitute an abusive tax shelter.

In a PORC transaction, a retailer sells an extended service contract or credit life insurance policy that is offered by a third party company or insurer. The third party then reinsures a portion of the risk back to a company that is owned by the retailer or a shareholder of the retailer.

The PORC is a common occurrence among automobile retailers, but the IRS believes it is far more widespread among appliance, consumer electronics and furniture retailers than many believe.

The IRS notice (2002-70) is designed to require, among other things, reporting of these transactions to the agency.

Will blackout spur national energy bill?
Opinions are mixed in Washington as to whether the recent power blackout in Michigan, the Northeast and parts of the Midwest will spur Congress into quick action on President Bush’s omnibus energy bill this fall.

Most lawmakers, returning from their summer recess, believe that the blackout will have little effect on the progress of the legislation, primarily because of its controversial provisions, such as oil drilling in the Alaska wilderness.

MRA’s Washington Office is keeping close tabs on the legislation because of its provisions on improving the electrical grid infrastructure and more mundane provisions dealing with mandatory conservation features on some small appliances and tools.