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Firm selects Employee of the Month for September 2019

Rachel Schones

Rachel Schones, Receptionist, is Phillips Murrah’s Employee of the Month for September 2019.

“It is a great honor to be selected as Employee of the Month by my co-workers,” she said.

The Employee of the Month is selected anonymously by Phillips Murrah staff on merits of teamwork and overall contributions to the Firm.

“Rachel has blossomed into such a poised young woman since she began with our Firm,” said Michelle Munda, Executive Director at Phillips Murrah. “All our employees as well as our clients love her and she handles that front desk with grace and charm.

“At times, that can be quite challenging. Thank you Rachel!”

The Firm recently began making a donation to the winner’s charity of choice, and Rachel chose The Association for Frontotemporal Degeneration.

To learn more about The Association for Frontotemporal Degeneration, click here.


Phillips Murrah has been recognized as an Oklahoma Top Work Place by The Oklahoman/Energage four years in a row. Our Firm strives to recognize and reward our employees for excellence.

 

Davis to present on Oklahoma open records laws issues

Eric Davis

Eric Davis is an attorney in the Firm’s Clean Energy Practice Group and the Government Relations and Compliance Practice Group. He represents clients in a range of regulatory and energy matters.

C. Eric Davis, an attorney in the Firm’s Government Relations and Compliance Practice Group, will give a presentation on Oklahoma open records laws Oct. 18 for Continuing Legal Education individuals.

Davis will present at 10:15 a.m. at the National Business Institute’s seminar titled “Ensuring Local Governments Comply with the Law,” focusing on public records issues.

“Oklahoma’s open records laws help make government more transparent,” Davis said. “Most documents generated when conducting government business are subject to disclosure, even texts and emails.

“Whether you’re a public official needing to maintain records, or a member of the public seeking access, it’s important to understand the public’s right to see government documents.”

The seminar will run from 9 a.m. to 4:30 p.m. Friday in Oklahoma City. Those interested in registering can find more information here. Attendees receive CLE credit for participating.

Three main methods of acquiring business

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on October 10, 2019.


Travis Harrison

Travis E. Harrison is a transactional attorney who represents individuals and both privately-held and public companies in a wide range of transactional matters.

By Phillips Murrah Attorney Travis E. Harrison

Acquiring a business is done through three main methods: merging with the selling company, referred to as the target company; purchasing the assets of the target company; or purchasing the stock or other equity interests of the target company. Each method has pros and cons depending on the legal, tax and business implications. Therefore, it is imperative the parties carefully consider these at the outset.

A merger is simply a combination of two legal entities becoming one. The one that survives the merger, called the surviving entity, assumes all assets and liabilities of the other. The logistics of a merger are driven by state statute and case law, which informs the parties of the legal requirements and procedures. For example, an Oklahoma limited liability company that is the surviving entity must file articles of merger or consolidation with the Oklahoma secretary of state containing details of the merger and entities involved. Additionally, the parties should review the organizational documents to ensure compliance with any contractual procedures.

Purchasing the assets of the target company means the buyer acquires the assets of the target company, including real property, IP, equipment, inventory and licenses. The buyer also acquires contractual liabilities and tax obligations. This method affords the parties great flexibility for the buyer to choose specific assets and liabilities, and to carve out liabilities the target company should keep. However, this method can be more complicated because it may need preparation of ancillary agreements to transfer contracts, tangible property and title to certain assets.

Purchasing the stock of the target company means the buyer acquires all of the target company’s assets and liabilities. In this method, the stock purchase buyer essentially acquires the target company rather than the components of the business. A stock sale can benefit sellers where it effectively transfers all liabilities without requiring all of the formalities in an asset purchase agreement, such as documents to retitle assets to the buyer. A stock acquisition generally will not have the same statutory constraints of a merger.

Each method has unique advantages and disadvantages depending on the specifics of the deal. The parties need to analyze and evaluate all implications for each method. Careful consideration and planning leads to the best deal for both sides and prevents unnecessary complications down the line.

Travis E. Harrison is an attorney with the law firm of Phillips Murrah.

Attorney Ashley Schovanec in article on potential Oklahoma civil lawsuit award caps

Attorney Ashley Schovanec Web

Ashley M. Schovanec is a litigation attorney who represents individuals and both privately-held and public companies in a wide range of civil litigation matters.

Ashley M. Schovanec, Phillips Murrah Litigation Attorney, was quoted in a Journal Record article by Steve Metzer regarding the decision by Chris Kannady, chairman of the Oklahoma House Judiciary Committee, to consider a legislative compromise to a ruling that made caps on certain damages in civil lawsuits unconstitutional.

Read Schovanec’s comments below:

Ashley M. Schovanec, a litigation attorney with the firm of Phillips Murrah, said another result of the Supreme Court’s decision might be that businesses will be more likely to settle lawsuits than contest them on legal grounds,

Because the risk of large verdicts just went up, cases may settle earlier because of the uncertainty associated with leaving a damages calculation up to a jury,” she said.

Read the full article from the Journal Record.

Law & Oarder to compete at 2019 Oklahoma Regatta Festival

Phillips Murrah’s rowing team, Law & Oarder, will put months of practice to the test as they compete in the annual Oklahoma Regatta Festival this Friday, Oct. 4.

Law & Oarder will compete in a 500-meter run at 6:20 PM, marking the fifth year the team has competed.

The festival runs from Oct. 4-6 and is open to the public. Teams will race at the Boathouse District (click here for more information).

Attendees are encouraged to carpool as parking will be limited.

Norman selected for LOYAL XV Class

Kendra Norman Web

Kendra M. Norman represents individuals and businesses in a broad range of transactional matters.

Leadership Oklahoma City recently selected members for Linking OKC’s Young Adult Leaders’ (LOYAL) 2019-20 class, and Phillips Murrah attorney Kendra M. Norman made the cut.

“I see my role in LOYAL as a community member and community leader who wants to experience personal growth with respect to leadership skills as well as further develop skills to improve the community,” Norman said. “I’m so excited to make new contacts and learn from others in different areas and professions as well.”

The LOYAL Program runs from September through April and focuses on enhancing personal leadership skills and cultivating community leadership skills by giving participants unique opportunities to learn leadership skills from Oklahoma’s most influential and accomplished business people, public servants, and non-profit managers.

“When you become an attorney, you join the legal profession and view yourself as an attorney, not just at work, but all the time,” Norman said. “No matter if you’re at work or at home, you are always an attorney and it’s a persona that you take on for life.

“But I’m so much more than just an attorney. I wanted to join the LOYAL program to help me make an impact on the community outside of this profession. I’m a leader in the Oklahoma City community and volunteer in several capacities, so I wanted to further develop those skills so that I can help improve the community and be a better leader and board member.”

Norman is a transactional attorney who represents clients in a broad range of matters in the areas of Mergers and Acquisitions, Real Estate Law, Tax Law, Clean Energy Law, and Private Wealth, Estate Planning and Business Succession.

Other Phillips Murrah graduates of Leadership Oklahoma City programs include Jim Roth, Signature Program Class XXII, and G. Calvin Sharpe, Signature Program Class XXIII.

Phillips Murrah welcomes three new attorneys to legal team

Phillips Murrah is proud to welcome Justin G. Bates, Kara K. Laster, and Phoebe B. Mitchell to our Firm.

Phillips Murrah welcomed Justin and Phoebe to the Firm’s Litigation Practice Group as associate attorneys. Each represents individuals and both privately-held and public companies in a wide range of civil litigation matters.

Justin attended the University of Oklahoma College of Law where he earned American Jurisprudence Awards for Civil Procedure II and Torts. He served as a member of the American Indian Law Review and was a member of the Phi Delta Phi Legal Honor Society. Justin also had the privilege of arguing in the final rounds of both the 2017 1L moot court competition and the 2018 Calvert Competition before an esteemed panel of Oklahoma justices.

Justin was born and raised in the metro area, where he currently lives. In his free time, he enjoys traveling, watching college football, discussing what could have been for the Oklahoma City Thunder, and spending time with friends and family.

Phoebe attended the University of Oklahoma College of Law where she earned the American Jurisprudence award for Civil Procedure II and was on the Dean’s Honor Roll. She served as the Research Editor and Candidate Mentor on the Oklahoma Law Review and was a member of the Phi Delta Phi Legal Honor Society. Phoebe also served as a mentor on the Dean’s Leadership Council, was selected as a Dean’s Leadership Fellow, and was selected to serve on the Academic Appeals Board.

While in law school, Phoebe had the opportunity to clerk as a judicial intern for the Honorable Judge Rob Hudson of the Oklahoma Court of Criminal Appeals.

Phoebe was born and raised in Oklahoma City and received a Bachelor’s Degree from Vanderbilt University in Nashville, Tennessee. She enjoys Thunder basketball, OU football and cheering on her Vanderbilt Commodores in her spare time.

Kara has joined Phillips Murrah’s Transactional Practice Group as an associate attorney where she represents individuals and businesses in a broad range of transactional matters.

Kara was part of the dual degree program at the University of Oklahoma College of Law and Price College of Business, achieving both her J.D. and M.B.A. During her third and fourth years of school, Kara worked as a Graduate Assistant for the Editor-in-Chief of the Southern Law Journal and business law professor at both the undergraduate and graduate levels. She was a member of the Phi Delta Phi Legal Honor Society, received the Elkouri Scholarship, and graduated with honors.

Kara was born and raised in Shawnee, Oklahoma, and now lives in Oklahoma City. In her free time, she enjoys traveling, snow skiing, spending time at the lake with friends and family, and attending OSU sporting events.

Firm selects Employee of the Month for August 2019

Abigail Duran

Abigail Duran, Accounting Specialist, is Phillips Murrah’s Employee of the Month for August 2019.

“It is a great honor to be chosen by my peers as Employee of the Month,” she said.

The Employee of the Month is selected anonymously by Phillips Murrah staff on merits of teamwork and overall contributions to the Firm.

“Abbie is a valued member of the Accounting Department and her contributions help to make the Firm run efficiently,” Controller Stephanie Oseland said. “She is a hardworking and positive person, and it is a pleasure to work with her.”

The Firm recently began making a donation to the winner’s charity of choice, and Abigail chose Alzheimer’s Association.

To learn more about Alzheimer’s Association, click here.


Phillips Murrah has been recognized as an Oklahoma Top Work Place by The Oklahoman/Energage four years in a row. Our Firm strives to recognize and reward our employees for excellence.

 

Norman elected Chapter Adviser for University of Oklahoma sorority

Alpha Omicron Pi’s house at the University of Oklahoma campus

Alpha Omicron Pi’s Xi Chapter members recently elected Phillips Murrah Attorney Kendra M. Norman to serve as Chapter Adviser for the sorority’s University of Oklahoma house.

Chapter Adviser is elected annually and advises the Chapter President, the Leader’s Council—which consists of women elected as leaders of the chapter—as well as the chapter as a whole, which is made up of over 250 women.

“I serve as a resource, a role model, and a coach to the chapter and its members,” Norman said. “I have the privilege of working one-on-one with the amazing women of Xi Chapter and have gotten to watch them grow as leaders, achieve their goals, and become professionals, and I am so proud to call each one of them my sisters.”

The Chapter Adviser also serves as the chairman of the chapter’s Alumnae Advisory Committee, comprised of alumnae who mentor the women on the Leader’s Council individually. Norman has served on the committee for about five years in various leadership roles.

“Alpha Omicron Pi’s motto is ‘Inspire Ambition,’ and I truly take that to heart as I practice law at Phillips Murrah P.C. and volunteer with Xi Chapter of AOII,” she said. “I find that being a collegiate member and now an alumna member of AOII has been an empowering experience, and it is amazing to see what women can do when they work together and build each other up.

“I am thrilled to be able to take on this new challenge and to have this opportunity to work side by side with the women of Xi Chapter as well as Inspire Ambition through my service.”

Norman represents individuals and businesses in a broad range of transactional matters in the Firm’s downtown Oklahoma City office.

Phillips Murrah Directors Discuss Oil and Gas Lease Cancellation Lawsuits at Petroleum Alliance Lunch and Learn

Phillips Murrah presentation to Petroleum Alliance

Directors John M. Bunting and Zac K. Bradt discuss legal actions related to a lease cancellation lawsuit.

Defending Against and Preventing Lease Cancellation Lawsuits

As leasing and drilling activities have increased over the last few years, so have lawsuits by mineral owners seeking to cancel existing oil and gas leases. More often than not, those suits allege that existing wells have ceased producing in paying quantities, and therefore the leases are no longer held by production or “HBP”.

On August 13, Phillips Murrah P.C. hosted a lunch and learn presentation at The Petroleum Alliance of Oklahoma headquarters. Phillips Murrah Directors Zac Bradt and John Bunting discussed the factors courts consider in determining whether a well is producing in quantities sufficient to hold the lease and provided some tips on how to minimize the risk of having the court rule that a lease has terminated for lack of production in paying quantities.

Phillips Murrah presentation to Petroleum Alliance“It is important for oil and gas producers to have an understanding of how courts are interpreting oil and gas lease terms,” said Phillips Murrah Director Liz Brown, who is also a member of the Petroleum Alliance of Oklahoma Board of Directors.

In her introduction statement to the well-attended program, Liz explained that a typical situation ripe for this type of litigation is when a producer has an old lease with a one-eighth royalty and marginal production that is holding acreage in hot areas for oil and gas development such as in the SCOOP or the STACK.

“There have been quite a few recent court decisions exploring what constitutes production in paying quantities,” Liz continued. “I’m glad Zac and John took the time to share their insights with us, so that our members can have a better understanding of what the courts are looking at in making these determinations.”

Some of the other information provided at the recent Lunch and Learn included an explanation of the habendum clause and other lease terms, suggestions as to how a producer can position itself to defend against a lease cancellation lawsuit, and a comparison of how the courts in Texas and Oklahoma interpret production in paying quantities for purposes of determining whether a lease is held by production.

About the presenters:

portrait of Elizabeth K BrownElizabeth K. Brown is a Director whose practice is focused on serving her privately-held business clients at a strategic level as outside general counsel where she assists in managing the many legal issues that arise in running a business, including structuring and negotiating business transactions, managing litigation, settling disputes, assisting with tax planning and designing the estate and succession plan for the family business owners.


Photo of Director Zac K. Bradt

Zac K. Bradt is a Director and an attorney in the Energy & Natural Resources Practice Group. He represents both privately-owned and public companies in a wide variety of oil and gas matters, with a strong emphasis on oil and gas title examination.


Photo of Director John M. Bunting

John M. Bunting is an attorney practicing all facets of commercial litigation and insurance coverage law. His experience includes representing clients in complex commercial disputes; representing energy producers, disposal well operators, and oilfield service companies; representing auto dealers in disputes with manufacturers and competitors; and helping business clients obtain insurance coverage.


Video courtesy of the Petroleum Alliance of Oklahoma

Q & A: Equifax data breach victims may file for restitution

Phillips Murrah attorney Cody J. Cooper was featured on Wednesday, Aug. 21, in a Q&A feature in the Oklahoman newspaper.

Photo of Oklahoma City Patent Attorney Cody Cooper

Cody Cooper is a Patent Attorney in the Intellectual Property Practice Group and represents individuals and companies in a wide range of intellectual property, patent, trademark and copyright matters. His practice also includes commercial litigation.

Equifax is a consumer credit reporting agency and, ironically, one of the products it publicly sells is individual credit monitoring. In 2017, Equifax disclosed one of the largest known data breaches in the United States affecting about 143 million people — close to half of the U.S. population. Equifax claimed that the breach was the result of their systems being hacked by thieves seeking to obtain information that is commonly referred to in the world of data privacy and cybersecurity as personally identifiable information (PII). The thieves were able to exploit a website application vulnerability to gain access to files that included customer names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers. Lawsuits were initiated by a number of entities, including the Federal Trade Commission, and a $700 million dollar settlement was recently reached, which included a total of $425 million to compensate individuals, $100 million in civil money penalty, as well as other relief.

Who is entitled to recover, how do you submit a claim and is $125 the amount I can recover?

Anyone whose information was included within the documents that were stolen is eligible to receive benefits. In order to submit a claim, an affected individual needs to go to https://eligibility.equifaxbreachsettlement.com/en/eligibility and complete the requested information. While submitting your claim, there are two compensation options: (1) credit monitoring for 10 years or (2) a cash payment. The payment was estimated at $125, but that is likely to change because of the overwhelming number of people who have apparently opted in for the settlement payment. Apparently of the settlement amount, only a small portion — approximately $31 million — of the overall amount is earmarked for cash payments, which means that the more people who sign up for the cash payment could greatly decrease the amount paid to each person. In fact, the most recent stories suggest that the FTC is going to allow individuals who initially opted-in for cash payment to change their selection to credit monitoring because of the number of people who have already chosen the cash option and the small amount that would be paid to each.

What constitutes a data breach?

A data breach can be most easily described as the unauthorized access of information. The issues get nuanced from there. This is a particularly hot topic right now with the Equifax settlement and the most recent announcement that Capital One has suffered a data breach affecting about 106 million people or about a third of population.

How does the public find out about a data breach incident?

What we see in the news is for reportable breaches. Reportable breaches typically include PII. However, not all data breaches must be reported. In fact, most data breaches are likely never publicly disclosed. If PII is not involved, the organization that suffered the breach typically surveys the damage, addresses the breach, takes steps to mitigate the impact and moves along without ever telling anyone — except possibly industry regulators, if required, and their insurance company, if they are smart and have cybersecurity insurance.

What does the law say about organizations disclosing a data breach?

Importantly, there is no uniform “data breach” or “breach notification” federal law. Instead, these laws are formed by a hodgepodge of state laws (all 50 states have a breach notification law) and various other laws, including Gramm Leach Bliley Act, NAIC Insurance Data Security Model Law, New York Department of Financial Services Cybersecurity Requirements for Financial Services Companies, and the National Credit Union Administration’s Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice. Because of this, the standards applied from state to state and industry to industry can vary. For example, the definition of PII can be slightly different for each law. Some states include biometric data (fingerprint, facial scan, etc.) within PII, while others do not. Additionally, the deadlines for reporting a discovered breach can also vary widely. Significantly, some states and regulatory bodies have taken steps to increase the standards applied to protecting PII. As an example, New York has enacted laws that have very specific requirements a company must meet in order to be compliant.

How does data breach disclosure work in Oklahoma?

Generally, any person or entity that collects and stores PII is subject to Oklahoma’s data breach notification laws. If a breach of PII is discovered, that person or entity must comply with the various breach notifications in the applicable laws. In Oklahoma, notice is to be made as soon as practicable following discovery of the breach. Once notice is made to the affected individuals, there are requirements for what the breached entity must do, including reporting to specific law enforcement entities and providing credit monitoring for the affected individuals for a specific length of time. Again, these requirements can vary from state to state. Typically, the large data breaches ultimately result in litigation being filed by the affected individuals and/or specific related regulatory authorities, which is what led to the Equifax settlement.

Hendrick partners with North Texas LGBT Chamber of Commerce

Janet Hendrick

Janet Hendrick is an experienced employment litigator who tackles each of her client’s problems with a tailored, results-oriented approach.

Director Janet A. Hendrick joins the North Texas LGBT Chamber of Commerce, supporting the organization for 2019-2020 as a Bronze Partner and taking on a hands-on role.

“I met the President of the Chamber, Tony Vedda, at the Dallas Business Equality Conference a few years ago, where I was asked to speak about evolving rights for LGBT employees in the U.S.,” she said. “We stayed in touch and he later asked me to be a member of the Chamber’s Governance Committee, the role of which is to assist in selection of the Chamber’s Board of Directors.

“I spoke again this year at the Business Equality Conference, which is sponsored by progressive Dallas-based companies like Toyota, Southwest Airlines and American Airlines.”

Janet is an experienced employment litigator who regularly appears in state and federal court to defend employers of all sizes against discrimination, harassment, retaliation, and related claims. She is a frequent speaker and author on topics including gender diversity in the legal profession, workplace accommodations and leave management, evolving workplace protections of LGBT employees, and the rapidly expanding gig economy.

The North Texas Lesbian Gay Bisexual Transgender Chamber of Commerce has been the premier business organization for the LGBT community in north Texas since 2005, working to improve the region’s economic vitality and support the positive attributes of a diverse workplace, supply chain and community.

To learn more about the North Texas LGBT Chamber of Commerce and its mission, click here.

Cooper named Court Appointed Special Advocates board member

Phillips Murrah Patent Attorney Cody J. Cooper

Cody Cooper is a Patent Attorney in the Intellectual Property Practice Group and represents individuals and companies in a wide range of intellectual property, patent, trademark and copyright matters. His practice also includes commercial litigation.

Attorney Cody J. Cooper has joined the Court Appointed Special Advocates of Oklahoma County as a member of the Board of Directors.

“As a director, I’ll being involved in helping CASA continue the success it is has experienced in serving Oklahoma County at-risk youth while helping to build off those prior successes to expand CASA’s operations and be able to help even more people,” he said. “This is an opportunity for me to be directly involved in a high community impact organization that provides an amazing services to those most vulnerable in our state.”

CASA provides a trained caring adult to advocate for the best interest of children who have been removed from their home due to abuse or neglect. Volunteers with CASA get to know these children and communicate with all parties in their case and people in the child’s life in order to provide complete information and sound recommendations to the court.

As “the eyes and ears” of the judge, the CASA volunteer offers a neutral, third-party opinion to the court, one that is unbiased and child-focused.

To learn more about CASA of Oklahoma County and volunteer opportunities, click here.

Firm selects Employee of the Month for July 2019

Bradley Burt

Bradley Burt, Legal Secretary, is Phillips Murrah’s Employee of the Month for July 2019.

“Phillips Murrah is a fantastic place to work, and it’s a privilege to be surrounded by such amazing people,” he said. “I try to learn and grow in my field each day, and Phillips Murrah fosters a really positive environment for that.

“To be selected as Employee of the Month in a workplace like this is an honor.”

The Employee of the Month is selected anonymously by Phillips Murrah staff on merits of teamwork and overall contributions to the Firm.

“We are very lucky to have Bradley as a member of the team,” Director Joshua L. Edwards said. “He is extremely bright and motivated—willing to help out wherever needed and able to handle whatever is thrown his way.”

The Firm recently began making a donation to the winner’s charity of choice, and Bradley chose World Literacy Foundation.

“Reading is really special to me, and I believe it is important for every person to have the opportunity to learn to read,” Bradley said. “Especially in areas with broken education systems, the ability to read is a crucial tool for self-learning.”

To learn more about World Literacy Foundation, click here.


Phillips Murrah has been recognized as an Oklahoma Top Work Place by The Oklahoman/Energage four years in a row. Our Firm strives to recognize and reward our employees for excellence.

 

Attorney Lauren Voth leads SmartTalks presentation on medical marijuana in the workplace

SmartTalks Virtual User Group Meeting:
Medical Marijuana in the Workplace

Thursday, Aug. 15
12 PM to 1 PM (CST)

Free to participate with registration

 

Employers can still enforce drug-free workplace policies and implement drug-testing policies even after their state legalizes Medical Marijuana.  However, you must ensure your policies comply with state law.

Phillips Murrah Attorney Lauren Symcox Voth will review what your company can do to ensure the safety and security of your workforce and organization even after the legalization of medical marijuana.

To register, click here.

Presenter:

Lauren Voth

Lauren Symcox Voth

Lauren Symcox Voth is a member of Phillip’s Murrah P.C. Labor and Employment Practice Group. She represents individuals and both privately-held and public companies in litigation, administrative matters, mediations and negotiations. Specifically, Lauren has experience representing large and small corporations in employment-related matters.

Phillips Murrah Directors to present: Defending (and Preventing) Lease Cancellation Lawsuits

Petroleum Alliance logo

presented by

Phillips Murrah logTuesday, Aug. 13
11:30 a.m. to 1 p.m.
Petroleum Alliance of Oklahoma Headquarters
500 N.E. 4th Street, Oklahoma City

As leasing and drilling increase, so have lawsuits by mineral owners seeking to cancel existing leases. More often than not, those suits allege that existing wells have ceased producing in paying quantities, and therefore the leases are no longer HBP.

Photo of Director Zac K. Bradt

Zac K. Bradt

The presenters of this Lunch & Learn will be Phillips Murrah Directors Zachary K. Bradt and John M. Bunting. They will discuss how operators can defend against lease cancellation lawsuits, including factors that Oklahoma courts consider when determining whether a well is producing in quantities sufficient to hold a lease.

They will also discuss how operators can resolve such disputes outside of court; and how to prevent a lease cancellation suit by determining whether an existing lease is HBP prior to purchasing it.

To register, click HERE.

Presenters:

Photo of Director John M. Bunting

John M. Bunting

Zac K. Bradt is a Director and an attorney in the Energy & Natural Resources Practice Group. He represents both privately-owned and public companies in a wide variety of oil and gas matters, with a strong emphasis on oil and gas title examination.

John M. Bunting is an attorney practicing all facets of commercial litigation and insurance coverage law. His experience includes representing clients in complex commercial disputes; representing energy producers, disposal well operators, and oilfield service companies; representing auto dealers in disputes with manufacturers and competitors; and helping business clients obtain insurance coverage.

Child support payments based on several variables

A headshot of Robert K. Campbell, a lawyer focused in the area of family law.

Robert K. Campbell’s legal practice is focused in the area of family law, specifically concentrated in matters of divorce, legal separation and custody issues.

In this article, Oklahoma City Attorney Robert K. Campbell answers questions about the basics of arranging and handling Oklahoma child support.

Who pays child support in a divorce proceeding?

Oklahoma law requires both parents to provide financial support for their children during a divorce. That being said, typically it is one parent paying the other parent. There are, however, situations wherein neither parent may owe the other parent child support.

How is the amount of child support calculated?

The child support amount is calculated based upon the Oklahoma Child Support Guidelines. The Oklahoma Child Support Guidelines will calculate the child support obligation of each parent.

What does the Oklahoma child support calculation take into consideration when determining the amount of child support?

There are several variables that go into the Oklahoma Child Support Guideline calculation. The primary variables determine the base child support amount consist of the parties’ gross monthly income, the number of minor children of the parties, and the number of overnights each parent has with the children. There are other variables that can be taken into consideration. A common example of these are health insurance premiums and child care costs.

What is considered gross income for child support purposes?

Oklahoma’s definition of gross income is broad and intended to include earned income and passive income. Gross income consists of wages, salaries, tips, commissions, bonuses, etc. Passive income can include dividends, pensions, rent, interest income, trust income, gifts, gambling winnings, lottery winnings, etc.

If both parents agree, can the child support agreement differ from the Oklahoma Child Support Guidelines calculations?

Typically, an agreed amount other than the guidelines will likely be approved if it is in the best interest of the minor child and the amount of support indicated by the guidelines is unjust or inappropriate under the circumstances; both parties are represented by counsel and have agreed to a different amount; or one party is represented by counsel and the deviation benefits the unrepresented party.

How long does a parent have to pay child support?

In Oklahoma, the law typically provides that a child is entitled to support by the parents until the child reaches the age of 18, or graduates high school, whichever occurs later; however, it shall not extend beyond the age of 20. There are certain situations where the law may provide support to an adult child with a disability beyond the age of majority. If you are paying support for more than one child, your payment amount does not drop automatically when one child no longer qualifies for support. You must take affirmative steps to recalculate future support for the remaining child or children and ask the court to enter a revised support order. When the last child no longer qualifies for child support, the support obligation ends if there is no past due support owed.

Can child support be modified?

Yes. In Oklahoma, either parent may request a modification of the amount of child support based upon a “material change in circumstances.” The increase or decrease in either parent’s income may constitute a material change in circumstances warranting a modification.

What happens if a parent who is ordered to pay child support fails to pay?

The parent who fails or refuses to pay their child support obligation can be cited for indirect contempt of court, which if found guilty can result in a $500 fine and/or up to six months in jail. Additionally, state licenses can be revoked, suspended or not renewed.

 

Robert K. Campbell is a family law attorney with Phillips Murrah.

Kelly selected to join Dallas Association of Young Lawyers Leadership Class

Kim Kelly Web

Kim Kelly is a civil litigator who represents individuals and corporations in both federal and state courts.

The Dallas Association of Young Lawyers has selected Phillips Murrah attorney Kim Beight Kelly to join the association’s exclusive Leadership Class for 2019.

Each year, the DAYL selects approximately 40 young lawyers of all practice areas, firm sizes and levels of experience to participate in the DAYL Leadership Class. The Leadership Program was created in 1997 as a way to reach out to young lawyers who wanted to make a difference in their community and the bar.

“I wanted to get involved with the Leadership Class because I want to learn how I can better serve my community,” she said. “My family and I benefit a great deal from the efforts of community leaders, and participation in this group will be an amazing opportunity to meet some of those leaders and learn how to follow their example.

“I look forward to getting to know other young lawyers who also want to get out there and take a more active role in making Dallas the amazing city that it is.”

The DAYL Leadership Class provides opportunities for young lawyers of all backgrounds to develop relationships with local city leaders and network with one another. With over 800 alumni, including judges, general counsels, law school professors, city leaders, and law firm-named partners, the Leadership Class has been emulated by bar associations across the state and the country and serves as a gateway for leadership among lawyers in the North Texas area.

Kim is a civil litigator who represents individuals and corporations in both federal and state courts who works in the Firm’s Dallas office.

To learn more about the Leadership Class, visit the Dallas Association of Young Lawyers website here.

Employers should examine paid parental leave policies

The notorious absence of any federally mandated paid family leave in the United States was a significant issue during the 2016 presidential election. Recent legislative proposals indicate that the issue will only gain steam through 2020 and beyond. Paid parental leave is not a partisan issue, as demonstrated by legislators on both sides of the aisle introducing bills in 2019, including Marco Rubio and Kirsten Gillibrand.

Phillips Murrah litigation attorney Hillary Clifton discusses holiday legal hazards.

Hilary Hudson Clifton is a litigation attorney who represents individuals and both privately-held and public companies in a wide range of civil litigation matters. Click photo to visit her attorney profile.

With parental leave policies under particular scrutiny, it is a good idea for employers to examine their existing policies. As it looks ever more likely that paid leave will be federally mandated in the not-too-distant future, now might be the right time for employers without a paid leave policy to consider implementing one.

Though some states have passed laws requiring paid parental leave benefits, Oklahoma is not among them, and employers in Oklahoma currently offering paid leave to new parents do so voluntarily. Still, employers could find themselves in legal trouble if their policies impermissibly distinguish between different classes of parents. For example, while it might be tempting to offer a certain period of paid maternity leave to a mother, and a different period of paternity leave to a father, employers must be careful to draft policies that do not discriminate on the basis of sex, sexual orientation, and other potentially protected categories.

Paid parental leave to care for a new child, sometimes referred to as bonding time, should apply equally to all new parents, including biological mothers and fathers, adoptive parents, and same-sex couples. However, with biological mothers requiring medical attention and recovery time related to pregnancy and childbirth, it is not discriminatory to offer biological mothers an additional period of paid leave, provided the policy specifies that such leave is for the mother’s medical/physical needs.

Increasingly, employers around the country are opting for generous parental leave policies to attract and retain qualified employees. In that regard, employers considering a policy that offers a birth mother significant paid leave for recovery but little time for bonding and childcare might consider whether such a policy could encourage fathers or adoptive parents to look elsewhere for job opportunities.

With no federal or state mandate in Oklahoma, there remains room for any employer to adopt a policy in line with its particular needs and preferences. That said, well-intentioned employers should take measures to avoid inadvertent discrimination in their policies.

Hilary H. Clifton is a litigation attorney with the law firm of Phillips Murrah.


Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on July 18, 2019.

Firm selects Employee of the Month for June 2019

David Carter web

David Carter

David Carter, Lead Office Clerk, is Phillips Murrah’s Employee of the Month for June 2019.

“It is a great honor to be chosen by my peers as Employee of the Month,” he said. “We are like family here, and it’s as a team we complete each task and assignment.

“I’m proud to be part of this team!”

The Employee of the Month is selected anonymously by Phillips Murrah staff on merits of teamwork and overall contributions to the Firm.

“David is one of the most well-liked, friendly, hard-working employees at the Firm,” Executive Director Michelle Munda said. “David is never too busy to help anyone with anything and does it with that big smile he has.

“We are lucky he chooses to work here with us!”

The Firm recently began making a donation to the winner’s charity of choice, and David chose City Rescue Mission.

To learn more about City Rescue Mission, click here.


Phillips Murrah has been recognized as an Oklahoma Top Work Place by The Oklahoman/Energage four years in a row. Our Firm strives to recognize and reward our employees for excellence.

 

Phillips Murrah Director Liz Brown elected to Board of Oklahoma’s largest petroleum association

Phillips Murrah would like to congratulate Elizabeth K. Brown, Shareholder/Director and member of the Firm’s Energy and Natural Resources Practice Group, on being elected to the Board of Directors of the newly formed oil and gas industry advocacy organization, The Petroleum Alliance of Oklahoma. Liz formerly was a member of the OIPA Board of Directors until its recent merger into the Alliance.

Liz’s election to the Petroleum Alliance of Oklahoma Board of Directors will allow her to continue her involvement in oil and gas industry matters. She brings to the Board not only her experience in representing oil and gas businesses in legal matters, but also her practical knowledge of oil and gas operations that she has gained through managing The Gloria Corporation, a privately held oil and gas company founded by her father and based in Ada, Oklahoma. Having been raised in the oil business, Liz has been actively involved in every aspect of running a small, independent oil company.

Photo of Liz Brown at Gloria Corporation wellsite

Pictured here are Liz and her brother, Mike Kemp, in the field reworking one of the Gloria Corporation wells in Pontotoc County.

“Running a second-generation, family-owned oil and gas business is both rewarding and challenging” Liz said. “I feel very fortunate to have been able to continue the business my father started years ago.”

Also notably, Liz is one of four women who serve on the 41-member Board. She joins Valerie Mitchell (Corterra Energy Operating, LLC), Geree Wald Morton (Plaster & Wald Consulting Corp.), and Samantha Omey (ExxonMobil Corporation).

“I am honored to have been elected to serve on the Board of Directors of the newly formed Petroleum Alliance of Oklahoma to, among other things, bring attention to issues affecting smaller producers who make up a significant segment of the oil and gas industry,” Liz said.

Liz’s law practice with Phillips Murrah is focused on serving her privately held business clients as outside general counsel where she assists in managing the many legal issues that arise in running a business. Her role often involves structuring, negotiating and handling mergers and acquisitions, managing litigation, settling disputes, assisting with tax planning and designing estate and succession plans for family business owners.

The Petroleum Alliance of Oklahoma was formed in November 2018, when two of the state’s industry groups merged. Oklahoma Independent Petroleum Association and the Oklahoma Oil and Gas Association combined memberships to create a larger, stronger association with the aim to more effectively represent members in legislative and regulatory matters.

The new organization is now the largest trade association representing the oil and natural gas industry in the state, with more than 2,300 individuals from about 1,300 companies – companies that account for more than 90 percent of the state’s oil and natural gas production.

How to determine whether to hold or terminate an oil and gas lease

When a landowner leases property to an energy company, the lease agreement typically contains a held-by-production provision, also known as a habendum clause. In Oklahoma, habendum clauses in oil and gas leases establish that after the primary lease term has ended, the lease shall remain in force as long as the land is capable of producing a minimum amount of oil or gas. But how do courts decide whether to hold or end such a lease?

Habendum clauses typically describe the lease term as, “from the date hereof and as long thereafter as oil or gas … is produced from said land.” When the term “produced” is used in a “thereafter” provision of the habendum clause, it has been determined by courts to mean production in “paying quantities.”

However, “paying quantities” is not determined by a specific dollar amount. Rather, it is defined as an amount of production sufficient to yield a profit to the lessee beyond lifting expenses, which include costs of operating the pumps, gross production taxes and electricity.

To determine whether a lease is commercially producing and, therefore, may be held by production, there are four factors that courts take into account: the accounting period, revenue during that period, expenses during that period, and equitable considerations.

The accounting period chosen for any production analysis varies and is determined by examining facts and circumstances specific to the lease. Accounting periods can make or break a case when trying to ascertain whether there was production in paying quantities. Thus, to reflect the production status, it is crucial to determine a sufficient amount of time that would provide information that would allow a “reasonable and prudent operator” to decide whether to continue or cease operation.

For example, in Hoyt v. Continental Oil Co., the accounting period was 14 months. In Smith v. Marshall Oil Corp., the accounting period was 35 months.

Once an accounting period is established, all revenue generated by the lease during that period is considered. Next, lifting expenses are considered and compared against revenue to see which is greater. However, this consideration does not include overriding royalties, overhead, and depreciation.

Lastly, if the lease is unprofitable, the court will examine any equitable considerations to determine if any justify maintaining the lease. These considerations are very specific to the circumstances of the lease that may affect profitability, which could include market conditions, changes in public policy, pipeline access, and conflict resolution activity.

If, after examining all factors, it is determined that the oil and gas lease is returning a profit over lifting expenses, the lease will not be vulnerable to termination and shall be allowed to continue beyond the primary lease term.

Originally published in The Journal Record on July 5, 2019.

Phillips Murrah rowing team competes in 2019 Stars and Stripes River Festival

PM Rowing Team

Phillips Murrah law firm’s rowing team, Law & Oarder, competes at the 2019 Stars and Stripes River Festival.

Phillips Murrah’s rowing team Law & Oarder completed the Summer 2019 season with a neck-in-neck race.

The team competed on June 29 at the 2019 Stars and Stripes River Festival held at the OKC Boathouse District, finishing a 500-meter run in 2:10.3—less than a second from clinching Third Place.

“First of all, I want to thank the Firm for being supportive and giving us as a team the opportunity to represent Phillips Murrah,” said Deena Baker, Legal Assistant and Law & Oarder team captain. “This last season had many challenges with weather and all, but the team as a whole never gave up.

“We didn’t quite pull out that win we hoped for at the regatta, but it was a super close race and I couldn’t be more proud of the progress we made as a team.”

In all ten seasons the Firm’s rowing team has competed, team members consisted of both attorneys and staff members.

“This was my first year rowing with the team, and getting to practice regularly with everyone was a great way to break down the divide between attorneys and staff and a great team building experience,” said Kat Mach, Legal Assistant.

The team will resume practice in the Spring for the Stars & Stripes Festival in June 2020.


Phillips Murrah has been recognized as an Oklahoma Top Work Place by The Oklahoman/Energage four years in a row. Our Firm strives to recognize and reward our employees for excellence.

 

Deadline Monday for pharmacies’ annual inventory of controlled dangerous substances

In this article, Oklahoma City Attorney Martin J. Lopez III discusses requirements pharmacies must abide by when submitting controlled substance inventories and the consequences they may face if they neglect to do so.

attorney Martin J Lopez III

Martin J. Lopez III is a litigation attorney who represents individuals and both privately-held and public companies in a wide range of civil litigation matters.

There seems to be increasing regulation of pharmacies in recent years, and this has been heightened by the responses to the opioid crisis. What are the various inventory requirements of the Oklahoma State Board of Pharmacy (OSBP)?

According to state regulation, and because of the dangerous propensities of these controlled medications, OSBP requires pharmacies to perform inventories much like any retailer, although there are some distinctions based upon the nature of the pharmacy’s product. The regulation, Oklahoma Administrative Code 535:15-3-10, sets forth four distinct circumstances where inventories must be performed: The first is an annual inventory of controlled dangerous substances (“CDS”). Most relevant for all pharmacies at this particular time, the OSBP requires an inventory of all CDS be performed between May 1 and July 1 of each year; this annual inventory must be included with the pharmacy’s annual license renewal application. This annual license renewal application must be in writing, must contain the names of the pharmacy’s owners and shall provide any other information deemed relevant by the board — including the CDS inventory. Inventory is required for a Change of Ownership or a change of the Pharmacist-in-Charge (PIC) and must be sent to the board within 10 days. The OSBP requires the inventory include the new manager’s name and registration number and recommends that it include the outgoing manager’s name, registration number, and current place of employment. The OSBP further recommends that both the incoming and outgoing managers sign the inventory. Inventory also may be triggered by circumstances such as theft. In the case of suspected loss, theft, or other event, the OSBP may require an inventory be performed and sent to the board within ten days of the completion of the inventory. Inventory is also required when a pharmacy closes and must be sent to the board within 10 days of the pharmacy’s closing.

What is a controlled dangerous substance for the purposes of the annual inventory to be performed between May 1 and July 1?

Generally, a CDS is a drug, substance or immediate precursor (a substance that serves as a chemical intermediary to manufacture a controlled dangerous substance) in Schedules I through V of the Oklahoma Uniform Controlled Dangerous Substance Act, found at Title 63, Sections 2-203 through 2-212 of the Oklahoma Statutes; these Schedules range from those with high potential for abuse and no accepted medical use (includes many “street” drugs like heroin) to those with low potential for abuse and which are accepted for medical use (such as pseudoephedrine—such as brands commonly known as Sudafed PE and Allegra D.

What happens if a pharmacy misses or fails to complete an inventory or doesn’t perform or submit the inventory on time? For example, what happens if a pharmacy doesn’t perform inventories of its controlled dangerous substances between May 1 and July 1?

If a pharmacy fails to comply with the annual CDS inventory, both the PIC and the pharmacy itself are deemed to have violated the administrative code. A violation of the administrative code amounts to a violation of the Oklahoma Pharmacy Act, over which the OSBP may take a number of actions, including a reprimand, probation, suspension, permanent revocation of a pharmacy’s license, or other disciplinary action in its discretion; the OSPB also can levy fines up to $3,000.

Martin J. Lopez III is an attorney with Phillips Murrah law firm.

OCBA Young Lawyers Division deems Phillips Murrah “Friend of the YLD”

Ben Grubb, YLD Chair, Hilary Clifton & David Cheek, Awards Committee Chair

YLD Chair Ben Grubb, Phillips Murrah Attorney Hilary Clifton and Awards Committee Chair David Cheek

The Oklahoma County Bar Association Young Lawyers Division honored Phillips Murrah as a “Friend of the YLD” at the annual OCBA Awards Luncheon on June 21.

“Phillips Murrah was chosen for this award because of their consistent support of the Harvest Food Drive and the Regional Food Bank,” said Debbie Gorden, OCBA Executive Director. “They have also continued to sponsor the events of the Chili Cook-Off and Striking Out Hunger Bowling Tournament by monetary donations as well as team participation.”

Many Phillips Murrah attorneys have dedicated their time to supporting OCBA’s mission. Multiple attorneys have even served on the OCBA Board of Directors.

“The Firm is honored to be acknowledged by OCBA Young Lawyers’ Division as a Friend of the YLD,” said Cody J. Cooper, Phillips Murrah Attorney and Past Chair of YLD. “Our attorneys are motivated to give back to Oklahoma’s community and privileged to support the YLD with their ongoing service efforts.”

Read more about the Firm’s past support of OCBA at the links below:

Journal Record awards Phillips Murrah law firm top Reader Rankings honors

PM Reader Rankings attendees 2019

Phillips Murrah attorneys and executive leaders attend The Journal Record’s Reader Rankings Gala where the Firm won in five categories.

Phillips Murrah is proud to announce our Firm received top honors in five of The Journal Record’s Reader Rankings categories.

“It’s an honor to be recognized in our community for the challenging work our attorneys do every day,” Marketing Director Dave Rhea said.

Phillips Murrah received awards for Best Civil Litigation Firm, Best Family Law Firm, Best Intellectual Property Firm, Best Malpractice Firm and Best Overall Leadership at Reader Rankings Gala on June 20.

“We take pride in providing exceptional legal services while striving to provide a positive, balanced atmosphere for our attorneys and staff,” said Thomas G. Wolfe, Phillips Murrah President and Managing Partner.

The Reader Rankings program recognizes and celebrates the achievements of Oklahoma businesses and entrepreneurs.

Journal Record readers nominate and vote for the best businesses and organizations across a wide variety of categories encompassing the areas of construction and design, entertainment, finance/accounting, general business, health care, higher education, hospitality, legal services, real estate and information technology.

To learn more about the workplace culture and opportunities at Phillips Murrah, visit our Careers pagehttps://phillipsmurrah.com/careers.

Hasenfratz inducted into American College of Real Estate Lawyers

Sally Hasenfrats

Sally Hasenfratz is a Director in the firm. She is a veteran real estate and transactional attorney with over 25 years of experience.

Phillips Murrah is proud to announce Director and Shareholder Sally A. Hasenfratz has been elected as a Fellow of the American College of Real Estate Lawyers.

Admission to ACREL is by invitation only, following a rigorous screening process and significant peer review. Members are elected based on recognition locally and nationally as a distinguished real estate practitioner, high standards of professional and ethical conduct, and contributions within both the legal and non-legal communities to the improvement of the practice of commercial real estate law.

Sally is the leader of the Firm’s Real Estate Practice Group, where she focuses her practice on the acquisition, development, leasing and financing of all types of commercial real estate. She is a co-founder and past president of CREW-OKC, Inc., which is the local chapter CREW Network, a global organization formed to transform the commercial real estate by advancing women in the industry.

Sally has receive a number of other honors such as being named in Chambers USA Guide to America’s Leading Lawyers in Real Estate, The Best Lawyers in America (real estate, construction, land use and commercial transactions), and Super Lawyers (real estate, top 25 women lawyers in Oklahoma, top 50 lawyers in Oklahoma).

She brings to her transactional practice an LL.M. degree in taxation, which allows her to strategize with her clients from a broad view of their projects, helping them to plan, structure and execute each piece of the deal to maximize business objectives.

For more information about ACREL, visit their website here.

Director Melissa Gardner featured in article about forced pooling in Oklahoma

Phillips Murrah Director Melissa Gardner is featured in an article published on June 3 at Oklahoma oil and gas industry online resource, Oklahoma Minerals, by founder, Gib Knight. The article, titled “Oklahoma Forced Pooling,” references a Q&A Gardner published in the Oklahoman in August 2017, titled “Forced pooling in mineral land leasing has upsides, downsides.”

From the Oklahoma Minerals article:

Melissa Gardner portrait

Melissa Gardner

Back in August of 2017, Paula Burkes with NewsOK interviewed Melissa R. Gardner who is a Director and attorney at Phillips Murrah P.C., and practices in the Energy & Natural Resources Practice Group. That interview provided some insight into the drawbacks and benefits of Forced Pooling. Here is an excerpt from that interview:

Q: What are the pros and cons of leasing versus being made subject to a forced pooling order?

A: If you choose to sign a lease, you will have the ability to negotiate more of the specifics of the usage of your minerals. You are in a position to get the oil and gas companies to agree to some conditions and special provisions. If you are subject to a forced pooling (as managed by the Oklahoma Corporation Commission), you’re not in a position to negotiate these details.

Second, you can negotiate bonus and royalty costs. If you are subject to a forced pooling order, you’re given three options, being a combination of the prevailing prices in the surrounding areas, with no option to negotiate those prices. In the alternative, if you allow yourself to be subject to the OCC forced pooling order, the applicant is given a shorter time within which it has to commence operations. The average lease is valid for three to five years, whereas the average pooling order is valid for six months to a year, both of which extend after production has been initiated. This keeps your minerals under contract for a shorter period of time.

Additionally, the minerals only are forced pooled as to certain, limited geological formations. If a well is drilled and producing from those zones, your minerals are still open and unleased as to other, non-pooled zones. In the alternative, most leases cover all depths or, at a minimum, from the surface to a certain depth below the surface. Finally, forced pooling orders expire at the end of production. If a producing well is drilled during the first year of a five-year lease and only produces for two years, the lease remains valid, and your minerals remain unmarketable for re-lease, for an additional three years.

To find out more about how forced pooling affects you or your business, you may contact Melissa Gardner by visiting her Attorney Profile here.

Maule to present at nonprofit business seminar

Byrona Maule

Byrona J. Maule is a Director and litigation attorney as well as a member of the Firm’s Labor & Employment and Healthcare practice groups.

Byrona J. Maule, Director and member in the Firm’s Labor and Employment Practice Group, will give a presentation on the current state of human resources on June 4 at a Nonprofit Accounting and Finance Seminar hosted by Arledge & Associates, P.C.

Accounting and finance professionals are invited to attend the seminar which is tailored to address tax and accounting issues specific to the nonprofit sector.

The seminar will cover a wide range of topics including audits, tax law changes and Financial Accounting Standards Board updates. Sessions will also cover employment law issues for nonprofits, donor relations matters and online marketing.

Byrona represents executives and companies in a wide range of business and litigation matters with a strong emphasis on employment matters, ensuring their compliance before various state and federal regulatory boards.

For more information about the seminar, click here.

Federal income tax challenges for medical marijuana businesses in Oklahoma

Jessica Cory web

Jessica N. Cory represents businesses and individuals in a wide range of transactional matters, with an emphasis on tax planning.

In this article, Oklahoma City Attorney Jessica N. Cory explores the conflict between federal and state law as it pertains to Oklahoma medical marijuana businesses.

What is the primary federal tax issue for Oklahoma medical marijuana businesses?

Jessica Cory, attorney with Phillips Murrah law firm answers: The primary tax issue for Oklahoma medical marijuana businesses stems from the conflicting treatment of the marijuana industry under federal and state law. Although the approval of State Question 788 last summer legalized the use, growth and sale of medical marijuana for state purposes, marijuana remains an illegal drug under the federal Controlled Substances Act. Special tax provisions apply to penalize anything deemed illegal drug trafficking under federal law, including licensed medical marijuana businesses.

What are the specific federal tax burdens a medical marijuana business will face?

Internal Revenue Code Section 280E represents the biggest tax challenge for medical marijuana businesses. Generally, the Internal Revenue Code allows a taxpayer to take a deduction for all “ordinary and necessary” business expenses paid or incurred during the taxable year. Congress has created an exception to this rule in certain instances, however.

One such exception is Code Section 280E, which prohibits a taxpayer engaged in the business of “trafficking in controlled substances” from taking a deduction for ordinary business expenses. Because the federal Controlled Substances Act defines marijuana as a Schedule I drug, Code Section 280E severely limits the types of deductions available to a medical marijuana business.

Although Code Section 280E prevents a marijuana business from taking normal business deductions, it does not bar a business from offsetting its gross receipts with its cost of goods sold (“COGS”). This means a business can at least reduce its potential taxable income by its direct costs of production. However, the Internal Revenue Code has issued guidance strictly limiting the types of costs a taxpayer engaging in a marijuana business can allocate to COGS, to prevent an end-run around Code Section 280E.

Case law supports this narrower interpretation of COGS for the marijuana industry, including prohibiting resellers of marijuana from including any indirect costs — costs other than the price paid for inventory plus any transportation or other necessary acquisition costs — in COGS.

Is there anything marijuana business owners can do to minimize their federal tax burden?

Yes, a tax professional can help marijuana businesses develop strategies for minimizing the impact of Code Section 280E. For example, a tax adviser can help a business differentiate between COGS and business deductions to take full advantage of the COGS offset allowed under federal law. In addition, a tax professional may be able to help a company structure its business to separate out its different activities to avoid having Code Section 280E apply too broadly. It is also essential for marijuana businesses to keep careful records, particularly if the business also engages in additional activities unrelated to growing, processing or selling marijuana.

Has there been any effort in Congress to fix the disparity in treatment under federal and state law?

Members of Congress have repeatedly introduced legislation to exempt marijuana businesses lawfully operating under state law from the parameters of Section 280E. For example, the Strengthening the Tenth Amendment through Entrusting States (“STATES”) Act, which would amend the Controlled Substances Act to protect people operating within the bounds of state cannabis laws, was recently reintroduced. Unfortunately, despite bipartisan support and the backing of several 2020 presidential candidates, the odds are not in favor of passage at this time.

Jessica Cory is an attorney with Phillips Murrah law firm.