Category: Legal Resources

The Six Rights of Copyright – Part I: The Right to Reproduce

Figuring out what copyright actually protects is truly a dizzying concept.  The fact that copyright actually has traditionally covered a bundle of five exclusive rights makes matters more complicated.  Things became even more confusing when Congress added a pseudo sixth exclusive right in 1995.  These six rights are:

  • The right to reproduce the copyrighted work
  • The right to prepare derivative works based upon the work
  • The right to distribute copies of the work to the public
  • The right to publicly perform the copyrighted work
  • The right to publicly display the copyrighted work
  • (sound recording only) The right to digitally transmit to publicly perform the copyrighted work

To try to get behind the curtain of copyright, we’re going to individually explore each of these six rights.  An understanding of each of these rights and how they operate will allow you, the creator, to be in a better position to take advantage of your copyright.

There are a couple words of caution.  First, the practical effect of these exclusive rights will depend on the type of copyrighted work (literary works, musical works, motion pictures, sound recordings, etc.).  Second, these are exclusive rights.  The law allows only the copyright holder to exercise these rights.

I.  The Right to Reproduce

Right to Reproduce
Pressing of Record

The exclusive right to reproduce your work is the core function of copyright and gives it its name.  Reproduction is the act of producing physical objects that contain or embody the copyrighted work.  Only the copyright owner can make or control reproduction of their work.  Reproduction commonly occurs in the form of publishing books from a manuscript, pressing records from a musical work, and manufacturing DVD’s from a motion picture.  Unauthorized reproduction occurs when someone photocopies that book, samples that music without permission, or pirates a copy of that film off the internet.

The general rule, as stated above, is only the copyright owner can control the reproduction of the work.  There are, however, a couple important exceptions to this rule (aren’t there always exceptions to the rule?):

  • “Fair Use” reproduction: This allows someone to make an authorized copy of the work if it’s for the purpose of education, commentary, criticism, parody of other similar reason.  Keep in mind, though, that the copy is limited to only what is necessary for the goal of fair use.  This means a critique of a music album can only fairly use samples of the music, not make an entire copy of the album.
  • Libraries and educational institutions can make a limited number of copies as provided by law.

An issue of Fair Use is the most common exception that people cite to when making unauthorized copies.  Many defendants claim Fair Use when copyright owners sue them for copyright infringement.

Reproduction of musical works also has its own separate, unique rule from other types of copyrighted work.  Anyone can make their own copies without permission and distribute them once a copyright owner records and makes first distribution of their audio only works (think CDs, not music added to film or TV).  This is a compulsory license.  The copies are legal, even though they are made without permission, but a royalty (9.1 cents per song or 1.75 cents per minute) must be paid to the copyright owner for each copy distributed.  This system is not very practical, however, so different agreements are commonly made.  The Harry Fox Agency is well known for arranging deals between copyright owners and third party distributors.

As a final note, copyright infringement can occur even when someone doesn’t make a complete copy of the work.  The copy need only be substantial and material.  Chopping off parts of a song or omitting a few tracks from an album can still be a violation of the law.

The right to reproduce, of course, would be of little economic value if not paired with the exclusive right to distribute.  Follow along as we next explore that particular right.

Chime in with any questions or comments that you may have about the right to reproduce.

–          Ari Good, Esq.

Ari Good, JD LLM, a tax, aviation and entertainment lawyer, is the Shareholder of Good Attorneys At Law, P.A.  Ari Mr. Good received his BA, With Distinction, from the University of Michigan in 1993.  He graduated from the DePaul University College of Law in 1997 and received his LL.M. in Taxation from the University of Florida.  Ari represents DJs, live musicians, fashion models and other entertainers in copyright, licensing and contract matters.

Florida Aircraft Repair Maintenance Exemption – Aircraft Tax Lawyer Ari Good

Aircraft Repair and Maintenance Exemption in Florda
It’s good to turn wrenches

Florida Aircraft Repair Maintenance Exemption:  As a friendly reminder to aircraft owners (and snowbirds) nationwide, be advised that Florida wisely modified the “repair and maintenance” exemption this past June to apply to smaller, in fact most, planes, giving greater tax benefits to small aircraft owners having work done on their planes in Florida.

The aircraft repair and maintenance exemption in Florida has since 1994 provided that “repair and maintenance” labor charges are tax-exempt when performed on aircraft with a MTOW of greater than 15,000 pounds (10,000 pounds for helicopters).  Parts and equipment remained taxable “except as otherwise provided” in the exemption statute.  Fortunately for the airplane owner, the statute does indeed otherwise provide that “equipment used in aircraft repair and maintenance” (including replacement engines, parts and equipment used for such activities) is also tax exempt when used for these purposes.

Taxpayer information publication TIP #12A01-04 extends this exemption to planes weighing 2,000 pounds or more. This will obviously apply to most owner-pilot, single piston aircraft using the plane partially or wholly for business.

Also welcome are provisions of the Florida Administrative Code that provide that “labor, parts and materials used and actually incorporated into and becoming a component part of [the aircraft] in rebuilding repairing or reconditioning same for resale or exclusively for leasing are exempt.”  Since many of you have airplanes in leasing company is for purposes of Florida’s “sale for resale” exemption, you may enjoy these provisions and reap considerable Florida sales tax and use tax cost savings.

Please contact me at 877-771-1131 for more information about this exemption, possible pitfalls and how I can make this work for you.

 

The Obamacare Tax Credit

Obamacare tax credit for small businesses
Employers providing health care coverage to employees get credit

The Obamacare Tax Credit – The Patient Protection and Affordable Care Act (“Obamacare”) permits certain small businesses to claim a tax credit for providing health insurance to their employees.  While there are many different options for claiming the Obamacare tax credit, the following is broad breakdown.  The maximum credit is 35% (25% for charities) of the total cost paid to employee covered health care premiums and expands to 50% (35% for charities) in 2014.  Small businesses may also still claim a deduction for premium expenses paid beyond the allowable tax credit.  This tax credit is transferable between tax years and can even create a refund when no federal taxes are owed. To qualify, a small business: (1) must cover at least 50% of the cost of single (not family) health care coverage for all of its employees; (2) cannot have more than 25 full time employees; (3) and employees must have an average wage of less than $50,000.  A business’ tax credit will vary, but generally, the smaller your business, the larger the tax credit.  An amended tax return can even capture health care tax credit unclaimed in prior years. An experienced tax advisor can assist you in maximizing your tax savings, not just this tax year, but for past and future years.  Contact us.

Deduct Your Flying Lessons

Deduct your flying lessons:  Can you take a tax deduction for your flying lessons?  The short answer:  yes, but it depends on your situation and the circumstances. To justify such a deduction, a taxpayer must show that the lessons are a reasonable and necessary business expense and not just helpful or useful.  Alternatively, a taxpayer could argue that the lessons are an educational expense necessary for a job that requires private flight.  The pilot must take due care to make these decisions up front so that he has a good defense in the event of an audit. Unlike in most other areas of US law it is the taxpayer’s burden to prove that a claimed deduction is legitimate.

In early 2012, a U.S. Tax Court considered this question and ruled that an experienced commercial real estate broker’s flight lessons were non-deductible.  The broker’s job involved identifying large properties to sell and drafting detailed brochures for prospective buyers.  From 2005 to 2007 he chartered airplanes to assist in finding and evaluating such properties.  During these flights, a licensed pilot flew the airplane while the broker took photographs that were included in the brochures.  To avoid future expenses of chartering flights the broker took flight lessons and purchased a Cessna 172s aircraft to perform the same task.  He subsequently claimed those flight lessons as an expense of $33,000.00 on his 2007 federal income tax return.  When the claimed deduction was challenged in court, however, he could not provide any receipts or invoices documenting the flight lessons, and therefore could not take a tax deduction for those flying lessons.

Deduct your flying lessons
Can you take a tax deduction for flying this big boy?

Upholding the IRS’ determination, the Court found that the broker failed to prove that flight lessons were an educational expense required for the business of a commercial Realtor   The Court concluded that while evaluating properties from the air may be helpful to a Realtor this particular broker had been able to do so earlier without the necessity of actually piloting a plane.  He could not explain why flight lessons were now required in order to view the properties or obtain aerial photographs.  Regarding the claimed business expense, the broker failed to provide evidence that flight lessons are normal, usual, or customary for commercial Realtor.

Adding insult to injury, the Court made a point of saying that the broker had not acted in good faith for claiming the subject deductions and upheld the 20% penalty assessment.  A taxpayer may be penalized if they act negligently or disregard (careless or otherwise) the tax law.  The Court noted that the broker was a sophisticated taxpayer with 20 years of experience as a licensed financial advisor and commercial Realtor   The Court similarly dismissed the broker’s defense that he just relied on professional advice in setting up his airplane structure.   The Court found broker had also erred in failing to keep financial records regarding the cost and purpose of the flight lessons.

These deductibility rules apply not only to the novice aviator but also those with years of flying experience.  As long as a taxpayer can justify the claimed deduction there is no rule barring that person from advancing their education and improving their rating, however, the taxpayer must continue to demonstrate that such expenses are an ordinary and necessary part of his existing business.  Cases in which the pilot deducts flight lessons in preparation for another career (such as moving from a general aviation pilot to an airline or transport pilot) seldom favor the taxpayer.

Careful planning can avoid the pitfalls illustrated above.  Here the deductions were disallowed not because of a “per se” rule against claiming a deduction for flight lessons but because he failed to demonstrate and document the connection between his real estate business and private flight.  The result may have been different, for example, if there was no viable option for sustaining his real estate business other than to fly privately, perhaps if the taxpayer owned real property spread over a large geographical area or in hard-to-reach places.

Consulting with a knowledge and experienced aviation tax advisor will ensure you’re on the right side of tax law (or a court’s opinion).

Year End 100% Aircraft Bonus Depreciation

Aircraft Bonus Depreciation
Aircraft bonus depreciation still in sight

From year-end 2011:  “As the holidays approach our thoughts become preoccupied with but one thing: how can I purchase an aircraft and write off 100% of the cost basis in the first year? Well, perhaps not for everyone, but here’s what you need to know: if you purchase an aircraft and place it in service by December 31, 2011 you will qualify for the 100% bonus provision provided you meet all of the other requirements. This is a considerable benefit under any circumstances.

If this is NOT possible, however, and you must place your aircraft in service next year, you are probably still better off than you would have been had you “only” been able to take the 50% bonus. This is because assets placed in service in the fourth quarter of the year do not receive the full first-year depreciation allowance. Your bonus allowance reverts back to 50% for assets placed in service in 2012. By waiting until early next year, you still receive this benefit, but are now able to take the full year MACRS depreciation allowance. In other words, unless the value of your depreciation allowance is considerably greater than it will be next year, you’re better off taking your time and making sure you have done your tax planning carefully, not only at the federal but also at the state – sales tax – level.”

Update 2012:  The good news:  100% bonus depreciation is still with us on qualified aircraft purchases through the end of this year.  What’s “qualified”?  There are several factors, including that you purchase a new (or substantially rebuilt) aircraft, and that you take delivery and place it in service before the end of the year.

The bad news:  This might not be around forever, which as bad news goes is pretty acceptable in my book.