Category Archives: superheroes

Iron Man 3: Iron Patriot Goes to Pakistan

Posted on May 17, 2013 by | 22 Comments

We’re just about done with Iron Man 3, which we still recommend seeing if you haven’t already.  Here’s an essentially spoiler-free version of the facts behind this post: at some point in the movie, Iron Patriot (the re-branded War Machine) goes to Pakistan to look for The Mandarin.  But wait a minute.  Iron Patriot is very much an official, publicly acknowledged part of the US military.  So how can he—armed to the teeth, mind you—conduct a potentially violent manhunt in a foreign country?

Obviously this is strongly reminiscent of the killing of Osama bin Laden in Abbottabad, Pakistan in May of 2011, and this post is based on some expert analysis of the law surrounding his killing.  A few more spoilery details inside (about the movie, not bin Laden; don’t get excited).

Continue reading →

→ 22 Comments

Posted in international law, Iron Man, movies

Iron Man 3: Surgery and Homicide

Posted on May 13, 2013 by | 16 Comments

In this, our third post on Iron Man 3, we consider the question of whether Dr. Aldrich Killian could theoretically be criminally liable for the deaths of people injected with Extremis, or certain deaths caused by Extremis patients. The idea here is fairly straightforward. Deliberately doing something that one knows has a reasonable likelihood of killing someone else which actually does result in their deaths definitely constitutes some species of homicide offense in most jurisdictions. But surgeons do precisely that all the time, engaging in acts which, given only minute alterations, can be either life-saving or horrific. Every time someone goes under the knife, there is an at least minor chance that they will die on the operating table, and more serious conditions justify undergoing riskier procedures. Extremis has been shown to possess incredible restorative properties, including the regeneration of lost limbs, but it does carry with it certain risks. As such, which homicide offense, if any, would be the most appropriate to charge Killian with, and would he have any defenses?

Spoilers within, so be forewarned. Continue reading →

→ 16 Comments

Posted in criminal law, Iron Man, movies

Iron Man 3: Property Law and Medical Experimentation

Posted on May 9, 2013 by | 13 Comments

We started talking about Iron Man 3 on Monday with some questions sent to us by a lucky reader who caught a sneak preview. Now we’ll take a look at two more issues: property law and medical experimentation.

Without giving too much away, we can say that at one point in the movie, Stark gives out his home address on live TV. Shortly thereafter, the press and bad guys show up and things start to get a bit hairy. The movie seems to assume that this would not have happened if Stark hadn’t given out his address. That strikes us as. . . dodgy. Further, the movie takes some inspiration from the Iron Man: Extremis storyline, and though the details of Extremis seem to vary quite a bit from the source material, both involve experimental medical injections. So we’ll talk about those issues as well. Continue reading →

→ 13 Comments

Posted in Iron Man, movies, property law, torts

Iron Man 3 Questions

Posted on May 7, 2013 by | 11 Comments

We’re going to start our coverage of Iron Man 3 with some questions we received almost two weeks ago from Heiki, who saw the movie at a local premiere in Europe.  We had to wait to see it this weekend, but it was well worth it.  If you haven’t seen it yet, you should.  It’s a great movie.  There are some fairly serious spoilers below, though.

Continue reading →

→ 11 Comments

Posted in constitutional law, criminal law, criminal procedure, Iron Man, mailbag, movies

Batman and the Unavailable Declarant

Posted on May 3, 2013 by | 6 Comments

Today we have a post based on a question from David, who asks:

I just watched Batman: Year One on Netflix, and there was an interesting issue presented that I thought I’d share. Toward the end of the movie, the corrupt Detective Flass is under indictment for involvement in a big drug scheme. Commissioner Gordon (through Batman’s intimidation) gets one of the crooks involved in the scheme, Jefferson Skeevers, to agree to testify against Flass.

Upon hearing this, Flass tells Gordon something along the lines of “he won’t testify if I have something to say about it…” The scene cuts to Skeevers unconscious in a hospital bed. Assuming Skeevers has confessed in a police statement out of court, wouldn’t this still be admissible against Flass under the forfeiture exception to hearsay as long as the prosecutor can show Flass had something to do with Skeevers hospitalization?

The Batman: Year One movie David mentions is a faithful adaptation of the classic Frank Miller graphic novel of the same name, several elements of which were integrated into the Christopher Nolan Batman films.  The book or animated version are well worth checking out.  We even gave away five copies of the book to celebrate our own year one.

Anyway, back to David’s question.  Before we worry about whether any hearsay exceptions or exemptions apply we have to decide whether Skeevers’s statement would be hearsay in the first place.  We don’t know what rules of evidence apply in a local criminal case in Gotham, but we’ll use the Federal Rules of Evidence, since many state rules are based on or are very similar to the FRE.

I. Is It Hearsay?

Under FRE 801, hearsay is an out of court statement (i.e. an oral, written, or nonverbal assertion) offered to prove the truth of the matter asserted in the statement.  In this case, we’re supposing that Skeevers made an oral or written assertion that Flass was involved in the scheme, Skeevers did so out of court, and the prosecution would offer Skeevers’s statement in order to prove that Flass was, in fact, involved in the Scheme (i.e. as proof that what Skeevers said was actually true).  It doesn’t matter whether the prosecution did this by offering a recording, a signed statement, or the testimony of a police officer who interviewed Skeevers.  All of that would be hearsay.

You might think about the exemption for statements ”made by the party’s coconspirator during and in furtherance of the conspiracy”, but although Skeevers and Flass may have been coconspirators at one time, these statements were not made during or in furtherance of the conspiracy.  Indeed, they were probably made as part of some kind of plea bargain or immunity deal.  Without any applicable exemptions, the statements are indeed hearsay, which is ordinarily inadmissible.

Normally this could be overcome by having Skeevers simply testify in person, which would give the jury a better opportunity to judge the truthfulness of his statements, and it would give the defense an opportunity to cross-examine him.  But Skeevers is lying unconscious in the hospital, apparently because Flass or someone acting at his behest put him there.  So now what?

Now we turn to the hearsay exceptions, of which there are several.  Some of them apply whether the declarant is unavailable or not and some of them only apply if the declarant is unavailable.  That said, it appears that only the latter will apply in this case.

II. FRE 803 and Recorded Recollections

You might think that if Skeevers had made a written statement for the police that his statement could be introduced as evidence under the recorded recollection exception of FRE 803(5).  After all, FRE 803 states that “The following are not excluded by the rule against hearsay, regardless of whether the declarant is available as a witness” (emphasis added).  And such a written statement would seem to fit the bill for 803(5):

A record that:
(A) is on a matter the witness once knew about but now cannot recall well enough to testify fully and accurately;
(B) was made or adopted by the witness when the matter was fresh in the witness’s memory; and
(C) accurately reflects the witness’s knowledge.

Skeevers clearly once knew about Flass’s involvement but also clearly cannot now recall it well enough to testify fully and accurately: he is unconscious.  The statement was made when the matter was fresh in his memory, before the incident that caused his injuries.  And we’ll assume that it is an accurate statement.

But despite the phrase “regardless of whether the declarant is available as a witness“, the courts have been uniform in holding that 803(5) only applies when there is a witness available to testify that they can’t recall the matter reflected in the record.  See, e.g., Steinberg v. Obstetrics-Gynecological & Infertility Group, P.C., 260 F.Supp.2d 492 (D.Conn. 2003) (the argument that 803(5) applies to an unavailable declarant “borders on frivolous”); Jacobson v. Deutsche Bank, A.G., 206 F.Supp.2d 590 (S.D.N.Y. 2002).

None of the other 803 exceptions are likely to apply in this case, so let’s move on to the heart of the matter: exceptions that apply only when the declarant is unavailable.

III. FRE 804 and the Unavailable Declarant

Declarants can be unavailable for a lot of reasons, one of which is when they “cannot be present or testify at the trial or hearing because of death or a then-existing infirmity, physical illness, or mental illness”.  FRE 804(a)(4).  That definitely describes Skeevers.

Once a declarant is unavailable, there are some special exceptions that can apply to statement they made before they became unavailable.  Two might apply in this case.  David alluded to one of them (804(b)(6)) in the question:

The following are not excluded by the rule against hearsay if the declarant is unavailable as a witness: … A statement offered against a party that wrongfully caused — or acquiesced in wrongfully causing — the declarant’s unavailability as a witness, and did so intending that result.

If the prosecution can prove that Flass caused (and that includes indirectly causing via an agent or conspirator) Skeevers’s injuries, then it’s pretty much a slam dunk to introduce Skeevers’s statements against Flass.  After all, we already have Flass indicating his intent: ”he won’t testify if I have something to say about it…”

Another possibility is 804(b)(3), statements against interest:

A statement that:

(A) a reasonable person in the declarant’s position would have made only if the person believed it to be true because, when made, it … had so great a tendency … to expose the declarant to civil or criminal liability

This exception might apply if Skeevers made the statement before he struck an immunity deal.  If he spilled the beans about his role in a criminal conspiracy in which Flass also played a part, confessing to multiple crimes in the process, then that would definitely be a statement against interest.  But if he signed an immunity deal first and then talked, then his statements wouldn’t actually be exposing him to criminal liability and so the exception wouldn’t apply.  If this did apply, however, it could be a useful backup in case the prosecution couldn’t prove Flass’s involvement in Skeevers’s unavailability.

IV. Conclusion

Apart from the issue of proof, this is a classic example of 804(b)(6), which is a rule that meshes very well with most people’s intuition about fairness—and gives criminals a disincentive to intimidate or kill witnesses.

→ 6 Comments

Posted in Batman, evidence, mailbag

Mutant Discrimination: GINA, Genetics and How Professor Xavier is Breaking the Law

Posted on March 29, 2013 by | 70 Comments

This guest column was contributed by Dan Vorhaus, an attorney at Robinson, Bradshaw & Hinson, P.A. and Editor of the Genomics Law Report.

Previous posts here at Law and the Multiverse have discussed the status of mutants under several of our nation’s anti-discrimination laws, including the applicability of constitutional protections afforded by the Equal Protection and Due Process clauses of the 14th amendment and statutory protections afforded by the Americans with Disabilities Act (ADA).

There remains, however, one key piece of important anti-discrimination legislation that has yet to be considered in evaluating the legal protections afforded mutants under the law: the Genetic Information Nondiscrimination Act, or GINA.

I. GINA and Mutant Genetics: A Primer.

GINA represents a historic achievement. Enacted in 2008 after 13 years of debate, many have called it the “first civil rights bill of the 21st century.” Five years later it remains the first and only piece of federal legislation to specifically address the use and effects of genetic information.

Broadly speaking, GINA is divided into two parts. Title I of GINA prohibits health insurers from using genetic information to deny coverage or to set premiums or payment rates. Title II prohibits employers from requesting genetic information or using genetic information in hiring, firing and other employment-related decisions.

GINA’s unique focus on genetic information makes the law of particular relevance to mutants. “Mutants,” as we now know thanks to decades of research by devoted and largely off-panel comic book scientists, are individuals who possess at least one mutated copy of the so-called “X-Gene.” The gene appears to promote the development of superhuman powers and abilities, typically post-puberty.

While much remains unknown about the X-Gene’s structure and function, scientists specializing in mutant genetics have isolated its protein product(s) as evidenced by the deployment of mutant suppression drugs in X-Men: The Last Stand (the drug in question is derived from the mutant Leech). From this we can extrapolate that the location of the X-Gene in the Homo sapiens genome is known and, importantly, that mutations within the gene can be identified through genotyping or even targeted sequencing of the X-Gene itself.

With the identification of the X-Gene and the subsequent decline in cost of genomic sequencing technology, there are a number of scenarios in which a genetic test to “diagnose” a mutant at an early stage, particularly before he or she has developed any superhuman (and frequently super-destructive) abilities, might be desirable. But in light of GINA’s passage, are such genetic tests legal?

II. Mutant Discrimination in a Post-GINA World.

We start with a pair of scenarios in which genetic testing for the X-Gene might be of interest.

First, a health insurer could require applicants to submit to testing in an attempt to screen in individuals with beneficial mutations (e.g., those resulting in unique healing abilities) or screen out individuals with X-Gene mutations capable of generating catastrophic levels of claims exposure (e.g., as a result of an at-times-uncontrollable ability to rearrange matter), thereby helping to more accurately project the insurer’s exposure.

Second, an employer might use the X-Gene test to gain valuable insight about a prospective hire. For instance, a research laboratory might use the X-Gene diagnostic test to double-check that the reserved but well-qualified physicist it is considering for an open position won’t demolish the lab – and everyone and everything within it – if an experiment goes awry.

Prior to GINA’s passage, testing in either scenario would have at least been arguably permissible, although various other anti-discrimination laws, including those discussed in previous posts, might have served as the basis for an effective challenge. Post-GINA, however, the analysis is crystal clear: both of the above examples of X-Gene screening are illegal.

The text of the statute itself offers no ambiguity:

  • A health insurer “...shall not request, require, or purchase genetic information for underwriting purposes.” (§ 101)
  • It is unlawful for an employer “to fail or refuse to hire, or to discharge, any employee, or otherwise to discriminate against any employee with respect to the compensation, terms, conditions or privileges of employment of the employee, because of genetic information with respect to the employee.” (§ 202)

 Although Congress did provide limited exceptions to the general prohibition on requesting and using genetic information in the insurance and employment contexts, none of the exceptions are targeted at mutants, tests specifically designed to test for X-Gene mutations or are otherwise applicable to the scenarios discussed above.

III. Professor Xavier and Pro-Mutant Genetic Discrimination

While GINA may operate to protect mutants from certain forms of genetic discrimination, we should not forget that the statute is crafted broadly and protects against the misuse of any individual’s genetic information. In other words, just as mutants are protected by GINA, so too are they bound by it.

Consider the case of Professor Xavier’s world-renowned school, variously referred to as “Xavier’s School for Gifted Youngsters” and the “Xavier Institute for Higher Learning.”

While little is known of Xavier’s closely-guarded school, it appears to satisfy the definition of an employer subject to Title II of GINA. (GINA applies to all private employers with 15 or more employees. With roughly a dozen identified faculty members, and likely additional faculty members and administrative and support staff on the payroll, Xavier’s school likely crosses the 15-person threshold.)

Xavier’s school also has an unbroken track record of employing mutants as faculty. While it may seem logical and even desirable to employ mutants in a school dedicated to the education and training of mutants, GINA prohibits the use of genetic information in hiring and other job-related decisions without exception. Even in situations where genetic information might appear to be a legitimate criterion for assessing fitness to perform a particular job, GINA forbids its use by an employer.

Of course, it is highly unlikely that Xavier requires prospective faculty members to submit to a traditional genetic test as a condition of their application and/or hiring. In addition to his well-known psionic powers which allow him to identify mutants using only his mind, many or all of the individuals applying to work at the school have manifest mutant powers. Nevertheless, GINA is clear that genetic information, however acquired, may not be used “in regard to hiring, discharge, compensation, terms, conditions, or privileges of employment.” 29 CFR § 1635.4. No matter how he comes by the information, if Xavier is indeed using genetic information in employment-related decisions, this would be a clear violation of GINA.

Since none of Xavier’s existing faculty members are likely to bring a discrimination claim, how might one arise? The most likely scenario: a gifted but non-mutant individual, perhaps one even possessed of other superpowers derived from, for example, an alien genesis or technological enhancements, seeks a position at Xavier’s school as an instructor but is turned away. Such an individual would be well-positioned to bring a successful genetic discrimination claim under GINA against Professor Xavier and his school. The Equal Employment Opportunity Commission (EEOC), the federal agency responsible for enforcing Title II of GINA, provides detailed instructions for filing just such a charge.

As with any new piece of legislation, it will take some time before GINA’s full implications for both mutants and humans become clear. Final regulations for Title II of GINA were published in 2010, but public examples of GINA-in-action remain few and far between, and illustrate the many uncertainties and difficulties of enforcement.  For example, given the EEOC’s difficulty subpoenaing documents from Nestle in a recent enforcement action, one can only imagine the considerable challenges that would await the Commission in attempting to gather the evidence needed to successfully establish a claim of discrimination under GINA.

Nonetheless, the law of GINA is clear, and the coming years may require the Commission and other regulatory bodies to overcome those challenges in order to appropriately enforce GINA both for and against the mutant population. Count on Law and the Multiverse and the Genomics Law Report to continue to keep you apprised of all the latest in GINA, mutants and genetic discrimination law.

→ 70 Comments

Posted in civil rights, guest posts, insurance, labor law, X-Men

Quick Questions from the Mailbag

Posted on March 22, 2013 by | 36 Comments

In today’s mailbag we have a couple of quick questions from a couple of Christophers.

I. Batman and Bats

The first Christopher had two questions about Batman and actual bats:

In Batman: Year One, and in the film Batman Begins, Bruce has that little gadget that essentially summons swarms of bats, which always looks really cool. But is he responsible for any of those bats dying? Because you just -know- some of them got smushed, or died somehow in the confusion. Also, if someone gets rabies or otherwise gets seriously injured by said bats, is that Bruce’s responsibility?

A. Injuries to the Bats

With regard to the bats themselves: it depends on the kind of bats and the laws of the state.  There are some federally protected bat species, and messing with an endangered species in that way would almost certainly run afoul of the Endangered Species Act, which  makes it a crime to “harass, harm, pursue, … trap, capture, or collect [an endangered species], or attempt to engage in any such conduct.” 16 U.S.C. § 1532(19).

Even if the bats weren’t endangered, state animal welfare laws may prohibit what Batman was doing.  If any of the bats were “unjustifiably injured”, for example, then under New York law that would constitute “overdriving, torturing, and injuring animals.”  N.Y. Agriculture & Markets Law § 353. Whether summoning a swarm of bats to confuse or evade criminals makes any resulting bat injuries unjustifiable is a difficult question to answer, but one has to wonder if someone has smart and well-connected as Bruce Wayne couldn’t have come up with a less risky alternative.

B. Injuries to Others

By ‘others’ I mean innocent bystanders.  We’ll assume self-defense, defense of others, or some other justification applied to any injuries inflicted on the criminals.

Ordinarily the owners of wild animals (such as bats) are strictly liable for injuries caused by those animals, assuming the injury is a result of the kind of danger that the animal poses.  Bites and rabies transmission from bats certainly fall into that category.  The trick is that Batman isn’t necessarily the owner of these bats.  There is a bat cave on the Wayne Manor property, but I don’t remember if it’s clear that these particular bats came from there.  Merely exercising some degree of control over the wild animal may not be enough to result in strict liability.

However, even if a more typical negligence standard were applied, Batman could still lose out.  He may be justified in using force against his attackers, self-defense will not necessarily prevent a negligence claim.  Would a reasonable person exercising ordinary care summon a swarm of wild bats in a crowded city?  I think a reasonable person might have opted for a less risky method.

II. Animal Transformations

The second Christopher had a question about the magician Zatanna turning people into animals:

I was reading Zatanna and she has a habit of turning people into animals (briefly, in one case, just to get rid of annoying guests.).  Later her father transforms someone into an inanimate doll?  This seems like assault … Can she be arrested and/or sued?

I think the answer is yes, such a transformation would be both a tort and a crime.  If the transformation were effectively permanent—it could not be treated and the responsible magician refused to undo it—it would be murder, particularly if the animal form was truly an ordinary animal and not the person’s mind trapped in an animal’s body.  From a legal point of view, the person would be dead.  Their cardiopulmonary and brain functions would have permanently ceased, since their body had been effectively destroyed.

In the case of a temporary transformation, that would be a very serious injury, albeit one that the victim recovered from.  That would affect the sentencing or damages, but it would still be a crime.  You might think: hey, she changed the victim back, no (permanent) harm, no foul, right?  But what if Zatanna had performed the transformation and then been killed or incapacitated?  Or if Zatanna and the victim had been separated?  We don’t want to encourage her to take the risk that she might not be able to change someone back.  This is similar to why factual impossibility is not a defense to an attempted crime: the defendant could not actually have committed the crime they were trying to, but we don’t want to let them off the hook just because they got lucky.

And then there’s the psychological harm of being turned into an animal, even temporarily.  So even a temporary transformation would be a criminal assault or battery (depending on the term the particular state uses) and a tortious battery.

→ 36 Comments

Posted in Batman, criminal law, mailbag, torts

Superman’s Diamonds Revisited

Posted on March 6, 2013 by | 19 Comments

Just over two years ago I discussed Superman’s (lack of) tax liability for crushing coal into diamonds and (actual) gift tax liability if he gave those diamonds to another person.  In the comments to that post I mentioned that Superman could theoretically avoid gift tax liability by performing the gratuitous service of crushing coal into diamonds rather than giving a finished diamond.  In this post I’d like to expand on that topic briefly.

I. Form Over Substance

Although it is true that gratuitous services are not taxed, it is also true that the IRS and the courts frown on tax avoidance schemes that attempt to exalt form over substance.  Gregory v. Helvering, 293 U.S. 465 (1935).  So a scheme by which Superman handed someone a piece of coal, fully intending to turn it into a diamond, then did so, would be tantamount to simply giving them a diamond.  The IRS would focus on the substance of the transaction, not the form, and consider it a taxable gift of property.

But if, for example, Superman were at someone’s house for a barbecue and decided to thank them for dinner by crushing a lump of their own charcoal into a diamond, that would be different.  In that case Superman really would be performing a gratuitous service.

This may seem like a fine distinction, but think of it in terms of a famous baseball player.  If the baseball player hands someone a baseball (retail value $3) and then signs it (market value $500), that’s not really a gratuitous service.  They’re really just giving the person a signed baseball.  But if the baseball player signs a baseball that the recipient already owns, then that is more clearly a service rather than a gift of property.

II. Engagement Rings

Superman has crushed coal into diamonds for various reasons, but one of the best known was his gift of a ring to Lana Lang in Superman III.  This raises an interesting question: is an engagement ring subject to gift tax?  There is, subject to certain qualifications, an unlimited marital deduction for gifts between spouses, but what about an engagement ring, which is given in anticipation of marriage?

The law surrounding engagement rings and other pre-nuptial gifts has a long and complex history, dating back to at least the Romans.  Most of the law has to do with who owns such gifts, particularly if the marriage is called off.  But it turns out that none of that matters for tax purposes.  If the donor and donee aren’t married at the time of the gift, then the marital deduction doesn’t apply.  26 U.S.C. § 2523(a).  So an engagement ring is subject to gift tax, even if the donor and donee get married later that same year.  In practice I suspect that few people actually report such gifts, even in the rare case where it would make a difference in their ultimate tax liability, but maybe Superman would actually be moral enough to do so.

III. Conclusion

Crushing coal into diamonds still doesn’t create tax liability for Superman, and he still has some ways to avoid liability if he crushes coal into diamonds for other people, but he has to be careful about it.  And strictly speaking he probably should have reported that ring he gave to Lana.

→ 19 Comments

Posted in Superman, tax law

Guest Post: Clark Kent’s Taxes

Posted on January 2, 2013 by | 26 Comments

Today we have a guest post from Martha L. Voelz, an associate with S.H. Jacobs & Associates LLC in New York that we met at New York Comic Con.  As we mentioned in a recent post, Clark Kent has quit his job with the Daily Planet to become a blogger.  Martha, who practices tax law, has written a post about some of the tax consequences of Kent’s newfound self-employment.  As with all of our posts, this post is not legal advice, does not create an attorney-client relationship, and does not necessarily reflect the opinions or views of the author’s employer.

Being Your Own Boss — Tax Consequences

With Clark Kent preparing to strike it out on his own in Superman #13, there are several  legal issues he faces as his own boss. As James Daily pointed out in his post, as an independent blogger and reporter Kent will have new intellectual property and liability issues. He also will have some tax differences as well.  For this post, I am sticking to Federal tax issues, but Kent will likely have state and local tax issues too.

As an employee, Kent’s share of income, Social Security and Medicare taxes were calculated and paid to the Internal Revenue Service (“IRS”) by his employer.  As his own employer, Kent now has to calculate and make these tax payments himself. Let’s start with the Social Security and Medicare tax differences, known as FICA and Self-Employment tax.

I. FICA v. Self Employment tax

When Kent received his pay stub from the Daily Planet, he would have seen withholding for his Federal income taxes and another  line notation called FICA. FICA stands for Federal Insurance Contribution Act, and this covers Kent’s tax contribution to Social Security and Medicare. FICA is found in §§ 3101-3128 of the Internal Revenue Code, which is part of the United States Code.

The total FICA tax rate is 15.3%, which is normally paid equally between the employer and employee.  Kent’s portion of FICA would normally be 7.65% and is broken down like this:

  • Social Security – Kent would pay 6.2% tax on his wages (including certain benefits) capped for the year at $110,100 in 2012 and will be capped at $113,700 in 2013. Anything Kent earns over the cap is not subject to the Social Security tax.
  • Medicare – Kent would pay 1.45% on his wages (including certain benefits). There is no yearly cap on this portion of the tax.

The reason for noting how FICA is normally paid is because in 2012 FICA is not working “normally”. In order to stimulate the economy, Congress reduced an employee’s portion of the Social Security part of FICA to 4.2% in 2011 and kept that reduction for 2012. This reduction is not set to continue in 2013. If Kent was working at the Daily Planet, when he received his first pay check of 2013 he might have been shocked by the reduction in his take-home pay and the sudden “increase” in the FICA line.

What makes this different for Kent as a self-employed taxpayer is that FICA does not apply. Instead self-employed taxpayers contribute to Social Security and Medicare under the Self-Employment Contributions Act of 1954, known as the Self-Employment Tax. This tax is found under §§1401-1403 of the Internal Revenue Code.

On its face, the Self-Employment Tax seems harsher because the taxpayer normally pays all 15.3% of the tax, which under FICA is split between the employer and employee.  However, the same 2012 reduction to the employee portion of the Social Security tax applies to the Self-Employment Tax. This means in 2012 the Self-Employment Tax rate is 13.3% and the breakdown would be as follows:

  • Social Security – Kent would pay 10.4% tax on his net earnings with the same income caps in 2012 and 2013 as FICA.
  • Medicare – Kent would pay 2.9% on his net earnings.

There are some additional differences in how the Self-Employment Tax is calculated to even out the differences between this tax and FICA.

First, the Self-Employment Tax is calculated on net earnings of the business and not the gross income. Net earnings are the amount Kent earns reduced by certain business expenses he may have during the year. Second, a portion of the Self-Employment Tax Kent paid may be deductible on his federal income tax return. This in turn may put Kent in a lower tax bracket and reduce his federal income tax.

II. Estimated Tax Payments

By becoming self-employed, Kent will have to calculate and pay income tax and Self-Employment Tax on his own. He will have to do this by making estimated payments to the IRS using Form 1040-ES. This form will help Kent calculate both his Federal income and Self-Employment Taxes.

He will need to file and make payments for each quarter to avoid an underpayment penalty. Quarterly estimated payments are due April 15 (for January, February and March), July 15 for (April, May and June), October 15 (for July, August and September) and January 15 of the following year (for October, November and December). If the due date falls on a Saturday, Sunday or Holiday, then the due date is typically the following business day.

Filing and payment is considered completed on the mailing date, and it is a good idea for Kent to send anything to the IRS via Certified Mail Return Receipt. This is his insurance should the IRS allege he missed a payment or filing deadline. Alternatively, he can make his quarterly estimated payments using the Electronic Federal Tax Payment System.

III. Happy New Year! – 2013 Tax Surprises

There are a few tax surprises in store for Kent and the rest of us taxpayers between the 2012 and 2013, in addition to watching our Social Security tax payment revert back to its normal amount.

First, some taxpayers may have to make an Additional Medicare Tax payment. If Kent makes over $200,000, then an Additional Medicare Tax will kick in. For every dollar over $200,000, he will pay Medicare Tax at 2.35%. (I assume for the rest of this post that Kent is not getting married in 2013 and has a taxpayer filing status of “Single”.)

Second, the Federal income tax brackets are set to revert to tax rates we last saw under President Clinton. The bottom income tax rate goes from 10% to 15% up to a maximum tax rate of 39.6%. Assuming Kent has an adjusted gross income between $35,351 and $85,650, his tax rate will go from 25% to 28% in 2013. This assumes that Congress does not make tax code adjustments connected to the “Fiscal Cliff” situation, which is still up in the air as of this writing. [Ed. note: the fiscal cliff has apparently been avoided, but if Kent makes more than $400,000 per year then he would pay 39.6% on income above that level.]

One of the best things Kent can do is read up on his obligations as a self-employed taxpayer and check out  the following IRS publications: Publication 334 –Tax Guide for Small Business and Publication 505 – Tax Witholding and Estimated Tax. If he doesn’t want to tackle this himself, hiring a certified public accountant is the best thing he can do. (Plus, the expense is a tax deduction in his new life as a self-employed reporter!)

→ 26 Comments

Posted in Superman, tax law

Superhero Journalists Revisited

Posted on December 21, 2012 by | 14 Comments

You may recall our previous post about superhero journalists Clark Kent and Peter Parker, which discussed how copyright affected them differently as an employee and an independent contractor, respectively.  Well the times they are a changin’, and Clark Kent quit his job at the Daily Planet in Superman #13 to become a blogger.  This will have more than a few legal consequences for Kent, some of which we’ll touch on today and some of which will have to wait for a future post.

I. Intellectual Property

As an individual Kent will either be working as a freelancer, selling stories to companies like the Huffington Post, or he may publish stories himself.  Regardless of which business model Kent chooses, he’ll also have to choose a form of business association (corporation, LLC, etc).  Basically, he could either choose some sort of corporation, or he could operate a sole proprietorship.  The latter is easier, but it’s also riskier (more on that later).

With regard to IP, the different kinds of business association give him some options.  For example, he could be an employee of a corporation, in which case the copyright in his works would be automatically owned by the corporation, just as they were owned by the Daily Planet when he worked there.  Or, if he wasn’t an employee then he could assign those copyrights by contract.  And if he chose not to incorporate, then he could retain ownership of the copyrights as an individual.

One practical effect of this choice will come into play when contracts with publishers are signed.  If Kent’s company owns the copyrights (either automatically or by assignment), then the company will be the one selling the stories, which entails either assigning the copyright to the publisher or granting the publisher a license.  If Kent operates as an individual, then it’ll be Kent selling the stories directly.  Either way it’ll probably be Kent signing the contracts, since he’ll be his company’s sole employee/shareholder/member.  The difference will be whether he signs it something like “Clark Kent, Manager, KentCo LLC” or just “Clark Kent.”

So what’s the point of all of this?  Why would Kent bother setting up a company, especially if he’s going to be the only employee or if it won’t even have any employees?  The answers are, as they so often are in the law, liability and taxes.  Taxes will have to wait for a future post, but let’s take a brief look at liability.

II. Liability

As a writer working alone, Kent probably won’t have to worry too much about some of the common sources of liability for companies, such as products liability or workplace injuries.  But he will have to worry about suits for defamation, invasion of privacy, and related torts.  To a certain extent these risks can be insured against, and it’s usually part of commercial general liability insurance, but there are limits to what insurance will cover.  If Kent intentionally defames someone or (more likely) intentionally invades their privacy, then an insurer isn’t going to cover that.  This is where the liability protection of the corporate form comes in to play.

Basically, the way this works is that the plaintiff could sue Kent’s corporation or company but not Kent himself as an individual.  This means that the corporation’s assets would be vulnerable in the suit, but not Kent’s personal assets.  There are some exceptions to this general rule, however.  Sometimes a plaintiff can “pierce the corporate veil” and sue the employees or directors and officers of the corporation as individuals.  There are several reasons why this can happen, but some of the most common are when the corporation is just an “alter ego” of the individual (i.e. they aren’t really distinct entities) or when the corporation is under-capitalized (i.e it doesn’t have nearly the assets it should given the kinds of risks it undertakes).  Both of these are potential issues for a one-person corporation or LLC.  Kent will have to be careful to observe the corporate formalities, avoid commingling personal and corporate assets, and maintain adequate capital in the company.

If Kent decides not to incorporate but instead operate a sole proprietorship or even act as an individual, then he won’t have this benefit.  He could be named in the suit as an individual and his assets would all be up for grabs, subject to the limitations of bankruptcy.  Incorporation has some upfront costs and requires some effort to maintain, but it beats being on the wrong end of a million dollar damage award.

III. Conclusion

So far there haven’t been a lot of details in the comics, but it’ll be interesting to see where this part of the Superman story goes.  Clark Kent’s work at the Daily Planet has been an iconic part of the character for decades.  ”Clark Kent, mild-mannered blogger” doesn’t have quite the same ring to it.

→ 14 Comments

Posted in copyright, intellectual property, privacy law, Superman, torts