November Handshake

"The Handshake" is published monthly by the Alarm Association of Florida, Inc. (AAF). Circulation: 1,000 copies mailed nationwide. Also available via www.fla-alarms.org on the Internet. The AAF reserves the right to edit and/or refuse any news item or advertisement at its discretion, and assumes no responsibility for correct content of ads or news items. Jude Ann Burk, Executive Director/Editor, 1349 E. Lafayette Street, Tallahassee, FL 32301. Copyright 1995, Alarm Association of Florida, Inc. All rights reserved . No reproduction of design or content may be made without expressed written permission of the association.

The big game approaches and the fans grab up all the available tickets, making it a ticket scalper’s haven. With a standing-room-only crowd declaring undying support, the team can feel the excitement that pushes them to want to play beyond their abilities as kickoff approaches.

On another field another big game is underway. This time though, the stadium is only half-full as fans sit quietly and watch their team go through their moves with little emotion. A lot of top-ranked teams get beaten by lesser teams because they lack the emotion and support that is necessary to win. It’s called home field advantage and to a great extent, it is the result of fans, not because one field is longer or shorter than another.

The same is true in politics. Too many politicians get elected or defeated because of voter apathy at the polls. Many bills get passed or defeated because of the inactivity of those that may or may not be concerned with the outcome.

As a new legislative session approaches, we are already seeing a return of some of the same old issues affecting our industry, as well as some new ones, that will be presented for 1998. Last year, most of our accomplishments were defensive rather than offensive. One of the more notable pieces of legislation was Rep. Sally Heyman’s glitch bill. I have to tell you, the only reason that it passed into law was the support it got from our opponents (and the lack thereof by our industry.)

This year we will have the sales tax issue, the sprinkler issue, and the FASA issue. The sales tax issue was worked last year by your legislative committee, as was the sprinkler issue (which has been going on for the last five years.) We didn’t get very far with the sales tax issue when Department of Revenue field representatives conducted a random telephone survey of alarm dealers, that revealed most dealers didn’t feel collection of taxes on installment contracts was a problem. We represented to the department that it was a major problem, as we had been told by some South Florida members. Based on this kind of inconsistency in our message, it is going to be difficult to go back this year and try to have the issue readdressed. We’ve successfully defended the consumer’s right to contract with whomever they choose to test waterflow switches connected to fire alarm systems. But once again, the issue has resurfaced, and each time it does, the fire sprinkler folks gain a little more support for their side. This year they are trying to align themselves with Rep. Heyman for their champion, and we all know the success she has had with legislation regulating our industry over the past two years.

The KEY to being successful this year is YOU. We cannot promote nor defend any legislation or programs successfully without your support.

I have read some of the comments from those of you who responded to our survey asking why you didn’t attend this year’s convention. Let’s review: some blamed the time of the year (it was held at the same time of the year as it has been for the past four years); some said the distance to the site was too long or just a bad location (it was held in the center of the state to make it as accessible to everyone as possible); some cited a too high registration cost, noting the budget restrictions of companies as a result of buy-outs (this year’s convention was shortened by a day to make it less costly for members to attend the whole event and the registration fee was the lowest we’ve ever had, just $99). Some of you stated that the trade show wasn’t attractive because local vendor days sponsored by local distributors make it unnecessary to go to a big trade show held once a year. Comments and reasons based on few facts, like those above, are heard by others who repeat them and pretty soon they are treated as reality.

Our membership has grown steadily over the past two years and is made up of mostly small to mid-sized companies. While the trade show is a very good reason to come to this annual event, the general assembly and election of your officers and directors is the real reason to be there. If the above comments are typical of the sentiment out there for not supporting your association’s annual program, then I can only guess at the lack of participation we are going to get on this year’s legislative agenda.

An election year is coming up and it is an important time for you to get involved locally and be heard by all the candidates. Your local discussions and contacts with legislators will help give us the advantage that we will need in addressing legislation. No better time for a legislator to listen to you than when they’re running for office or in need of something. This year when we call for your help, give us the home field advantage. Show the opposition that we are going to pack the stadium.

Finally, my Board Member of the Month is Joe Holfelner. Joe never hesitates to ask questions about Board business so he can make correct reports to members back home, always presents his region’s concerns, and does so with the understanding that he may not gain the Board’s support. If he doesn’t, he maintains his good nature and agrees to disagree. He is the essence of what a Regional Director is supposed to be and the Gold Coast is fortunate to have such a dedicated representative. Thanks Joe!

As you saw from the cover of this month’s issue, your association is now a property owner in Florida’s Capital City, Tallahassee. Ever since the organization’s administrative and government relations offices merged almost four years ago, the AAF leadership have been investigating the feasibility of buying property.

Due to the great publicity generated from a recent Time magazine article naming Tallahassee one of the top ten places to raise a family, bolstered by the fact that 90 percent of all trade and professional associations have taken up permanent residency where government and regulators dwell, the city is experiencing a commercial boom. That equates to one inescapable reality: invest now or face continued rent increases and/or frequent relocations. I’m here to tell you that since I have personally been involved in three moves of your association offices, the prospect of boxing up the myriad files and sorting out the 27/plus years of records again and again was not an attractive notion!

However, the most compelling reason to buy real estate is monetary. The AAF Executive Committee has been monitoring the association’s fiscal health each month over the past fifteen months in an effort to keep the line item budgets on track, while allowing for additional monies to be set aside for investments and reserves. Treasurer Thodey fired the first "purchase salvo" last December when he reported that projected rent payments would cost more than an amortized mortgage on a $350,000 building. A more sobering comment from the Treasurer put the issue into perspective: if the AAF had purchased a building in 1995 when the federal government awarded us a major grant award, part of which the association received in overhead reimbursements, we could have realized $37,000 in equity with only a $15,000 outlay of member funds!

Now the task of finding a suitable property was at hand. The Executive Committee made their proposal to the full Board of Directors in January and received the approval to go forward and investigate options for the Board’s review in March. We engaged the services of Chip Hartung, Coldwell-Banker, who had brokered the sale of the AAF’s Lake Placid offices in 1995.

Between January and June, the Board was presented with five possible options, one of which was purchasing raw land and building a 3,500 square foot building. One building purchase slipped through our hands when a counter offer couldn’t be approved by the Board in time, and another buyer outbid us. The Executive Committee asked for and received Board permission to proceed with their search and to spend up to $350,000 for an existing 3,500 square foot building or, absent that by August 30, purchase a piece of raw land and build a 3,500 square foot building at a total cost of no more than $350,000 for both land and building. President Mims, Chip, and I set out in search of buildings that would fit the criteria. After looking at numerous offices that needed major renovations just to meet our minimal needs and discussing the lengthy construction permitting schedule in Tallahassee, things were looking pretty dismal. Then came the phone call that presented us with the best of all opportunities!

Chip got a referral from another broker on a 7,000 sq.ft. building that’s just two minutes from the Capitol building! And, best news yet, the building has a long-term tenant who pays more than 50% of the mortgage! Not only did we find a solid, attractive suite of offices for our immediate and future office needs, we found twice the space for the same $350,000 the Board had approved spending! The net result is that, with our tenant, the AAF will actually spend less each month on its own real estate than we are spending now on rent for only 1,300 sq.ft. of space!

We’re doing some minor interior renovations and replacing the air conditioning system, with the hope of moving in before Christmas. President Mims will host an open house early in the New Year. We’re excited, and you should be too! Your officers and Board have done an outstanding job of ensuring the financial health of your AAF through this exceptional purchase. Welcome home!

Ron Walters, former president of the Alarm Association of Florida and current Life Member, has been named Model State Coordinator for Florida in the International Association of Chiefs of Police Model States Program. The appointment was made last month and announced by Stan Martin, ADI, coordinator of the national program to be run in five states.

Walters will work with the AAF in presenting information and programs to governments and industry organizations on preventative strategies for reducing false alarms. One of his first efforts will be to assist with the AAF’s "Target Zero" false alarm prevention symposium on November 13 in Miami.

As a former law enforcement officer and an alarm industry pioneer, Walters brings to the job a unique perspective that will work to enhance relationships between public officials and alarm dealers.

For more information or to contact Walters directly for assistance on local false alarm issues, you may reach him at the following address:

Favorite quote: "If you think you can, you can. If you think you can’t, you’re right!" --Mary Kay Ash

The Florida Fire Sprinkler Association (FFSA), led by Executive Director Buddy Dewar, has declared war on fire alarm contractors to restrict consumer choice on inspections of flow and tamper switches on fire sprinkler system interfaces with fire alarm systems. They have drafted two amendments to the Florida Statute Chapter 489, Part II that will prohibit licensed fire alarm contractors from conducting the inspection of flow and tamper switches as part of an annual fire system inspection.

Dewar claims in correspondence to the House Business Regulation & Consumer Affairs Committee that the alarm industry is clouding the interpretation of national fire codes and takes a direct shot at AAF Executive Director Jude Ann Burk in stating:

"Ms. Burk, absent any experience and knowledge of interpreting fire codes, is under the impression that a reference in NFPA 72, the State Fire Marshal’s Office adopted code dealing with fire alarm systems, of NFPA 25, the State Fire Marshal’s Office adopted code dealing with fire sprinkler contracting, gives her members free access to the world of fire protection contracting. If her interpretation were valid, untrained alarm contractors would be allowed to do annual flow tests of fire pumps, conduct annual tests of halon systems in computer rooms, flow water through standpipes, even would allow her members to conduct flow tests of foam induction systems in deluge fire suppression systems frequently found in aircraft hangers."

Burk, speaking for the AAF, has taken the position that the national code addresses how and when a flow and tamper switch will be tested. It is the NFPA 72 that enumerates codes inspections, testing frequencies, and methods for testing and lists five categories of qualified personnel, any one of which can conduct the test, including: Factory trained and certified; NICET fire alarm certified; International Municipal Signal Association fire alarm certified; Certified by a state or local authority; or Trained and qualified personnel employed by an organization listed by a national testing laboratory for the servicing of fire alarm systems.

The AAF contends that FASA is trying to create a monopoly on the flow and tamper switch testing, that will ultimately equate to increased costs for consumers.

"Mr. Dewar continues to dazzle individuals with a recital of various disciplines and code references in an effort to get off the point in question. By referencing halon systems, etc., he gives the impression that fire alarm contractors are somehow trying to invade his members’ turf, which is not true, but makes for a good scare tactic to stir up support among his association. Our members are merely performing work that they are qualified to do and are doing so with the approval of the State Fire Marshal’s own statute that bows to the authority of the National Fire Protection Association codes. The beauty of the NFPA codes adoption by the state is the specific mandate for each kind of system’s testing, including who can perform the work. Mr. Dewar is comparing apples to oranges and must resort to making personal attacks on me in order to defend an empty argument," Burk responded.

In a nutshell, FASA’s complaint is that fire alarm contractors who flow water to test flow and tamper switches are not doing so correctly and are flooding properties and causing property damage and harm to the public. When asked to produce evidence of such problems, FASA has not been able to do so. The AAF contacted the Electrical Contractors Licensing Board to determine how many complaints had been received from local Authorities Having Jurisdiction against fire alarm contractors for doing some of the unprofessional work of which they have been accused. To date, no complaints have been received from 1989 forward.

The House committee will continue to study this issue to determine if legislation should be enacted to nullify the NFPA code authority. Nothing will prohibit FASA from obtaining the sponsorship of an individual legislator, but it is doubtful that the amendments would find their way onto the Department of Business & Professional Regulation’s bill, since both House and Senate committees have declined any requests from individual groups to attach their self-interest legislation onto the department’s bill.

AAF members are encouraged to share their thoughts on this contentious issue with AAF headquarters. Updates on the progress of the legislation will be provided via the weekly "Signal" legislative updates on the AAF’s home page "Hotlist."

AAF members who have not yet obtained a passcode for this restricted area of the AAF home page are encouraged to call Edie Crum at 1-800-899-2099 to obtain one. The majority of legislative information and reporting will be done on the web site and those who don’t have access to the site will not be well informed on issues affecting their business.

The October meeting of the Goldcoast Region featured a report by Joe on the AAF Convention & Southeast Security Show . Discussion was heard on the location of the event and how to get more members to attend.

(Editor’s note: Rob Sanders and Troy Bruce, AAF Convention Committee members, circulated questionnaires among the exhibitors at the 1997 Southeast Security Show to determine vendors’ exiting remarks on the show and their ideas for improving it next year. Likewise, the AAF sent out a mail poll to all members who did not attend this year to determine why they didn’t, i.e., inconvenient dates, too far, etc. Sanders, Bruce, and Convention Chairman Harvey Hudgins reviewed all comments at their October 28 meeting in Jacksonville. A complete report on their findings and recommendations for 1998 will be featured in the December issue of "The Handshake." )

The Florida Department of Insurance, Division of State Fire Marshal, has issued an advisement from department legal counsel, J..Craig Myrick, Esq., that is aimed at preventing "forum shopping" by special interest groups. Currently, any individual or organization can write a formal letter to the division and request a State Fire Marshal interpretation of a specific rule or statute. Many times these interpretations have been used to counter another interpretation obtained from another division staff member, thus causing confusion and conflicting information at the local level.

Myrick advises that informal interpretations may still be given, but they will not be binding on the division as factual and authoritative. Following is the new procedure for obtaining a definitive interpretation:

"There are still two avenues available for receiving a formal, binding interpretation should this become absolutely necessary. However, each of these requires definitive action on the part of the requester. First, is filing a Petition for Declaratory Statement under section 120.565, F.S. The mechanics of this action are set forth in that section. The other avenue is to petition for rulemaking under section 120.54(7), F.S., which sets the rulemaking process into motion.

In order to request an informal interpretation, please submit a letter requesting the interpretation to either the State Fire Marshal employee with which you have discussed the matter or to Jim Radcliff, Chief of the Bureau of Fire Prevention. The letter should set forth the facts and issues with as much specificity as possible. After a position has been determined on the issue, you will receive your answer by letter. At this point, we think this procedure is a workable one, although it is not carved in stone."

Workers' compensation insurance rates in Florida will fall for the second straight year as a result of Insurance Commissioner Bill Nelson’s rejection of a request by insurers for a rate increase. Instead of approving a 4.5 percent increase in premiums suggested by an insurance industry-backed council, Nelson ordered the insurers to cut premiums by an average of 3.2 percent next year. This year Nelson lowered rates by 11 percent, despite a request by the National Council on Compensation Insurance for a slight increase in rates. The industry can appeal Nelson's decision, but hasn't tried to do so for years. A spokesman for the council in Tallahassee said it is too early to know whether the decision will be appealed. The new rates and premiums will take effect January 1, 1998 if the council does not appeal Nelson's order.

The move, is good news for 196,000 Florida employers who pay for the insurance and who are not self-insured. Last year, companies paid $2.1 billion in workers' comp premiums in Florida. Historically, rates in Florida have been much higher than in many other states. But it does appear that workers' comp reforms enacted four years ago are beginning to pay dividends.

Though the average workers' comp premium will drop 3.2 percent, the actual change in rates will vary depending on the occupation, and some rates still may increase. The insurance department will break down Nelson's order by each classification, setting individual rates in a few weeks. At the same time, Nelson has authorized a "sting" to uncover insurance fraud in South Florida, where more than 100 individuals will be arrested, based on preliminary investigations.

For any employer, it is essential that the most qualified job applicants be selected and offered positions of employment. On the other hand, it is equally important that hiring decisions be made in accordance with federal, state, and local laws prohibiting discriminatory hiring practices.

The heightened concern in recent years regarding potential discriminatory hiring practices has led to the perception by many employers that they are prevented from asking the job applicant to state little more than the applicant’s name and address. However, an employer in the electronic security industry cannot afford to succumb to the misperception. The nature of the profession requires employers to carefully screen job applicants because (1) the quality of the service is only as good as the company’s employees, and (2) the industry requires that employees be honest and reliable.

The employer who fails to hire a qualified candidate will expose the company to liability for negligent hiring. An employer may become liable for the conduct of its employee when the employer has failed to exercise reasonable care in the hiring process. The elements of negligent hiring are (a) the existence of an employment relationship; (b) the employee’s incompetence or propensity to commit criminal or violent acts; (c) whether the employer knew or should have known of such incompetence or propensity of a criminal or violent act; (d) the employee’s act which causes injury; and (e) a connection between the employer’s negligence in hiring and the harm suffered.

An employer can lessen its exposure to liability in this context by (1) establishing criteria for finding the most qualified candidate based upon the job’s requirements, (2) regularly hiring the best qualified candidate, and (3) eliminating from the selection process any non-essential criteria which appears on its face to be non-discriminatory; but which has a negative effect on the employment opportunities for individuals within certain protected classes of people (for example, applicants who are female or over 40 years of age).

Proper execution of the preemployment interview is a key step in this program. Preparation for the interview begins with an examination of the job for which applicants will be sought. Employers should define exactly and specifically the qualifications, background and personal characteristics required for each job opening. These standards will differ from job to job. For example, and installer will be required to have certain technical skills while a central station operator will be required to possess proficient communication skills. Information from this analysis should then be used as a checklist from which the interviewer can frame questions to ask during the interview. For each job, the list of topics of inquiry should be consistently used from one applicant to another. An employer who radically varies the areas of inquiry invites charges of bias.

During the preemployment interview, the interviewer should utilize the list of topics for inquiry and ask open-ended questions in the general categories of (1) personal qualities and education; (2) work accomplishments and required skills; (3) strengths and weaknesses for a position; (4) employment history. It is important for the interviewer to listen carefully to the answers to these questions and then decide fairly and objectively as to the applicant’s suitability for the job. After the interview is over, the interviewer should review his or her notes and rate the candidate as objectively as possible against the criteria of the position. The interview’s finding should be documented with the expectation that these interview notes may one day be used to justify the employment decision before a court or an administrative body.

As outlined above, the legality of inquiries will vary from job to job, however, the hiring criteria generally cannot include questions regarding the applicant’s race, color, religion, sex/pregnancy, age (over 40), or national origin/ancestry.

Following are a few examples of questions to avoid and acceptable counterparts for use by employers in the electronic security industry:

In many states, an employer may ask an applicant whether the applicant has pled guilty or has been convicted of a crime (including misdemeanors) Involving dishonesty where the employer has a bona fide employment reason for doing so. For applicants that will have access to individuals’ homes, there will be a bona fide employment reason for this inquiry.

If an inquiry regarding criminal convictions or pleading guilty to a crime is not justified by business necessity, such an inquiry can expose the employer to discrimination liability.

Statement by employer that offer may be made contingent of applicant passing a job-related physical examination.

The interviewer shoulddescribe the duties of the job. Then, the interviewershould ask, "Are you able to perform all of the jobduties?" If the interviewee reveals a condition that could affect job performance, the employer must then determine whether the individual can perform the "essential functions" of the job with or without reasonable accommodations.

Questions regarding applicant’s general medical condition, state of health,or illness.

Questions regarding receipt of Workers’ Compensation

"Do you have any handicaps?"

Statement by employer of regular days, hours, or shifts to be worked. Statement followed by inquiry as to whether applicant can work these hours.

Questions regarding applicant’s religion.

Religious days observed/or "Does your religion prevent you from working weekends or holidays?"

Question: Is it possible that some of my salaried employees may qualify for overtime pay? When would that happen?

Answer: A common misconception is that employees paid on an hourly basis must receive overtime pay (at the stated hourly rate for hours in excess of the employee’s norm up to 40 per week, and at the rate of 1 ½ times the hourly rate for hours in excess of 40 per week), while employees paid on a salaried basis are not entitled to overtime pay. In fact, the method of computing an employee’s compensation does not determine whether the employee must be paid for overtime.

The Fair Labor Standards Act addresses minimum wages, hours worked, overtime pay, and equal pay. It identifies exempt employees, or those not entitled to overtime pay, as executive, administrative, and professional employees and outside salespeople. The exempt category is based on the activities or functions performed by the employee, rather than his or her job title, compensation or pay level, or the payment of compensation based on an annual salary. Employees who are professionals, engaged in managerial functions, or who are highly skilled, are

Since 1896, the National Fire Protection Association (NFPA) has led the way in fire safety. The NFPA is an international non-profit organization whose mission is to reduce the burden of fire on the quality of life by advocating scientifically-based consensus codes and standards, research, and education for fire and related safety issues.

Over 275 National Fire Codes that have achieved worldwide recognition, adoption and enforcement, include NFPA 70, National Electric Code, and NFPA 72, the National Fire Alarm Code. The NFPA protects people and property by developing standards, working for their adoption by local authorities, and assisting in the enforcement of the codes. Familiarity with the NFPA and the NEC are essential for anyone in the business of electronic security, and elements of NFPA and NEC are included in all technical training materials and courses on electronic security sponsored by the AAF.

If you use wire, install locking or burglar alarm equipment or are in any way involved in fire alarms, NFPA should be a constant resource for standards and practices. Contact them at: nfpa.org or, simply go into the AAF’s home page and click on our "Licensing & Certification" page. The NFPA is listed as a direct link and all you need do is click on their name to be automatically hooked into their page.

Another great organization is the Security Industry Association. The organization is currently assembling a set of criteria for false alarm prevention for equipment, and trying to get everyone to agree on a glossary of terms to be applied to alarm systems. This is an ongoing exercise, and it relies heavily on the people who understand the requirements and shortcomings of the alarm industry best...the installers.

The document is titled "Control Panel Standard: Features for False Alarm Reduction." It’s a quick, interesting read. The false alarm preventing features listed fall into three categories:

*** Features that haven’t been thought of yet (the most interesting category!)

Most alarm panels do what they’re designed to do very well. The feature that is missing from all but the top of the line and is the feature that is also missing from many alarm system users: the ability to think! A typical "smart" alarm panel costs more than the price of many entire systems. Also, many of the false alarm features available in "smart" panels require a sophisticated installer to apply and program.

At the present time, the SIA only recommends. Manufacturers respond on a voluntary basis, and in most cases will do only what they have to do in order to remain competitive. SIA does good work and you’d do yourself and your industry a service by visiting their web site and finding out more about this worthwhile initiative. Contact them at: siaonline.org.

The AAF’s Tallahassee phone numbers will have a new area code in the New Year, as well as AAF members in Wakulla, Gadsden, Jefferson, Madison, Jackson, Washington, Holmes, Walton, and Okaloosa counties. The new area code will be 850.

The current 904 area code will be used for numbers in the Jacksonville and Daytona Beach calling areas only. Please note these changes on all of your records.

Unfortunately, the AAF can’t supply you with the Watergate Tapes, Orson Welles’ rendition of War of the Worlds, or dolphins discussing the weather, but we can offer you AAF’s 1997 Convention training sessions on tape. Just because you were unable to attend the annual meeting doesn’t mean you should have to miss out on all the excellent training programs that were held. Or, if you did attend, you may want the tapes to share with your company or simply to have something entertaining to listen to on long road trips!

We don’t like to brag, but we’ve heard from countless attendees that this year’s training sessions were the best ever. The tapes capture the actual instruction and commentary given that made them so popular. Four of the best-attended sessions will be offered to you as a set:

For a limited time, we’re offering you the opportunity to purchase the set for the low price of just $67.00, including tax and shipping costs!! But, you must hurry! This offer will expire December 31, 1997. After that, the price will increase to $79.00. Take this opportunity to "attend" the AAF’s top-of-the-line business training courses. Buy your cassette tapes today! Copy this page and write your name and address on the back and attach your check for $67.00, or provide your VISA, MasterCard, American Express, or Discover card number, expiration date, and a signature for charge orders. Your tapes will be sent to you right away. Return to: AAF-On-Tape, 1349 E. Lafayette St., Tallahassee, FL 32301, Fax: (800) 465-9773.

The recently enacted Taxpayer Relief Act of 1997 carries a wide variety of important tax changes that affect individuals, families, investors and businesses. It is also one of the most complex tax laws enacted in recent memory. Many will have to reorient their tax and financial plans in order to take advantage of the new tax breaks, and to avoid the few crackdowns. While many of the new provisions are not effective until next year, it may be necessary to plan now to get the most benefit out of these provisions. For example, some of the new credits available next year are lost in whole or in part if income exceeds a specified level. It may be possible to take steps now to reduce your income next year and thus get a greater benefit from one of more of these credits. On the other hand, some provisions are effective retroactively and provide refund opportunities that you should take advantage of as soon as possible.

This article is designed to give you a brief summary of the new law’s major provisions so that you can begin to consider how your personal, family, investment, and business plans and goals should be changed in the coming weeks and months.

*** In 1998, parents get a new tax credit equal to $400 ($500 after 1998) for each qualifying dependent child under age 17. The credit phases out for those whose adjusted gross income exceeds $75,000 ($110,000 for married persons filing jointly; $55,000 for married persons filing separately.)

*** Beginning in 1998, more individuals will be able to make deductible IRA contributions. The new law boosts the adjusted gross income levels at which the IRA deduction begins to phase out for individuals who participate in an employer retirement plan. And a spouse who is not a retirement plan participant will be able to make a deductible IRA contribution even if the other spouse is a retirement plan participant. The new break for spouses phases out for those with adjusted gross income between $150,000 and $160,000.

*** Beginning in 1998, retirement savers have a new tax-favored alternative called the Roth IRA. The new IRA will not yield deductions when you put money in, but will result in tax-free distributions for payouts made after five years if the taxpayer is at least 59 ½, or because of death, disability, or the need to pay for certain first-time home buyer expenses. Otherwise, allowable contributing to Roth IRAs phase out for single taxpayers with adjusted gross income between $95,000 and $110,000, and for joint filers between $150,000 and $160,000 of adjusted gross income.

*** For tax years beginning after 1997, Alternative Minimum Tax (AMT) is repealed for small corporations. In brief, the exemption from the AMT applies to a corporation that has under $5 million of 3-year-average-annual gross receipts, and continues to apply as long as it has under $7.5 million of average gross receipts.

*** The AMT adjustment requiring use of a generally longer depreciation write-off period than applies for regular tax purposes is repealed, effective for property placed in service after 1998.

*** Retroactively effective to tax years beginning in 1987, qualified farmers are eligible to use the installment method of accounting for AMT and regular tax purposes.

*** A self-employed individual’s above-the-line deduction for health insurance costs (40% of eligible expenses for 1997), will increase at a quicker pace than it would have under prior law. The deduction will be equal to 45% of eligible costs in 1998 and 1999, and 50% in 2000 and 2001. The deductible percentage will grow in later years until it reaches 100% in 2007 and later years.

*** Starting in 1999, more individuals will be able to claim home office deductions. Qualifying home offices will include those used to conduct administrative or management activities relating to a business if there is no location outside the home where the taxpayer conducts those activities.

There are some new crackdowns in the new law. Changes you should watch out for include the following:

*** A number of relatively specialized corporate provisions are subject to tougher rules (e.g., gain recognition on certain distributions of controlled corporate stock, tougher holding period rules for the corporate dividends-received deduction, registration of certain confidential corporate tax shelters.)

*** There are several changes in the partnership area. For example, contributing partners recognize gain on the property distributed to another partner or on distribution of other property to the contributing partner within seven years of the original contribution (had been five years). This is effective generally for appreciated property contributed to a partnership after June 8, 1997. In addition, effective generally for sales, exchanges and distributions after August 5, 1997, gain on the sale or exchange of a partnership interest generally is taxed as ordinary income to the extent it is attributable to inventory (had applied only to the extent attributable to substantially appreciated inventory.)

*** Gross proceeds reporting will be required on all post-1997 payments to attorneys made in the course of a trade or business (except those now reported on Form 1099-MISC or Form W-2).

*** The net operating loss (NOL) carry back period is decreased from three years to two years, but the carry forward period is increased from 15 years to 20 years, effective for NOLS arising in tax years beginning after August 5, 1997. But the three year carry back is retained for losses in disaster areas by farmers or small business, and for an individual’s casualty losses.

Keep in mind that you will be exposed to estimated tax penalties to the extent any underpayment was created or increased by the Taxpayer Relief Act of 1997. This penalty applies for any period before 1998 for any payment due before January 16, 1998.

Recently, the Tax Court held in favor of a corporate taxpayer who challenged the IRS’s attempt to change its method of accounting. This is one of several cases where courts have rejected the IRS’s attempts to place cash method taxpayers on the accrual method of accounting.

The taxpayer, as S corporation, was a service business that generated less than $5 million a year in gross receipts. The corporation had always used the cash method of accounting. The IRS argued that the cash method of accounting did not clearly reflect the income of the corporation, because it resulted in a mismatching of income and deductions.

The court agreed with the IRS that a mismatching occurs when the cash method is used. But, the court also stated that mismatching is inherent to the cash method, and as long as the method was used consistently, as the taxpayer had, a clear reflection of income would result. The court viewed the IRS’s action as "clearly unlawful, plainly arbitrary , and not substantially justified," and held for the taxpayer. The court ordered the IRS to reimburse the taxpayer for attorney’s fees and other costs incurred in the case.

A report prepared by the Business Higher Education Forum, an organization of Fortune 500 chief executives, found that higher education and business must start working together to better prepare students to meet the growing demands of a global economy.

Business leaders, who participated in the study, Spanning the Chasm: Corporate and Academic Cooperation to Improve Workforce Preparation, reported that newly-hired graduates have impressive academic skills. However, they said graduates lack communication skills, the ability to work in teams and with people from diverse backgrounds, they are not flexible and they have little or no ethics. Requirements for many of the companies included this broad spectrum of needs for success in the future.

Educators claimed business was unrealistic: business leaders want major change in too short a time. They charged that business executives frequently provided vague descriptions of the required skills and knowledge and too often sent inconsistent messages. Other difficulties related to failure to understand the differences between education and training and the heavy focus on profit. The report, published by the American Council on Education, recommended that business and higher education work together to bridge the gap between expectations and performance.

The 1997 Legislature enacted Chapter 97-294, Laws of Florida, effective June 1, 1997. This new legislation creates subsection 192.001(19), Florida Statutes. This subsection defines the term "computer software" and addresses the valuation of certain software for purposes of the imposition of ad valorem property tax. The legislation reads specifically as follows:

"WHEREAS, it is the intent of the Legislature to clarify that computer software, as defined in this act, is not tangible personal property under the ad valorem tax laws of this state, and

"WHEREAS, it is the further intent of the Legislature that the provisions of the act are remedial...

"(19) `Computer software' means any information, program, or routine, or any set of one or more programs, routines, or collections of information used or intended for use to convey information or to cause one or more computers or pieces of computer-related documentation. Computer software does not include embedded software that resides permanently in the internal memory of a computer or computer-related peripheral equipment and that is not removable without terminating the operation of the computer or equipment. Computer software constitutes personal property only to the extent of the value of the unmounted or uninstalled medium on or in which the information, program, or routine is stored or transmitted, and, after installation or mounting by any person, computer software does not increase the value of the computer or computer-related peripheral equipment, or any combination thereof."

It should be noted the provisions of this act were identified within the act as remedial by the 1997 Legislature and its stated intent is to clarify that certain computer software, as defined by the act, is not tangible personal property taxable under the ad valorem property tax laws of this state.

The provisions of the act became effective upon becoming law and it is to apply to "all periods open for additional assessment or refund under applicable law." See Chapter 97-294, Section 5, Laws of Florida. This law became effective without the Governor's signature on June 1, 1997. Periods currently open for refund on the effective date of the law are described in s. 197.182(1)(c), F.S., which provides that claims for refund must be made within 4 years of January 1 of the tax year for which the taxes were paid. Therefore, refunds of 1994, 1995, 1996, and/or 1997 ad valorem property tax may be currently due to persons who owned or were assessed for nontaxable computer software and paid ad valorem property tax on the property for the years in question. If a claim for refund is not timely filed, the right to the refund will be lost. Periods currently open for additional assessment on the effective date of the law are described in s. 193.092, F.S., which provides for assessment of property for back taxes for three years prior to the current year.

The Florida Supreme Court has ruled that any changes to prior year tax assessments may not be made where the change involves the exercise of appraisal judgment. The property appraiser should be prepared to certify corrections to the tax roll stating that the software which was determined to be nontaxable by this law change was taxed, and stating the amount of assessed value on which tax was paid. The property appraiser should ascertain and ensure that adequate documentation is supplied by the taxpayer to support the property appraiser's change. Under the new law, upon verification by the tax collector that payments of taxes were made on assessments being corrected as described above, these payments would be considered payments when no tax was due.

If further assistance or clarification is needed, please call Kathy Henley or Connie Frank with the Florida Department of Revenue, Property Tax Administration Program, at (850) 488-3335.

The Constitution Revision Commission (CRC) held their final meeting on proposals submitted by the public last month in Tallahassee. The Commissioners reviewed all 672 proposals submitted by the public over the past six months, and those moved by a commissioner and receiving at least 10 votes will be referred to committee for future action.

***Reimbursing criminal defendants for out-of-pocket costs expended in a successful defense;

***A bifurcated regular session of the Legislature with a minimum two week recess after the first 60 days;

***A property rights amendment which assumes property is taken if a governmental action diminishes use or value by at least 20%; and

***Establishing a process governing the sale, lease, or use of state conservation funds.

Among the items which were moved but did not receive the requisite 10 votes were:

Even if a measure did not receive 10 votes, or was not even considered by the full Commission, all proposals are still available for any members of the Commission to sponsor on their own.

One of the more intriguing issues that will be hotly debated by local governments and port authorities is the elimination of all tax exemptions given to organizations and companies and instituting a 4% flat tax on all entities. The concern raised in this regard has been that many tax exemptions have been on the books for so long, no one remembers why they were put in. The proposal would allow for a minimum of two public comment periods when those who enjoy a tax exemption will come before the commission and defend their exemption.

Bottom line, though: there will be some form of tax revolution via the Florida Constitution within the next 12 - 24 months. Stay tuned...

Due to increased requests from legislators and others for association contributions to campaigns (this is an election year, you know!), and the desire to strengthen its grassroots political efforts, the AAF is creating a Committee of Continuous Existence called the "AAF Campaign Contribution Committee."

The fundraising efforts for the committee began at the AAF’s 1997 Annual Convention which featured a dart throw at a state legislator’s picture who has not been kind or favorable to the alarm industry. Darts were sold at $10/3 darts, with a total of $170 being raised to kick-start the campaign fund.

Future efforts to raise funds will include a check-off contribution on 1998 dues invoices that have been mailed out. Any AAF member contributing to the fund will automatically become a member of the campaign committee and will be part of the decision-making team on how/where/when funds will be distributed.

The fund differs from a standard political action committee by allowing contributions to be collected vis-a-vis annual dues statements, as well as allowing the association to create a line item on its annual budget rather than establishing a completely separate bank account for the fund.