If you run a successful online business, you know how important it is to anticipate future developments in your niche. When it comes to e-commerce, 2018 is shaping up to be a volatile year from a legal point of view. Here are the four primary changes you need to be aware of moving forward.
20 Percent Pass-Through Tax Deduction
The Tax Cuts and Jobs Act of 2017 is now law after much debate. All it took was one party controlling both houses of Congress and the White House. Many negative and positive claims are being made regarding the new code, but one particular provision is very interesting for the online business community. The new law contains a provision providing business owners who use a pass-through entity a 20 percent reduction of the total net income produced by the business. It isn’t entirely clear how the deduction will function when it comes to tax returns as of yet, but the limited liability company and S-corporation just became the go-to entity for most startups not seeking venture capital.
Make sure to speak with an accountant to determine if you need to make any changes to your current business structure to take advantage of this change. The change applies beginning in the 2018 tax year, but any changes you make to your entity usually have to be made in the first 90 days of the 2018 calendar year. Don’t procrastinate on this one. You could end up costing yourself a sizeable amount of money.
The Digital Millennium Copyright Act [“DMCA”] provides websites and internet-connected apps with immunity from copyright infringement claims based on content users upload to your site or app. For example, YouTube is not liable if I upload a video of my dog dancing to a Depeche Mode song and a music publisher sues for copyright infringement. If you allow visitors to upload any content to your online properties, you should pursue compliance with the DMCA to take advantage of this immunity.
A catch exists, of course. You must comply with a “takedown notice” process detailed in the law. One requirement is that businesses designate an agent to receive DMCA takedown notices. The significant change for 2018 is the Copyright Office launched a new online agent registration platform. If you registered an agent prior to December 2016, you must register again in the new system. The agent data in the old registration system is not being transferred to the new platform. Fail to take this step, and you lose the protection of the DMCA. The good news is the registration fee for the new system is a whopping $6, which is a decrease from $135 with the previous platform. If you need an agent to act on behalf of your company, visit DMCAAgentService.com.
Death of Section 230 – Review Site Problems
Ever wondered why sites like Yelp and RipOffReport.com don’t get sued for defamation by companies who receive bad reviews? Well, plenty of businesses try to file such lawsuits, but Section 230 of the Communications Decency Act provides these sites with immunity from defamation claims based on reviews left by a third party. The basic idea behind Section 230 when it was enacted in the late 1990s was that sites should be protected from such lawsuits so the web could grow. Without Section 230, the Internet would likely not be what it is today and sites such as Facebook and Yelp might well not exist.
The Internet is no longer in its infancy. 20 years have passed since Congress enacted Section 230. As you may have noticed, defamation is a real problem online with people leaving fake reviews on sites, stating horrible things in comments, and generally being low lifes. A valid question now exists as to whether sites should be required to do more to control the content posted by users? Judges appear to be receptive to placing limits on Section 230, so keep an eye out for any significant court decisions on the law. Setting up a Google alert for Section 230 might be wise.
Damn you, Europe! In late May 2018, a new privacy regulation known as the General Data Protection Regulation [“GDPR”] will go into effect in the European Union. The regulation is primarily a privacy law applicable to all 28 member states of the EU.
The new GDPR is a bitch. Apologies for the language, but there is no other way to put it.
The GDPR works on an “opt-in” basis, which is to say a website may only collect personal information from visitors if the visitor gives his or her permission. Put another way, when you visit a site based in the EU, the first page will consist of a pop-up that explains what information the site wishes to collect and how it will be used. The visitor must then check a set of boxes giving permission for the information collection or rejecting it. The problem is “personal information” includes such minor bits of information as IP addresses.
If you are based in the EU, you must comply and should speak with counsel in your area to get moving. The deadline is May 25, 2018.
If you are based in another country, such as the U.S., there is a question as to whether you must comply. An analysis must be performed in which it is determined if you “envisage” providing services or goods to Europeans. If so, compliance is a must. If not, compliance is not required. Contact me to learn more about this little nightmare.
As you know by now, the regulatory framework issued by the FCC establishing net neutrality has been quashed by…the FCC. Why? Democrats are in favor of net neutrality while Republicans are not. With Republicans controlling the federal government, the new FCC board voted to abolish its own regulation. As a business owner, you will eventually pay more for your site to load quickly for viewers. For consumers, the bad news is the web will likely move to a fee-based access system where you pay a certain amount to watch videos, a certain amount to access email, and so on.
Anyone suggesting the abolishment of net neutrality is good for consumers should be slapped upside the head immediately. If there is good news in this area, the changes aren’t likely to happen in 2018 as voter outrage may compel Congress to pass a law on net neutrality while larger companies such as Netflix will challenge the FCC’s right to terminate the regulation in court.
As for 2019, well we’ll just have to see how things play out.
Happy New Years to you and yours. Feel free to contact me if you have any questions regarding the above subjects.
Richard A. Chapo, Esq.