Labor and Employment
From Allegations to Adjudication! Court Strips Lively–Baldoni Case to a Retaliation Reckoning
The April 2, 2026, decision in the dispute between Blake Lively and Justin Baldoni is best understood as a post discovery narrowing that leaves the case both smaller and more legally coherent. Judge Lewis Liman granted the defendants’ motion for judgment on the pleadings and motion for summary judgment in substantial part, dismissing most of the claims and allowing only a limited set to proceed. This was not an early-stage plausibility ruling. It was a merits-driven assessment of what the record can actually support. What remains is precise. Lively’s retaliation claim under the California Fair Employment and Housing Act proceeds against the production entities. Her aiding and abetting retaliation claim proceeds against the public relations firm. Her breach of contract claim proceeds against the entity that signed the Contract Rider Agreement. The rest of the case, including Title VII, Labor Code retaliation, and the common law theories, has been dismissed. The contractual analysis is where the opinion does some of its most important work, and it explains why the case looks the way it does now. The court treated two agreements very differently, and the reason is not subtle. One was never signed. One was. The Actor Loanout Agreement failed as a matter of contract formation. The court focused on express language that made execution a condition of any obligation. The agreement provided that the company’s obligations were conditioned on “receipt of executed copies of this Agreement signed by Lender and Artist.” It also required execution of the inducement. Those provisions were not treated as boilerplate. They were treated as dispositive. Lively never signed. The parties continued to negotiate material terms, including the very provision addressing sexual harassment and remedies. On those facts, the court held there was no binding contract to enforce. That conclusion carries broader significance than this case. The court rejected the idea that substantial performance can override an express intent not to be bound absent execution. Filming occurred. Compensation was paid. Negotiations continued. None of that altered the contractual analysis. Where the parties clearly reserve the right not to be bound until signature, courts will enforce that reservation. In practical terms, the court treated the ALA as exactly what it was in the record. An unconsummated negotiation. The Contract Rider Agreement, by contrast, is the rare piece of paper in this record that does exactly what lawyers expect a contract to do. It was signed. It contains operative language. And that language goes directly to the theory that survived. Paragraph 10 provides that there shall be “no retaliation of any kind” against Lively for raising concerns, including retaliation “during publicity and promotional work.” That provision is not abstract. It is tailored to the very conduct Lively alleges occurred after she raised complaints. The court’s willingness to let the contract claim proceed flows directly from that text. The difference in treatment between the ALA and the CRA is therefore not a matter of judicial preference. It is a straightforward application of contract law. An unsigned agreement with disputed terms does not bind. A signed agreement with a clear anti-retaliation clause does. The retaliation analysis follows a similar pattern of doctrinal precision. Several claims failed because they required an employment relationship that the court concluded was not present. That determination eliminated the Title VII and Labor Code theories. But FEHA retaliation is written differently. It protects any person who engages in protected activity. That statutory distinction is what allows the claim to proceed. The court also declined to treat the alleged conduct as too remote from California to support a FEHA claim. It found a sufficient connection based on allegations that California-based actors directed and executed the challenged conduct. That holding keeps California law in play and preserves a framework that is often broader than its federal counterpart. The most closely watched aspect of the case, the alleged reputational campaign, survives but only in the narrow sense that matters at this stage. The court did not find that retaliation occurred. It held that a reasonable jury could find it occurred. It also held that the defendants’ explanation that they were protecting their reputations and the film does not resolve the issue as a matter of law. Competing explanations are for a jury where the record supports them. That brings us to the question that tends to get lost in the headlines. What about Baldoni himself. Is he out? The answer is no, but his exposure is materially reduced. Many of the claims asserted directly against him, including harassment and certain statutory claims, have been dismissed. However, he remains a defendant to the extent he is part of the group alleged to have engaged in retaliatory conduct and conspiracy. The case against him now lives or dies on the retaliation theory rather than on the broader set of claims originally pleaded. The same narrowing applies across the board. Wayfarer is no longer in the contract case because it was not a party to the agreements and the argument was not preserved. But it remains in on retaliation. The public relations entity remains in on aiding and abetting. The film specific entity remains in on both retaliation and contract. The cast of defendants is still present. The script they are operating under is simply much tighter. What the court has done is not to decide who is right. It has decided what can be decided later. The case now turns on a set of familiar but demanding questions. Whether Lively engaged in protected activity. Whether she experienced adverse action after doing so. Whether that action was motivated by retaliation. And whether it breached a written promise prohibiting retaliation. For a legal audience, the lesson is as straightforward as the holding. Contracts matter in the form they are actually executed, not the form in which they are discussed. Statutes matter in the words they actually use, not the words we assume they contain. And at summary judgment, claims survive not because they are compelling in the abstract, but because the record permits a reasonable jury to accept them. The case that remains is narrower. It is also more dangerous in a familiar way. Retaliation claims tend to turn on motive and sequence rather than a single discrete act. Those are questions that courts are often reluctant to resolve as a matter of law. That is why, even after a ruling that eliminates most of the complaint, this litigation is far from over.
April 3, 2026
Business
The Great Ownership Transfer: Why Execution Breaks Search Fund & ETA Deals
Most commentary on the “Great Ownership Transfer” or the "Silver Tsunami" focuses on sellers. It is right there in the name. Aging owners. Lack of succession planning. Uncertainty around exit. That framing is incomplete. This is not just a supply story; it is a buyer capacity problem. Particularly for search fund entrepreneurs, independent sponsors, and others pursuing entrepreneurship through acquisition McKinsey estimates that ~6 million SMBs will face ownership transitions by 2035, representing up to $5 trillion in enterprise value. Yet roughly 92% of exits are likely to occur through closure, not sale. McKinsey Report: The Great Ownership Transfer. If you are acquiring businesses in the $500K–$25M range, your primary competition is often not another buyer. It is the business quietly shutting down. This Is Not a Deal Flow Problem - It Is a Buyer Execution Problem in Search Funds and ETA There is no shortage of businesses to buy in the lower middle market. The challenge for search funds, independent sponsors, and ETA buyers is execution. It is likely that for some of these businesses, the rational step is closure, but there will remain a significant number of profitable businesses in search of a buyer during this economic event. The problem exists in the shortage of buyers who can: Source effectively Underwrite accurately Finance reliably Transition successfully The gap between going under LOI for a “viable business” and closing is where most deals fail. That gap is also where the opportunities and risks live. The Buyer Capabilities Stack In practice, buyer success in this market comes down to the four capabilities identified above. Sourcing: The Best Deals Are Not in Market Because closure dominates exit paths, many viable businesses never run a formal sell process. They speak with a CPA, a broker, or a peer about selling, and when friction appears, the process stops. Running a sell process is not without its hurdles, which is why the rewards are greater for those who do it. If your sourcing strategy depends solely on brokered deals, you are competing in the most efficient (and crowded) segment of the market. If a buyer wants to improve their odds at wining, they need to: Build referral channels with accountants, attorneys, and advisors Focus on specific industries to accelerate underwriting Embrace cold outreach Engage sellers before a formal process exists The winning edge is not price. It is access to top tier deals that are found through hard work and diligence. Seller Readiness: Most Deals Fail Before Diligence Another recurring issue in lower middle-market transactions is not business quality, but transferability. Common issues that cause buyers to avoid deals include: Incomplete or inconsistent financials Owner-dependent relationships Undocumented processes Unclear working capital needs The better initial question is not: “Is this a good business?” It is: “Can this business be transferred and financed cleanly?” Buyers can use a simple readiness screen when examining prospective companies to purchase by examining for: 24 months of monthly financials and tax returns Customer concentration and contract review Identification of key personnel dependencies Basic operational systems (billing, quoting, payroll) Working capital dynamics post-close Deals that fail this screen rarely improve during diligence. I recently posted about broken LOIs and the reasons why buyers walk away: Broken Executed LOIs By Reason. Over 45% of the reasons for failure can be categorized within the items listed above. Financing: The Constraint Most Buyers Underestimate Financing is not a closing step. It is a very serious pre-LOI workstream. That may seem like an obvious statement, but many failed deals share a common pattern: The buyer underwrites one version of EBITDA, and the lender underwrites another. That gap kills deals. Particularly in SBA-driven transactions common in search funds and small business acquisitions: Equity requirements and guarantees are real constraints Underwriting timelines introduce friction Smaller deals are treated as bespoke, not standardized Disciplined buyers: Underwrite to debt service, not seller-adjusted earnings Normalize add-backs conservatively Identify working capital needs early Seriously consider the structure pre-LOI (seller notes, holdbacks, transition-linked payments) The deal is not real until the capital stack is real. Nothing happens without financing. Post-Close Execution: The First 100 Days Decide the Outcome The most underappreciated risk in these transactions is not closing. It is transition. I believe buyers should familiarize themselves with at least some turnaround management practices during the search process because buyers inherit: Informal systems Relationship-driven revenue Limited reporting infrastructure Outdated systems Without a clear transition plan, value can erode immediately. It is not simply a digital transformation play (digital advertising, industry specific project management Saas, etc.). Effective buyers plan for: Defined transition services from the seller Retention of key employees Structured customer handoffs Weekly cash and operations cadence post-close This is not operational detail. It is downside protection and risk mitigation. It is also some of the hardest work because it cannot be brute forced - it requires soft skills, attention to detail, and time-consuming review of information. What This Means for Investors Backing Buyers For family offices, independent sponsor investors, and capital partners backing search funds and ETA buyers, the underwriting focus needs to shift. Similar to what we discussed above, the question is not: “Is this a good business?” It is: “Can this buyer execute this transition?” Key diligence questions for investors to ask should include: Does the buyer have a repeatable sourcing strategy? Is there a defined readiness filter? Is financing aligned with lender reality? Is a post-close execution plan in place? Most deals in this segment fail due to execution gaps, not thesis failures. The Structural Inefficiency Creates Opportunity The inefficiency in this market is not hidden. It is structural: fragmented deal flow, inconsistent advisor quality, limited financing standardization, and minimal post-close support. These are not isolated issues - they are systemic frictions that sit between a viable business and a closed transaction. Prepared buyers can benefit from this inefficiency because it creates: Less competition in off-market deals Pricing inefficiencies The ability to win through structure and not just valuation But those advantages are only available to buyers who can execute. This is not a market where capital alone wins. It is a market where taking a business from “viable” to “financeable” to “transferable” is necessary and may require a longer pre-LOI/pre-close relationship with the seller. If pre-screening raises concerns around financial quality, customer concentration, or post-close execution, the question is not just whether the deal is attractive. It is whether those risks can be mitigated before committing to an LOI. Most deals don’t fail because the business is bad. They fail because the buyer underestimated what it would take to close and operate it. Spending time with the seller (sometimes weeks or even months) before fully committing can be one of the most effective ways to de-risk a transaction before signing an LOI and set up a smoother, more profitable transition. The Real Takeaway The Great Ownership Transfer is often framed as a wave of supply. The data suggests the real issue is execution. This is especially true for those pursuing entrepreneurship through acquisition, where execution risk concentrates in a single asset. The challenge is not finding viable businesses. It is getting them across the finish line after turning viable businesses into successful buyer transitions, not closures. For buyers, the edge is not just identifying a good business. It is building the capability to move a deal from: possible → financeable → transferable → stable The market does not reward intent. It rewards execution. Buyers who can deliver that consistently will capture disproportionate value.
April 3, 2026
Estates and Trusts
Choosing the Right Fiduciary: Why It Can Make or Break an Estate Plan
Even the most carefully crafted estate plan can unravel if the wrong individuals are appointed to serve as executor or trustee. Executors and trustees are fiduciaries vested with broad authority to administer assets under their custody. They are responsible for asset management, tax compliance, recordkeeping, and the distribution of assets to beneficiaries. Sometimes the fiduciary only serves a matter of months; other times, their appointment can last for years or even decades. Oftentimes, a client will reflexively appoint their spouse as primary fiduciary, followed by one or more of their children as successor fiduciaries. It is certainly understandable that a client would want their closest relatives involved in administering their assets. When the fiduciary is also the primary beneficiary, and there is no need for ongoing administration, even a fiduciary who lacks sophistication may not cause significant issues, as the fiduciary is essentially tasked with administering their own assets. However, when the fiduciary is not the primary beneficiary, or when the administration will be ongoing, the complexity of the role means that appointing the wrong fiduciary may have significant consequences. This is because the fiduciary may be tasked with satisfying claims, paying estate taxes, or even winding down a business. A fiduciary who lacks sophistication or knowledge exposes the assets under their control to significant risk of mismanagement and waste. A fiduciary who lacks the knowledge and experience to navigate their responsibilities may fall into traps that a more seasoned fiduciary would avoid. A fiduciary’s contentious relationship with a beneficiary may make it difficult to maintain neutrality and avoid conflict. Even well-intentioned fiduciaries may have poor communication skills or fail to engage competent professionals to assist them in their duties. The client can take proactive steps to mitigate the risk of appointing the wrong fiduciary and prepare their nominated fiduciaries for success in their roles. Setting the Nominated Fiduciary up for Success While these conversations are often considered taboo, the client should have a candid conversation with their nominated fiduciaries to ensure that they understand the scope of their responsibilities. The fiduciary should be provided with the names and contact information of the client’s accountant, financial advisors, and attorney. The fiduciary should also know where the client’s important documents and records are located. While clients are often (and understandably) uncomfortable revealing the nature and extent of their assets, they should maintain records of their assets, liabilities, and obligations, as well as the passwords to their e-mails and other electronic accounts, along with their other important documents. The client may also wish to discuss with their nominated fiduciary any specific wishes or priorities that they want honored, family dynamics, gifting history, and any other particular issues or concerns the client may have. Taking these proactive steps will ensure that when the time comes for the nominated fiduciary to assume their role, the transition will be smooth. Consider Appointing Co-Fiduciaries with Defined Roles Appointing more than one fiduciary is also a way to balance family involvement with ensuring that a competent fiduciary is appointed to guide the family member in their duties and responsibilities. This may be particularly advantageous when the family fiduciary is young or inexperienced, as having an experienced fiduciary to serve together with them ensures that assets are properly invested, tax returns are timely prepared and filed, and records of their administration are maintained. For states that permit directed trusts, consideration should be given to clearly defining the roles of each co-fiduciary. For example, a client could designate a family member as the fiduciary responsible for making distribution decisions, while an independent trustee is tasked with making decisions concerning investment strategies. A mechanism should also be incorporated to anticipate and resolve deadlocks, avoiding delays or even total inaction. It is important to note that having more than one fiduciary can increase administrative costs or create the potential for conflict between the co-fiduciaries. Therefore, appointing co-fiduciaries may not be the right decision in every circumstance. Drafting for Flexibility and Ongoing Administration Sometimes the client’s nominated fiduciary may be unable or unwilling to serve for justifiable reasons, or after assuming office, can no longer continue to serve as fiduciary. While the client should evaluate the qualifications of any successor fiduciary that may need to serve, mechanisms should also be incorporated to anticipate and resolve fiduciary succession issues. For example, a trust agreement may provide that the last remaining trustee in office can appoint successor trustees or co-trustees. This provides the primary fiduciary with the opportunity to assess the current administrative landscape, what family members may be willing or available to serve, as well as the costs and benefits of appointing a professional or corporate fiduciary as successor fiduciary. Similarly, the trust agreement can provide that a majority of the beneficiaries may nominate successor fiduciaries if the office becomes vacant. These mechanisms help to avoid a contentious or difficult relationship forming between the fiduciary and the beneficiaries. Fiduciary Removal Taking appropriate steps and precautions during the client’s lifetime to ensure proper administration may still not be enough to avoid conflict or difficulties once the fiduciary is appointed. Therefore, it is just as critical to provide a mechanism to remove an unqualified or recalcitrant fiduciary. Sometimes it is appropriate for the beneficiaries to hold this power. Other times, a trust protector may be appointed to serve in this role. A “trust protector” is a non-fiduciary who is provided with defined, limited powers. Having a trust protector to monitor the activities of a trustee and, if need be, remove a trustee ensures impartiality and neutrality in the decision. Conclusion Nominating an executor or trustee is among the most consequential decisions that a client will make in their estate plan, yet many clients reflexively appoint their spouse or other close relatives. The wrong choice can cause conflict, erode family relationships, increase the cost of administration, and (in the worst of circumstances) invite litigation. By thoughtfully evaluating fiduciary candidates, ensuring fiduciaries are prepared and willing to serve, and incorporating flexibility into the estate planning documents to anticipate changed circumstances, advisors can help clients preserve family harmony and ensure their wealth is preserved for their beneficiaries.
April 2, 2026
DC Rental Act in Three Minutes
Understanding DC Protective Orders Under the RENTAL Act
The DC RENTAL Act has reshaped how protective orders work in eviction cases—making them faster, more consistent, and far more beneficial for housing providers. A protective order requires tenants to pay rent into the court registry rather than directly to the landlord, ensuring continued payment while a case is pending. Before the RENTAL Act, landlords often faced long delays. Tenants could raise even minor disputes, pushing protective‑order hearings months out and slowing down the eviction process. Now, judges are expected to issue preliminary protective orders at the very first hearing. Tenants may still request a Bell hearing or raise defenses, but they must begin making monthly payments immediately until the court adjusts the amount. Since the Act took effect, DC courts have been issuing protective orders more reliably at initial hearings—resulting in steadier payments and fewer procedural setbacks for landlords.
April 2, 2026
Labor and Employment
Virginia Joins the National Trend Limiting Noncompete Agreements
Employers who do business in Virginia and have employees who work in that jurisdiction need to be aware of a law which will soon be enacted limiting the use of noncompete agreements. It is no secret that there is a growing national trend towards limiting the use and enforceability of noncompete agreements, predicated upon what legislatures and courts deem to be unfair restrictions on employee mobility and freedom of competition in the marketplace. Thus, on March 4, 2026, the Virginia legislature approved Senate Bill 170, which contains a detailed regimen of restrictions imposed on employers who have employees in the Commonwealth. So, in general, what does this piece of legislation do, which is expected to be signed into law by Governor Spanberger? Well, there are a number of detailed nuances to the legislation, and they are too numerous to be enumerated here, but the following are merely highlights of the newly anticipated restrictive law: The new law, if enacted as expected, would prohibit noncompetes for any employee who is laid off without severance benefits or other monetary payment, unless such employee is terminated for “cause” (both “severance benefits” and “cause” are undefined in the law) The new law would become effective for all noncompete provisions entered into, amended, or renewed AFTER July 1, 2026, but significantly does not apply retroactively to any agreement entered into prior to July 1, 2026 Interestingly, the law applies to all employees, irrespective of their rank or station in the company, even those in senior management positions The law does not prohibit non-solicitation of customers or employees Employers who violate the provisions of the law face the possibility of being sued in a private right of action where the claimant can obtain injunctive relief, liquidated damages, backpay, and counsel fees Additionally, under the law, the Virginia Commissioner of Labor and Industry may impose a civil monetary penalty of $10,000 for each violation Employers doing business and employing individuals in Virginia need to closely monitor developments with the new law, and if enacted as expected, be prepared to carefully draft noncompete provisions in accordance with what appears to be a very restrictive legislative scheme. Because there are many open questions surrounding the details of the new law, it is strongly advised to seek qualified employment counsel when contemplating the use of noncompete provisions in the Commonwealth of Virginia.
April 1, 2026
Labor and Employment
Spring Cleaning Your Employee Files
Spring inspires a certain kind of ambition. Closets are reorganized. Garages are reclaimed. Kitchen drawers finally surrender their mysterious collections of takeout menus and expired soy sauce packets. Employers would do well to apply the same seasonal energy to another space that tends to accumulate clutter quietly over time: employee records. Personnel files have a remarkable way of expanding without supervision. A performance note here, an email printed there, a manager’s handwritten reminder tucked into a folder for “later.” Years later, the file resembles less of a clean employment record and more of a historical archive. Unfortunately, when a dispute arises, those archives tend to become exhibits. Spring is a useful moment for employers to step back and examine how employee records are organized, what should be retained, and what should not be living in the same file in the first place. A thoughtful approach to data retention is not just good housekeeping, it is a meaningful risk management strategy. One of the most common misconceptions about employee files is that everything related to an employee should live in one folder. Legally speaking, that approach creates more problems than it solves. Most employers should maintain several distinct categories of employee records, each with its own purpose and level of confidentiality. The traditional personnel file is the record most employers think of first. It typically contains materials related to hiring, compensation, performance evaluations, promotions, disciplinary actions, and other employment decisions. In short, it tells the professional story of the employee’s relationship with the company. But certain types of information should not live in that same file. Medical information is a prime example. Documents related to medical conditions, disability accommodations, and medical certifications for leave must be maintained separately and treated as confidential under federal law, including the Americans with Disabilities Act. Keeping medical records apart from the general personnel file helps limit access and ensures managers reviewing performance information are not inadvertently exposed to protected medical details. Immigration related documents are another category that deserve their own home. Form I-9s, which verify employment eligibility, should be stored in a separate I-9 file or electronic system rather than within the personnel file itself. There is a practical legal reason for this. If the Department of Homeland Security or another agency conducts an I-9 audit, employers are required to produce those forms. Housing them separately allows employers to provide the required documents quickly without turning over the entire personnel file or exposing unrelated, potentially sensitive employment records. A similar logic applies to background check documentation. Reports obtained under the Fair Credit Reporting Act often contain personal information that should be maintained separately from routine personnel materials and handled in accordance with the statute’s confidentiality requirements. If this sounds like a lot of folders, it is. But the structure matters. Separating records by category is not about bureaucracy. It is about protecting sensitive information, limiting unnecessary disclosure, and ensuring compliance with multiple overlapping employment laws. Consistency is equally important. Employers should aim for uniform recordkeeping practices across the workforce. Documents that are routinely created, such as performance evaluations or written warnings, should appear consistently in employee files. Sporadic documentation invites uncomfortable questions later about whether records were selectively created or preserved. This becomes especially relevant in litigation. When employee files contain scattered notes, informal comments, or partial documentation, they often raise more questions than they answer. The absence of records can be just as problematic. If an employer asserts that an employee struggled with performance but the file contains no documentation of those concerns, that gap becomes difficult to explain. Of course, spring cleaning does not mean shredding everything in sight. Employers must comply with a bevy of federal and state record retention requirements. Under the Fair Labor Standards Act, for example, payroll records must generally be retained for at least three years. The Equal Employment Opportunity Commission requires employers to preserve personnel and employment records for at least one year, and longer if a charge of discrimination has been filed. Form I-9s must be retained for a specific period tied to the employee’s date of hire and separation. Benefit plan records, tax documents, and workplace injury reports often carry their own retention timelines as well. Because the rules vary, the most effective approach is to adopt a written document retention policy that clearly identifies which records must be maintained and for how long. A well-designed policy helps HR teams manage records consistently and prevents the ad hoc cleanups that tend to occur when file cabinets become too full. Those spontaneous cleanups can create real problems. Once an employer becomes aware of a dispute, investigation, or potential claim, the organization has a legal obligation to preserve relevant records. Destroying documents after that point, even if it would normally be permitted under a retention policy, can lead to allegations of evidence destruction. Courts tend to take a dim view of that kind of spring cleaning. Modern technology has also complicated the recordkeeping landscape. Employee information now lives in HR platforms, email systems, messaging tools, shared drives, and occasionally personal devices. A comprehensive retention strategy should account for both physical and electronic records and ensure they are governed by consistent rules. At the same time, employers should resist the temptation to keep everything forever. Over retention can create its own problems. The more documents an organization keeps, the more it may have to search, review, and produce in the event of litigation or an investigation. In other words, the goal is not hoarding. It is curation. Spring cleaning employee files may not provide the immediate satisfaction of finally conquering the garage, but it offers something arguably more valuable: clarity. Organized, compliant records help employers make better decisions, respond confidently to audits or claims, and protect the confidentiality of sensitive information. And unlike that kitchen drawer full of soy sauce packets, an orderly recordkeeping system rarely produces unpleasant surprises later.
April 1, 2026
Bankruptcy
Deal Structures Under Stress: Courts Reexamine Prebankruptcy Transactions
According to data from Epiq Bankruptcy, February 2026 marked a significant increase in commercial bankruptcy activity. Commercial Chapter 11 filings rose by 67% year over year, while Subchapter V elections by small businesses increased by an even more striking 91%. For restructuring professionals and deal participants, this surge is not merely a statistical datapoint. It is a harbinger of avoidance actions yet to come. As more cases move past the filing stage, trustees and debtors‑in‑possession will inevitably turn their attention to transactions that preceded bankruptcy, particularly those involving affiliates, directors and officers, sponsors, or asset purchasers. These challenges most often surface as fraudulent conveyance actions, and a mix of recent and historical cases serves as a pointed reminder of the practical exposure risks facing transaction participants. Courts are looking past labels, deal structures, and market conventions to examine the economic reality of transactions that leave debtors overleveraged and creditors exposed. Although these cases arise in very different factual settings, they converge on the same core principle: economic reality controls. Transactions that extract value while saddling a company with unmanageable obligations will receive heightened scrutiny if in financial distress and ultimately in a bankruptcy proceeding. The cases discussed below, spanning leveraged buyouts, subsequent transferee liability, merchant cash advances, and insider transactions, underscore a unified principle: courts are increasingly indifferent to form where creditor harm is real. Market-standard LBO is not insulated from a fraudulent conveyance claim. In Worth Collection, the Delaware bankruptcy court denied motions to dismiss a Chapter 7 trustee’s amended complaint challenging a 2016 leveraged buyout that allegedly gutted the debtor while enriching insiders. Worth Collection Ltd. was placed in bankruptcy, involuntary by its inventory suppliers and service providers. After an earlier dismissal, the trustee returned with a much more detailed pleading that carefully laid out the transaction’s financial consequences. According to the amended complaint, the LBO increased the debtor’s debt from approximately $2.4 million to more than $25 million. Interest expense increased by over 5,000%, operating losses quickly followed, and the company’s cash reserves fell from roughly $12 million in 2014 to less than $500,000 by 2016. At the same time, former equity holders allegedly received over $39 million in closing distributions, leaving unsecured creditors to absorb the downside. The trustee asserted a broad range of claims, including substantive consolidation, veil-piercing, the collapsing of the LBO transactions, and avoidance of transfers as both actually and constructively fraudulent under the Bankruptcy Code and Delaware law. Judge Shannon held that the amended complaint plausibly alleged each of these claims. Of particular importance, the court found that the traditional badges of fraud, like insider transfers, lack of reasonably equivalent value, and insolvency, were pleaded with sufficient detail to survive dismissal. The court also emphasized that fraudulent intent need not be shown directly and may be inferred circumstantially, especially in LBO cases where leverage spikes and liquidity collapses shortly after closing. The significance of Worth Collection lies in its confirmation that leveraged buyouts are not insulated from challenge simply because they resemble market‑standard deals. Where the economic effect of the transaction is to burden the operating company while delivering value to insiders, courts will allow fraudulent conveyance claims to proceed, often into costly and protracted discovery. “Purchase of Future Receipts” Called by Its Real Name: A High‑Interest Loan The Bankruptcy Court for the Northern District of Texas, In re Denali Construction Services, LLC v. Cloudfund et al., dismantled the merchant cash advance model marketed as purchases of future receivables. Denali experienced significant financial distress since its CFO embezzled funds by failing to fund union and tax obligations. The company’s condition worsened with the onset of the COVID‑19 pandemic in 2020. From 2019 through 2022, Denali unsuccessfully sought traditional bank financing. By late 2022, Denali could not continue operating without outside funding. Beginning in October 2022, Denali entered into at least 10 merchant cash advance agreements with eight different providers. Over time, Denali used later MCAs to repay earlier MCAs due to insufficient operating cashflow. Denali was never able to stabilize its cash flow, and it filed a Chapter 11 petition on October 3, 2024. On October 7, 2024, Denali filed an adversary proceeding against multiple MCA providers. After trial, the Texas bankruptcy court concluded that the MCAs were loans in substance rather than true receivables purchases. Repayment was effectively fixed and absolute, enforced through daily ACH debits that operated regardless of actual revenue. Default provisions accelerated repayment obligations and expanded remedies to sweep assets, hallmarks of traditional lending rather than asset sales. When the court examined the pricing mechanics, the embedded “interest” produced effective annual rates ranging from approximately 348% to 427%, far exceeding Texas’s 28% cap for commercial loans. As a result, the agreements were declared usurious and void, the lender was hit with treble damages exceeding $2.6 million, and the liens securing the obligations were avoided as constructively fraudulent transfers under section 548. Where risk is illusory, repayment is guaranteed in practice, and labels such as “revenue purchase” disguise functionally predatory lending terms, courts are increasingly willing to intervene. The same lesson echoes earlier cases such as Teligent and Coco Foods, where courts placed greater weight on how transactions actually operated than on formal documentation. The Coco Transactions: Structure, Control, and Fraudulent Transfer Exposure Coco Foods, Inc. and Coco Partners, Inc. (the “Debtors”) filed voluntary petitions for relief under Chapter 7 on October 9, 2017. A little over a year before that, these two companies acquired the assets of Nelson and Son Formals and Rychards Formals. The Chapter 7 trustee brought fraudulent conveyance actions against the sellers, an affiliated entity, and the principal, Richard Nelson. Coco Foods and Coco Partners were corporations wholly owned by Steven Fielitz. Richard Nelson was the principal and 100% owner of Nelson & Sons Formals Ltd., Rychards Formals Ltd., Nelson & Sons Rentals Inc. Nelson & Sons Formals and Rychards Formals operated tuxedo rentals and sales businesses on Long Island. Nelson & Sons Rentals Inc. functioned as the assignee of promissory notes arising from the debtors’ purchases and was dissolved in September 2017. During 2015–2016 Nelson and his business broker Transworld negotiated with Steven Fielitz for the sale of the businesses. Fielitz was given access to QuickBooks data and summarized financial records, and point‑of‑sale sales figures for the calendar year 2015. The financial materials initially provided reported positive net income for both businesses and significantly higher sales figures. On May 18, 2016, two transactions closed simultaneously: Coco Foods purchased the assets of Rychards Formals for $380,000 Coco Partners purchased the assets of Nelson & Sons Formals for $570,000 The combined purchase price was $950,000, approximately two times the represented net profit of each business. Each purchase consisted of a down payment, a promissory note, a cash payment at closing, and broker commissions. Although the sellers were Nelson Formals and Rychards Formals, none of the sale proceeds were received by those entities. All net proceeds were deposited into a Charles Schwab account held by Nelson & Sons Rentals, Inc. Both promissory notes were assigned to Nelson & Sons Rentals, and all payments under the notes were made to that entity. Richard Nelson controlled the flow of all purchase consideration through Nelson & Sons Rentals. Shortly after closing, Fielitz discovered discrepancies between the pre‑sale information and the actual operations of the businesses. Payroll data understated the number of employees. Additional employees were paid in cash and not reflected in the records. Actual payroll expenses were substantially higher than disclosed. Sales figures for 2015 were overstated by approximately $113,000 across both stores. Actual sales for 2016 and 2017 were consistent with the lower corrected figures. Within months of closing, Coco Foods and Coco Partners required outside financing to continue operations. Coco Foods obtained lines of credit and incurred credit card debt, all personally guaranteed by Fielitz. Fielitz invested personal funds to keep the businesses operating. Despite these efforts, the businesses were unable to stabilize financially. In February 2017, Fielitz attempted to sell both companies but received no viable offers. Nelson & Sons Rentals received $383,954 from the Coco Partners transaction, and $255,968 from the Coco Foods transaction. In September 2017, Nelson & Sons Rentals was dissolved. At dissolution, the Schwab account held approximately $340,000, all accessible to Richard Nelson as sole owner. The court held that structure and formalities do not shield transactions from attack. Funneling proceeds through controlled entities did not protect recipients from liability. Disclaimers of reliance and boilerplate acknowledgments proved ineffective, as the court valued the transaction holistically rather than mechanically. In some cases, complex structures may actually increase exposure, where value flow and control are misaligned. As Judge Grossman noted: The Defendants’ argument fails to recognize that the statutes authorizing the recovery of constructively fraudulent transfers are drafted neither to reward the debtor, nor to punish the defendant for intentional wrongdoing. Rather, the basic intent of constructive fraudulent conveyance statutes is to protect creditors of a debtor from transactions where assets of a debtor’s estate were transferred for less than fair value. Richard Nelson, who was the principal for each of the corporate defendants and orchestrated the structure of the transactions, may believe that he cleverly outwitted the principal of the debtors, but his maneuvers do little as a matter of law to protect the recipients of the fraudulent transfers from liability in these actions. To the extent they as transferees have statutory or other legitimate defenses to such actions, they must assert them in the adversary proceeding itself. Having failed to assert any defenses, the recipients are liable for the fraudulent conveyances. The Court notes that Richard Nelson directed the flow of all consideration paid by the debtors to an entity he controlled. Neither that entity nor Richard Nelson transferred anything of value to either Coco Foods or Coco Partners. Like the LBO and MCA cases, Coco demonstrates that layered entities and transactional complexity will not obscure where value actually went. Informal Contemporaneous Statements Can Override Transaction Documents In Teligent, the court notably credited the debtor’s CEO’s contemporaneous newspaper interview over the negotiated separation agreement, concluding that loan forgiveness was a voidable transfer The case illustrates how informal explanations like emails, interviews, and casual descriptions can outweigh carefully drafted agreements. Teligent is also a reminder that any transaction that eliminates a claim, obligation, or enforcement right should be evaluated as though cash changed hands. Teligent, Inc. was a telecommunications company that filed for Chapter 11 bankruptcy. Alex Mandl was Teligent’s former Chairman and Chief Executive Officer. Prior to joining Teligent, Mandl served as President and Chief Operating Officer of AT&T. On September 1, 1996, Mandl entered into an employment agreement with Teligent’s predecessor to serve as Chairman and CEO. As part of the same transaction, Mandl borrowed $15 million from Teligent’s original shareholders, evidenced by two promissory notes. In 1998, the notes were assigned to Teligent. The employment agreement included several provisions under which the loan would be automatically forgiven; the loan would be automatically forgiven if Mandl was terminated “other than for Cause” or if he resigned for “Good Reason,” subject to notice requirements. Good Reason included Teligent's failure to comply with any material provision of the employment agreement, including a breach of the provision committing Teligent to employ Mandl as its Chairman and CEO, with the customary duties and responsibilities. If Mandl was terminated for Good Reason, his Notice of Termination had to detail the facts and circumstances claimed as the basis for the termination. Upon termination of his employment, Mandl was required to resign from the board. On the first anniversary of employment, one‑fifth of the principal and all accrued interest were forgiven automatically, leaving a remaining balance of $12 million. On April 17, 2001, IDT Corp. acquired a controlling interest (approximately 41.1%) in Teligent’s Class A common stock. As part of this transaction, new directors affiliated with IDT were installed on Teligent’s board. The board composition changed substantially following IDT’s acquisition. Mandl’s employment was terminated after IDT assumed control. A Separation Agreement and Release, dated April 27, 2001, provided that Mandl’s employment was terminated “other than for cause,” Mandl resigned as Chairman, CEO, and from all board positions, and mutual releases were exchanged between Mandl and Teligent. The agreement restructured forgiveness of the $12 million loan into 20 annual installments, effectively canceling Mandl’s repayment obligation. Mandl signed the separation agreement on May 8, 2001, and Teligent’s general counsel signed on May 17, 2001. The newspaper interview that the court found more credible was made within months of his departure. The court concluded that the statements in the interview indicated that Mandl was not forced to resign but voluntarily separated. He stated that he was disappointed that the board rejected his $700 million recapitalization plan and he had already discussed the possibility of resigning with the board. Conclusion The sharp increase in commercial bankruptcies in early 2026 signals an equally sharp rise in avoidance litigation. Recent decisions make clear that courts are increasingly focused on substance over form and creditor impact over transactional labels. Transactions that load debt, shift risk, or extract value during periods of distress or transition are especially vulnerable. As filings continue to climb, sponsors, lenders, directors, officers, and asset buyers should assume that past transactions will be reexamined with fresh skepticism and prepare accordingly.
March 30, 2026
Labor and Employment
JFK–Bessette: When an Employee Becomes the Headline—How Much Control Do Employers Have Over Public Image?
Ryan Murphy’s dramatization of the relationship between Carolyn Bessette Kennedy and John F. Kennedy Jr. offers an extreme illustration of a workplace issue that employers increasingly face—when an employee’s personal profile begins to impact the brand he or she represents. Long before becoming part of one of the most scrutinized couples of the 1990s, Bessette worked in public relations at Calvin Klein, managing celebrity relationships and helping shape the company’s public image. But as media attention surrounding her relationship with Kennedy intensified, the publicity began to compete with the brand she was responsible for promoting, creating a distraction from the very image she had been hired to help manage. While that story took place decades before social media, it highlights a question employers continue grappling with today: how much control does an employer have over an employee’s public image when it affects the company’s reputation? The answer, in most cases, is that employers have some ability to regulate conduct that legitimately affects the business, but that authority is limited. Employers, understandably, care about how their workforce reflects on the organization. In roles such as public relations, marketing, executive leadership, and client-facing positions, employees function as ambassadors for the company’s brand. When public attention turns toward an employee, whether by media coverage or viral online exposure, that attention can easily spill over onto the employer. That concern is no longer confined to celebrities or high-profile executives. In the digital era, the separation between employees’ professional and personal lives has narrowed dramatically. Social media allows posts, comments, and photographs to circulate widely within hours, and it often makes it easy to connect individuals to their employers. As a result, situations that once affected only public figures can now involve employees at every level of an organization. To manage the negative side of that risk, many companies implement policies addressing employee conduct outside the workplace. These policies include social media guidelines governing how employees reference their employer online and restrictions on public statements that could be perceived as representing the company, and confidentiality provisions protecting internal information. When employees serve as public-facing representatives of the brand, employment agreements may also include reputation or morality clauses allowing employers to respond when an employee’s conduct creates reputational risk. Nonetheless, employers’ authority to control employee conduct has limits. Even when reputational concerns are legitimate, companies must balance their interests against employee rights. For example, some states protect lawful off-duty conduct, which could limit an employer’s ability to discipline employees for activities outside the workplace that have no connection to their jobs. Similarly, under federal labor law, employees have the right to discuss workplace conditions, publicly in some instances, if those discussions constitute protected concerted activity. In addition, employers also must be mindful of discrimination risks. If workplace image policies are enforced against some employees but not others, those decisions can expose the employer to claims of disparate treatment. Consistency in enforcement is therefore critical when reputational concerns arise. The lesson for employers is not that they should attempt to control employees’ personal lives. Rather, employers should focus on clearly defining expectations that relate to legitimate business interests. Well-drafted social media policies, consistent enforcement practices, and thoughtful training for managers can help organizations navigate situations where an employee’s public image intersects with the company’s reputation.
March 30, 2026
Estates and Trusts
Will‑Challenge Litigation: Forensic Expert Cross‑Examination
Estate litigation rarely turns on a single moment, but an effective cross‑examination of the other side’s forensic document examiner may be one’s best shot at that “Perry Mason moment.” When a will’s authenticity is in dispute, the expert’s testimony is counted on to provide the foundation upon which one’s entire case rests. Successfully reducing their document authenticity evidence to a mere guess based on conjecture can provide that Jenga-like moment of removing that pivotal piece and watching the tower of blocks come crashing to the floor. And while jurists routinely remind us that experts are “advisory,” anyone who has tried one of these cases knows that a confident expert with a clean narrative can carry enormous weight. The inverse is equally true: a shaky expert can unravel a proponent’s case in minutes. The Real Work Begins Before the First Question Effective cross‑examination starts long before the expert takes the stand. Forensic document analysis is a discipline built on methodology, not mystique. Every document authenticity opinion, whether about signatures, ink, paper, toner, or page substitution, rests on a chain of decisions made by, or in some situations, forced upon the expert: what they examined, what they ignored, what they assumed, and what they concluded. Mapping that chain is the key to exposing weak or even missing links. Several pre‑trial “to dos” can be expected to pay consistent dividends: Pin down the expert’s universe of materials. What known samples of the author’s handwriting, known as “exemplars,” were used? Who selected them? Were they contemporaneous with the questioned handwriting? Were they originals or scans? Identify methodological “shortcuts.” Did the expert deviate from published standards? Did they rely on subjective impressions or conduct objective testing? Trace the chronology. When did the expert receive the documents? Were they sealed? Was the chain of custody documented? Did the expert know the litigation posture before forming opinions? By the time cross‑examination begins, one’s goal should not be to surprise the document examiner. If properly prepared, there won’t be one of those “gotcha moments” as there was on every single episode of Perry Mason. The goal rather, should be to walk the court through the expert’s own process and let the weaknesses reveal themselves. Where Forensic Opinions Tend to Break Down Most will‑challenge cases involve one or more of the following: (i) handwriting analysis; (ii) ink and/or paper dating; (iii) indentation analysis; (iv) spectral imaging; and/or (v) digital or toner evaluation. Each offers its own pressure points, which if sufficiently exploited, can be expected to reveal a lack of reliability. Handwriting and signature analysis often falters on the quality and quantity of exemplars. An expert’s reliance on a narrow or non‑representative sample, exposes vulnerabilities which any good forensic expert already knows. The smaller the sample size and the less representative of the decedent’s handwriting at the time of the document being challenged, the less reliable the opinion regarding authenticity. Ink and paper dating can be powerful, but only when the expert can articulate the limits of the testing. Many methods can rule out a date but cannot confirm one. Indentation and page‑sequence analysis is only as strong as the expert’s documentation. Missing photographs, incomplete notes, or ambiguous impressions create fertile ground for doubt when appropriately exposed. Spectral imaging can detect alterations, but courts expect the expert to explain what the imaging cannot show. Overstatements are often more damaging than gaps. Digital forensics requires a clear explanation of how the expert distinguished between original signatures and those that have been scanned or mechanically reproduced. Ambiguity here tolls the death knell. Cross‑examination succeeds when it forces the expert to concede the limits of their discipline without appearing combative. Most judges will tend to appreciate clarity over theatrical “A-ha!’s.” The Most Persuasive Cross‑Examinations Share a Common Structure The strongest cross‑examinations in will‑challenge litigation tend to follow a predictable arc: Establish the expert’s own standards. Let the expert define what “reliable methodology” means. Demonstrate where the expert departed from those standards. Even small deviations can undermine confidence. Highlight what the expert did not do. Courts understand that omissions matter as much as findings. Expose assumptions. Many forensic conclusions rest on untested premises, e.g., about timing, custody, or exemplar authenticity. Return to the ultimate opinion. By the time the expert restates it, the court should already see its fragility. The goal is not to “win” a battle of experts. It is to give the court a principled reason to discount the soundness of the other party’s process underpinning the conclusion the expert ultimately reached. Why This Matters in Today’s Estate Litigation Landscape Modern will contests increasingly involve blended families, high‑value estates, and digital documents. Consequently, powerful forensic testimony is often the centerpiece of probate-related document authenticity disputes. Courts expect practitioners to understand not only the legal standards, but also the scientific ones. A well‑executed cross does more than weaken an opposing expert. It reinforces the broader narrative, i.e., that the proponent of an alleged will or other testamentary document bears the burden of establishing authenticity, and that doubts grounded in methodical, fact‑driven questioning are legally significant. Weighing Conflicting Forensic Reports in Will Contests Conflicting forensic reports are no longer the exception in will‑challenge litigation; they are the norm. As estates grow more complex and documents increasingly blend handwritten, printed, and digital elements, courts are routinely asked to choose between dueling experts who appear equally credentialed and equally confident. Navigating the conflict is far more structured than many litigants appreciate. Understanding that structure is essential to presenting (or defending against) a challenge to a will’s authenticity. What Judges Look for First: Methodology, Not Conclusions When two experts disagree, courts do not start with the bottom‑line opinion. The starting point, appropriately, ought to be the methodologies relied upon to get there. Harken back to grade school math class with me for a moment. It wasn’t enough to tell the teacher the answer was “12.” You had to show your work if you expected the credit. How you got to 12 was more important than the correct answer, in fact, objectively, “12.” The difference, of course, is that forensic document examination still relies on expert opinion, even if the discipline is built principally on SWGDOC and ANSI/ASB standards, OSAC-reviewed standards under NIST, relevant ASTM standards, and generally accepted forensic document examination methodology, including validated testing techniques and reproducible procedures. For a trier-of-fact, judge or jury, to trust an expert’s subjective opinion in this context, the extent of one’s gray-haired “eminence grise” and years of relevant experience will likely count for something, sure, but scrutinizing the objective path taken to reach the subjective conclusions may prove to be the only differentiator upon which the fact-finder may be forced to rely. If two seemingly equally credentialed experts have reached opposing conclusions, strict adherence to process is necessarily relevant and ought, therefore, to be critically scrutinized so as to appreciate the full extent to which the expert or experts: Consistently applied recognized standards Documented each step of the examination Used appropriate exemplars and controlled conditions Avoided assumptions about timing, authorship, or custody An expert who followed a disciplined, transparent process will almost always be favored over one who relied on subjective impressions or incomplete testing, even if the latter’s conclusion appears more definitive. So be critical of your own expert, seeming to fall too easily into the trap of giving you precisely the answer you want to hear. Assess the foregoing factors in his or her work prior to finalizing the expert’s disclosure and/or report. Imagining the ease with which you, yourself, would elicit such weaknesses on cross-examination should provide more than sufficient fodder for “rehabilitating” your own witness well before they ever need it. The Weight of “Negative” Findings Courts often give greater weight to findings that rule out authenticity than to those that merely support it. For example: Ink that post‑dates the decedent’s death Paper inconsistent with the claimed execution period (or inconsistent pages within the document itself) Toner or printer characteristics that did not exist at the time Indentation patterns showing pages were added or substituted Evidence of any one of these findings may prove dispositive. As difficult as they are to explain away, a single disqualifying inconsistency can undermine an entire document. How Courts Evaluate Competing Signature Opinions Handwriting analysis remains the most commonly contested component of will‑challenge litigation. I’m not aware of any statistical analyses, but my own limited research efforts confirm that it is much easier to find published cases challenging signature authenticity above all other factors. Perhaps this is more a factor of which types of cases are more likely to settle when expertly identified. With that in mind, it is fair to anticipate a high probability that cases coming before the court for resolution involve experts on both sides reaching different conclusions about signature authenticity. With conflicting opinions regarding the signature itself, key potentially distinguishing factors include the following: The number and quality of exemplars each expert used Whether the expert relied on originals or degraded copies The expert’s ability to articulate and exemplify specific stroke‑level comparisons Whether the expert acknowledged natural variation in the decedent’s writing Judges are going to be wary of conclusory statements like “the signature is consistent with the writer’s hand” unless supported by detailed, observable features. In other words, simply saying it, does not make it so no matter how many gray hairs on the expert’s head or letters after their name. When presenting one’s case, one must assure that the expert provides articulable evidence of both consistencies and inconsistencies. The Role of Chain of Custody and Document History Even the strongest forensic opinion can be weakened if the document’s history is murky and/or if the document reflects a significant change of course from the decedent’s previously documented planning for the benefit of a beneficiary who is also the source and proponent of the document. Courts scrutinize the following: Who possessed the will and when Whether the document was sealed or stored securely Whether any party had the opportunity to alter or replace pages Whether the expert knew the litigation posture before forming an opinion A clean chain of custody enhances credibility; a compromised one amplifies doubt. When Experts Cancel Each Other Out In some cases, the court finds both experts credible but inconclusive. When that happens, judges must shift their focus to the surrounding circumstances: The decedent’s prior estate‑planning patterns The relationship between the decedent and the beneficiaries Evidence of undue influence, isolation, or last‑minute changes Testimony from witnesses to the execution The presence (or absence) of earlier, consistent wills Forensic science informs the ultimate decision, but the broader factual landscape often decides it. The Practical Reality: Courts Want a Reason to Trust One Expert Judges are not expecting perfection or 100% certainty. They are looking for credibility, consistency, and restraint. An expert who acknowledges limitations, explains uncertainties, and grounds every conclusion in documented observations is typically far more persuasive and effective than one who overreaches and speaks only in terms of “all or nothings” (e.g., refuses to acknowledge anomalies and/or steadfastly claims to a high degree of certainty). In will‑challenge litigation, the most effective strategy is not to “win the science,” but to “trust the process” and give the court a principled, fact‑driven basis to trust your expert’s path to the conclusion. To that end, cross-examination should be directed at establishing grounds to distrust the other side’s process, the totality of which will include more than just their expert. One would do well to prepare for expert cross-examination in this context, as exposing not only the weaknesses in the expert’s process but recognizing, as well, that the expert’s ultimate conclusions are only as strong and trustworthy as the weakest link in their opinion chain.
March 26, 2026
DC Rental Act in Three Minutes
The DC RENTAL Act in Three Minutes: A New Series
In this kickoff episode of The DC RENTAL Act in Three Minutes, Offit Kurman attorneys Brian Dorwin, Gwen Roy Harrison, and Rob Donahue introduce the sweeping legislative changes that took effect in Washington, DC on January 1, 2026. The DC RENTAL Act—passed just one day earlier—marks one of the most significant shifts in landlord tenant law the District has seen in years. The team explains why this reform was long overdue. In 2024 and 2025, DC became an outlier in delinquencies and strained landlord tenant relationships. Affordable housing projects were destabilized, and many multifamily owners faced foreclosure or default. The RENTAL Act is the City Council’s attempt to correct course and bring greater balance and predictability to the system. Over the coming weeks, Brian, Gwen, and Rob will break down the Act’s most impactful components, including changes to court procedures, protective orders, TOPA, public safety evictions, and the new 10- and 30-day notice requirements. Because the law took effect so quickly, DC Superior Court is already interpreting it in real time—meaning early rulings are emerging, but many questions remain open. This series will help property owners, managers, and industry professionals understand how the RENTAL Act is being applied today and what to expect as litigation and guidance continue to develop throughout 2026.
March 25, 2026
Labor and Employment
Continued Disparities in Joint-Employer Status Laws
Updated on April 23, 2026 On April 22, 2026, the U.S. Department of Labor announced a plan to create one nationwide standard from multiple federal laws for when two or more employers can be jointly liable for workplace offenses. The proposed rule, as published in the Federal Register, would eliminate the current disparate treatment of joint employer status under various federal laws, including the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. The proposed singular rule would reduce the previous “economic realities” tests to just four criteria: (a) the power to hire or fire, (b) the ability to supervise or control a worker's schedule, (c) the power to determine the rate and method of payment to the worker, and (d) maintaining a worker's employment records. The new rule would not eliminate the disparities present in state laws discussed in the article below but would provide important clarification and simplification of federal laws on joint employer status. The new rule could also provide more guidance which may potentially resolve conflicting rulings in federal courts. Federal law provides baseline joint‑employer standards under the National Labor Relations Act (as interpreted and enforced by the National Labor Relations Board) and the Fair Labor Standards Act (as interpreted and enforced by the U.S. Department of Labor). States, however, have increasingly adopted their own joint‑employer rules, often broader and more worker‑protective. The result is an assortment of rules in which a business may be a joint-employer under state law but not under federal law or potentially even under the Fair Labor Standards Act but not the National Labor Relations Act. National Labor Relations Act and National Labor Relations Board: Current Law The operative rule is the 2020 Trump-era “direct and immediate control” standard. The following is a summary of the key developments that led to the current framework. The 2020 standard established that to be deemed a joint employer, an entity must exercise "substantial direct and immediate control" over essential terms and conditions of employment. Workers were required to demonstrate this level of control by another entity over another entity's employees. On October 27, 2023, the NLRB published a final rule that rescinded and replaced the 2020 rule. The proposed new rule would have dramatically broadened the standard by establishing that two or more entities may be considered joint employers if each: Has an employment relationship with the employees; and Shares or codetermines one or more of the employees' essential terms and conditions of employment. On March 8, 2024, Texas federal judge J. Campbell Barker vacated the 2023 rule, holding that the test was unlawfully broad, as it would have allowed an entity to be deemed a joint employer with or without any exercise of meaningful control over the relevant employees' terms and conditions of employment. As the 2023 rule never took effect, the prior 2020 rule remained the operative rule. The NLRB formalized this by revising its regulations, effective February 27, 2026, to replace the vacated regulatory text with the 2020 rule. The NLRB had filed an appeal of the Texas court's decision in 2024, but given the change in administration and the formal February 2026 withdrawal of the 2023 rule, the broader Biden-era standard appears definitively off the table for now. Fair Labor Standards Act and U.S. Department of Labor: Current Law Similar “back and forth” changes have occurred in the U.S. Department of Labor’s joint-employer criteria. The DOL’s current joint-employer criteria under the Fair Labor Standards Act (FLSA) and other federal employment laws hinge not only on whether two or more businesses, through association, share "substantial direct and immediate control" over an employee's essential terms and conditions—specifically hiring, firing, discipline, supervision, and pay—but also on the “economic realities” of the relationship of each employer to the employees. The current DOL focus is on whether a business "meaningfully affects" a worker's employment. Key Aspects of Joint Employment (FLSA/DOL) Influence Over Essential Terms and Conditions: Includes hiring, firing, discipline, supervision, and pay. Horizontal Joint Employment: Exists when an employee works for two separate employers who are sufficiently associated (e.g., shared employees, common management). Hours worked for both must be combined for overtime pay. Vertical Joint Employment: Occurs when an employee of an intermediary (like a staffing agency) is economically dependent on another employer (the client). Key Considerations Control vs. Association: The test is not just about ownership but whether they share control. Overtime Liability: Joint employers are jointly responsible for compliance, including overtime, for all hours worked. Key Aspects of DOL Joint-Employer Criteria Control and Association: A joint employment relationship exists when employers share control over essential terms and conditions of employment, such as hiring, firing, payroll, and supervision. Totality of the Circumstances: No single factor determines the status; it is based on the entire relationship, including shared facilities, overlapping management, and interconnected business operations. Shared Personnel: An employee works for two different entities, such as two restaurant locations, in the same workweek. Coordinated Operations: Employers share managers, a kitchen, or other resources. Economic Reality: The worker is economically dependent on both potential joint employers. This pre-2020 FLSA standard now governs wage-and-hour joint-employer liability, particularly for franchisors, staffing agencies, and companies using third-party contractors. Different Applications of the FLSA by Different Courts In 2024, the Supreme Court’s decision in Loper Bright Enterprises v. Raimundo overturned the legal doctrine known as Chevron deference, meaning courts now exercise independent judgment in interpreting statutes and do not defer to agency interpretations simply because a statute is ambiguous. However, prior cases upholding specific agency actions remain good law. As a result, while DOL regulations and guidance remain influential, federal courts now independently interpret the FLSA’s joint-employer provisions, focusing on statutory text and the economic realities of the employment relationship. Consequently, employers in different federal court jurisdictions may be subject to different joint-employer criteria. Patchwork of Differing State Laws State joint-employer laws and regulations vary substantially across states. Some states coincide with or expressly follow federal standard. Other states have adopted independent and more expansive tests, with the result that some employers that are not joint employers under one or both federal laws are joint employers under one or more state laws. The broader state tests include criteria such as: Economic dependence frameworks Statutory expansions targeting industries such as franchising or subcontracting The result is a fragmented legal landscape where joint‑employer status depends heavily on jurisdiction, industry, and the specific statute(s) that apply to the employer’s operations. Industry‑Specific Joint‑Employer Rules Some states impose joint‑employer obligations in targeted sectors: Construction (e.g., wage theft statutes making general contractors liable for subcontractor wages) Janitorial services (e.g., California’s Property Service Workers Protection Act) Agriculture (e.g., state migrant worker protections) Fast food (e.g., California’s recent reforms) Federal law does not have comparable industry‑specific joint‑employer statutes. Key Practical Takeaways Under the NLRA: The narrower 2020 standard applies, requiring actual, substantial, and direct control over employment terms to establish joint-employer status. Under the FLSA: A similar pre-2020 standard governs, but joint-employer liability for wage-and-hour purposes may be more easily established based on potential or indirect control, considering a variety of relevant facts. Businesses that utilize independent contractors, including franchise business models, should remain wary of these evolving standards. This is an area of active legal and regulatory change, so consulting an employment attorney for advice specific to your situation is strongly recommended, along with regular review of federal and state laws that may apply to your operations.
March 24, 2026
Commercial Litigation
Five Common Pitfalls Hard Money Lenders Must Avoid to Reduce Risk and Protect Their Deals
This article details five pitfalls hard money lenders’ teams face when working on potential deals. Detailing these pitfalls is intended to be a useful guide for those new to the industry (and want to avoid costly mistakes) and, for more experienced people in the industry, a helpful reminder of the biggest red flags everyone must be vigilant about when working on deals. The business of hard money lending carries enormous risk. Starting out requires raising sufficient capital to lend and navigating the thicket of licensing requirements and regulations that apply to hard money lenders (an endless process due to ever-changing regulations in the industry). Once established, however, hard money lenders, and their teams, have to maintain the standards they set for each deal that gets onboarded. From the sales stage through underwriting to closing, mistakes, indiscretions, and oversights may occur, and some of those errors have very costly consequences. If there is one thread tying together each of these five pitfalls, it is: know your borrower—and especially so if it’s an entity. Here are the five pitfalls. For borrowing entities, failing to properly evaluate and research individual members. When the borrower is an entity, the individual owners of that entity must be evaluated thoroughly. Hard money lenders, although they are not financial institutions in the same vein as major banks, are subject to the same requirements that the Bank Secrecy Act imposes. Those requirements include an obligation to file a suspicious activity report (SAR) with the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) for transactions that are suspicious and raise questions as to whether the transaction is an attempt at money laundering. Similarly, FinCEN requires that hard money lenders maintain an anti-money laundering program with written procedures, personnel responsible for day-to-day operations, employee training to detect suspicious activity, and testing and review of the program. For each owner of the business entity, it is crucial to run a background search on that individual. Vetting individual owners of the borrower entity is not only important for understanding who is effectively the borrower; it is also essential for the lender to comply with the Bank Secrecy Act’s requirements. Sometimes, an individual working for the lender does not realize the consequences of missing a detail like this. The most common consequence in this type of situation is an audit. If the lender faces an audit—whether from FinCEN or a state licensing authority—and that audit reveals the lender missed a red flag related to a borrower and its individual owners, the consequences can be significant. Although an audit can result in a timeframe for the lender to take corrective action, regulators also may impose fines and civil penalties, issue cease-and-desist orders requiring the lender to stop its lending activities, require loan rescissions or restitution, or pursue more frequent audits. That range of consequences coming from an audit may be daunting, but regardless of the result, it means taking resources and time away from deals and instead diverting those into managing audit responses and working with counsel to mitigate the negative consequences. For borrowing entities, not confirming the signatory has the authority to bind the entity. For any type of business entity, whether a corporation, limited liability company, or another type, it is crucial to ensure that the lender knows the signatory has the authority to sign documents on behalf of the entity. Typically, during the onboarding phase, the entity will have provided an operating agreement and a resolution authorizing the person to sign on behalf of the entity. Reviewing that operating agreement’s terms to verify the process it sets out for passing a resolution is a step that too often gets overlooked. Connecting each dot, from the company’s formation to its operating agreement setting out how a resolution may be passed, to having a resolution appointing the signatory, is necessary for any deal involving a borrower entity. If there is no follow-through on this step, the lender’s position becomes perilous for clawing back the funds it lent. In short, if the signatory did not have authority to sign, the loan documents are essentially meaningless, and the lender has virtually no recourse. A signatory lacking authority does not just arise where there is fraud. For example, if there is a dispute among the owners of the business entity regarding the operations of that entity, and there is a potential buyout or sale of an owner’s interest in the entity, that may end up affecting the lender’s loan. To avoid being caught in the middle of such a dispute, the lender, at the time of the loan, must clearly establish that the person signing on behalf of the borrowing entity had authority to do so and then maintain copies of those documents. If there is any dispute about the signatory’s authority to sign, then it may lead to a court deeming the loan documents and any guaranties invalid and unenforceable. The debt would thus not be collectible, and foreclosure on the property—the most effective way for the lender to pursue collection, if not the only way—becomes impossible. In many cases, the lender will be able to conclude that the debt is not collectible only after commencing a lawsuit seeking to enforce the loan documents and pursue a foreclosure of the property. It is only after incurring legal fees, expenses, costs, and time that a court would then potentially declare the documents to be unenforceable and leaving the lender with a loss on the loan and then the fees, expenses, and costs incurred. For borrowing entities, not confirming the structure of sub-entities. When the entity is a borrower with sub-entities, it is necessary to understand the owners of the sub-entities, as well as the layout of those sub-entities. Often, when there are sub-entities, there are specific, easily identifiable reasons, such as being a family business that incorporates family members’ interests. Other times, a web of sub-entities can be used to hide the true ownership of the borrowing entity, conceal financial problems with that entity, shield individuals known to be bad actors, or launder money. Those same requirements coming from the Bank Secrecy Act, the anti-money laundering programs and suspicious activity reports come when analyzing the sub-entities for a borrower. Every individual owner associated with the sub-entities should have a background check performed, and there should be clarity about the structure and all the individuals involved with the business. As with other failures to comply with the Bank Secrecy Act and other such regulations, one of the most common consequences is an audit. As detailed above, that audit may be very disruptive to the lender’s operations. Overlooking open judgments and liens. Thoroughly reviewing active litigation, unpaid judgments, and open liens is critical to evaluating the viability of the loan. If there is active litigation, reviewing the documents filed in that litigation is necessary to understand how it might impact the deal. That litigation may impact the real estate or the borrower’s business. As to the real estate, neighbors could have filed lawsuits that are seeking access to portions of the property or restrictions related to the property. Lawsuits like that could not only affect the salability of the property; they could also affect the lender’s rights to the property even if it foreclosed on the property and sought to sell it afterward. But, most often, it will affect the lender’s priority of lien on the property. When there are multiple liens on the same property, the priority of lien dictates who gets paid first when the property is sold, either at foreclosure or just on the market. Many times, the value of the property may only pay off the first loan, or even part of the second loan. If the lender’s lien is second, third, or fourth priority, then the lender may end up totally empty-handed when attempting to collect the loan. Failing to verify the legitimacy and contents of bank statements or other documents submitted by borrowers. Lenders’ guidelines for loans require the borrower to submit bank statements and other documents to verify the borrower’s qualifications for the loan. These are helpful mechanics for ensuring the borrower is capable of repaying the loan. Sometimes, however, borrowers engage in fraud or other unlawful activity leading them to submit documents that are either entirely fabricated or partially doctored and tailored to meet the lender’s requirements. Reviewing those documents through the lens of common sense can go a long way in revealing that they are false. When documents are suspicious or simply do not add up, it becomes important to make additional requests for documents that corroborate those already submitted and come from third parties over which the borrower has no control. Ideally, the lender maintaining these standards roots out fraudulent documents prior to the closing. For most hard money lenders, an overwhelming majority of the closed loans are then sold to private capital providers/secondary market buyers or to institutional private credit funds, such as private equity funds or hedge funds. When each loan is sold, there are representations and warranties about the loan that the lender makes to the purchaser. Those representations and warranties virtually always require the lender to buy the loan back if there is any fraud, regardless of whether the lender knows of the fraud. If, for example, the bank statements were fake and the borrower defrauded the lender, the lender would be obligated to buy back that loan. Then, if a loan is bought back, the lender would have to service the loan and take steps to collect it. This would be a highly burdensome process for a lender to undergo and would divert resources away from new deals. Conclusion Although these are not the only pitfalls that hard money lenders face, they are the most common and guarantee outsized consequences. Every member of the lender’s team needs to be aware of not only these pitfalls but others as well, to ensure that the deals being closed are the right ones.
March 24, 2026
Construction
A (Simple) Primer on the Voiding of Tariffs by the Supreme Court and Its Impact on the Construction Industry
On February 20, 2026, the United States Supreme Court voided the tariffs on international goods imposed by President Trump under the IEEPA. The initial, immediate effect is that the recently imposed (and relatively high) tariffs on imported goods are immediately void. This has raised various questions in the construction industry. Will prices go down? Will new tariffs be imposed? Simply because the tariffs were voided does not necessarily mean that prices will go down. Prices are affected by other market forces, not just tariffs. Also, there is the likely prospect of other tariffs being imposed. In fact, that is exactly what the Trump Administration immediately did in response to the Supreme Court ruling. The tariffs are less onerous, however, and they might be temporary. Still, there is the potential for additional or increased tariffs to be imposed on goods. Also, not all construction materials were exclusively under the new tariffs; some materials, such as steel, had longstanding protectionist tariffs dating back decades. If the tariff was through something other than IEEPA, then, the refunds are inapplicable. Thus, even with the voiding of the recent Trump Administration Tariffs, other tariffs or price volatility may still affect certain goods and materials. Contractors should carefully examine the specific tariffs that apply to specific goods and should continue to account for forthcoming tariff volatility risk in all contracts by negotiating clauses (or prices) that address economic volatility. What about the tariffs that I already paid on imported materials and goods? Generally, the key point to understand is that the “Importer of Record” has the right to seek a refund of moneys paid on the tariffs. If you are not the Importer of Record, then, it is likely difficult for you to seek a refund. Refunds are to be sought directly from Customs and Border Protection (“CBP”) or the Court of International Trade (“CIT”). Refunds from CBP generally require filing specific documents within 180 days of the “liquidation” of the initial entry of the goods. Consult with an attorney to identify the correct filing(s) for which you might be eligible, as the filings are time-sensitive with deadlines. Even if you ultimately paid the tariff cost through pass-through clauses in your contracts, if you were not the Importer of Record, you likely do not have eligibility to file a refund claim against the government. Still, each circumstance should be reviewed by an attorney. Theoretically, depending on your contract clauses, the Importer of Record could seek a refund and pass the refund dollars to you. Why did I pay all those tariff costs if the whole thing was void from the start? Shouldn’t I have refused to pay them from the start? Once the executive branch of the federal government imposed the tariff, it became required to be paid in order to receive the imported good. There really was no other option in real time (other than refusing to receive the good). You could negotiate in your contract who would bear the cost of the tariff, but refusing to pay it meant that you would be unable to receive the imported goods. Theoretically, you could have filed a protective claim with CIT with the intent of appealing to the United States Supreme Court; but realistically, that is a very expensive and burdensome process. Typically, for significant matters of this nature, a single contractor importing a good would not want to carry the cost and burden of a Supreme Court case. Thus, you did what everyone did—paid the tariff to get the goods imported and attempted to price and account for the risk in your contracts accordingly. But, with the recent Supreme Court ruling, refunds are available for certain eligible claimants, including interest. JEFFREY C. BRIGHT is a Principal attorney in Offit Kurman’s Construction Practice Group and maintains a multi-state construction law practice, representing contractors, subcontractors, owners, construction managers, design-builders, and design professionals. He is licensed and active in construction law matters in PA, MD, DC, VA, and CA. In addition to handling construction litigation and project disputes, including time impact claims for liquidated damages, delays, or disruptions, he regularly advises on the preparation, revision, and negotiation of construction contracts for various project delivery systems. He can be reached at jeff.bright@offitkurman.com. Special thanks to Janine Campanaro and Matthew Reddington from the Offit Kurman tax law group for contributing to this article.
March 24, 2026
Commercial Litigation
Defeating the IRS at Trial: Lessons from the Taxpayer Victory in Ankner v. United States
After successfully trying Ankner v. United States and defeating a multi-million-dollar promoter-penalty assessment, Matthew S. Reddington analyzes what the verdict means for the government’s burden of proof under IRC § 6700—and for taxpayers and advisors facing promoter investigations. In Ankner v. United States, a federal jury rejected the Internal Revenue Service’s attempt to impose approximately $4 million in promoter penalties under IRC § 6700 against a captive insurance manager. Janine Campanaro and I served as trial counsel for the taxpayer and successfully tried the case to verdict in the United States District Court for the Middle District of Florida. The decision offers an important reminder for businesses, advisors, and professionals facing promoter-penalty investigations: even in industries the IRS has publicly targeted, the government must still prove each statutory element of § 6700 at trial. When the government cannot meet that burden, the penalties cannot stand. As the trial record and jury verdict in Ankner illustrate, promoter-penalty disputes frequently turn not on sweeping policy debates about the legitimacy of an industry, but on far more specific evidentiary questions. The government must prove that materially false statements were made regarding the tax benefits of the transaction and that the alleged promoter knew or had reason to know those statements were false. When those elements are carefully examined through witness testimony, documentary evidence, and expert analysis, the government’s theory does not always hold. § 6700 Promoter Penalties Require the Government to Prove Specific Elements Internal Revenue Code 6700 authorizes the IRS to impose substantial penalties on individuals or businesses that promote abusive tax shelters. The statute permits penalties equal to 50% of the gross income derived from the promotional activity, which can quickly result in multi-million-dollar assessments. Despite the severity of the penalty, the government must still establish specific statutory elements when the penalty is challenged in court. In particular, the government must prove: A False or Fraudulent Statement The promoter made false or fraudulent statements regarding the tax benefits of a transaction. Knowledge or Reason to Know The promoter knew, or had reason to know, that the statements were false. In practice, the knowledge requirement frequently becomes the most contested issue in promoter-penalty litigation. A Federal Jury Found the Government Failed to Meet That Burden in Ankner Ankner v. United States arose from the government’s investigation of a captive insurance manager who assisted small businesses in forming insurance companies intended to qualify under IRC § 831(b). Rather than focusing exclusively on promotional statements regarding tax benefits, the government argued that the underlying captive insurance arrangements did not constitute legitimate insurance companies. Based on that premise, the government asserted that the captive manager and related entities made false statements regarding the tax consequences of participating in the arrangements. After paying a portion of the assessed penalties permitted in promoter-penalty disputes, the taxpayer filed suit challenging approximately $4 million in penalties related to tax years 2010 through 2016. Following the trial, the jury concluded that the government failed to carry its burden of proof, and the taxpayer was not liable for the penalties. Although jury verdicts are necessarily fact-specific, the case underscores an important point: even in areas the IRS has identified as enforcement priorities, the government must still prove each element of § 6700. Traditional Promoter-Penalty Cases Often Involved Clear Tax-Avoidance Schemes Historically, many litigated § 6700 cases involved blatantly abusive tax-avoidance schemes, where the government’s evidentiary burden was comparatively straightforward. For example, in United States v. Schulz, the defendants promoted materials instructing taxpayers how to stop withholding and paying federal income taxes. The court concluded that the promoters knowingly advanced positions repeatedly rejected by the courts. Similarly, in United States v. RaPower-3 LLC, the government successfully pursued promoter penalties against a company marketing solar-energy technology that was incapable of producing electricity. Participants were promised tax benefits tied to equipment that never functioned as represented. In Tarpey v. United States, the Ninth Circuit affirmed an $8.5 million promoter penalty related to a timeshare-donation scheme, emphasizing the broad scope of § 6700 when determining the gross income derived from the promotional activity. These cases involved clear factual records demonstrating knowingly false representations. By contrast, more recent promoter-penalty investigations increasingly involve legitimate industries and complex transactions, where the relevant facts and legal standards are far more nuanced. The IRS Is Expanding the Use of Promoter Penalties Across Multiple Industries The significance of Ankner must also be viewed against the backdrop of expanding IRS enforcement initiatives. In recent years, the IRS has increasingly relied on promoter penalties as a mechanism to deter activity in industries it believes involve aggressive tax planning. Current enforcement efforts have focused on areas such as: Micro-captive insurance arrangements Syndicated conservation easements Employee Retention Credit (“ERC”) promotions Certain partnership basis-adjustment transactions The IRS’s Office of Promoter Investigations has become particularly active in these matters, and promoter-penalty assessments are frequently pursued alongside broader civil or criminal investigations. Given the scale of potential penalties, these disputes can carry significant financial and reputational consequences for businesses and advisors. For Taxpayers and Advisors Facing § 6700 Investigations, Litigation Strategy Matters For taxpayers, captive managers, tax advisors, and other professionals facing promoter-penalty investigations, Ankner highlights an important strategic point: § 6700 cases ultimately turn on proof of statutory elements—not simply the IRS’s view of the underlying transaction. Promoter-penalty disputes often begin with extensive government investigations that focus heavily on the perceived legitimacy of the transaction itself. While those issues may form part of the broader context, the government must ultimately prove far more specific facts at trial—namely, that false statements were made and that the alleged promoter knew, or had reason to know, those statements were false. In practice, those evidentiary requirements can present meaningful challenges for the government. Because promoter-penalty cases frequently involve complex industries, expert testimony, and extensive factual records, early strategic guidance is critical. Decisions made during the investigative stage—often long before litigation begins—can substantially influence how the case develops if it proceeds to court. For that reason, businesses and advisors confronting potential § 6700 exposure should consider engaging counsel with significant experience litigating complex tax disputes through trial. Promoter-penalty cases are not merely technical tax controversies; they are fact-intensive litigation matters that require careful development of the evidentiary record and a disciplined focus on the government’s burden of proof.
March 23, 2026
Family Law
The Most Common Lies Spouses Tell Their Divorce Lawyer
People rarely walk into a divorce lawyer’s office intending to lie. What they usually bring instead is fear—fear of judgment, fear of consequences, fear that telling the full truth will somehow make everything worse. So they edit. They minimize. They leave things out. And they tell themselves it doesn’t matter; however, it almost always does. One of the most common things clients say early on is some version of “I’ve told you everything.” They believe it at the time. But as the case progresses, details start to surface—an old relationship that wasn’t quite over, a text thread they forgot about, a financial account they assumed was irrelevant, an incident they didn’t think would come up again, or a monetary transfer they didn’t think would be noticed. Divorce has a way of dragging the past into the present, whether you’re ready for it or not. When information emerges late, it puts your attorney on the defensive instead of in control, and that shift can be costly. Another frequent claim is that money doesn’t matter. Clients say they just want out, that they’re willing to walk away from assets or support to keep the peace. That mindset is usually emotional, temporary, and short-lived. Once the dust settles and real life resumes—housing costs, childcare expenses, retirement planning—that earlier indifference often turns into regret. The law doesn’t assume you’ll feel the same way six months from now, which is why your lawyer can’t afford to either. Many people also present their divorce as a story with a clear hero and villain. They insist they’ve done nothing wrong and that all the blame lies with the other spouse. While that narrative may feel emotionally satisfying, it rarely aligns with reality or how judges, mediators, and evaluators see cases. Family court isn’t about moral perfection. It’s about credibility. When someone claims absolute innocence, it often signals that there’s more beneath the surface, and opposing counsel is very good at finding it. Financial honesty is another area where clients often convince themselves they’re being truthful while still withholding information. Money moved before filing, cash withdrawals, side income, business perks, cryptocurrency, or funds held “temporarily” by family members are frequently dismissed as insignificant or unrelated. But financial disclosures are sworn statements, and inaccuracies, intentional or not, can damage a case far more than the underlying financial issue ever would. Then there’s digital behavior. Clients routinely downplay how much they’ve accessed their spouse’s phone, email, or social media accounts. They assume that if the information exists, it must be fair game. But how evidence is obtained matters just as much as what it shows. Illegally accessed material can be excluded and can even create legal exposure for the person who obtained it. When a lawyer doesn’t know the full story behind the evidence, they can’t properly assess the risk. Parents often tell their attorneys that the children are “fine.” Sometimes that’s wishful thinking. Sometimes it’s an attempt to appear cooperative or resilient. But children talk to teachers, to therapists, to friends, and sometimes directly to the court through evaluators. Minimizing concerns doesn’t protect children, and it can make a parent appear disengaged or unaware of what’s actually happening. Dating during divorce is another subject where honesty tends to falter. Clients insist they aren’t seeing anyone, or that it’s not serious, or that it has nothing to do with the case. In reality, new relationships can affect custody dynamics, financial claims, and settlement negotiations, especially if children are involved or marital funds are being spent. And these relationships almost always come to light. Perhaps the most deceptively loaded statement clients make is that they just want things to be “fair.” Fair, however, is a deeply personal concept, not a legal one. Clinging to a personal sense of fairness often leads to prolonged litigation, unrealistic expectations, and mounting legal fees. The law doesn’t divide assets or assign responsibility based on who feels more wronged. It relies on statutes, evidence, and precedent. Clients lie—or half-lie—not because they’re bad people, but because divorce is uncomfortable and exposing. The irony is that these small acts of self-protection usually have the opposite effect. They limit an attorney’s ability to plan, anticipate, and negotiate effectively. They increase costs, delay resolution, and weaken outcomes. A divorce lawyer isn’t there to judge you. They’re there to protect you. But they can only do that with the full picture, even when parts of it are embarrassing, messy, or inconvenient. In divorce, the truth almost always comes out. The only real question is whether it comes out early enough to work in your favor.
March 20, 2026
Real Estate
Understanding Like-Kind Property and IRS Requirements for a 1031 Exchange
A 1031 Exchange is a valuable tool for real estate investors to defer capital gains tax when investment property is sold, provided the proceeds are reinvested in replacement property. According to the IRS, like-kind exchanges, when you exchange real property used for business or held as an investment solely for other business or investment property that is the same type or “like-kind,” have long been permitted under the Internal Revenue Code. Generally, if you make a like-kind exchange, you are not required to recognize a gain or loss under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other property or money (not like-kind), you must recognize a gain to the extent of the other property and money received. You can’t recognize a loss. Under the Tax Cuts and Jobs Act, Section 1031 now applies only to exchanges of real property and not to exchanges of personal or intangible property. An exchange of real property held primarily for sale still does not qualify as a like-kind exchange. A transition rule in the new law provides that Section 1031 applies to a qualifying exchange of personal or intangible property if the taxpayer disposed of the exchanged property on or before December 31, 2017, or received replacement property on or before that date. Thus, effective January 1, 2018, exchanges of machinery, equipment, vehicles, artwork, collectibles, patents, and other intellectual property and intangible business assets generally do not qualify for non-recognition of gain or loss as like-kind exchanges. However, certain exchanges of mutual ditch, reservoir, or irrigation stock are still eligible for non-recognition of gain or loss as like-kind exchanges. Properties are of like-kind if they’re of the same nature or character, even if they differ in grade or quality. Real properties generally are of like-kind, regardless of whether they’re improved or unimproved. For example, an apartment building would generally be like-kind to another apartment building. However, real property in the United States is not like-kind to real property outside the United States. The rules of the exchange in order to qualify for the capital gains deferral are as follows: First, the definitions: the property that is sold in a 1031 Exchange is referred to as the “relinquished property,” and the property that is subsequently purchased is referred to as the “replacement property.” There may be one or multiple relinquished/replacement properties. Any real property can be exchanged for other real property within the same state or other state(s). Property outside of the United States, however, is not considered like-kind. In order to avoid paying any taxes on the sale of the relinquished property, the replacement property must be of equal or greater value than the net sale price of the relinquished property. Also, if all of the proceeds from the sale of the relinquished property are not reinvested in the replacement property, and some of the cash is taken out, this is known as “boot.” Boot is taxable up to the amount of total realized gain on the sale. A key point to watch for is utilizing less debt to purchase the replacement property. For example, the relinquished property is sold for $2,000,000 with debt in the amount of $1,000,000, and the replacement property is purchased for $2,000,000 using $500,000 of debt. Even though the replacement property’s value is equal to (or more than) the replacement property, the $500,000 difference in debt would be taxable. This can be offset, however, if more cash is put into the replacement property purchase. The timing of identifying and purchasing the replacement property is very important. The possible replacement property(ies) must be identified within 45 calendar days of the sale date of the relinquished property. Up to three properties, of any value, can be identified, but only one (or two or three) must be purchased within the time frame below. Keep in mind that all of the net proceeds must be reinvested, or there will be taxable boot. More than three replacement properties can be identified, but their value cannot exceed 200% of the value of the relinquished property. Otherwise, 95% of what was identified will need to be purchased. The replacement property must be purchased within 180 calendar days of the sale of the relinquished property. The actual rule, however, states that the closing on the replacement property must be completed on the earlier of 180 days or the next due date to file an income tax return, including extensions. So, if the relinquished property is sold between October 17 and December 31, the replacement property must be purchased on or before April 15 if the seller’s tax return is filed accordingly or an extension request is made in order for the full 180 days to complete the transaction to be allowed. The tax return and name appearing on the replacement property must be the same as those on the relinquished property. If the property is owned using a wholly-owned limited liability company, known as a single-member LLC, the LLC is treated as the taxpayer. Below is the 1031 Exchange Process. Determine whether the property should be the subject of a 1031 Exchange. Not every property is a good candidate for a 1031 Exchange. For example, if there is significant passive activity losses whereby those losses will be greater than or equal to the gain on the sale of the property, it may not be a good fit for a 1031 Exchange. In addition, the taxpayer1 should run the numbers on the tax savings and consider that rates may be different compared to what they may be down the road. The seller should discuss the tax consequences with an accountant or tax attorney to determine whether a 1031 Exchange is appropriate. Contact a Qualified Intermediary. Assuming that a 1031 Exchange is appropriate, the taxpayer should contact a qualified intermediary. A qualified intermediary is a person (or entity) who is not the taxpayer (or a disqualified person). The qualified intermediary enters into a written agreement with the taxpayer (the exchange agreement) under which the qualified intermediary: Acquires the relinquished property from the taxpayer Transfers the relinquished property to the buyer Acquires the replacement property from the seller Transfers the replacement property to the taxpayer The exchange agreement must expressly limit the taxpayer’s rights to receive, pledge, borrow, or otherwise obtain benefits of money or other property held by the qualified intermediary. The property to be relinquished should be listed for sale. The property would be listed whether or not there is going to be a 1031 Exchange, and there is no different procedure for a 1031 Exchange (other than including a 1031 disclosure in the sales contract), so there will be no elaboration regarding listing real property for sale at this time. Look for replacement property(ies). At this point, the taxpayer should start looking for replacement properties. Possible replacement property(ies) must be identified within 45 calendar days of the sale date of the relinquished property. One easy way for a 1031 Exchange to fail is by not identifying potential replacement properties in time. The sale of the relinquished property. The sale is very similar to a typical real estate sale, except the qualified intermediary will hold the sales proceeds in a special account. The taxpayer cannot have access to the proceeds from the sale of the relinquished property. From this account, the proceeds will be distributed to purchase replacement property or properties. Identify the replacement property. The replacement property or properties must be identified within 45 days of selling the relinquished property. The property(ies) must be identified to the qualified intermediary. Purchase the replacement property(ies). Working with and through the qualified intermediary, the replacement property or properties must be purchased within 180 days of selling the relinquished property (or the next due date to file an income tax return, including extensions). The funds for this purchase must be sourced from the qualified intermediary’s account. The taxpayer may bring additional cash if needed to close the transaction. 1The person/entity selling the relinquished property and buying the replacement property will be referred to as the taxpayer.
March 19, 2026
Estates and Trusts
The Hidden Estate Planning Crisis Facing the Sandwich Generation
Why millions of families caring for two generations are legally unprepared for either. Across the country, millions of adults are quietly living in what has come to be known as the sandwich generation. Statistics show that one in six Americans is in the sandwich generation, supporting aging parents while also raising children or helping launch young adults. Much of the public conversation around this group focuses on the emotional and financial strain of caregiving and those receiving the care. What receives far less attention, however, is the legal vulnerability many of these families face. Many estates and trusts attorneys see a growing and largely invisible problem: a hidden estate planning crisis affecting the very people holding multiple generations together. Many people still consider estate planning something to address later in life. Yet the sandwich generation sits at the exact intersection where planning becomes essential for two generations at once. It is not uncommon for estate and trust attorneys to encounter families whose aging parents have not established even the basic vital legal documents, such as powers of attorney and health care directives. At the same time, and as a result, the adult children who are helping manage their parents’ lives have no legal authority to make decisions on their behalf. Even more striking, those same caregivers—busy raising children and supporting parents—often have not completed estate planning for their own families. In other words, the individuals coordinating care, finances, and medical decisions for everyone else are often doing so without a legal framework protecting anyone involved. A common situation involves adult children informally stepping in to help aging parents. They begin by paying bills, organizing, advocating at medical appointments, and helping manage finances. Over time, those responsibilities expand. Without the proper legal documents in place, the adult child may technically have no legal authority to act. What these adult children find, often too late, is that financial institutions refuse to discuss accounts and medical providers limit the information they can share. Important decisions become delayed and complicated, even when everyone in the family agrees on what should happen. If an aging family member or parent experiences cognitive decline before these documents are in place, the situation becomes even more difficult. Families may suddenly find themselves navigating court proceedings to obtain guardianship or simply to manage basic financial and medical matters. What could have been handled through proactive planning becomes a crisis-driven, stressful, and expensive legal process at precisely the moment families are already under inordinate emotional and often financial strain. Another dynamic frequently emerges within sandwich generation families when one sibling becomes the primary caregiver for the aging parent. Often referred to as the “caretaker child,” this person may take on the bulk of responsibility for coordinating care, managing finances, or in some cases, even housing a parent. While these arrangements are often made with the best intentions, they can create fractures within the sibling relationship as the parent grows more dependent. The opportunity for discord grows with certainty when estate plans are unclear or nonexistent. Questions about whether the caregiving child should be compensated or how caregiving contributions should be recognized, often surface only after a parent becomes incapacitated and can no longer take part in those discussions, or worse, after the parent dies. Without clear planning and communication, these issues can quickly evolve into family conflict or worse, family estrangement. Making matters worse, the caregiver’s own legal planning is frequently neglected. Many members of the sandwich generation are simply too busy managing daily responsibilities to focus on their own estate planning, creating another significant vulnerability. If something were to happen to the caregiver such as an illness, accident, or an unexpected death, there may be no legal structure in place to protect their children or guide decisions about their assets. The people responsible for stabilizing two generations of family life often overlook the fact that they remain central to their own household’s future security. There are varying studies that indicate that a caregiver can be 18-40% more likely to die before the care recipient, a testament to the necessity that the caregiver, too, must consider their own planning. The encouraging news is that this crisis is entirely preventable: addressing it does not necessarily require complex legal strategies. What it requires most is starting the conversation early and recognizing that estate planning is no longer a single-generation exercise. Families navigating the sandwich generation need planning that considers the needs of aging parents while also protecting the caregiver’s own family. When parents have clear legal authority in place for trusted decision-makers, when siblings communicate openly about caregiving roles, and when caregivers ensure their own families are protected, the most difficult and painful conflicts can be avoided. Demographic trends suggest the sandwich generation will continue to grow as people live longer and families remain financially interconnected for longer periods. What once happened sequentially, raising children first and caring for parents later, is now happening simultaneously for millions of households. Yet the way many families approach estate planning has simply not adapted to this reality. Planning today is no longer simply about preparing for the end of life. It is about creating stability for families managing the complex responsibilities of supporting multiple generations at once. The individuals carrying that responsibility deserve a legal framework that reflects the critical role they already play in their families’ lives. The question facing many families is not whether they will encounter these issues, it is whether they will confront them prepared or in crisis.
March 19, 2026
Construction
Pennsylvania Supreme Court Entertains Oral Argument on Significant Construction Statute of Repose Appeal in Aloia v. Diament Building Corp
On March 12, 2026, the Pennsylvania Supreme Court heard oral arguments in Aloia v. Diament Building Corp., a closely watched appeal that could significantly affect the future of Pennsylvania’s Construction Statute of Repose. The key question presented to the Court is how the statutory phrase “lawfully performing” design or construction services will be interpreted. Pennsylvania’s Construction Statute of Repose has long provided architects, engineers, and contractors with a defined endpoint for liability arising from improvements to real property. Unlike the statute of limitations, which begins to run when an injury occurs or is discovered, the Pennsylvania statute of repose establishes a firm cutoff for claims, without regard to discovery or other equitable tolling. The dispute in Aloia arises from a residential construction project completed in the mid-2000s. Certificates of occupancy were granted in 2006 and 2007 to the original owner. In 2021, more than a decade later, homeowners who purchased the home in 2016 filed suit alleging latent construction defects. The contractor invoked the construction statute of repose as a complete bar to the claims. Both the trial court and the Superior Court determined that the twelve-year repose period applied to the claims alleging building code violations, dismissing the homeowners’ claims. Key Themes from Oral Argument On appeal to the Pennsylvania Supreme Court, the homeowners advance an interpretation of the statute, asserting that the repose period did not apply where the construction work was alleged to violate the applicable building code. The homeowners asserted that a design professional or contractor who was alleged to have violated the building code was not a person “lawfully performing or furnishing” construction services, and, therefore, the construction statute of repose was inapplicable to the homeowners’ claim. At argument, the Court repeatedly framed the central issue as whether “lawfully performing” requires compliance with all code requirements or, instead, requires that the individual or person be lawfully entitled to perform the services (i.e. authorized). Interpreting the phrase “any person lawfully performing” to require full compliance with any and all applicable statutes, building codes, and regulatory requirements would effectively nullify the construction statute of repose, exposing design professionals, contractors, and subcontractors to claims decades after substantial completion. At argument, the Court discussed the statute’s underlying purpose was to promote a robust building industry, preventing unlimited liability by protecting those who work within the industry’s regulatory framework (i.e. licensing and permitting requirements). Additionally, the Court engaged in questioning focused on the fact that the failure to comply with building codes constitutes a construction deficiency, and that the homeowners’ reading makes other provisions of the statute, which require claims for design or construction deficiencies to be brought within 12 years, mere surplusage. Further along these lines, the Court also questioned the statutory or regulatory authority of an individual to bring a private cause of action to enforce the building code, noting that no violations were issued by the code official and, therefore, the homeowners were necessarily pursuing deficiency claims squarely within the construction statute of repose. The Court also engaged in a robust discussion regarding the structure of the statute itself. Looking to the grammatical structure, justices noted that the structure of the statutory phrase, “a person lawfully performing or furnishing,” in which the term “lawfully performing” modifies the term person rather than the terms building or improvement. The Court also scrutinized the statutory structure, as the contractor emphasized that the homeowners’ interpretation effectively rewrites the statute by inserting an additional exception into subsection (a), which establishes the general rule, rather than looking to subsection (b), in which the legislature expressly set forth the statutory exceptions. The Supreme Court’s decision in Aloia stands poised to shape the contours of construction liability in Pennsylvania and will determine whether the Commonwealth’s longstanding statute of repose will remain a meaningful barrier against stale claims against design professionals and contractors. Offit Kurman through Anthony S. Potter, Franklin C. Miller, and Robyn St. Hilaire represented the American Institute of Architects ("AIA"), AIA-Pennsylvania, the American Council of Engineering Companies (“ACEC”), ACEC/PA, the Structural Engineers Association of Pennsylvania, the Pennsylvania Society of Professional Engineers, the Pennsylvania Society of Land Surveyors, and the Pennsylvania-Delaware Chapter of the American Society of Landscape Architects as Amici Curiae before the Pennsylvania Supreme Court.
March 17, 2026
Business
Planning for a Sale: Engineering the Best Possible Outcome
Most business owners approach a potential sale by asking a single question: What is my business worth? While valuation is important, it is rarely the most important question. A more productive starting point is: What do I want the sale of my business to accomplish for my family, my legacy, and the next phase of my life? A recent series by Family Business Magazine outlines a useful framework for thinking through that question. It moves the conversation beyond price and into a broader discussion of life planning, liquidity planning, and post-sale purpose. I highly suggest taking at those articles here: Part 1: How to exit a family business with purpose, profit and peace of mind - Family Business Magazine Part 2: Planning for the best possible outcome of a business sale - Family Business Magazine The below focuses primarily on maximizing enterprise value while preparing for a sale, but the articles linked above are a must read for owners planning an exit. Many of these themes closely mirror what we see in transactions involving search funds, independent sponsors, and family office investors acquiring privately held businesses, because many of those deals pull from the same group of sellers. Sellers Should Define "Enough" Before Negotiating One of the most common mistakes founders make is negotiating a transaction before defining what success actually looks like. Owners should enter negotiations with clarity on: The lifestyle they want after the sale How much liquidity is required to support that lifestyle Legacy or philanthropic goals Whether they want to remain involved in the business Without defining what "enough" means, sellers can end up optimizing for headline price rather than overall outcome. Some reject reasonable offers while others accept deals that ultimately do not support their long‑term financial goals. From a planning perspective, this is where tax modeling, estate planning, trust structuring, and charitable planning should occur before a letter of intent is signed. Once negotiations begin, many of these planning opportunities become more limited. Transaction Structure Matters as Much as Price A higher purchase price does not always produce a better result for the seller. Owners should carefully evaluate the structure of a proposed transaction, including: Cash at closing versus rollover equity Earn‑outs and performance contingencies Seller financing Employment agreements and non‑compete obligations Indemnification exposure and escrow provisions Capital tied up behind unrealistic performance benchmarks, potential clawbacks, and unintended tax consequences can quickly change how a seller views the attractiveness of a deal. A Practical Example: How Structure Shapes the Outcome Consider a common lower‑middle‑market transaction. A founder sells a services company for $12 million to a search fund backed by several investors. The deal structure may look something like this: $8 million paid in cash at closing (often financed through SBA or senior debt) $2 million rolled over by the seller as minority equity $1 million tied to performance‑based earn‑out targets $1 million held in escrow to cover indemnification exposure On paper, the headline purchase price is $12 million. In practice, the seller only receives $8 million at closing, with the rest dependent on future performance and negotiated protections. For some sellers, this structure can be extremely attractive. Rollover equity allows them to participate in future growth, particularly if the buyer plans to pursue add‑on acquisitions or scale the platform. For others, the priority may be liquidity and simplicity. The Emotional Transition Is Real Selling a business is not purely a financial event. For many founders, the business represents years of personal effort and identity. The business may represent: A founder's reputation in the community Their daily structure and purpose Their primary social and professional network This is why many successful transitions incorporate some form of gradual change rather than an immediate exit. Options may include: A phased transition period A recapitalization instead of a full sale Minority liquidity events Installing professional management before a transaction These approaches can allow owners to preserve value while also managing the emotional realities of stepping away from the enterprise they built. Post‑Sale Wealth Requires Structure For many founders, the sale of a business represents the single largest liquidity event of their lives. The transition from operating income to investment income requires a completely different mindset and governance framework. A successful sale often creates a new set of challenges. A significant liquidity event can introduce complexity that many founders have never previously faced. Common considerations include: Investment governance Asset protection Estate and gift tax exposure (although much of this should be planned prior to the sale date) Family alignment around wealth management Many families explore options such as establishing a family office, joining a multi-family office platform, or pursuing their own investments in different asset classes (real estate, private equity, traditional stocks and bonds, etc.). The legal and governance infrastructure supporting these structures is just as important as the purchase agreement that completes the sale. Why Sellers Need to Have This Conversation Now Several market trends are increasing the number of potential transactions in the lower middle market. We are seeing: Growing number of retiring business owners Continued growth of search funds Increased independent sponsor activity Expansion of family office direct investing Strong buyer demand in certain service sectors As a result, many business owners are receiving inbound acquisition interest earlier than expected. But inbound interest does not necessarily mean a business or its owner is ready for a transaction. The most successful exits tend to occur when three elements align: The owner is personally ready The business is operationally prepared Legal, contractual, and financial structures are organized When those pieces are in place, a transaction can achieve far more than simply generating liquidity. It can provide the foundation for the next chapter of the owner's personal and financial life. Seller Readiness Checklist For founders considering a potential exit, several questions can help determine whether the business and owner are ready for a transaction: Have you defined what financial outcome is "enough" for your post‑sale goals? Are your financial statements, contracts, and corporate records organized and diligence‑ready? Do you understand how different transaction structures affect liquidity and taxes? Have you discussed succession and estate planning with your advisors? Do you know whether you want to exit completely or remain involved post‑transaction? Is your management team capable of operating the business during and after a transition? Owners who address these questions early often enter negotiations from a position of clarity and strength. Final Thoughts Selling a business is one of the most consequential financial decisions an entrepreneur will make. The best outcomes rarely result from focusing on price alone. Instead, they come from thoughtful planning that integrates transaction strategy, tax considerations, estate planning, and personal goals. For owners considering an exit, taking the time to plan intentionally, before negotiations begin, can make the difference between a good outcome and a transformative one.
March 17, 2026
Tax
ERC Refund Claims Are Running Out of Time: Why Waiting on the IRS Could Cost Businesses Their Credit
The Employee Retention Credit may be closed to new filings, but the controversy surrounding unpaid and disallowed claims is very much alive. For many businesses, the real risk in 2026 is no longer just whether the IRS will eventually act. The real danger is that waiting too long may eliminate a taxpayer’s ability to force action and recover the refund at all. That risk is becoming acute. The IRS’s own ERC disallowance guidance states that once a Letter 105C is issued, the taxpayer generally has two years from the date of that letter to file suit. Requesting an administrative appeal does not extend that deadline. In other words, a protest can sit comfortably in the IRS administrative queue while the clock on your right to sue keeps ticking away. This is not a theoretical concern. In its Annual Report to Congress, the National Taxpayer Advocate warned that the IRS issued roughly 28,000 ERC disallowance notices during the summer of 2024. By the time the report was published, many of those taxpayers had fewer than six months remaining on the two-year period to file suit. That should get the attention of any business with an unresolved ERC dispute. The practical message is straightforward. A taxpayer cannot assume that “waiting on appeals” preserves the claim. It does not. Nor can a taxpayer assume that the IRS will affirmatively safeguard the deadline. And while TAS has reportedly set up a universal email address where taxpayers and practitioners can send Form 907s that need immediate attention, there is no clear definition of what “immediate” means or how submissions with be prioritized. That is if you can get one signed. Practitioners have widely reported that the IRS has a directive to deny any requests for extensions. For businesses stuck in the administrative process or waiting out IRS inaction, that is not encouraging news. Just as troubling is the disconnect between official reporting and what many practitioners are seeing on the ground. The Government Accountability Office (“GAO”) reported in February 2026 that the IRS told GAO it had closed all ERC claims, except for the 41,000 still in examination or appeal. BUT the IRS did not provide documentation for that figure, did not define what it meant by a “closed” claim, and had not publicly updated ERC processing status since October 2024. That lack of transparency matters. A claim that the IRS internally considers “closed” may not feel closed at all to the business that has received no payment, no final resolution, no meaningful movement in the administrative process, and no clear explanation of what happens next. And practitioners, who have direct knowledge about how many ERC claims remain unresolved or pending for their clients, are scratching their heads at the IRS’s numbers. When the government’s statistics and the real-world experience of taxpayers diverge this sharply, the problem usually isn’t arithmetic. It’s visibility. The disconnect could be driven by resource constraints. The IRS is attempting to manage complex amended return inventories, controversy matters, and operational changes at the same time its workforce has shrunk significantly. According to the National Taxpayer Advocate’s 2026 report, the IRS workforce fell from 102,113 to 75,702 over the prior year, with major reductions in taxpayer services, small business and self-employed functions, and information technology. A workforce reduction of that magnitude inevitably affects how quickly and effectively disputes are resolved. All of this to say: businesses should not treat delay as harmless. Put differently, this is not an environment in which a company should confidently assume its case will be resolved through the ordinary administrative process before a limitations problem arises. When the statute of limitations is involved, time does not merely fly, it sprints. For businesses with ERC claims, 2026 should be treated as a decision year, not a waiting year. If your claim has been denied, you should determine the date on the denial letter and calculate the two-year suit deadline now. Many businesses will find that deadline is coming this July. If your protest is pending, you should evaluate immediately whether the statute is still running and whether action is necessary to preserve your rights. If your claim remains unresolved after prolonged inaction by the IRS, you should assess whether court action is appropriate rather than assuming the administrative process will eventually resolve itself. Businesses that filed ERC claims in good faith should not lose their recovery rights because the IRS process is slow, opaque, and under-resourced. They should not lose a legitimate tax credit simply because a handful of aggressive promoters created skepticism around the program. Yet that is precisely the position many taxpayers now face. One of the important nuances of filing for a refund is that it takes it out of the hands of the Office of Chief Counsel (IRS in-house attorneys) and thrusts it into the arms of the DOJ. At a time when the DOJ has defunded its tax division and spread its specialized attorneys amongst its various criminal and civil litigation divisions, perhaps an abundance of filings creating pressure will cause the DOJ to push the IRS into action and resolution. Who knows. But there’s only one way to find out. Either way, the window to act is narrowing, particularly for taxpayers who received ERC disallowance letters in the summer of 2024 and assumed their protest would preserve the claim. It may not. If your company has an unpaid ERC claim, a pending protest, or a disallowance letter that has been sitting for months, now is the time to review the file, confirm the applicable deadlines, and determine whether litigation or other protective action is necessary. You still have options today, but that may not be true for long. Waiting for the IRS to move first may be the very thing that costs you the chance to recover.
March 16, 2026
Family Law
In Depth Crypto Secrets and Divorce: Valuing Hidden Wealth in New York Splits
As cryptocurrency moves from the margins of finance into the mainstream, matrimonial practitioners are increasingly encountering digital assets in divorce proceedings. Assets such as Bitcoin, Ethereum, and other blockchain-based tokens, once considered speculative investments, now appear regularly within marital estates. The presence of cryptocurrency in a divorce raises issues that traditional financial assets rarely present. These assets exist outside conventional banking systems, are often held in decentralized digital wallets, and may be transferred or stored in ways that are not immediately apparent from traditional financial records. As a result, identifying, valuing, and dividing cryptocurrency can present unique challenges during equitable distribution proceedings. Under New York law, cryptocurrency is generally treated as property subject to equitable distribution if acquired during the marriage. However, its technological structure, market volatility, and potential for concealment often complicate discovery and valuation. For matrimonial attorneys and litigants alike, understanding how courts approach digital assets has become an increasingly important component of modern divorce practice. Understanding Cryptocurrency Cryptocurrency is a digital asset that uses cryptographic technology and decentralized networks to verify and record transactions. Unlike traditional currencies issued by governments or central banks, cryptocurrency operates on a distributed ledger known as a blockchain. The blockchain functions as a permanent digital record of transactions maintained across a network of computers. While these transactions are publicly recorded, the individuals behind them are typically identified only by alphanumeric wallet addresses rather than by name. This structure creates a level of pseudonymity that can complicate efforts to identify ownership. Control of cryptocurrency is determined by possession of private cryptographic keys associated with a digital wallet. Whoever holds the private keys effectively controls the asset. Cryptocurrency may be stored through online exchanges, mobile wallets, hardware wallets, or offline storage devices, often referred to as “cold storage.” While the technology underlying cryptocurrency offers transparency because transactions are permanently recorded on the blockchain, it also creates practical challenges when these assets must be addressed in a matrimonial context. Cryptocurrency as Marital Property in New York New York is an equitable distribution state governed by Domestic Relations Law §236(B). Under this framework, marital property is distributed in a manner the court considers fair under the circumstances, though not necessarily equal. For purposes of equitable distribution, cryptocurrency is generally treated as property in the same manner as other financial investments. Digital assets acquired during the marriage are therefore typically considered marital property subject to distribution. Conversely, cryptocurrency acquired prior to the marriage, or received individually by gift or inheritance, may be considered separate property, provided it has not been commingled with marital assets. Practitioners are increasingly encountering cases where one spouse began investing in digital assets years before the marriage, but continued trading during the marriage using marital funds. In those circumstances, careful tracing is often required to determine what portion of the asset may remain separate and what portion may be marital. Discovery and Identification of Cryptocurrency Perhaps the most significant challenge in cases involving cryptocurrency is identifying whether such assets exist in the first place. Traditional financial accounts generate regular statements and leave clear documentary trails. Cryptocurrency, by contrast, may be stored in decentralized wallets that are not tied to any financial institution. As a result, the existence of these assets may not be readily apparent from standard financial disclosures. Ownership of cryptocurrency is not determined by whose name appears on an account, but rather by who controls the private keys associated with the digital wallet. A spouse who controls those keys effectively controls the asset. For this reason, discovery in cases involving cryptocurrency often requires a detailed examination of financial records. Attorneys frequently review bank and credit card records for transfers to cryptocurrency exchanges such as Coinbase, Binance.US, Kraken, Uphold, or Gemini, as well as unexplained withdrawals or transfers that may indicate digital asset purchases. Common discovery tools include subpoenas to exchanges, requests for wallet addresses and transaction histories, and forensic analysis of electronic devices and financial accounts. Although cryptocurrency is sometimes perceived as anonymous, transactions recorded on the blockchain are permanent and publicly available. When analyzed by professionals familiar with blockchain technology, these records can often reveal patterns of transactions and help trace the movement of digital assets. In several recent matters handled by the New York Supreme Court, the Court has permitted expanded financial discovery when credible evidence suggested undisclosed digital asset holdings. As with other financial assets, the failure to disclose cryptocurrency may result in sanctions, adverse inferences, or adjustments to equitable distribution. Valuation Considerations Once cryptocurrency has been identified as part of the marital estate, determining its value presents additional challenges. Cryptocurrency markets are well known for their volatility. Prices may fluctuate dramatically within hours or days, which can complicate the valuation process. In New York divorce proceedings, courts may value marital property as of the date of commencement of the action, the date of trial, or another date deemed equitable under the circumstances. Given the volatility of digital assets, the selection of the valuation date can significantly affect the final distribution. Practitioners often retain financial experts to analyze historical pricing data from major exchanges and determine a reliable fair market value. In cases involving substantial holdings, experts may calculate average pricing over a defined period in order to minimize the impact of short‑term market fluctuations. Methods of Distribution Once cryptocurrency has been identified and valued, the parties or the court must determine how the asset will be distributed as part of equitable distribution. Several approaches are commonly used. In‑Kind Division One option is to divide the cryptocurrency itself between the parties. Each spouse receives a proportionate share of the digital asset. While this allows both parties to share in future gains or losses, it also requires both individuals to maintain secure digital wallets and understand how to manage the asset. Buyout or Offset In many cases, one spouse retains the cryptocurrency while the other receives an offsetting asset of comparable value, such as cash or additional equity in the marital residence. This approach is often preferred when only one spouse was actively involved in managing digital investments during the marriage. Liquidation Another option is to sell the cryptocurrency and divide the proceeds. This approach eliminates the uncertainty associated with price volatility, but may create tax consequences depending on the asset’s appreciation and holding period. Concealment Concerns The decentralized nature of cryptocurrency can make it easier for individuals to attempt to conceal assets during divorce proceedings. Digital assets can be transferred rapidly between wallets or across exchanges in ways that may initially appear difficult to trace. In some instances, individuals attempt to obscure transaction histories by transferring assets through multiple wallets or converting them into privacy‑focused tokens. Despite these challenges, blockchain technology can also work in favor of investigators. Because blockchain transactions are permanently recorded, forensic specialists are often able to reconstruct transaction histories and trace the movement of funds. In practice, experienced matrimonial attorneys are increasingly working with forensic accountants and blockchain analysts to determine whether undisclosed digital assets exist. Tax Implications Cryptocurrency also raises important tax considerations in divorce proceedings. The Internal Revenue Service treats cryptocurrency as property rather than currency. As a result, selling cryptocurrency to divide proceeds may generate capital gains taxes depending on the asset’s cost basis and holding period. Transfers of cryptocurrency between spouses incident to divorce may qualify for non‑recognition of gain under federal tax law. However, the receiving spouse generally assumes the original cost basis of the asset, which can create tax implications when the asset is later sold. Accordingly, tax consequences should be carefully evaluated when structuring any settlement involving digital assets. The Role of Experts As cryptocurrency becomes more prevalent in marital estates, the role of financial and forensic experts in matrimonial litigation continue to expand. Professionals experienced in blockchain analysis and digital asset valuation can assist attorneys and courts in identifying hidden assets, tracing transaction histories, and determining fair market value. In complex cases involving substantial digital holdings, these experts often provide the evidentiary foundation necessary for courts to confidently include digital assets within the marital estate. Conclusion By 2030, the global cryptocurrency market is expected to surpass $3 trillion in value. As digital assets continue to expand within personal and marital financial portfolios, understanding how these holdings are identified, valued, and equitably distributed in a New York divorce has become not merely important, but essential. Coin Market Cap is an online platform that provides data on the cryptocurrency market.
March 13, 2026
Landlord Representation
HUD’s New Citizenship Verification Mandate: What HUD-Assisted Housing Providers Must Do
In January 2026, the U.S. Department of Housing and Urban Development (HUD) issued a surprise directive announcing immediate verification of citizenship and eligible immigration status for all households receiving federal housing assistance. Owners, public housing authorities, and managers of HUD‑assisted properties are now subject to a 30‑day deadline to identify and correct documentation gaps—or face potential consequences. HUD already issued the same mandate directly to Public Housing Authorities nationwide in late 2025. At Offit Kurman, we have been closely monitoring this development and advising affordable housing providers on what this mandate means, how to comply, and how to protect against significant legal risk during implementation. Why HUD Issued This Directive HUD recently executed a Memorandum of Understanding with the Department of Homeland Security (DHS) to align their data systems—specifically HUD’s Enterprise Income Verification (EIV) system and DHS’s SAVE (Systematic Alien Verification for Entitlements) program. They combined the two into a new joint registry called the EIV-SAVE Tenant Matching Report. After conducting their own preliminary audits, the agencies assert they identified: Households receiving assistance without verified eligibility Non‑citizen household members with inconsistent or missing SAVE records Deceased residents listed as active in EIV files Who Must Comply If your property participates in a HUD‑assisted program, the mandate applies. This includes: Public Housing Authorities Section 8 Project‑Based properties Section 202, 236, 221(d)(3), 811 HUD Multifamily assisted housing programs What HUD Requires You to Do Immediately HUD expects these affordable housing providers to: Review and verify the citizenship or immigration status of all assisted household members Correct discrepancies identified in the EIV-SAVE Tenant Matching Report Prorate assistance applied to mixed‑status households Document every step along the way and ensure electronic and paper files align This mandate is a significant operational challenge, but it is manageable with structure, consistency, and careful communication. The biggest risks lie not in HUD’s verification requirements, but in missteps during resident interactions, potential selective enforcement, or insufficient documentation. Remember: National origin and race/color are protected classes under the Fair Housing Act, which is federal law. Your jurisdiction may have additional protected classes to be aware of. Housing providers should keep in mind that communication with all residents should be neutral, factual, uniform, non-threatening, and non-political. Housing providers who respond quickly, apply the process uniformly, and preserve clear records are well‑positioned to navigate this change successfully.
March 12, 2026
Landlord Representation
After the Layoff: Rebuilding Trust and Avoiding Legal Landmines
A reduction in force is one of the hardest decisions any organization makes. Even when the business case is clear, the human impact is not. Jobs are lost. Teams are disrupted. And the employees who remain are left trying to process a complicated mix of relief, anxiety, and uncertainty. For employers, the work does not end when the layoff notices go out, or the separation agreements are signed. In many ways, the real challenge begins the next morning when the remaining workforce logs in and asks the same quiet question: what happens now? From a labor and employment perspective, the post-layoff period is where culture, communication, and legal risk collide. Organizations that handle this moment thoughtfully can rebuild trust and stabilize their teams. Those that do not may find themselves facing declining morale, increased turnover, and avoidable legal exposure. The employees who remain are often referred to as “survivors,” and that description is not far off. Survivor’s guilt is common. Employees may feel uneasy about colleagues who lost their jobs while they remained. At the same time, many are wondering if they will be next. The instinct for some leaders is to move on quickly and return to business as usual. That approach rarely works. Silence invites speculation, and speculation almost always fills the gap with worst-case assumptions. The first step toward rebuilding trust is clarity. Employees do not expect leadership to promise that layoffs will never happen again. They do expect honesty about why the reduction occurred and what the path forward looks like. When leaders explain the business realities behind difficult decisions, employees are more likely to view the process as legitimate, even if they wish it had not happened. Transparency also means explaining how decisions were made. Without sharing confidential information, employers should communicate the factors used to evaluate roles and determine which positions were eliminated. When employees understand the reasoning, they are less likely to assume the process was arbitrary or unfair. Managers play a critical role in this moment. Frontline supervisors are usually the first people employees turn to with questions and concerns, yet they are often the least prepared for those conversations. Employers should provide managers guidance on how to address the layoff, answer common questions, and recognize signs of burnout or disengagement on their teams. At the same time, organizations need to take a realistic look at workload. One of the most common mistakes after a reduction in force is assuming the remaining employees can simply absorb the work of those who left. In the short term, teams often step up heroically. Over time, however, sustained overload leads to frustration, mistakes, and eventually departures. Rebuilding trust means acknowledging this reality and adjusting priorities where necessary. Recognition matters as well. Employees want to know their contributions are seen and valued, especially during periods of uncertainty. Celebrating small wins, inviting employee input, and acknowledging extra effort can go a long way toward restoring a sense of stability. But rebuilding morale is only part of the equation. The period following a reduction in force also comes with a number of legal landmines that employers should not ignore. One of the biggest risks is inconsistent messaging. If leaders offer different explanations about why the layoff occurred or how decisions were made, employees may begin to question whether the stated business reasons were genuine. Confusion and mixed signals can quickly fuel discrimination or retaliation claims. Employers should make sure leadership, HR, and managers are aligned on what will be communicated and how. Another key issue is whether the layoff had a disproportionate impact on certain employee groups. Even when a reduction is driven by legitimate business needs, the selection criteria can sometimes result in unintended disparities affecting protected groups. Conducting an adverse impact analysis before implementing a reduction is a critical step that many employers overlook. Age-related issues deserve particular attention. When employees aged 40 and older are asked to sign releases in exchange for severance, employers must comply with the Older Workers Benefit Protection Act. That means using clear language and providing the appropriate review and revocation periods. In group termination situations, employers must also provide specific disclosures regarding job titles and ages of individuals selected and not selected for the program. These requirements are technical, and cutting corners can undermine the enforceability of the agreement. Retaliation is another common flashpoint. Employees who previously raised concerns about discrimination, harassment, pay practices, or workplace safety may claim they were selected for the layoff because they spoke up. That does not mean they cannot be included in a legitimate reduction in force, but it does mean the employer should have well-documented, objective business reasons for the decision. Employers should also be mindful of wage-and-hour issues that may arise after layoffs. When teams shrink, but expectations stay the same, remaining employees may start working off the clock, skipping breaks, or accumulating overtime that managers quietly hope will go unreported. That dynamic can quickly lead to wage claims. Reviewing timekeeping practices and reminding managers of their responsibilities can prevent small issues from becoming larger ones. Severance agreements themselves can also create problems if they are drafted too aggressively. Overly broad confidentiality or nondisparagement provisions may run afoul of employee rights to discuss workplace conditions or participate in protected activity. The goal should be a thoughtful, compliant agreement, not language that attempts to silence employees entirely. Another surprisingly common mistake occurs when leaders try to reassure employees by making promises they cannot guarantee. Statements like “this was a one-time event” or “there will be no more layoffs” may calm nerves in the moment, but they can create credibility problems if circumstances change. Honest, measured communication is always safer than absolute assurances. Finally, employers should remember that documentation matters. Casual comments in emails or internal messages can look very different when reviewed months later by a government agency or a court. Descriptions of employees lacking “energy,” not fitting the “new culture,” or being “close to retirement” may seem harmless in conversation, but can quickly become problematic in litigation. The bottom line is that a reduction in force is not just an operational decision, it is a defining moment for an organization’s culture and leadership. Employers that communicate clearly, train managers thoughtfully, and review decisions through both a business and compliance lens are far better positioned to move forward. Just as important, they signal to the employees who remain that they are valued partners in the company’s future. And in the aftermath of a layoff, that message matters more than ever.
March 12, 2026
Tax
When Will the IRS Compromise Tax Liability?
We have all seen the television commercials hawking tax relief with “satisfied clients” shilling for the promoter. But will the IRS really compromise a tax liability? If so, when, how, and why? There are four grounds on which the IRS is authorized to compromise a tax liability: (1) Effective tax administration on grounds of equity or public policy; (2) Effective tax administration on grounds of economic hardship; (3) Doubt as to liability; and (4) Doubt as to collectability. Because the business is the taxpayer, a request to compromise must be made in the name of the business. This means that partners in a partnership cannot compromise an individual’s portion of a partnership tax debt. The partnership must submit its own offer in compromise based upon the partnership’s and the individual partner’s ability to pay. The Internal Revenue Manual (IRM) is the IRS’s internal policies and procedures manual and contains a wealth of information regarding how the IRS evaluates offers in compromise (among many other topics). To see what factors the IRS considers and how it evaluates offers in compromise as set forth in the IRM, click here. Effective Tax Administration on Grounds of Equity or Public Policy This means there is no doubt the tax liability is owed, and that the full amount could be collected. In this case, compelling public policy or equity considerations exist, such that collection of the full liability would undermine public confidence that the tax laws are administered in a fair and equitable manner. Not to say the IRS has never compromised a tax debt on these grounds, but a successful result is almost unprecedented. Effective Tax Administration on Grounds of Economic Hardship Like its sibling, a compromise on grounds of public policy, this exception also means there is no doubt the tax liability is owed and that the full amount could be collected. This ground would apply where full collection would cause severe economic hardship, such as an inability to pay basic, reasonable living expenses. Most efforts to compromise a tax debt under this exception fail because other, more common grounds exist. Doubt as to Liability This means there is a genuine dispute whether the amount of the assessed tax is correct or whether the assessment is correct. Tax protester arguments, i.e., the Income Tax Act is unconstitutional, the income tax is a voluntary tax, wages are not income, the sovereign citizens theory, and a plethora of other arguments do not constitute a genuine dispute. In fact, all these tax protester arguments have been repeatedly characterized as frivolous, which, if made, will subject the person making them to possible sanctions under IRC § 6673(a). For information on tax protester arguments (and the consequences) click here. Doubt as to liability frequently arises in cases involving innocent spouse relief, but may arise in other areas as well. Doubt as to liability can arise in a number of circumstances such as a missed notice from the IRS resulting in the IRS disallowing all deductions, which, assuming the time for correction has not expired, can be proven and credited, mistaken or incorrect reporting such as when a payroll service reports (and pays) employment taxes for one affiliate when it should have been the other affiliate, or the IRS examiner made a mistake in applying the law or in calculating a tax liability. It happens. Doubt as to liability could arise when the IRS seeks to impose a Trust Fund Recovery penalty—the Trust Fund Recovery penalty, or TFR for short, is a 100% penalty— on a corporate official for not making payroll tax deposits and a genuine issue exists whether the person is a “responsible party” for purposes of withholding, collecting, and remitting payroll taxes. In virtually all the litigated tax cases, the issue is doubt as to liability. In each case, the determination of whether there is any doubt as to liability will be made on the totality of the facts and circumstances. To raise the issue of doubt as to liability, several conditions must be met: (1) there cannot be a final court determination regarding the tax liability; (2) there must be a legitimate dispute regarding the tax liability (no tax protester arguments); and (3) you must have supporting documentation. Typically, doubts as to liability are resolved well before the offer in compromise stage; but if not, an offer in compromise on the basis of doubt as to liability is made using Form 656-L. The last category, doubt as to collectability, is the most often used ground for compromising a tax debt. Doubt as to Collectability This means the IRS does not think it can collect the full amount of the tax liability through forced collection, so it would rather have something rather than nothing. Before the Service will consider compromising a tax debt due to doubt as to collectability, it will require the taxpayer to submit Form 433-B, Collection Statement for Businesses (for individuals, there is Form 433-A). Form 433-B requires a business to list extensive financial information. Though it may seem intrusive at first blush, the purpose of Form 433-B is to determine what the IRS can achieve through force collections. After all, the IRS will not compromise a tax debt for doubt as collectability where the full amount can be paid through available assets or income, either in full immediately or through an installment agreement. Though some may be tempted to understate assets and overstate liabilities on Form 433-B, this is a very bad idea. Form 433-B, like all forms submitted to the IRS, is signed under penalty of perjury. Intentionally understating assets or overstating liabilities on a Form 433-B is a 1001 violation (a crime punishable by up to five years imprisonment) just as if the person signing the form had lied to a federal agent. As thorough as Form 433-B is, it is just numbers on a piece of paper. To maximize the chances of getting the IRS to compromise a business tax debt, the business’s story needs to be told, in writing, ideally accompanying Form 433-B. An offer in compromise (OIC) for doubt as to collectability is made on Form 656-B. If the taxpayer can demonstrate that it is unlikely that the IRS will collect the full amount through forced collection and the offer in compromise reflects the taxpayer’s reasonable collection potential (RCP), the IRS will likely accept the offer and compromise the tax debt.
March 11, 2026
Family Law
Cryptocurrency in Divorce: How Courts Handle Bitcoin, Valuation, and Disclosure
As cryptocurrencies become more common, Bitcoin is increasingly showing up in divorce cases. Unlike traditional bank accounts, dividing Bitcoin involves unique issues related to valuation, transfer, and tax consequences. In most states, including Maryland, property acquired during the marriage is generally considered marital property, regardless of how it is titled. If Bitcoin was purchased during the marriage using marital funds, it is typically subject to division. If it was acquired before the marriage, some or all of it may be non-marital property. However, any increase in value during the marriage may still be considered when dividing assets. Bitcoin’s price fluctuates significantly. Courts must determine a valuation date, which could be the date of separation, filing, or trial, depending on the jurisdiction. Because of volatility, the timing of valuation can meaningfully affect the outcome. Some settlements divide the actual Bitcoin amount rather than assigning a fixed dollar value to account for price swings. There are three common methods to dividing Bitcoin: 1) Transfer in-kind: one spouse transfers a portion of the Bitcoin directly to the other; 2) Sell and divide proceeds: the parties agree to liquidate the Bitcoin and the cash is split, and 3) Offset with other assets: one spouse keeps the Bitcoin, and the other receives different marital assets of equal value. Each method has tax and risk considerations that should be analyzed and assessed. Cryptocurrency can raise concerns about hidden assets, especially when wallets or exchanges are not fully disclosed. Courts take nondisclosure seriously. Bitcoin is also treated as property for tax purposes. Selling it may trigger capital gains, so the tax impact should be considered when structuring any division. While Bitcoin is divisible in divorce, its volatility and tax implications make it more complex than dividing traditional assets. Careful planning and clear settlement terms are essential to ensure a fair and enforceable outcome.
March 10, 2026
Family Law
Public vs. Private School in Divorce: Who Decides and Who Pays?
When parents divorce, disagreements about whether a child should attend public or private school are common. The answers to “who decides?” and “who pays?” depend largely on custody and the family’s financial circumstances. Who Decides? School choice is part of legal custody, which governs major decisions about things like a child’s education, medical care, and religion. If parents share joint legal custody, neither parent can unilaterally choose a private school or switch schools without the other’s agreement. If they cannot agree, a judge may decide based on the child’s best interest. Maryland courts apply guidance from cases such as Taylor v. Taylor and Montgomery County Dept. of Social Services v. Sanders, focusing on stability, the child’s academic history, parental involvement, and practical considerations like distance and scheduling. If one parent has sole legal custody, that parent typically has authority to decide the school, although the other parent may challenge the decision if it is harmful or unreasonable. Who Pays for Private School? Even if a private school is chosen, tuition is not automatically required. Courts examine factors like whether the child historically attended private school, whether the family can afford the expense, and whether private education is consistent with the child’s best interest. Private school tuition is often treated as an additional child-related expense and may result in child support adjustment. Courts are more likely to require payment if the child attended private school during the marriage and the parents have the financial ability to continue it. The Bottom Line Educational decisions in divorce should not be about what one parent prefers; instead, they should be about what serves the child’s best interests while remaining financially realistic. If you are facing a dispute about school choice, early legal guidance can help you protect both your parental rights and your financial stability.
March 9, 2026
Estates and Trusts
Protecting the Modern Family with Mindful Estate Planning
Early in the show Modern Family, we meet a family formed through remarriage, cultural differences, and a significant age gap. When Jay Pritchett marries Gloria Delgado, he becomes stepfather to her sensitive teenage son, Manny. Gloria, in turn, joins a family that already includes Jay’s adult children, Claire and Mitchell. Blended Families, Real-Life Challenges The show has a field day as Jay grapples with Manny’s love of espresso, poetry, and candlelit dinners, while Gloria adjusts to having stepchildren old enough to be her high school classmates. Later, Jay and Gloria welcome a son they have together, Joe, adding another layer to the family structure. While these moments provide plenty of laughs on screen, similar situations in real life raise serious legal questions. Their household reflects many of the realities of today’s blended families—the complexities of prior relationships, stepparenting, and children with different legal ties to each parent. Manny has a biological father, Javier, who remains part of his life. If Gloria were to die unexpectedly, what arrangements would protect Manny’s financial future? If Jay were to die first, how would his estate be divided among Gloria, Claire, Mitchell, Manny, and Joe? Would Manny inherit in the same way as Jay’s biological children? Would Gloria have full access to Jay’s assets, and if so, how might that setup affect what ultimately passes to Claire and Mitchell? Questions like this call for thoughtful estate planning. Prenups and Marital Trusts: Planning for Every Scenario Before tying the knot, Jay and Gloria could have met with an estate-planning attorney to clarify their intentions and protect everyone involved. One possible tool would be a prenuptial agreement. Second marriages, especially those involving children from prior relationships, often benefit from a written agreement that defines property rights and financial expectations. A prenup outlines how assets will be divided in the event of divorce and can also address inheritance rights upon death. For Jay, who built a successful business before marrying Gloria, this document could ensure that certain assets are preserved for Claire and Mitchell while still providing generously for Gloria. Another strategy would be to create a marital trust under Jay’s will. If Jay died first, his assets could be placed in trust for Gloria’s lifetime benefit. She would receive income and, if needed, principal for her health and support. After Gloria’s death, the remaining trust property could pass according to Jay’s wishes—perhaps divided among Claire, Mitchell, and Joe, or allocated in a way that also provides for Manny. This structure enables a surviving spouse to remain financially secure while preserving the first spouse’s intentions regarding his children. Gloria would need similar planning. Because Manny has another living parent, Javier, questions of guardianship and inheritance require thoughtful consideration. Having a current will, clear beneficiary designations on assets like life insurance and retirement accounts, and possibly a trust could ensure that Manny and Joe are protected without unnecessary complications. Adoption presents another consideration in some blended families. If Jay adopted Manny (and Manny’s biological father consented), that would strengthen Manny’s inheritance rights and formalize his legal relationship with Jay. Adoption would also affect how assets are passed under intestacy laws if either Jay or Manny died without a will. Blended families often bring love and complexity in equal measure. With a clear estate plan in place, Jay and Gloria could focus on raising Joe, supporting Manny, and staying connected to Claire and Mitchell—confident that their legal foundation supports the family they built together. Putting Your Plan Into Action If you are part of a blended family—or considering creating one—taking time to address the legal and financial details can be just as important as building emotional bonds. Speaking with an experienced Estates & Trusts attorney can help you protect your spouse, your children, and your intentions. With mindful planning, you can ensure a more secure future for the family you build today.
March 6, 2026
Estates and Trusts
Using a Private Foundation to Preserve an Artist’s Legacy
Thoughtful estate planning is essential for artists seeking to ensure the long‑term preservation, management, and presentation of their lifelong work. Although executors and trustees can competently administer the legal and financial aspects of an estate, they may lack the specialized knowledge required to oversee a significant body of artistic work. Establishing a private foundation—whether in the form of an operating foundation that directly manages, displays, and loans artwork, or a non-operating foundation that supports public charities—can provide a structured and durable mechanism for stewardship. By appointing directors who are artists or professionals familiar with the creator’s oeuvre, these entities can administer, conserve, and promote the artwork in a manner consistent with the artist’s intent. As a result, private foundations can serve as an effective vehicle for extending an artist’s legacy and ensuring that their work remains accessible and properly managed for many years beyond the administration of the estate. Structure of a Private Foundation: Corporate vs. Trust A private foundation can be established in either trust format or as a nonprofit corporate entity. Choosing the format of the entity depends on desired flexibility, liability, and administrative burdens. Nonprofit corporations are generally preferred for their flexibility, greater liability protection for their directors, and ease of modification. Trusts are simpler to form but are more rigid, often requiring court approval to amend, and are best for straightforward non-operating or grant-making foundations. Nonprofit Corporations Flexibility: Allows for amending bylaws, changing the charitable purpose, or moving the location — all without court intervention. Liability: Offers better protection for its officers and directors. Structure: Requires a board of directors, regularly scheduled meetings held at least annually, minutes, and formal state filings. Best for: Foundations with complex activities, multiple individuals in charge, or that may evolve over time. Trusts Simplicity: Easier and less expensive to set up, with fewer administrative requirements such as regular meetings and minutes. Control: Usually in the hands of one or more trustees who are appointed by the donor, who provides rigid guidelines in the governing instrument that are difficult to change. Modification: Amending a trust often requires court approval, making it less flexible and adaptable to change. Best for: Simple, grant-making foundations with a specific, unchanging purpose. What is the difference between operating foundations and non-operating foundations? An operating foundation is a private foundation that focuses on direct service by running its own programs in support of its charitable purposes, while a non-operating foundation is a charitable entity that distributes funds to public charities rather than operating its own programs. An operating foundation actively conducts its own programs, such as operating a museum, library, or research facility. An operating foundation may also provide grants to individuals, provided that those grants are within the foundation’s purposes. It must meet IRS "income" and "asset/service" tests to prove it is actively running programs rather than just holding assets. Generally, an operating foundation offers higher tax deductions for donors (up to 50%-60% of adjusted gross income) than a non-operating foundation. However, an operating foundation must spend at least 85% of its annual income on direct, active charitable activities. A non-operating foundation exists to support one or more specific public charities. It is typically funded by one or more individuals and focuses on grant-making to other qualified non-profits. Deductions to a non-operating foundation are limited to 30% of an individual’s adjusted gross income, and the foundation is required to pay out at least 5% of its assets annually to public charities. Since most artists’ foundations are formed to support and promote an artist’s legacy, they are usually formed as operating foundations unless the foundation is formed to sell the artist’s works and donate the proceeds to public charities. What are the duties and responsibilities of the board of directors of a private foundation? The board of directors of a private foundation leads the organization by defining its strategic vision, managing operations, and ensuring financial, legal, and ethical compliance. They are responsible for overseeing the officers of the foundation, who are the face of the organization with respect to fundraising, stewarding donors, cultivating relationships, and overseeing grantmaking programs that align with the foundation's mission. The board of directors is usually composed of at least three individuals. Some of the key responsibilities of the board of directors include: Mission & Strategy: Developing long-term goals, policies, and strategic plans for the foundation. Financial Oversight: Managing the foundation’s investment portfolio, approving budgets, reviewing audits, and ensuring tax compliance. Grantmaking and Programs: Developing grant guidelines and monitoring the distribution of funds. Leadership Oversight: Hiring, supporting, and evaluating the officers of the foundation, actively identifying and managing potential conflicts of interest, and ensuring transparency and accountability. Governance: Recruiting new board members, planning for succession, and maintaining foundation records. How do the foundation directors and officers interact with an artist’s works and intellectual property? The directors and officers are responsible for overseeing the management, preservation, and use of both the foundation’s physical artworks and its related intellectual property rights. Their authority and responsibilities are defined by the foundation’s governing documents, applicable state nonprofit law, and federal tax‑exempt organization rules. Some examples include ensuring the proper care, conservation, storage, and security of the foundation’s art collection; overseeing how copyright or other intellectual property rights to the artist’s work are licensed, enforced, or shared; ensuring that all interactions with the artwork and intellectual property comply with the IRS’s private foundation rules. Are the foundation directors and officers permitted to donate the artist’s artwork, organize exhibits, or sell the artwork? In general, the directors and officers of a private art foundation may donate, exhibit, or sell artwork only to the extent that those activities are consistent with the foundation’s governing documents, tax‑exempt purposes, and fiduciary duties. A private foundation’s charter, bylaws, and mission statement typically define how the artwork may be used and the scope of the directors’ and officers’ authority. Directors and officers may donate artwork if the donation furthers the foundation’s exempt purposes, for example, advancing the arts or supporting educational or cultural institutions. However, directors must avoid self‑dealing, meaning the artwork cannot be donated in a way that benefits disqualified persons, including directors, officers, substantial contributors, or related parties. Directors and officers are generally permitted to organize exhibitions, loan artworks, or otherwise make the collection accessible to the public. These activities are typically well aligned with a private operating foundation’s mission to directly manage and display the artist’s work, or a non-operating foundation’s mission to benefit public charities that further the foundation’s purposes. Directors and officers must ensure that exhibition or loan arrangements are documented at fair market terms and are consistent with the foundation’s charitable objectives. Directors and officers may sell artwork when doing so is allowed by the governing documents, consistent with the foundation’s purpose, and conducted at arm’s length and for fair market value. Sales to insiders or related parties can raise significant self‑dealing concerns under IRS rules applicable to private foundations. When permitted, sales may be used to fund operations, conservation efforts, or long‑term endowment needs. Finally, directors and officers must always act in the foundation’s best interests, preserve charitable assets, and comply with the Internal Revenue Code rules governing private foundations, including those related to self‑dealing, excess benefit transactions, and prudent investment of assets. How often do foundation directors meet? How are the meetings, held and what is discussed in those meetings? Board meetings are necessary because directors have legal fiduciary duties, which include the duties of care, loyalty, and obedience, all of which require active oversight and informed decision‑making. Regular meetings ensure that the foundation complies with nonprofit and tax‑exempt requirements, documents major decisions, manages charitable assets responsibly, and carries out its mission. Written and recorded minutes of all board meetings are essential to provide a clear governance record should the foundation ever face audit, regulatory review, or future questions about its stewardship of the artist’s legacy. The frequency and format of board meetings for a private foundation are determined primarily by the foundation’s governing documents, its bylaws, and organizational policies. Most private foundations hold board meetings at least annually, while many choose to meet quarterly or semi‑annually to fulfill fiduciary oversight responsibilities. Additional special meetings may be convened as needed, particularly when significant decisions arise concerning the foundation’s assets, including the management or disposition of artwork. Meetings may be held in person, virtually, or through hybrid formats, provided the bylaws and applicable state nonprofit law permit remote participation. Virtual meetings have become increasingly common due to their practicality and flexibility. Regardless of format, directors must receive proper notice, and the foundation must maintain accurate minutes documenting the actions taken. At each meeting, directors review matters related to governance, finances, and program activities. For an art-focused private foundation, discussions often include the following: Collection Management: Conservation needs, storage conditions, insurance coverage, cataloguing updates, and loan requests. Exhibitions and Programming: Potential exhibitions, partnerships with museums or cultural institutions, and educational initiatives. Intellectual Property Management: Licensing requests, reproduction permissions, and protection of the artist’s moral rights. Financial Oversight: Review of operating budgets, endowment performance, fundraising (if applicable), and compliance with expenditure responsibility rules. Legal and Compliance Matters: IRS private‑foundation compliance, conflict‑of‑interest reviews, self‑dealing safeguards, and approval of significant transactions. Strategic Planning: Long‑term preservation of the artist’s legacy, mission alignment, and governance succession planning. Are foundation directors compensated? The directors of a private foundation may be compensated with a "reasonable" salary or fees. Compensation should be outlined in the foundation's bylaws or governing documents, must not be excessive, and is typically based on industry standards. However, most directors of private foundations serve without compensation; only about 25% of private foundations compensate its board members, often using methods like annual retainers or per-meeting fees. Directors’ compensation is considered reasonable if it is what similarly situated individuals are paid for similar work at comparable organizations. Directors can be paid for professional and administrative services, including managing investments, legal work, accounting, overseeing foundation operations, and any work that is necessary to conduct the foundation’s exempt purposes. Directors are prohibited from receiving compensation for routine clerical work, physical labor, or services not related to the charitable purpose. Since directors are "disqualified persons," improper or excessive compensation can trigger IRS penalties (excise taxes) for self-dealing. Common methods of compensation include monthly or annual retainers, per-meeting fees (often $2,000+), or salaries. It is essential to document board approval and justify the salary amount to ensure it is not excessive, particularly for founder salaries, which are often 10%–25% of revenue. How are private foundations exempted under Section 501(c)(3) of the Internal Revenue Code? Private foundations qualify for tax‑exempt status under Section 501(c)(3) of the Internal Revenue Code by being organized and operated exclusively for charitable purposes, such as educational or cultural activities. To obtain this status, the foundation must (i) have organizing documents that limit its purposes to those permitted under §501(c)(3), (ii) refrain from activities that provide private benefit to insiders, and (iii) file Form 1023 or Form 1023‑EZ with the IRS to request recognition of exempt status. Once approved, the foundation must comply with the private‑foundation rules, such as restrictions on self‑dealing and minimum distribution requirements, to maintain its exempt status. If the application for a charitable exemption under Section 501(c)(3) of the Internal Revenue Code is submitted within 25 months of the formation of the private foundation, gifts to the foundation will be eligible for a charitable exemption under Section 170(c) and Section 2522 of the Internal Revenue Code dating back to the date of formation of the entity. Filing Form 1023 within 25 months (which is within the 27-month deadline) allows a non-profit to be recognized as tax-exempt retroactively from its date of formation. If the application is filed after the deadline (27 months from the end of the month of formation), the exemption is only effective from the date of the submission, meaning previous years may require amended tax filings by both the entity and its donors. Filing before the 25-month deadline ensures that all income earned since formation is exempt, and donations made to the organization are tax-deductible from the inception, provided it met 501(c)(3) requirements during that period. If done properly, the organization avoids having to pay corporate income tax for the period between its formation and the approval of the exemption, avoiding potential "gap" issues where tax might be owed. What are other team members in a private foundation? A private foundation typically relies on a broader team beyond its board of directors to ensure proper governance, financial management, and strategic oversight. While the board of directors is ultimately responsible for fulfilling fiduciary duties and guiding the foundation’s mission, several key roles support the foundation’s operations and compliance. Officers are the public face of a foundation. There are four types of officers that help the directors manage a private foundation, and they include the president, vice president, secretary, and treasurer. Each role serves a different purpose, but it is common for one person to hold one or more roles. President/CEO The president or chief executive officer provides overall leadership, reports to the board, sets agendas, and ensures that the foundation operates in accordance with its mission and governing documents. The president often serves as the primary liaison between the board and the public, including donors, museums, advisors, and service providers. Vice President The vice president supports the president and may assume leadership responsibilities in the president’s absence. Depending on the bylaws, the vice president may oversee specific committees or initiatives, such as exhibition planning or legacy programs. Secretary The secretary maintains the foundation’s official records, including meeting minutes, board resolutions, and governance documents. This role is critical for ensuring transparency, regulatory compliance, and properly documented decision‑making, particularly important for a private foundation managing valuable artwork. Treasurer The treasurer oversees financial matters, including budgeting, accounting practices, investment oversight, and compliance with IRS rules governing private foundations. The treasurer works closely with financial advisors and accountants to ensure proper stewardship of assets and adherence to annual reporting requirements. In addition to the directors and officers, the foundation may engage other professionals to serve as part of its advisory team. Although not required, these individuals can help ensure that the foundation operates smoothly and effectively. Legal Counsel Attorneys experienced in nonprofit and tax‑exempt organizations help interpret IRS rules, draft governance documents, review contracts (e.g., loan agreements or licensing deals), and advise on self‑dealing and conflict‑of‑interest safeguards. Accountant / CPA A certified public accountant plays a central role in maintaining the foundation’s financial books, preparing the annual federal tax Form 990‑PF, ensuring compliance with private‑foundation excise tax rules, and advising on issues such as valuation of artwork, endowment management, and expenditure responsibility. Art Advisors, Curators, or Conservators For foundations centered on an artist’s legacy, professionals with expertise in art handling, conservation, exhibition planning, and market knowledge may assist the directors and officers in making informed decisions about the artwork. Executive Director or Administrative Staff (if applicable) Some foundations appoint an executive director or administrative team to manage day‑to‑day operations, coordinate programs, and support the board in implementing strategic initiatives. Together, these individuals form a governance and advisory structure that ensures the private foundation operates responsibly, fulfills legal obligations, and effectively advances its charitable mission, particularly important for foundations entrusted with preserving and promoting an artist’s work. For artists, the process of estate planning involves more than transferring assets; it requires establishing a structure capable of preserving, interpreting, and managing a lifetime of creative work. A private foundation can serve as a legally durable vehicle to steward an artist’s collection, intellectual property, and reputation in a manner consistent with the artist’s intentions. Whether organized as an operating foundation dedicated to managing and exhibiting the artwork directly, or as a non-operating foundation whose purpose is to support public charities, this approach provides a clear governance framework and ensures that qualified directors are entrusted with long‑term oversight. Given the legal, tax, and fiduciary complexities associated with forming and administering a private foundation, artists should seek guidance from competent legal counsel. An attorney experienced in nonprofit, tax‑exempt, and estate planning matters for artists can help determine whether a foundation is the appropriate vehicle and ensure compliance with applicable state and federal laws.
March 5, 2026
Commercial Litigation
When Hypothetical Liquidations Become “Illogical”: Otay Project LP v. Commissioner
The Tax Court’s recent decision in Otay Project LP v. Commissioner, T.C. Memo. 2026-21, is likely to become one of the most discussed partnership cases of the year — not because it announces a new doctrine, but because it quietly rewrites how § 743(b) is expected to operate in large tiered partnerships. At issue was a familiar structure. A real estate development partnership underwent ownership changes that triggered a technical termination under pre-2018 § 708(b)(1)(B). Because the partnership had a § 754 election in effect, the termination required a basis adjustment under § 743(b). The partnership computed that adjustment using the regulatory hypothetical liquidation framework in Treas. Reg. § 1.743-1(d), which assumes a fully taxable disposition of partnership assets at fair market value. That hypothetical recognition of embedded gain — including large deferred income under long-term contract accounting — produced a substantial negative “previously taxed capital” amount and therefore a large positive § 743(b) adjustment. The IRS disallowed the deduction, and the court ultimately agreed. But the court did not reject the adjustment primarily on economic substance grounds. Instead, it concluded the calculation itself was “illogical,” pointing to the resulting balance sheet, which reflected negative partner capital and a basis adjustment far larger than the partnership’s book of equity. That reasoning deserves scrutiny. The Problem with the Court’s Analytical Frame Section 743(b) is mechanical. When a partnership interest is transferred, and a § 754 election exists, the statute requires the partnership to adjust inside basis so that the transferee partner’s share of inside basis matches its outside basis. Congress did not condition the adjustment on accounting symmetry, economic parity, or a positive capital account. The statute simply compares two numbers. Treasury regulations likewise adopt a mechanical approach. Treas. Reg. § 1.743-1(d) defines a transferee partner’s share of partnership basis using a “hypothetical transaction”; an immediate sale of all partnership assets for cash equal to fair market value. The regulation expressly requires gain recognition in that hypothetical liquidation. In a development partnership using the completed contract method, such a hypothetical sale necessarily accelerates large amounts of deferred income. The resulting negative capital is not anomalous — it is the direct product of the regulatory model. The purpose of § 743(b) is precisely to prevent that phantom gain from being taxed to the transferee partner a second time. The court, however, treated the result as evidence that the computation must be wrong rather than evidence that the regulation is working as intended. Negative Capital Is Not a Defect The opinion implicitly assumes that inside basis cannot produce a negative capital allocation. But neither the statute nor the regulations impose that limitation. To the contrary, § 743(b) adjustments routinely arise when outside basis exceeds a partner’s share of inside basis — especially in partnerships holding appreciated property or deferring income. The regulatory hypothetical liquidation is not a balance-sheet exercise; it is a tax allocation exercise. Its purpose is to determine how much gain would be allocated to the transferee partner if the partnership sold all of its assets immediately after the transfer. If that hypothetical gain exceeds the partner’s liquidation proceeds, negative capital necessarily follows. Calling that result “illogical” effectively replaces the regulation with a net-equity test that does not appear anywhere in subchapter K. The Liability Expansion Issue The government also argued that additional liabilities — including construction obligations — should reduce the § 743(b) adjustment. The court appeared receptive to this position. That approach risks blurring an important doctrinal boundary. Section 752 governs partnership liabilities. It does not treat executory performance obligations as liabilities simply because the partnership must perform under a contract. Real estate developers frequently have future performance obligations, but those obligations do not automatically create recourse liabilities for basis purposes. If performance obligations are treated as § 752 liabilities in order to neutralize § 743(b), the liability rules cease to be administrable. A Practical Consequence The most significant implication of Otay is not confined to pre-2018 technical terminations. The reasoning threatens routine partnership transactions: family succession transfers upper-tier partnership restructurings real estate development partnerships using CCM any partnership with a large built-in gain and a § 754 election Under the decision’s logic, a § 743(b) adjustment may be disregarded whenever the result is large enough to appear economically disproportionate. That converts a mechanical statute into a facts-and-circumstances inquiry — exactly what subchapter K historically sought to avoid. What the Case Really Reflects The opinion appears less concerned with statutory interpretation than with scale. The partnership reported substantial deferred income and an offsetting basis deduction attributable to the prior § 743(b) adjustment. The court viewed the magnitude as incompatible with economic reality. But subchapter K has never limited tax consequences by magnitude. Congress allowed long-term contract deferral. Congress allowed § 754 elections. Congress required § 743(b) adjustments to maintain parity between inside and outside basis. Large numbers are sometimes the inevitable consequence of those interacting provisions. Courts traditionally police abusive transactions through economic substance or anti-abuse doctrines. Here, however, the court did something more consequential, it recast a regulatory computational rule into an equitable limitation. Why the Decision Matters The importance of Otay lies in its methodological shift. Instead of asking whether the statute and regulations were followed, the court asked whether the result looked sensible on a balance sheet. That is not how subchapter K operates. Partnership taxation depends on predictability. Taxpayers make structural decisions — § 754 elections in particular — based on mechanical consequences. If courts can override those consequences whenever hypothetical liquidation math produces large disparities, then § 743(b) becomes unreliable as a planning tool. In short, Otay Project does not merely deny a deduction. It introduces uncertainty into one of the most fundamental coordination rules in partnership taxation: the alignment of inside and outside basis. The case will likely be remembered not for its facts, but for its implication that regulatory mechanics yield to judicial intuition. For partnerships relying on § 754 elections, that is a far more significant development than the adjustment at issue in the case itself.
March 4, 2026
Tax
Treasury and IRS Issue Interim Guidance on Prohibited Foreign Entity Rules with New Safe Harbors Under Notice 2026‑15
On February 12, 2026, the Department of the Treasury and the Internal Revenue Service released Notice 2026-15, the first substantive regulatory action implementing the prohibited foreign entity ("PFE") provisions enacted by the One, Big, Beautiful Bill Act ("OBBBA") on July 4, 2025. The Notice provides interim guidance on restrictions to the Section 45Y clean electricity production credit, the Section 48E clean electricity investment credit, and the Section 45X advanced manufacturing production credit, with respect to sourcing from a PFE. It establishes temporary safe harbors and reliance rules for determining whether a facility, energy storage technology ("EST"), or eligible component includes "material assistance from a PFE," while previewing how Treasury and the IRS intend to approach related concepts, including effective control, in forthcoming proposed regulations. Unlike the domestic content bonus credit, which merely offered an incremental adder, these rules are binary: a facility that fails is ineligible for the tech-neutral ITC or PTC entirely with potentially devastating consequences for project capital stack. The Statutory Framework The OBBBA added new Sections 45Y(b)(1)(E), 48E(b)(6) and (c)(3), and 45X(c)(1)(C) to the Code, providing that the terms "qualified facility," "energy storage technology," and "eligible component" do not include items that incorporate material assistance from a PFE. The OBBBA simultaneously amended Section 7701 to add new paragraphs (a)(51) and (a)(52), defining a "prohibited foreign entity" and "material assistance from a prohibited foreign entity," respectively. Under Section 7701(a)(52), "material assistance from a PFE" is present when a facility's, EST's, or eligible component's material assistance cost ratio ("MACR") falls below the applicable threshold percentage. The threshold percentages phase in over time based on the calendar year during which construction of a qualified facility or EST begins (for Sections 45Y and 48E) or the calendar year during which an eligible component is sold (for Section 45X). For example, a qualified facility beginning construction in calendar year 2026 must achieve a Clean Electricity MACR of not less than 40% (for qualified facilities) or 55% (for ESTs), and a solar energy component sold during calendar year 2026 must achieve an Eligible Component MACR of not less than 50%. Calculating the MACR: A Two-Track System Notice 2026-15 establishes a detailed framework for calculating the MACR, distinguishing between two tracks: the "Clean Electricity MACR" (for qualified facilities and ESTs under Sections 45Y and 48E) and the "Eligible Component MACR" (for Section 45X eligible components). Clean Electricity MACR For qualified facilities and ESTs, the Clean Electricity MACR equals the taxpayer's total direct costs attributable to all manufactured products ("MPs") and manufactured product components ("MPCs") incorporated into the facility or EST, minus the total direct costs attributable to MPs and MPCs that were mined, produced, or manufactured by a PFE, divided by the total direct costs. The calculation requires a taxpayer to: (a) identify MP and MPC types; (b) track relevant characteristics of each MP and MPC; (c) determine direct costs; and (d) determine PFE direct costs. A separate Clean Electricity MACR must be calculated for each qualified facility or EST placed in service during a taxable year. Eligible Component MACR For Section 45X eligible components, the Eligible Component MACR substitutes "total direct material costs" for "total direct costs," focusing on the constituent elements, materials, or subcomponents ("Constituent Materials") incorporated into or consumed in the production of the eligible component. The relevant costs are those paid or incurred by the taxpayer for direct materials under Section 1.263A-1(e)(2)(i)(A), including freight-in and tariffs. Interim Safe Harbors: The Core of the Notice The most consequential aspect of Notice 2026-15 is its three-tiered interim safe harbor framework, which is intended to significantly simplify the compliance burden. Identification Safe Harbor The Identification Safe Harbor allows taxpayers to use the 2023–2025 domestic content safe harbor tables (from Notices 2023-38, 2024-41, and 2025-08) as the exclusive and exhaustive list of MPs and MPCs (or Constituent Materials) for purposes of identifying what must be tracked and costed. Components not appearing in the tables are disregarded entirely and do not factor into the MACR calculation. This is material compliance relief, it obviates the need for deeper upstream tracing that many in the industry feared and instead limits the inquiry to a discrete, published list of components. However, this pathway is available only for projects and components listed in the safe harbor tables. Facility types without specified tables, such as nuclear, fuel cells, or geothermal, cannot use this safe harbor. Likewise, facilities relying on the incremental production rule cannot use the Cost Percentage Safe Harbor. The Treasury has acknowledged these industries’ interest in obtaining updated tables, but guidance remains forthcoming. Cost Percentage Safe Harbor Building on the Identification Safe Harbor, the Cost Percentage Safe Harbor permits taxpayers to use the Assigned Cost Percentages from the safe harbor tables in lieu of tracking actual direct costs. The taxpayer sums the Assigned Cost Percentages for each listed MP and MPC (the "Total Percentage"), sums the Assigned Cost Percentages attributable to PFE-produced MPs and MPCs (the "Total PFE Percentage"), and calculates the MACR as: (Total Percentage – Total PFE Percentage) / Total Percentage. Structural steel and iron are excluded entirely from the MACR calculation, consistent with their treatment under the domestic content rules. Used property in facilities qualifying under the 80/20 rule is also disregarded; only the costs of new MPs and MPCs count toward the calculation. The Notice’s examples, particularly the PV facility illustration walking through both safe harbors, will be invaluable in standardizing the calculation methodology. Certification Safe Harbor The Certification Safe Harbor provides an alternative pathway allowing taxpayers to rely on supplier certifications to determine direct costs, PFE direct costs, and PFE status. Three certification forms are available, tracking the statutory framework in Section 7701(a)(52)(D)(iii)(II)(bb): (AA) an attestation that the property was not produced or manufactured by a PFE and the supplier has no knowledge of PFE involvement in the upstream chain; (BB) for Section 45X, a statement of total direct material costs not produced or manufactured by a PFE; or (CC) for Sections 45Y/48E, a statement of total direct costs attributable to non-PFE manufactured products. Importantly, pathways (BB) and (CC) do not facially require the supplier to possess knowledge of the entire upstream chain, as does pathway (AA). Certifications must include the supplier's employer identification number (or foreign equivalent), be signed under penalties of perjury, be retained for at least six years by both the supplier and the taxpayer, and be produced upon IRS request. A taxpayer may rely on a certification unless it "knows or has reason to know" the certification is inaccurate. The “reason to know” standard is the most significant area of ambiguity in the Notice and is driving intense market discussions. Early practice suggests a tiered diligence approach: baseline certifications with PFE-status checklists from established suppliers, supplemented for higher-risk Tier 2 suppliers and battery storage components by third party supply chain audits. Suppliers offering compliance packages, including legal memoranda and compliance presentations, are gaining a competitive edge. Tracking and Averaging Flexibility The Notice provides meaningful flexibility in how taxpayers track components to specific facilities or eligible components. Three tracking methods are available: Individual tracking. The default approach requiring each MP or MPC to be traced to the specific facility or EST into which it is incorporated. De minimis assignment-based tracking. Allows MPs or MPCs of the same type to be assigned across qualified facilities or ESTs placed in service during the same taxable year without individual tracing, provided the assigned components represent less than 10% of the Total Direct Costs of each facility. Average-cost tracking for small ESTs. For ESTs of the same type, each under 1 MW, placed in service during the same taxable year, taxpayers may use averaged costs and PFE Production Percentages over specified periods within the taxable year. Section 45X manufacturers may use a similar averaging system for Constituent Materials incorporated into eligible components during specified time periods. Binding Written Contract Election A notable feature of the statutory framework, addressed in the Notice, is the elective grandfather provision under Section 7701(a)(52)(D)(iv). Upon a taxpayer's election, MPs, eligible components, or Constituent Materials acquired or manufactured pursuant to a binding written contract entered into before June 16, 2025, and placed in service before January 1, 2030 (or January 1, 2028 for applicable wind facilities) in a facility where construction began before August 1, 2025, may be excluded from the MACR calculation entirely. For Constituent Materials, the item must be used in a product sold before January 1, 2030 (or January 1, 2027 for Section 45X). Treasury has been granted anti-abuse authority to prevent stockpiling of components during any period prior to the application of the PFE requirements. Qualified Interconnection Property The Notice addresses the separate treatment of qualified interconnection property under Section 48E with a nuanced approach. A taxpayer seeking to include interconnection property expenditures in its qualified investment must calculate a separate Clean Electricity MACR for the interconnection property, apart from the facility itself. Each project component: solar, storage, and interconnection, qualify independently; failure on one does not disqualify the others. However, the safe harbors are unavailable for interconnection property, requiring the direct cost method, with practitioners view as significantly more invasive and more susceptible to error. Effective Control and Anti-Abuse Provisions Notice 2026-15 previews forthcoming regulatory action on two important fronts. First, the Notice clarifies that effective control under the foreign-influenced entity provisions of Section 7701(a)(51)(D) is determined independently under each prong of the statute. Notably, any licensing agreement for intellectual property with respect to a qualified facility entered into or modified on or after July 4, 2025, constitutes effective control, even absent any of the other enumerated prohibited provisions, such as limits on IP usage. Second, Treasury and the IRS intend to propose regulations to prevent entities from evading, circumventing, or abusing the PFE restrictions, including through temporary lapses of restricted foreign ownership or control. Suppliers restructuring ownership of supply chains mid-stream to achieve compliance raise particularly difficult questions, as the rule lack specificity on the timing of qualification relative to procurement and delivery. Enhanced Penalty and Statute of Limitations Framework The OBBBA established a robust penalty regime supporting the PFE rules. New Section 6662(m) lowers the substantial understatement threshold to 1% (from 10%) for credit disallowances attributable to overstating the MACR. New Section 6501(o) extends the statute of limitations to six years for deficiencies attributable to MACR determination errors. New Section 6695B imposes a separate penalty on suppliers who provide certifications they know or should have known to be inaccurate, equal to the greater of 10% of the resulting underpayment or $5,000, though a reasonable cause defense is available. Reliance and What Comes Next Taxpayers may rely on the guidance in Sections 3 and 5.01 of the Notice for projects that begin construction after December 31, 2025, and continue through 60 days after publication of the forthcoming proposed regulations. The Section 4 safe harbors may be relied upon through 60 days after publication of the forthcoming safe harbor tables under Section 7701(a)(52)(D)(iii)(I), which must be issued by December 31, 2026. While Notice 2026-15 resolves several of the most pressing compliance questions confronting the clean energy tax credit market, particularly around supply-chain depth, cost allocation methodology, and certification standards, it expressly defers comprehensive guidance on the PFE definitional framework, constructive ownership mechanics, and long-term recapture rules to forthcoming proposed regulations. Stakeholders should use the comment period strategically and begin integrating the safe harbor frameworks into project and deal structures without delay. The early market consensus is that Notice 2026-15, while demanding increased diligence and documentation relative to the domestic content regime, provides workable and solvable rules. Storage remains the highest-risk area given the battery supply chain’s continued dependence on Chinese components. Stakeholders should engage counterparties and advisors early, integrate the safe harbor frameworks into deal structures without delay, and prepare for escalating MACR thresholds in future years.
March 3, 2026
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