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
Landlord Representation
Landlord Liability for Tenant Safety: Lessons from the Jason Billingsley Case
In recent years, courts have taken a closer look at what landlords must do to keep tenants safe, especially when property owners give employees access to residents’ homes. A major example is the civil case that followed the violent attacks committed by Jason Billingsley in Baltimore. The lawsuit, filed by survivors April Hurley and Jonte Gilmore, resulted in a jury awarding more than $21 million in damages against the landlord and related property management entities. The case provides a powerful study in landlord liability, negligent hiring, and premises safety law. In September 2023, Billingsley, who had been hired as a maintenance worker and given access to tenant areas, knocked on April Hurley’s door, identified himself as “maintenance,” and claimed there was a water leak in her kitchen that needed immediate attention. Once inside, Billingsley violently assaulted Hurley and Gilmore inside the apartment and set fire to the premises. Days later, he murdered tech CEO Pava LaPere in a separate incident. Billingsley ultimately pled guilty to two counts of attempted first-degree murder, one count of first-degree murder, and was sentenced to life in prison. Hurley and Gilmore brought a civil lawsuit against the property owner and management company. Their argument was not that the landlords committed the assaults, but that their negligence made the assaults foreseeable and preventable. The case illustrates three central doctrines of landlord liability: Negligent Hiring Negligent hiring occurs when an employer or property owner fails to exercise reasonable care in selecting someone for a position that poses a risk to others. Maintenance workers typically have: Master keys Unsupervised access to private units Knowledge of tenant schedules and vulnerabilities In this case, the plaintiffs argued that the landlord failed to conduct a reasonable background check before hiring Billingsley. Given his prior violent criminal record, which included convictions for assault in 2009, 2011, and 2013, the plaintiffs contended that giving him access to tenants’ apartments created a foreseeable risk of harm. The defendants argued that Billingsley was not an employee. According to reporting by the Baltimore Banner, one of the management company’s owners testified that he met Billingsley at a bar and subsequently allowed him to reside in one of the complex’s apartments rent-free in exchange for completing “odd jobs” around the property. A jury agreed with the plaintiffs, finding that reasonable property managers would have investigated his background and that the failure to do so constituted a breach of duty. Premises Liability Under premises liability law, landlords owe tenants a duty of reasonable care to maintain safe conditions on the property. Traditionally, this doctrine covered physical hazards (e.g., broken stairs or inadequate lighting), but modern courts increasingly recognize that safety can include protection from foreseeable criminal acts. The key legal question is foreseeability: Was the harm reasonably predictable? Did the landlord’s conduct increase the risk? The jury concluded that giving a person with a violent criminal history unrestricted access to tenant homes made the harm foreseeable. Breach of Lease and Implied Warranty of Habitability Residential leases carry an implied promise that the premises will be safe and habitable. While this doctrine historically addressed structural conditions, plaintiffs argued that tenant safety includes reasonable screening of employees granted intimate access to living spaces. Although the negligent-hiring theory was central, contractual duties reinforced the broader argument that landlords must safeguard tenants’ security. Why the Verdict Matters The jury’s multimillion-dollar award sends a strong signal about evolving expectations for landlords: Access equals responsibility. The more access an employee has to private living spaces, the higher the duty of care. Background checks are not optional in high-risk roles. Courts may treat failure to screen as unreasonable when foreseeable harm results. Tenant safety extends beyond physical maintenance. Security policies and hiring practices can create liability. Importantly, this was a civil negligence case, not a criminal proceeding. The standard of proof was “preponderance of the evidence,” meaning the jury had to find it more likely than not that the landlord’s negligence caused the harm. Broader Legal Implications The case may influence: Property management industry standards Insurance underwriting requirements Corporate risk policies for residential landlords Litigation strategies in negligent security cases Landlords are not insurers of tenant safety — they are not automatically liable for all crimes on their property. But when their own actions increase the risk of foreseeable harm, courts may impose substantial financial consequences. The litigation arising from the Jason Billingsley case demonstrates how landlord liability can extend beyond broken locks and dim hallways. When property owners place individuals in positions of trust and access without reasonable vetting, they may face significant civil exposure. The defendants have appealed the jury’s ruling, and the case is currently pending before the Appellate Court of Maryland. For landlords, the lesson is clear: tenant safety includes not only maintaining the building, but also carefully screening the people given keys to it.
March 3, 2026
Business
Investor Equity Placement: Why HoldCo vs. OpCo Matters
When a searcher or independent sponsor brings in outside capital, the conversation often centers on valuation and percentage ownership. But an equally important question is structural: Should the investor hold equity in the operating company (OpCo) or in the parent holding company (HoldCo)? This decision carries meaningful legal, economic, governance, and strategic implications. It affects dilution, future capital raises, control dynamics, exit flexibility, and long-term alignment. The analysis also becomes more nuanced depending on the investor’s role and non-monetary contributions. Consider a common scenario: a sponsor raises $2 million to acquire a $10 million HVAC company, with plans to pursue add-on acquisitions over time. In a roll-up strategy like this, what if one investor brings domain expertise, sourcing capabilities, or operational leadership that materially influences growth? That strategic contribution may justify equity at the HoldCo level, where the investor participates in platform-wide upside and profits. By contrast, a passive investor whose involvement is limited to board oversight may be more appropriately placed at the OpCo level, particularly in a single-asset acquisition. Of course, this assumes the target will operate as a subsidiary rather than being merged into an existing operating entity — which is itself a separate structural decision. An investor in this scenario will usually see investment income flow solely from OpCo (instead of the entire portfolio of companies). The structure and placement of an investor's equity is rarely mechanical. It should reflect strategy, bargaining power, long-term vision, and investor expectations. The considerations below provide a framework for both searchers/sponsors and investors to consider when evaluating this decision. The Two Primary Structures Investor Holds Equity at the Portfolio Company Level (OpCo) Under this structure, the investor owns equity directly in the acquired operating business. OpCo is typically maintained as a standalone entity or as a clearly defined subsidiary beneath a holding structure. Key Implications The investor’s economics are tied solely to the business of OpCo Governance rights are limited to decisions within OpCo Exit proceeds flow from the sale or recapitalization of OpCo The investor has no direct rights to unrelated subsidiaries or future acquisitions Common Use Cases Single-asset traditional search fund deals One-off independent sponsor acquisitions Transactions without a broader platform thesis Situations where negotiation dynamics support a narrower investment scope Advantages Structural simplicity Clear alignment around a single asset Cleaner distribution waterfall Reduced complexity in governance documents Easier return modeling tied to one business Risks and Considerations Limited investor participation in future add-on acquisitions Potential need to restructure if platform ambitions later emerge Dilution of equity will occur at the operating level if additional capital is raised, although usually unlikely unless part of a larger restructuring Misalignment if investors expect exposure to future platform growth OpCo equity works best when the investment thesis is narrowly defined and neither party anticipates a broader multi-asset strategy. Many first-time searchers/sponsors and their investors will fall into this structure. Investor Holds Equity at the Parent Holding Company (HoldCo) In this structure, a parent entity owns one or more subsidiaries, and the investor holds equity at the parent level. Key Implications The investor participates in the economics of all subsidiaries beneath HoldCo Add-on acquisitions can be completed without issuing new OpCo equity Governance is centralized at the parent level Platform value creation accrues across the entire enterprise Common Use Cases Platform or roll-up strategies Independent sponsor models contemplating multiple acquisitions Long-term scaling plans involving additional capital raises Advantages Centralized governance and decision-making Easier implementation of sponsor promote structures Ability to allocate management incentive equity across subsidiaries Greater flexibility for future capital formation Risks and Considerations Increased complexity in operating agreements and shareholder documents Need for carefully drafted distribution waterfalls Cross-subsidiary economic exposure if not properly structured Greater sensitivity to dilution stemming from future equity financing More robust negotiation of protective provisions and investor rights HoldCo structures reward forward planning but require thoughtful drafting and clear alignment among stakeholders. Legal and Governance Considerations In practice, HoldCo structures centralize power and economics at the parent level, while OpCo structures localize rights and obligations within a single operating entity. Where the investor equity sits directly impacts: Voting rights and approval thresholds Board composition and observer rights Protective provisions Information and reporting rights Drag-along and tag-along mechanics Transfer restrictions and liquidity rights Put and call rights, if negotiated If the investor sits at HoldCo, governance documents must anticipate: Future equity issuances Add-on acquisitions and layered capital structures Sponsor promote mechanics Reallocation of advisor and/or employee incentive equity pools Distribution waterfalls across multiple subsidiaries Potential conflicts between legacy investors and new investors If the investor sits at OpCo, documentation tends to focus more narrowly on: Operating distributions Exit triggers tied to a single asset Seller rollover alignment These differences materially affect control and economics. They also influence negotiations with senior lenders, particularly where covenants intersect with equity commitments. Strategic Questions Before Deciding Before finalizing entity placement, sponsors and investors should consider: Is this a single-asset investment or the foundation of a broader platform? Are add-on acquisitions part of the near-term or long-term strategy? Will additional investors likely participate in future rounds? How centralized should governance be? What is the intended exit pathway (strategic sale, recapitalization, long-term hold)? How does the structure align with sponsor promote economics and incentive equity? Does the investor bring strategic value beyond capital? Common Structural Mistakes Frequent errors to keep in mind (and avoid): Defaulting to OpCo equity without evaluating long-term platform goals Granting HoldCo equity without clearly defining dilution mechanics Misaligning promote structures with entity placement Overlooking interaction between investor rights and senior debt covenants Ignoring tax, estate, or succession planning implications Treating entity placement as a documentation detail rather than a strategic decision These choices are difficult to unwind and can create friction during future capital raises, refinancings, or exits. Final Perspective Bringing on an investor is not merely a capital event. It is a structural decision that defines governance, economics, capital formation, and exit flexibility. Whether you are a search funder acquiring your first business, an independent sponsor building a scalable platform, or a family office co-investing alongside operators, the level at which equity is issued matters. The best structures anticipate the second deal before the first one closes. Structure intentionally. Plan forward. Align incentives early.
March 3, 2026
Intellectual Property
Britney Spears' Music Catalog Sale Highlights Rise in IP Deals Across the Music Industry
Britney Spears is the latest cultural icon to monetize her intellectual property by selling the rights to her entire music catalog to publisher Primary Wave for an estimated $200 million. This landmark agreement encompasses over two decades of hits and underscores a surging industry trend in which creators convert the long-term value of their IP portfolios into immediate capital. Spears joins a growing list of major artists (including Bruce Springsteen, Bob Dylan, Justin Bieber, and Katy Perry) who have recently brokered massive nine-figure transfers of their publishing and recorded music rights. For artists evaluating their intellectual property strategy, liquidating a catalog offers compelling advantages. The chief and obvious benefit is the immediate, guaranteed lump-sum payout an artist receives, which protects the artist from the uncertainties of fluctuating streaming revenues and shifting market trends. Additionally, a sale relieves the artist and their heirs from the complex, ongoing administrative burdens of managing copyright rights, negotiating licensing deals, and auditing royalties. The firms that acquire these rights assume the responsibility of actively pitching the catalog for lucrative placements in film, television, and commercial branding, by using their resources to maximize the IP's reach. However, cashing out requires artists to make significant trade-offs, the most notable drawback being the forfeiture of long-term royalty streams. If the music's value spikes due to a viral trend or a high-profile placement, the publishing firm reaps the financial windfall, not the creator. Furthermore, artists often surrender the ultimate right to control how their work is commercialized, opening the door for their music to be licensed for campaigns or media they might otherwise have rejected. In today’s highly charged political climate, this trade-off is not insignificant. This monumental sales strategy highlights the immense, tangible value of a well-protected IP portfolio, illustrating the careful balance creators must strike between immediate financial certainty and the long-term stewardship of their brand.
March 2, 2026
Mergers and Acquisitions
Preparing to Sell: The Most Common Deal-Killing Mistakes Business Owners Make, and How to Avoid Them
For many middle-market business owners, 2026 could present an ideal window to explore a sale. With financing markets improved and private equity (PE) sitting on significant amounts of dry powder, strategic buyers are in a prime position to pursue acquisitions that offer them growth and efficiency. Smart sellers will be prepared to take advantage of these improved conditions and strike while the iron is hot. But even in healthy deal environments, deals can fall apart, and most of these failures are preventable. As a corporate M&A attorney, what I typically see are the same avoidable issues that derail transactions. Below, we look at the most common mistakes business owners make before going to market and most importantly, how to avoid them. Sloppy or Unvetted Financials An easy way to erode buyer confidence is to present unreliable financials. Buyers expect clean financial statements, normalized EBITDA with clearly supportable add-backs, transparent revenue recognition policies, and thorough documentation. This requires significant preparation and engagement of advisors early in the process (at least 12 to 24 months before a contemplated sale). Taking the time to get your financials in order can help reduce friction, prevent re-trades, and ultimately protect your company’s valuation. Failure to Clean Up Your House Failure to clean your corporate house before going to market is a very common mistake owners make. Before engaging in any sale process, sellers should take a critical look at everything in the business, making sure it is all in order. This includes ensuring customer contracts are in writing, properly assignable, and free of any change of control termination rights that can present problems. Vendor agreements should also be scrutinized, making sure they clearly document pricing terms and are commercially sustainable. Do your debt structures contain restrictive covenants? And are your equity records and governing documents accurate and up to date? Is your intellectual property ownership properly documented? A deep dive into all of this and more is critical. Buyers do not like surprises in the diligence process. Further, having to “clean-up” the business in front of the buyer can cost credibility as well as deal value. Conducting a thorough pre-sale legal audit can help eliminate surprises as well as the costly delays (or worse). Limiting the Potential Universe of Buyers Assuming you already know your ideal buyer can be a major mistake. Many owners assume they will sell to a competitor or a PE firm, but the universe of buyers in 2026 is much larger. Limiting yourself to only certain types of buyers can materially depress value. Today’s buyers span strategic acquirers seeking bolt-on growth, family offices in search of long-term cash flow, international buyers looking to enter the US market, and more. To ensure you are maximizing your valuation and considering all options, there must be a broad, well-run process to vet buyers. This will increase competitive tension, which in turn, drives up the price and lays the groundwork for better deal terms. Overlooking Tax Structuring Tax structuring is not an afterthought. It must be a part of the strategy. After all, taxes drive transactions. How your transaction is structured matters. Whether it is an asset sale, stock sale, rollover equity arrangement, or partial liquidity event, it can materially impact net proceeds. Therefore, it is important to coordinate early with both legal and tax advisors who can dramatically change the “after-tax” outcome of your transaction. That is the number that truly matters. The Owner is the Business There are some red flags that buyers look for in an acquisition in relation to the owner and their role within the organization: Is the owner the primary salesperson? Are they the sole keeper of customer relationships? Are they the only decision maker? Without the owner, does the organization run into an operational bottleneck? If the answer is yes to these questions, then you do not have a truly transferable business. This creates a real issue for buyers, as they discount businesses that rely entirely on a founder. They want systems and processes in place, depth of management, and a company that can exist without its owner. Start working early to develop a solid management team, formalized processes, and institutionalized customer relationships to decrease risk and increase value. Failure to Incentivize Key Employees When key employees start to feel uncertain or that they are unprotected, it can negatively impact a transaction. Employees want some clarity, and buyers are looking for continuity. That means you must plan and communicate regularly and effectively. Retention plans, bonuses tied to the transaction, or equity offers are all incentives that can help preserve stability during and after the close. Failure to Plan Ahead Selling a business is a major financial event, but it is also a significant life transition. Most owners have spent years, if not decades, building their business, and it has become a part of their identity. So, it is surprising that they don’t often consider the role they will play (if any) with the company moving forward. Nor do they consider what’s next. What lies beyond the day after the sale? These might seem like afterthoughts, but they are not. They must be considered upfront so that expectations with the buyer are clearly communicated and there is no tension or dissatisfaction on either end. Waiting Too Long to Involve Advisors If you wait too long to involve your legal and financial advisors, you may have already lost your leverage. You cannot wait until you have received an unsolicited offer. Involving advisors early in the process is the key to success and to avoiding the mistakes we have discussed. Reach out to your advisors 12-24 months before considering a sale so that you can address any issues and ensure preparedness. By engaging experts early on, you are shortening diligence timelines and strengthening your negotiating position. And remember, valuation can be significantly eroded by avoidable preparation failures. Prepare your business, and yourself, for the outcome you want.
March 2, 2026
Tax
Tariff Litigation & Section 122 Tariffs
On February 20, 2026 the U.S. Supreme Court issued a landmark decision in Learning Resources, Inc. v. Trump holding that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs. The decision invalidates the reciprocal tariffs and trafficking/immigration tariffs imposed in 2025 under IEEPA and confirms that the power to impose tariffs lies with Congress. The Court did not prescribe a refund mechanism; that responsibility now falls to the U.S. Court of International Trade (CIT) and U.S. Customs and Border Protection (CBP). Within hours of the decision, the Administration imposed a new 10% tariff under Section 122 of the Trade Act of 1974 (now 15%), effective February 24, 2026, and limited to 150 days (absent congressional action). This creates two immediate opportunities: Refund claims for prior IEEPA tariffs (available to domestic and foreign companies) Advisory and planning work related to new Section 122 tariffs and potential replacement regimes (Section 232/301) What Changed: 1. IEEPA Tariffs Invalidated The Supreme Court ruled that IEEPA does not authorize tariff imposition. IEEPA tariffs imposed in 2025 are unlawful ab initio. Refunds are not automatic. Importers must act. 2. Section 122 Tariffs Now in Effect 15% tariff on most imports entered on or after February 24, 2026 Limited to 150 days (approx. expires July 24, 2026 unless extended) USMCA-qualified goods excluded “Goods on the water” exception for certain shipments loaded before Feb 24 and entered before Feb 28 This is a temporary bridge. Section 232 (tariff imposed for national security) and 301 (tariffs imposed on foreign products to counter unfair trade practices) actions may follow. Who May Have a Refund Claim: Those who: Imported goods between February 2025 and February 24, 2026 Paid additional IEEPA ad valorem duties Are the importer of record Have entries that are unliquidated or recently liquidated Did not yet file a protective Court of International Trade (CIT) action Refund claims are available to domestic and foreign companies – the controlling factor: who is the Importer of Record on the customs entry Important: Only IEEPA duties are refundable — not Section 232 or 301duties. Downstream buyers may have contract-based reimbursement claims. Areas Where Offit Kurman Can Assist You: 1. Tax Litigation / Customs Litigation Refund analysis and quantification Protest filings Protective CIT litigation Federal Circuit appeals Strategic coordination of administrative and judicial remedies 2. Transactional Tax Tariff deductibility analysis Accounting method considerations Timing of refund recognition Contingent asset treatment Structuring to mitigate future tariff exposure 3. Corporate & Business Structuring Restructuring importer-of-record status Creating new import entities Evaluating transfer pricing implications Risk allocation between affiliates Supply chain realignment 4. Commercial Contracts Review of tariff pass-through clauses Reimbursement rights for downstream buyers Force majeure and change-in-law provisions Supplier renegotiation strategy Indemnification enforcement 5. Commercial Litigation Claims between buyers and suppliers over tariff allocation Breach of contract actions Indemnity disputes Class or coordinated actions among distributors 6. Restructuring & Insolvency Tariff-driven liquidity pressure Claims valuation in bankruptcy Recovery of tariff refunds as estate assets Documents You Should Be Gathering: Entry summaries (CF 7501) Duty payment records Liquidation dates PSC filings Contracts allocating tariff responsibility ACE and ACH refund account status SKU lists affected by Section 122 Bottom Line: IEEPA refunds are potentially significant. Deadlines are running. Section 122 tariffs create immediate planning needs. If you import goods, manufacture overseas, distribute foreign products, or rely on cross-border supply chains, connect with Offit Kurman for consultation.
March 2, 2026
Labor and Employment
Safeguarding Your Business in an Era of Restrictive Covenant Scrutiny
For years, businesses have relied on non-competes and broad confidentiality agreements to protect themselves when employees leave. That approach is changing. Courts and regulators are increasingly wary of restrictions that limit employee mobility, as reflected in the last several years of activity by the Federal Trade Commission, the National Labor Relations Board, and state legislatures. This shift, however, is not anti‑business. It is aimed at curbing overbroad restraints that prevent former employees from earning a living. In many respects, it reflects a return to the true purpose of restrictive covenants: protecting legitimate business interests and competitive advantage. As a result, employers’ litigation focus is moving away from preventing former employees from simply joining competitors and toward examining whether company information was improperly taken or used. In practical terms, protecting the business now centers on protecting its data. Importantly, restrictive covenants are not dead. Properly tailored covenants remain enforceable in most jurisdictions and continue to play a meaningful role in safeguarding legitimate interests. Courts are far more likely to enforce restrictions that are narrowly drafted, periodically reviewed, and tied to an employee’s role and access to sensitive information. Employers should therefore refine—not abandon—restrictive covenants to ensure they can withstand scrutiny. Within this framework, data protection operates as a supplement to, not a replacement for, other restrictive covenants, providing an added safeguard if contractual restrictions are narrowed or fail. Most businesses are not harmed simply because a former employee takes a new job. Rather, the harm occurs when something leaves with that employee: customer lists, pricing strategies, internal processes, technical know‑how, reports, or analytics. To qualify for protection, this information must be valuable, not generally known, and subject to reasonable safeguards. Modern disputes increasingly turn on trade secret principles under the Defend Trade Secrets Act and comparable state laws. Courts focus less on contractual labels and more on whether the company actually treated the information as valuable. Effective protection requires more than labeling information “confidential.” At hiring, employees should be clearly informed about the information they will access and the limits on its use. At departure, employers should require exit certifications confirming that devices were returned, company files were removed from personal accounts, and no information was retained or forwarded. This process alone prevents many disputes and creates a clear record if concerns later arise, allowing employers to investigate based on objective representations rather than speculation. During employment, employers increasingly rely on monitoring tools that provide objective evidence of whether files were accessed, transferred, or retained improperly. Courts are generally more receptive to such technical proof than to assumptions based solely on an employee joining a competitor. The takeaway is straightforward. Courts are becoming less concerned with where a former employee works and far more concerned with whether protected information was misused. Businesses best positioned going forward will not be those with the longest non‑compete agreements, but those that can show they identified their critical information and consistently safeguarded it.
February 27, 2026
Tax
Top Audit Red Flags Businesses Shouldn’t Ignore
My recent blog, So, The IRS Has Selected Your Return for Audit, discussed the four types of IRS audits. What factors may trigger an audit of a business’s income tax return? The presence of multiple red flags in a business’s income significantly raises the likelihood of an audit. Round Numbers While rounding 49 cents up to 50 cents is not problematic—the IRS instructs you to round cents up or down for whole dollar amounts—reporting $10,000 of income from a customer instead of the actual $10,089 or reporting depreciation of $7,500 instead of $7,448 is. The algorithms the IRS uses to select returns for audit are programmed to identify rounding like this because the IRS knows (as we all do) that transactions are rarely in exact round amounts. Claiming Excessive Expenses The IRS compares your deductions against deductions for similarly situated businesses, using figures from returns filed by businesses similar in size and industry sector. The IRS has a bell curve for each category of expense. These figures are tweaked by the Taxpayer Compliance Measurement program. Similarly, your business expenses must be ordinary and necessary. Ordinary means the expense is a type common in your business’s industry sector. Necessary means the expense is helpful for your trade or business. If your business’s figures are excessive as measured against the IRS’s figures or the types of expenses are different than what the IRS routinely sees for businesses of your size or type, the chance of your return being audited increases. The more categories your figures are above the norm or are different from what the IRS usually sees, the greater the chances of an audit. It is also a matter of degree. Being slightly high in several categories is not necessarily an audit flag, but being very high in a few categories is a red flag. It is important to mention business use of automobiles. As a result of changes to the law in the Tax Cut and Jobs Act of 2017, the ability of employees to deduct unreimbursed business expenses was all but eliminated. However, self-employed persons (which includes partners in an entity classified as a partnership for federal income tax purposes) can still deduct business use of automobiles. Claiming 100% business use is a red flag. Likewise, because of accelerated depreciation associated with heavy SUVs and large trucks, the IRS may look twice at purchases near the end of the tax year. So, take advantage of that year-end sale but have the records to substantiate the business purpose and use. Misreporting Income First, beyond rounding cents, don’t round. Second, just because you didn’t receive a 1099 doesn’t mean the payor didn’t file the 1099 with the IRS. If you know you are missing a 1099, call the payor and ask for it otherwise this brings up the next flag. Large Cash or Large Numbers of Cash Transactions Some businesses naturally have large cash transactions or large numbers of cash transactions. If a cash transaction is over $10,000, financial institutions are required to file a currency transaction report (CTR). Breaking a cash transaction into smaller transactions to avoid the CTR threshold is known as structuring and is a crime under federal law. If your business deals in cash, keeping an accurate record of all transactions and documentation is essential in the event of an audit. Real Estate Rental Losses The IRS has strict rules regarding the ability to deduct losses from real estate rental against other income. For those who are not real estate professionals, which means you spend more than 50% of your working hours and more than 750 hours each year materially participating as a developer, landlord, or agent, you must own at least 10% of the value of all interests in the activity (spousal interests are combined for this threshold test) and you must actively participate in the operations of the rental property in the year in which the loss is claimed and in the year in which you seek recognition of the loss. If you meet these requirements, then you may deduct $25,000 of losses from real estate rental activity. This deduction phases out beginning with an adjusted gross income (AGI) of $100,000 and is completely phased out once AGI reaches $150,000. Deducting Hobby Losses Only losses incurred in a trade or business are deductible, which means you are engaging in the activity with the reasonable expectation of making a profit and you conduct the activity in a business-like manner. If your activity three out of every five years (two out of seven years for breeding horses), the IRS presumes that the activity is for profit. If not, whether the activity is for profit depends on the facts and circumstances. If you claim losses year after year, which is common among start-up businesses, your business will likely be audited. As with other areas, substantiation of expenses is imperative. Misclassification of Employees Whether a worker is an independent contractor, in which case your business issues them a 1099 at year end, or an employee, in which case your business issues the worker a W-2, is a hot bed item with the IRS and the U.S. Department of Labor. If a worker is misclassified as an independent contractor, then your business (and potentially you personally) owe employment taxes and withholding, plus interest and penalties. As with other areas, proper documentation (which includes agreements setting forth the worker’s independent contractor status) are essential. If your workers are employees (W-2) consistently filing and paying payroll taxes (941s) will also trigger additional scrutiny that likely will result in an audit. Claiming the R&D Tax Credit The R&D credit is great—if your business qualifies and if your business substantiates the credit. The One Big Beautiful Bill Act (OBBBA) reversed a 2022 law that required businesses to amortize research and development expenses over a five-year period. Businesses are now permitted to expense R&D costs immediately. The OBBBA also provided additional relief for small businesses that applied the new rule retroactively for the 2022 through 2024 tax years. Unscrupulous promoters (for a fee that is a percentage of the R&D credit) offer to analyze a business’s records to see if the business can claim the R&D credit retroactively. Often these promoters try to persuade a business to claim routine expenses as R&D activities to qualify for the R&D credit (which increases the promoter’s fee). Activities that are not eligible for the R&D credit include modifying an existing product, customer-funded research, research after commercial production, or research on a product about which there is no doubt about the expected result (this merely confirms what the company already knows). With proper substantiation costs for these activities still are deductible, just not eligible for the R&D credit. Growing and Selling Mary Jane Despite the current administration’s proposed rescheduling of marijuana, it is still a controlled substance at the federal level. It does not matter to the IRS that marijuana is legal in your state. Because it is illegal, expenses (other than cost of goods sold) incurred in the production, distribution, and sale, even if permitted under state law, are not deductible. Here is the real burn—you must still report and pay taxes on the income generated from your marijuana business. Because marijuana is illegal at the federal level, it also means if you invest in a marijuana business you can’t deduct investment losses. It also means you cannot use your self-directed IRA to invest in marijuana businesses. Bummer man. Home-Office Expense Deduction If you can take the home-office deduction (see Claiming Excessive Expenses above regarding restrictions on the ability to deduct unreimbursed business expenses incurred by employees), to claim the deduction you must use the space exclusively and regularly as your principal place of business. Guest bedroom, bonus room where the kids watch TV or play X-Box? Nope. Exclusive means exclusive. In the IRS’s eyes, returns that claim the home-office deduction is a target rich environment. Don’t paint a bullseye on your back. In the end, avoiding an audit is not about fear—it is about diligence. By keeping accurate records, understanding which expenses truly are allowed, and steering clear of overly aggressive tax positions, businesses can reduce their audit risk significantly. Most importantly, thoughtful documentation and consistent business practices provide the strongest defense should the IRS come knocking.
February 25, 2026
Construction
A Primer on Mechanics’ Lien Claim Waivers in Pennsylvania
Waiver of mechanics’ lien claims is an important and frequent issue on construction projects. There are various approaches to lien claim waivers, depending on the type of project and the preferences of the parties. Because of the various types of lien claim waivers, there is often confusion. This article explains the different types of lien claim waivers. An initial fundamental point regarding mechanics’ lien claims and waivers, is that they are creatures of statute. Each state has its own laws that govern mechanics’ liens and waivers. There is no universal, national law that governs. Instead, each state has its own statutes and interpretation of the law. Additionally, mechanics’ liens generally cannot be asserted against public projects. Advance Lien Claim Waiver Versus Progress or Final Lien Claim Waiver One categorical distinction between lien claim waivers is whether they apply in advance of the work, versus lien claim waivers that are executed during the progress of the project and apply to work performed as of the date of the waiver. An “advance” lien claim waiver is executed prior to the work being performed. Accordingly, it waives lien claim rights before doing the work. Most states prohibit advance lien claim waivers. In Pennsylvania, however, advance lien claim waivers are enforceable, but only on specific types of projects, and only if specific requirements are met (more on that below). In contrast, a progress or final lien claim waiver is executed during the project, or after the work is completed, and it typically clarifies that it applies to the work already performed. The standard approach is to identify a “through date,” which means that the waiver applies to all work performed “through” a certain date. Typically, the “through date” would be a prior date that has already passed, and the lien claim waiver states that it is effective to waive lien claim rights for all work performed up to and including that date. Typically, progress lien claim waivers are executed with each payment application. None of the “through dates” are future dates—which would instead be an advance lien claim waiver. Progress and final lien claim waivers are effective and enforceable. In Pennsylvania, for advance lien claim waivers to be effective, it must be a commercial project (non-residential), and a payment bond must be posted that covers the project. Also, the advance lien claim waiver is only effective to waive downstream (subcontractor/supplier) lien claim rights. The prime contractor with a direct contract with the owner cannot waive lien claim rights in advance, and the payment bond is posted by the prime contractor (so the payment bond does not cover the prime contractor’s demands for payment). Conditional Versus Unconditional Lien Claim Waivers Another categorical distinction in lien claim waivers is “conditional” versus “unconditional.” A conditional lien claim waiver identifies that it is only effective if certain conditions (typically pending payment) occur. Thus, for example, with a conditional lien waiver, it will expressly state that the waiver is “conditioned” on the future receipt of the identified payment. If the identified payment is not received, then, the waiver (even if executed) is unenforceable. Unconditional lien claim waivers, on the other hand, expressly state that the payment has already been received, and that there are no other requirements or events to occur for the lien claim waiver to be effective. Typically, these lien claim waivers identify themselves with the words “unconditional,” and they often state that the payment identified has been “received in fact,” or “received in hand.” Complications can arise when payment has not in fact already been received; yet, an unconditional lien claim waiver (stating that payment has already been received) is erroneous executed. Generally, it is fair and reasonable to insist that lien claim waivers accurately express whether the payment has in fact already been made, or whether a conditional lien claim waiver should be used instead, because the payment is pending and not yet received. It is also appropriate to revise or annotate a lien claim waiver to expressly state that certain claims, disputed amounts, open change orders, etc., are preserved and not waived. This avoids confusion on whether the payment was intended to cover any disputed, open, or unresolved items. Preliminary Notices of Lien Rights, Construction Notices Directory, and Other Requirements Lien claim waivers are specific documents that address whether a lien claim has been waived or preserved. Different and separate from lien claim waivers are statutory requirements that must be satisfied in order to preserve or pursue lien claims. Most states, including Pennsylvania, have requirements to notice and enforce lien claims. If you fail to satisfy all the requirements, including timeliness, it is likely that your lien claim will be lost. Pennsylvania, similar to most states, has certain requirements that must be fulfilled when pursuing lien claims. In Pennsylvania, certain projects may be eligible for registration on the Construction Notices Directory, which is maintained by the Department of General Services. If a project is registered, then, the requirements under the mechanics’ lien law that pertain to the Construction Notices Directory must be followed; otherwise, the lien claim may be lost. One such requirement is to provide (and file with the Directory) early notice of potential lien claim rights. Additionally, in pursuing a lien claim, certain processes must be followed; otherwise, the lien claim may be lost. In Pennsylvania, as a general rule, if the claim is by a subcontractor or anyone who is not in direct contract with the property owner, then, the claimant must give advance notice to the property owner of the intent to file the lien claim. Also, any claimant, whether a downstream subcontractor/supplier or the prime contractor must meet specific deadlines in pursuing the lien claim. And the substance of any notices or lien claim filings must fulfill the statutory requirements. Failure to timely notice or file any of the items, or failure to adhere to the substantive requirements, will often result in the lien claim being unenforceable. These requirements for noticing and pursuing the lien claim are not technically “waivers,” of the lien claim, but failure to follow the rules may result in the same outcome—the lien claim being lost and unenforceable. This article also appears in the February 2026 edition of the Spokesman, a publication of ABC Keystone.
February 25, 2026
M&A Nuggets
M&A Nuggets: Stop Signs
Contrary to popular belief, most business purchases do not succeed. That is not necessarily a bad thing, because occasionally the best deal is the deal that does not happen. To avoid closing a bad deal, the acquiror should be on the lookout for big red stop signs. Some stop signs are obvious, like material litigation, declining revenues, downward profits or a seller that engages in a particularly risky business. Some stop signs are not so obvious. These more subtle stop signs can spell disaster for a business combination. Examples include: a lack of symmetry in business culture between the purchaser and the seller the seller’s lack of proper recordkeeping, such as poor financial books and records, corporate documents or human resources files a seller who is unable to express a rational reason for sale a seller who appears recalcitrant in its position and/or somewhat aloof in the negotiation process Special attention should be paid to these last two items. Starting early in the process, the acquiror should ask a seller about its motivation to sell and its plans for devoting resources to the sale, and then track whether the seller’s actions follow its words. Otherwise, an acquiror could be negotiating with a seller who is not “all in,” wasting months of time and resources on a fruitless endeavor.
February 23, 2026
Labor and Employment
Employer Use of AI Wage-Setting Tools: Risks, Bias Concerns, and Employer Responsibilities
As employers increasingly adopt artificial intelligence to streamline compensation decisions, the promise of efficiency must be carefully balanced against significant legal and ethical risks. AI‑driven wage‑setting tools can help analyze market data, standardize pay ranges, and reduce human error, but only when the underlying data and algorithms are reliable. When these systems rely on incomplete, outdated, or biased inputs, they may unintentionally replicate or even worsen existing disparities. For example, algorithms trained on historical pay data can reinforce gender‑ or race‑based wage gaps, regardless of an employer’s intent. Lawmakers are also signaling that wage‑setting algorithms will not operate in a regulatory vacuum. Over the last year, legislators in California, Colorado, Georgia, and Illinois have introduced bills to curb discriminatory or opaque uses of AI in compensation decisions. Several states, including Georgia, Illinois, Maryland, and New York, are renewing or expanding these efforts in 2026. Many of these proposals reflect a growing concern that businesses may rely on personal data unrelated to job duties – such as biometric characteristics, behavioral patterns, or even parental status – to generate so‑called “optimized” pay rates. Employers should remember that AI does not shield them from longstanding legal obligations. Anti‑discrimination statutes, equal pay laws, and wage‑and‑hour requirements apply regardless of whether a human or an algorithm drives the recommendation. With state activity accelerating, employers should take a proactive approach to assessing their exposure and strengthening internal controls over wage decisions. Regular pay‑equity audits, careful review of the data inputs and assumptions behind AI tools, and meaningful human involvement in all compensation decisions are essential steps to ensure employers can meet emerging legal standards and maintain fair, compliant pay practices. By reinforcing these safeguards now, organizations will be better positioned to adapt as regulatory requirements continue to evolve.
February 23, 2026
Labor and Employment
A Practical Guide to Collective Bargaining: Strategies, Obligations, and Best Practices for 2026
Collective bargaining remains one of the most important processes governing labor–management relations in the United States. For organizations preparing for negotiations in 2026 and beyond, the key to success is understanding not only the legal framework, but also the strategy, preparation, and interpersonal dynamics involved. This outline walks through the essentials of collective bargaining under the National Labor Relations Act (NLRA), along with practical techniques, negotiation tactics, and preparation tips drawn from decades of labor‑relations practice. What Is Collective Bargaining? Collective bargaining is the structured process by which an employer and a union negotiate wages, hours, benefits, and working conditions of employees represented by the union. The outcome is a Collective Bargaining Agreement (CBA), a binding contract that sets those terms for a defined period. The process is regulated by the National Labor Relations Act, which preempts state labor laws for private employers. Though every negotiation is unique, all follow a similar progression. Collective bargaining typically unfolds in several key phases: Preparation - Both sides analyze the existing CBA, gather economic and operational data, and develop proposals. Negotiation - Each party presents its proposals, discusses priorities, and responds to the other side’s demands. Agreement - Once consensus is reached, the parties draft a written agreement or memorandum of understanding. Ratification - The union’s membership votes on the agreement, and the employer formally approves it. Implementation The new CBA takes effect, often retroactively if negotiations extend past the previous contract’s expiration. The Legal Duty to Bargain Section 8(d) of the NLRA requires both parties to meet at reasonable times and negotiate in good faith over mandatory subjects such as wages, hours, and working conditions. Importantly, neither party is required to agree to any specific proposal, nor must they make a concession. Types of Bargaining Subjects Mandatory Mandatory subjects are those that “vitally affect” wages, hours, or working conditions. Examples include: Compensation and incentive pay Pension and benefit plans Paid and unpaid leave Discipline and discharge Seniority Work rules Grievance procedures Employers may not make unilateral changes to mandatory subjects without bargaining. Permissive Permissive subjects are relevant, but not central to working conditions They include definition of the bargaining unit, internal union procedures, and terms for non-unit employees. Parties may negotiate these, but neither side can be forced. Illegal Illegal subjects are topics prohibited by law, and include closed shop provisions, hot-cargo agreements, and discriminatory clauses based on race, religion, sex, age, disability, national origin, or union activity. Understanding these categories helps both sides stay compliant and focused on productive negotiation topics. Good Faith vs. Bad Faith Bargaining Good-faith bargaining is legally required and is the foundation of the negotiation process. It requires sincerity, openness, and a genuine desire to reach an agreement. What Good‑Faith Bargaining Looks Like: Meeting at reasonable times Making concessions and counteroffers Providing relevant information upon request Engaging in meaningful discussion Drafting written agreements when terms are reached Importantly, good faith does not require either party to accept proposals or make concessions they find unacceptable. Automatic Violations of Good Faith Certain actions are considered violations regardless of intent: Making unilateral changes to mandatory subjects before the impasse Bargaining directly with employees instead of the union Refusing to meet or discuss mandatory subjects Refusing to sign a written agreement reached at the table Other Signs of Bad Faith The National Labor Relations Board may also infer bad faith from patterns of behavior, such as: Delaying tactics Unreasonable demands Withdrawing previously agreed‑upon terms Failing to designate a representative with authority to bargain Attempting to bypass the union Good‑faith bargaining is not just a legal requirement—it is essential to building trust and reaching durable agreements. The Duty to Provide Information Under the National Labor Relations Act, both the employer and the union must provide information relevant to bargaining, resolution of grievances, or contract administration. Failure to provide information can result in: Unfair labor practice charges Conversion of an economic strike to an unfair labor practice strike Delayed or invalid impasse claims Even vague or burdensome requests may need to be answered, and requests cannot be ignored simply because they involve confidential information. Preparing for Negotiations Preparation is the backbone of successful bargaining. Management’s team typically includes: A chief spokesperson Financial and cost specialists HR representatives Operations experts A note‑taker Decision makers with authority The NLRA prohibits either side from interfering with the other’s choice of representatives, and employers cannot limit the size of a union bargaining team. Economic data collection is essential. Key sources include: Bureau of Labor Statistics (CPI, wages, employment data) Bloomberg Law contract settlement databases Local and industry CBA comparisons Teams should identify desired changes, anticipate union demands, prioritize issues, and prepare arguments with supporting data. Negotiation Strategies and Tactics Collective bargaining is both a legal process and a strategic exercise. Successful negotiators understand the unwritten rules, anticipate the other side’s priorities, and maintain discipline throughout the process. Experienced negotiators follow unwritten norms, such as: Neither party expects to get everything it asks for Parties begin with broad proposals and refined goals Early progress often focuses on non‑economic issues Major issues are typically addressed closer to contract expiration Common Bargaining Styles Auction bargaining - High opening proposals lowered incrementally. Trade‑off bargaining - Movement on one issue in exchange for concessions on another. Blue‑sky bargaining - Unrealistic initial demands with slow movement. Illegal Bargaining Styles Boulwarism - Presenting a single “fair, firm offer” and refusing to negotiate. Surface bargaining - Pretending to bargain with no real intent to reach an agreement. Experienced and successful negotiators operate from a realistic, “give and take” perspective that often involves some of the following tactics. Acknowledge the other party’s views Use real‑world examples Highlight points of agreement Ask open‑ended questions Keep negotiations fair, calm, and professional Build trust, rapport, and momentum Running Effective Bargaining Sessions The first meeting sets the tone and bargaining climate. Each party makes an opening statement, establishes schedules and routines, and exchanges initial proposals. Unions typically present more than they expect to receive, setting room for concessions. At the next session— usually the second meeting— the parties clarify demands, understand priorities, and begin evaluating economic impacts. This is critical for setting expectations and building negotiation strategy. For subsequent sessions as the deadline approaches sessions become more frequent, offers and counteroffers accelerate, committees may handle complex issues, and tentative agreements (TAs) are recorded clause-by-clause. Best Practices: Tips, Tricks, and Traps Collective bargaining has elements of skill. Skilled negotiators will recognize the other party’s perspective, provide clear explanations and supporting data, often ask open-ended questions, keep discussions focused and productive, and importantly remain calm and respectful. The most effective teams are well‑prepared, unified, and strategic in how they present and defend their proposals. Here are some hints and tips: Treat all early agreements as tentative until the full contract is settled. Document everything—written summaries, session notes, and caucus discussions. Never lose your temper, even if provoked intentionally. Avoid claiming you “cannot afford” a proposal, which could obligate financial disclosure. Caucus frequently to regroup or strategize. Build momentum through small agreements. Always preserve the authority and credibility of the chief negotiator. Advanced Negotiation Techniques Certain techniques may be useful for resolving conflicts and finding common ground. These include: (a) caucuses, which are private discussions of each negotiating team that are used to refine proposals, assess costs, or cool tensions; and (b) so-called “sidebar” meetings, which are private meetings between lead negotiators to break logjams or explore sensitive options. Trust is essential. If negotiations stall, the Federal Mediation and Conciliation Service (FMCS) can facilitate resolution by suggesting compromises, tradeoffs, or settlement formulas. Understanding Impasse An impasse occurs when good‑faith negotiations no longer offer a realistic path to agreement. When negotiations stall, executives and in-house counsel must navigate a complex landscape of legal standards, operational risks, and strategic considerations. Understanding impasse and mediation is essential to avoiding missteps that could escalate conflict or trigger legal exposure. After impasse is declared: Employers may implement their last, best, and final offer—but only positions already proposed before impasse Strikes and lockouts may occur The duty to bargain is suspended, not terminated Impasse may be broken by events, such as new proposals, the passage of time, strikes, or changed economic conditions. Business Decisions and “Effects” Bargaining Employers must bargain over employment-related decisions such as layoffs or production quotas, but not over core entrepreneurial decisions like closing a business unit. However, even when not required to bargain the decision, employers must bargain over the effects of that decision—timing, transition issues, severance, etc.—at a meaningful time. Key Questions for Upcoming Negotiations Collective bargaining is one of the most consequential legal processes an organization undertakes. It shapes labor stability, operational flexibility, cost structure, and long‑term workforce relations. For executives and in‑house counsel, the goal is not simply to negotiate a contract — it is to manage legal exposure, protect enterprise interests, and ensure compliance with federal labor law at every stage. Below are some key questions that may help achieve these goals. What are the union’s likely demands? Which CBA provisions are most problematic for management? What changes does the company desire? What internal or external constraints shape negotiation limits? Final Thoughts Effective collective bargaining is both an art and a science—grounded in legal requirements but shaped by preparation, data, trust, communication, and strategy. With thoughtful planning and disciplined execution, organizations can reach agreements that are fair, workable, and sustainable for both labor and management.
February 20, 2026
Real Estate
Delaware Non-Consolidation Opinions: A Critical Tool in Structured Finance Transactions
In sophisticated commercial real estate and other finance transactions, bankruptcy risk is not an abstract concern; it is a central underwriting consideration. One of the primary legal tools used to manage that risk is the Delaware non-consolidation opinion. Although these opinions are now standard in many large transactions, their purpose and legal foundation are often misunderstood by deal participants who do not regularly work with Delaware entity structures. This article explains what a Delaware non-consolidation opinion is, why lenders require it, and what transaction counsel should understand about its scope and limitations. What is a Delaware Non-Consolidation Opinion? A non-consolidation opinion addresses whether, in the event of a bankruptcy filing by a parent entity or affiliate, a bankruptcy court would be likely to substantively consolidate that entity with a related but legally separate borrower. In most real estate finance transactions, the borrower is a Delaware-organized single-purpose entity formed specifically to own and operate the collateral property. Substantive consolidation is an equitable doctrine developed under federal bankruptcy law. When ordered, it permits a court to disregard entity separateness and treat multiple affiliated entities as a single debtor, pooling assets and liabilities and fundamentally altering creditor expectations. A Delaware non-consolidation opinion does not state that consolidation is impossible. Rather, it provides a reasoned legal analysis concluding that, based on the borrower’s structure and governing documents, a bankruptcy court should not order substantive consolidation, provided that applicable separateness requirements are met. Why Substantive Consolidation Matters to Lenders From a lender’s perspective, substantive consolidation represents a material credit risk. If a borrower’s assets were consolidated with those of an insolvent affiliate, a lender that underwrote a loan based on a discrete collateral package could find itself competing with unrelated creditors in a combined bankruptcy estate. For this reason, lenders, rating agencies, and securitization participants focus heavily on entity separateness. Non-consolidation opinions serve as a risk-allocation mechanism, confirming that the transaction structure is designed to preserve separateness under prevailing legal standards. Why Delaware Law is Central Most special-purpose borrowers in structured finance transactions are organized under Delaware law. As a result, Delaware entity statutes and case law play a critical role in the non-consolidation analysis. While substantive consolidation is governed by federal bankruptcy principles, courts routinely look to state law to determine whether affiliated entities were properly formed and respected as separate legal persons. Delaware’s well-developed body of entity law, together with its emphasis on contractual freedom and corporate formalities, is one reason lenders routinely require that non-consolidation opinions involving Delaware entities be delivered by Delaware counsel. Key Structural Features Analyzed Delaware non-consolidation opinions are transaction-specific, but they typically analyze several core structural features, including: Single-purpose provisions limiting the borrower’s activities Separateness covenants requiring separate books, records, and bank accounts Restrictions on commingling assets or liabilities Independent managers or directors whose consent is required for a voluntary bankruptcy filing Limitations on intercompany indebtedness and guarantees Arm’s-length dealings among affiliates The opinion assumes that these provisions are observed in practice. Failure to maintain separateness after closing can materially undermine the analysis. What These Opinions Do and Do Not Do A Delaware non-consolidation opinion is not a guarantee of a particular bankruptcy outcome, nor is it insurance against future misconduct. It does not address facts that may arise after closing or violations of separateness covenants. Instead, it is a carefully reasoned legal analysis, delivered subject to customary assumptions and qualifications, that allocates bankruptcy risk based on existing law and the transaction’s structure. When Non-Consolidation Opinions Are Required These opinions are most commonly required in: CMBS and CRE securitizations Large commercial mortgage financings Mezzanine loan and preferred equity structures Credit-tenant and master-lease transactions Portfolio financings involving affiliated borrowers As transaction structures have grown more complex, non-consolidation opinions have become a standard closing deliverable rather than an exception. Conclusion A Delaware non-consolidation opinion is not boilerplate. It is a critical component of modern real estate finance transactions and a key element of lender risk analysis. When supported by proper entity structuring and ongoing compliance with separateness requirements, these opinions provide meaningful comfort that borrower separateness will be respected, even in a bankruptcy scenario. For lenders and deal counsel working with Delaware-organized borrowers, understanding the role and limits of non-consolidation opinions is essential—and engaging Delaware counsel with regular opinion experience remains a best practice.
February 18, 2026
Labor and Employment
Severance Packages: Best Practices for Calculating and Communicating Them
Severance decisions sit at the intersection of legal risk, employee relations, and business judgment. For employers, the challenge is not simply deciding whether to offer severance, but determining how much to offer, under what circumstances, and how to communicate it without creating unnecessary exposure. From the employer-side counsel perspective, severance works best when it is approached deliberately—not reactively—and when it aligns with both the reason for separation and the employer’s broader workforce strategy. Understanding the Legal Starting Point Despite common assumptions, severance is rarely required by law. Outside of contractual obligations, collective bargaining agreements, or statutory notice requirements tied to layoffs, most severance arrangements are discretionary. Problems arise when past practice, offer letters, or outdated policies blur that line and create an expectation of entitlement where none was intended. Before discussing numbers, employers should confirm what obligations already exist and whether prior decisions have set informal benchmarks. Consistency matters, but so does clarity about when severance is offered as a business decision rather than a legal requirement. Let the Reason for Separation Drive the Analysis Not all separations should be treated the same, and severance decisions should reflect that reality. A position eliminated due to restructuring presents a very different risk profile than a termination for poor performance or misconduct. Offering severance in situations that contradict the stated reason for termination can undercut the employer’s position if the separation is later challenged. Employer-side counsel often advises against rigid formulas in favor of a framework that considers why the employment relationship is ending, how the decision was documented, and what claims the employee could realistically assert. Severance should reinforce the employer’s narrative—not weaken it. Calculating Severance With Defensibility in Mind While there is no universal formula, employers benefit from anchoring severance decisions to objective factors such as length of service, seniority, and compensation level. These guideposts help ensure internal equity and reduce the risk that severance decisions appear arbitrary or discriminatory. At the same time, employers should preserve discretion. High-risk separations may justify enhanced severance in exchange for a comprehensive release, while low-risk exits may not. The goal is not mathematical precision but defensibility if the decision is later scrutinized. Severance as a Risk-Management Tool From a legal standpoint, severance is most valuable when it is tied to meaningful protections. Employers are not simply paying for goodwill; they are often seeking certainty. A properly structured separation agreement can significantly reduce exposure by resolving potential claims before they become disputes. That tradeoff only works if the consideration offered is proportionate to the risk being addressed. Underpaying for broad releases or overpaying in low-risk situations can create problems. Thoughtful calibration is key. The Importance of Clear, Careful Communication Even well-designed severance packages can create risk if they are communicated poorly. Separation conversations are emotional, and off-the-cuff remarks can later take on outsized significance. Employers should communicate severance in a way that is respectful, measured, and precise, avoiding language that suggests fault, guarantees, or precedent. Employees should understand that severance is being offered in exchange for an agreement, and they should be given adequate time to review. A rushed or confusing process often invites second-guessing—and, in some cases, litigation. Avoiding Unintended Precedent One of the most common employer concerns is that severance decisions will set a precedent for future separations. While consistency is important, employers are not required to treat every departure identically. What matters is whether each decision can be explained based on legitimate business considerations. Maintaining internal documentation of the rationale behind severance decisions—particularly when they deviate from past practice—can be invaluable if those decisions are later challenged. Revisiting Severance Practices Over Time Severance practices should evolve alongside the business. Workforce changes, economic conditions, and developments in employment law can all affect how severance is viewed and valued. Employers who periodically review their policies, templates, and decision-making frameworks are far better positioned than those who rely on habits formed years earlier. Severance is not just an end-of-employment expense. When handled thoughtfully, it is a strategic tool that helps employers manage risk, preserve credibility, and bring closure to difficult transitions.
February 18, 2026
Healthcare
Telehealth Access for Medicare Patients: Consolidated Appropriations Act Extends Key Policies
Healthcare providers that rely on telehealth to serve Medicare patients can continue to do so as a result of an extension of the Medicare telehealth rules that were originally implemented during the COVID-19 Public Health Emergency (“COVID”). On February 3, 2026, the Consolidated Appropriations Act, 2026, H.R. 7148 was signed into law and, among other features, extends key components of the emergency telehealth requirements and will continue to allow for increased provider eligibility, remote care from home, and relaxed site-of-service, all rules upon which providers have extensively relied since COVID. CMS extended these rules in order to provide greater flexibility and remote health care access. Providers should be aware that this extension will only last through December 31, 2027, unless Congress puts a permanent solution in place.
February 17, 2026
Intellectual Property
Beckham v Beckham: The Legal Anatomy of a Very Public Breakdown
If HBO’s writer’s room is looking for its next prestige drama, then they should look no further than the Brooklyn family feud. Brooklyn Beckham, the first son of David and Victoria Beckham, took to his Instagram story to unleash a set of accusations against his family, including allegations of interference with his marriage to Nicola Peltz and “Brand Beckham” priorities. These statements intensified an already rumored family rift dating back to wedding-related disputes. But the most commercially significant feature of this story is not interpersonal conflict; it is that the conflict is playing out inside a high-value brand ecosystem, creating a multijurisdictional intellectual property battle. Once such allegations are made to millions of followers, the situation stops being purely private: it becomes an enterprise risk event that is capable of triggering contractual defaults, insurance notifications, and formal legal positioning, even if nobody wants to ever walk into a courtroom. Viewed through a legal lens, the dispute quickly breaks into several distinct areas of exposure. Defamation Risk (and why wording matters) When accusations are aired on social media, lawyers immediately ask: fact or opinion? Statements framed as verifiable facts that harm reputation can trigger defamation claims, especially when a reputation is also a revenue stream. When endorsements and licensing deals are involved, reputational harm can quickly morph into business tort exposure. “Rights to My Name”: Trademarks as Leverage Brooklyn’s reported complaint that he was pressured to sign away rights to his name pulls the dispute squarely into trademark law. Public reporting suggests the Beckhams registered their children’s names as trademarks while they were minors, with renewals now looming. That matters because whoever controls the mark controls licensing, commercial use, and has negotiation leverage in a family fallout. Contracts, Endorsements, and Morals Clauses Public drama makes brand partners nervous. Endorsement and licensing agreements often include morality clauses, non-disparagement language, and notice requirements. Once a controversy breaks, counterparties will quietly check whether they have termination rights, or at least a reason to renegotiate. Non-Disparagement and Confidentiality in Family Businesses Family empires often run through layers of companies and agreements. If any family members are contractually bound by confidentiality or non-disparagement provisions, public statements can create legal headaches. Enforcement is tricky, though. Injunctions risk free-speech pushback or loss of goodwill, damages are hard to quantify, and over-lawyering can amplify the story instead of burying it. Cease-and-Desist Letters: The First Legal Chess Move Some outlets report that lawyers got involved. From a litigator’s perspective, early correspondence matters: non-privileged pre-litigation letters can become evidence, admissions can haunt later filings, and privilege only protects communications handled carefully. A cease-and-desist letter is more about positioning than the endgame. Media Control, Privacy, and Narrative Wars Complaints about “media manipulation” raise different legal questions depending on jurisdiction. In the UK, privacy and misuse-of-private-information claims loom larger; in the US, privacy torts vary wildly by state. Fame doesn’t erase rights, but it does complicate them. Brand Custodianship and Fiduciary-Adjacent Issues When parents hold intellectual property rights for children, especially through guardian or trust structures, disputes can trigger questions that sound a lot like fiduciary duties: who controlled the asset, who benefited, and whether transitions to adulthood were properly documented. Who’s Authorized to Speak? PR teams, agents, managers, and family members often operate under overlapping authority. When statements fly, lawyers look at who approved what, whether anyone exceeded their mandate, and whether internal PR or confidentiality protocols were breached. In conclusion, Brooklyn’s private grievances should trigger public company-level risk management. The Beckham name is a business after all, and Brooklyn’s public breakdown is risky for the business. Beckham v Beckham is a battle for control. For anyone operating inside a family enterprise or personal brand, the warning is clear: adequate governance, contracts, and IP planning prepare your brand for when that Instagram statement goes live.
February 13, 2026
Landlord Representation
The HUD Administration One Year Review: Withdrawal of Fair Housing Guidance, Administrative Cutbacks, and the Implications for Housing Providers
Approximately one year into the second Trump Administration, the U.S. Department of Housing and Urban Development (HUD) has taken notable steps to reshape the federal fair housing compliance landscape by withdrawing numerous guidance documents issued by HUD’s Office of Fair Housing and Equal Opportunity (FHEO). While these actions do not alter the text of the Fair Housing Act (FHA) itself, they materially affect how housing providers, enforcement agencies, and courts may intepret and enforce the Act. This article examines the substance of HUD’s recent actions, distinguishes between guidance and law, and evaluates the short- and long-term implications for multifamily owners, landlords, managers, and developers. HUD’s Withdrawal of FHEO Guidance: Scope and Substance In September 2025, HUD issued a formal notice withdrawing a substantial number of FHEO guidance documents, effective immediately. These documents—some dating back more than a decade—had provided interpretive frameworks for applying the FHA and related civil rights statutes. Among the withdrawn materials was guidance on: Reasonable accommodations, including assistance and emotional support animals The use of criminal history in tenant screening National origin discrimination and Limited English Proficiency (LEP) considerations Fair housing implications of digital advertising practices Interpretations related to source of income and special purpose credit programs HUD emphasized that these prior guidance documents were non-binding policy statements rather than regulations. Nonetheless, many in the industry heavily relied on these documents. HUD has stated that the withdrawn guidance will no longer be relied upon internally or externally, signaling a meaningful shift in agency priorities. Guidance Versus Law What Changed It is critical to distinguish between interpretive guidance and legal obligation. The withdrawals removed HUD’s detailed, agency-level explanations of how it historically interpreted and enforced certain provisions of the FHA. As a result: Housing providers no longer have HUD-endorsed procedural benchmarks for evaluating certain fair housing issues Compliance frameworks once built around HUD guidance must now rest on statutory text and case law HUD enforcement appears narrowly (if not solely) focused on clear statutory violations and intentional discrimination What Did Not Change Equally important, the withdrawal of these guidance documents did not amend or repeal: The Fair Housing Act Obligations to provide reasonable accommodations for individuals with disabilities Prohibitions against discrimination based on race, color, religion, sex, familial status, national origin, or disability Nor does HUD’s action override state or local fair housing laws, many of which impose broader or more explicit requirements than federal law. HUD’s Enforcement Philosophy after Administrative Cutbacks HUD’s withdrawal of guidance reflects a broader administrative philosophy emphasizing regulatory restraint and reduced reliance on sub-regulatory interpretation. From an enforcement perspective, this suggests: Deprioritizing claims premised solely on noncompliance with previously issued guidance Greater reliance on statutory language and judicial interpretations Increased variability in how fair housing disputes may be evaluated across jurisdictions However, the absence of guidance does not eliminate enforcement risk. FHA complaints may still be filed with HUD, state agencies, or pursued through private litigation, where courts are not bound by HUD’s current enforcement preferences. Practical Implications for Housing Providers For multifamily owners, landlords, managers, and developers, the withdrawal creates both elasticity and uncertainty. First, many compliance programs mirrored HUD’s previous guidance as a best-practice standard. With those benchmarks removed, providers must reassess whether their policies are grounded in enforceable law or agency interpretation alone. Second, documentation and consistency become increasingly critical. In the absence of clear federal guidance, uniform application of policies and well-documented decision-making remain among the strongest defenses to discrimination claims. Third, state and local law take on heightened importance. In jurisdictions with robust fair housing statutes or active enforcement agencies, HUD’s retrenchment may have little practical effect on day-to-day obligations. Looking Forward: Stability Amid Political Change Presidential administrations are, by design, temporary. HUD guidance may be withdrawn, revised, or reissued as political leadership changes. Housing providers who recalibrate their practices solely in response to current administrative signals risk repeated disruption in the future, when new administrations reassess policy priorities. The shrewd path forward remains unchanged: Maintain consistent, legally grounded fair housing policies Ensure staff training reflects statutory and jurisdiction-specific requirements Monitor HUD developments without overreacting to short-term shifts Ultimately, durability—not oscillation with political change—offers the greatest protection against legal risk. Conclusion HUD’s withdrawal of FHEO guidance marks a significant moment in the history of fair housing enforcement. While the move reduces federal interpretive direction, it does not diminish the force of the Fair Housing Act or state and local laws. For housing providers, the path forward lies in steadfast adherence to existing legal requirements, consistency in policy application, and an awareness that today’s regulatory environment may look markedly different under a future administration. Fair housing law has endured across political cycles. Compliance strategies should be built to do the same.
February 12, 2026
Commercial Litigation
When the Chicken Does Come Before the Egg: The Taxpayer-Friendly Takeaways from George v. Commissioner, Plus a Few ‘Egg-cellent’ Judicial Puns
Some tax court opinions are dry. Others are dense. And then there are the rare decisions where the court clearly enjoyed the assignment. George v. Commissioner, T.C. Memo. 2026-10 falls squarely in the third category. From its opening pages, the court signals both the seriousness of the R&D credit issues at stake and its willingness to have a little fun along the way. As Judge Greaves famously framed the dispute: “Forget the proverbial chicken or the egg; today we are called to answer which came first, the research or the research credit?” Clever turn of phrase aside, the opinion delivers something far more important for taxpayers, particularly those in agriculture and other operationally complex industries: a roadmap for how real-world innovation can qualify for the R&D credit when done correctly. The Big Win: The Court Acknowledged That Agriculture Innovates. Full Stop. Before we get to the substance, it’s worth pausing on tone. Over the course of 80+ pages, the court peppers the opinion with references to “ruling the roost,” “sunny-side up,” and other poultry-themed flourishes. That levity is notable because it accompanies a very serious acknowledgment: modern agriculture is technologically sophisticated. The opinion’s humor is not accidental. By leaning into chicken metaphors, the court subtly reinforces its understanding of the industry it is judging. From a litigation perspective, that tone is telling. Courts don’t joke about industries they don’t take seriously. The takeaway? The court was engaged, informed, and analytical, not dismissive. That is good news for future taxpayers who bring better-structured R&D claims to the table. This is reinforced by the court repeatedly recognizing that poultry production involves: Complex biological systems Evolving disease pressures Feed chemistry and nutrient optimization Genetic performance tradeoffs Data-driven decision-making at massive scale Indeed, the court emphasizes that even “small changes having dramatic impacts on profitability” are central to the industry, noting that producers may earn “approximately one penny of profit per pound.” That framing matters. The court did not dismiss these activities as routine farming. Instead, it treated them as legitimate candidates for R&D analysis, rejecting the outdated notion that innovation only happens in laboratories. What the Taxpayer Got Right (and the Court Agreed) Despite ultimately limiting the credits claimed, the court credited the taxpayer with confronting real technological uncertainty, a foundational requirement under §41. The opinion details extensive efforts to address: Disease outbreaks with no clear industry solution Antibiotic-free production pressures Feed efficiency and nutrient absorption challenges Vaccine administration methods and dosage questions Genetic line performance under different conditions The court acknowledged that these efforts involved trial-and-error, failed approaches, and iterative refinement, classic hallmarks of experimentation. In fact, the court goes as far as rejecting the IRS’s argument that data collected by George was “routine” and thus excluded from consideration. Instead, the court rejected the ‘routine’ argument the IRS has been fighting hard to revive. Likewise, the court rejected IRS attempts to repurpose the adaptation exclusion, definitively stating that an improved business component is a different business component. That distinction leaves the door wide open for taxpayers who document their experimentation contemporaneously and intentionally, even when data used for testing is collected during standard production. Practical Lessons the Court Practically Hands to Taxpayers If you read the opinion with an eye toward future claims, the lessons are unmistakable: When possible, articulate uncertainty before acting. This helps avoid the IRS assertion that a company reverse-engineered the research narrative. Design experiments with intent, though they don’t have to look like laboratory work. Document while the feathers are flying. Production data is helpful, but technical reasoning is essential. Separate experimentation from execution. Rolling out a solution is not the same as proving it works. Assume IRS scrutiny and prepare accordingly. The IRS will ask whether the “research” existed before the credit study. Courts will too. These lessons don’t clip the wings of the R&D credit. They strengthen it. The Broader Takeaway: Courts Want Better R&D Claims, Not Fewer For all the poultry puns, George v. Commissioner delivers a serious, taxpayer-friendly message: Section 41 remains viable for real-world businesses that innovate intentionally and document rigorously. The court did not narrow the statute. It did not exclude agriculture. And it did not demand laboratory conditions. It simply required that the research come first—and the credit follow honestly. Final Thought If nothing else, George proves that even an R&D case about chickens can be meaty. Matthew Reddington served as counsel in this matter and played a primary role in securing the favorable outcome for the taxpayers.
February 12, 2026
Family Law
Flirting with Divorce: Social Media’s Silent Role in Broken Vows
Valentine’s Day is marketed as a celebration of love—roses, cards, public tributes, and carefully curated posts declaring devotion. Yet before posting a perfectly worded caption, sending a private message, or striking up a new connection online, whether accidentally or intentionally, it is worth pausing to consider the consequences. What may feel harmless in the moment can quietly alter emotional boundaries, invite comparison, or create intimacy that no longer belongs outside the marriage. There are no longer just two people in today’s marriages. There is a third, non-human, perhaps thought to be non-threating “person”—social media. However, this third entity is silent, omnipresent, and often more dangerous than any physical affair. Social media isn’t just a distraction; it has become a third party in relationships, quietly fueling suspicion, jealousy, and in many cases divorce. What often begins as harmless scrolling—liking a friend’s post, following a coworker’s stories, sending a meme—can quickly spiral into something far more serious. Emotional affairs frequently start online, where boundaries are blurry, and temptation is constant. A spouse may confide in someone over direct messages, flirt through private chats, or even maintain a hidden online persona. By the time the other partner notices, trust has often already been compromised. Scrolling through curated snapshots of other people’s lives only makes matters worse. Vacations, date nights, and seemingly perfect relationships broadcast online can create an insidious sense of dissatisfaction. Suddenly, your own marriage feels dull in comparison, and small online interactions can take on disproportionate emotional weight. A partner’s “likes” on someone else’s posts or private exchanges with friends can sting more than any overt betrayal because they tap into feelings of neglect and inadequacy. Social media doesn’t merely tempt, it reshapes perceptions of your spouse and your life together, creating tension that can escalate into irreparable conflict. Secrecy is easy in the digital age. Hidden accounts, disappearing messages, and private conversations allow people to hide their activities, creating invisible wedges between spouses. Emotional or digital infidelity often goes unnoticed until the damage is severe, leaving a partner blindsided and questioning the foundation of the relationship. Unlike traditional affairs, social media leaves traces, but the subtlety and constant accessibility make it easy to overlook until trust has already crumbled. Even without physical betrayal, these online dynamics are enough to push a marriage toward divorce. Social media may not be the sole cause, but it amplifies existing cracks until they can no longer be ignored. Divorces today are increasingly influenced by these digital pressures. Emotional cheating, jealousy fueled by constant comparison, erosion of intimacy, and secret online lives create a perfect storm that can tear even strong marriages apart. Public interactions on social media—arguments, passive-aggressive posts, or humiliating comments—only escalate tensions further. The very tools that are supposed to connect us instead divide, distracting from real-world intimacy, and creating conflict that often feels impossible to resolve. Couples who recognize the danger and set boundaries, communicate openly, and prioritize real-life connection over digital validation have a chance to survive, but ignoring the problem can have devastating consequences. Social media has become a silent third presence in marriages, observing, tempting, and reshaping relationships in ways that can be fatal to love. In a world dominated by likes, comments, and notifications, the marriage that survives is the one in which the partners choose each other over the digital world. This Valentine’s Day, love is not proven by what is posted, liked, or shared online. It is proven in what is protected. The most meaningful Valentine’s gesture may not be a public declaration at all, but the quiet decision to guard emotional boundaries and invest fully in the relationship that matters most.
February 10, 2026
Tax
So, The IRS Has Selected Your Return for Audit
The Internal Revenue Service (“IRS”) audits 1% to 2% of small business income tax returns annually for one of two reasons: (1) something about the return (or information reported on the return) flagged the return for a closer review and the revenue agent reviewing the return decided an audit was appropriate; or (2) (bad) luck of the draw – the return was randomly selected for audit. The first reason – a red flag – is far more common than a random audit. The IRS publishes Audit Technique Guides for use by revenue officers. These guides can be found on the IRS’s website here and provide insight into what the IRS checks for and hopes to discover. Regardless of the reason or type (more on that below), the IRS never emails you and never calls without first sending you correspondence BY MAIL (not email). There are Four Types of Audits There are four types of audits, listed from least to most intrusive. Correspondence Audit The first (and most common) is a correspondence audit, which constitutes about three-quarters of all audits. With correspondence audits, you never meet with a revenue agent face-to-face because everything is done through the mail. In the simplest of audits, the IRS asks for information only regarding certain specific entries on your return. For example, if your return reported sales of stock and the return failed to indicate the basis, the IRS will write and request you to provide them with basis information (how much you paid for the stock you sold). Once you supply the requested information, the audit may be over (assuming the information provided matches the gain or loss reported on the return). Office Audit The second form of audit is an office audit, which takes place at their office, not yours. Office audits arise when a return is too complex for a correspondence audit but does not meet the threshold for a field audit. Often, office audits are over itemized deductions, rental incomes and losses, or Schedule C filers. During an office audit, the examiner will ask you questions in an attempt to find other areas to examine. Often, the examining agent will ask for more information, usually documents, and will give you a reasonable amount of time to gather and supply the requested information. Field Audit The third form of audit is a field audit. This audit takes place at your office, not theirs. During a field audit, the examiner will frequently ask for additional information and expect you to provide it reasonably quickly, after all, they are at your office where (in their mind) the records should reside. Line-By-Line Audit The fourth form of audit is a line-by-line audit, otherwise known as a Taxpayer Compliance Measurement Program (TCMP) audit. In this audit, the IRS reviews the returns of lucky taxpayers, line-by-line. The stated purpose of the audit is to build and refine the data points used to tweak the algorithms that determine whether a return should be selected for audit. Still, it is an audit, nonetheless. No matter the type of audit, the IRS’s starting position is to count all income and deny all deductions. For example, in our correspondence audit example, if you claimed a loss on the sale of stock, unless and until the IRS receives the requested supporting documentation, they will deny the loss, adjust your return accordingly, and send you a tax bill with interest and penalties. Office, field, and TCMP audits are the same way. The IRS wipes out your deductions and makes you build them back, providing reasonable substantiation for each type and amount of deduction. All audits begin the same way regardless of the type: the IRS sends you a letter, often by certified mail, advising you of the audit. The letter always has a response date. Do not ignore this date. If you ignore the date and do not respond, the IRS will either escalate the audit or issue a 30-day letter in which the IRS tells you what changes they propose and how much additional tax, interest, and penalties you will need to pay. If you ignore the 30-day letter, the IRS will issue a Statutory Notice of Deficiency (SNOD), and you will have ninety (90) days to file suit in the United States Tax Court to contest the IRS’s findings. When Do You Need a Tax Lawyer Certainly, for office and field audits. During office and field audits, the audit examiner will be asking you questions. Audits are unpleasant, and many people simply think that if they answer all the examiner’s questions the audit will be over quicker. WRONG. The examiner is asking questions because they are looking for additional areas to audit. Equally important, statements you make to the examiner fall under 18 USC § 1001, more commonly known as a “1001 violation.” 18 USC § 1001 criminalizes knowingly and willfully making materially false, fictitious, or fraudulent statements or representations made to a federal agent. This is the statute under which Martha Stewart was convicted. What she lied about was not a crime, but lying about it to a federal agent was (and still is) a crime under 18 USC § 1001. Whether an incorrect answer is merely the fault of a bad memory or may be considered lying to a federal agent is a question over which reasonable minds can and do differ. Just as I often told baseball teams I coached, never put the calling of a close pitch a ball or strike in the hands of an umpire; you shouldn’t leave the decision whether it was your bad memory or something worse to an IRS agent. A tax lawyer can help keep this from happening. When Should You Call a Tax Lawyer The minute you get the notice in the mail advising you that your return has been selected for audit. An experienced tax controversy lawyer can meet with the audit examiner on your behalf and provide information in a limited, organized manner, which will help limit the scope of the audit. The audit examiner will address questions to your attorney, not you. Tax lawyers’ answers are measured and designed to keep the audit as limited as possible. Even with a correspondence audit, your best solution may be to engage a tax lawyer to respond on your behalf or, at the very least, guide your response. Professional counsel can make a significant difference in the outcome, so leave the DIY to other areas.
February 9, 2026
Page 5 of 36
About the Blog
Receive timely content, newsletters and event information delivered to your inbox.
