Financing challenges are many, but there are some options for builders

Many years ago, as a young lawyer, I was representing a client in a difficult series of negotiations with its proposed lenders. The loan was burdened by conditions and restrictions, and was on economic terms less advantageous than what the client had in mind originally. The alternative was to put the project on hold and hope that the credit markets would change. Discussing the matter with one of the more experienced attorneys in the office resulted in a very simple direction: “When someone offers you money, take it.”

IRS leaves the door open for 10-year carryback on homebuilders’ Chinese drywall losses

The IRS Chief Counsel’s Office recently released a memorandum concluding that a homebuilder is not entitled to treat home warranty losses like product liability losses for net operating loss purposes.

However, the rationale of the memorandum still leaves open the possibility that a homebuilder might be eligible for the more favorable product liability loss treatment for repair losses due to Chinese drywall or mold remediation. How?

Net operating losses (NOLs) can generally be carried back for two years (three years in the case of a casualty loss) in order to generate a tax refund. A special rule allows product liability losses to be carried back 10 years. The longer the carryback period, the more likely a refund will be generated, since the NOL must be carried back to a year where there was a tax liability in order to obtain a refund.

Many theories and many risks

In a recent edition of Northern California’s Humboldt County Mirror, county supervisor and California Coastal Commission chair Bonnie Neely was pictured with devil’s horns beside an article about her acceptance of out-of-town campaign contributions—including “the pot of cash she got from the So Cal developer with matters pending before the Coastal Commission…”

The Coastal Commission is one of the toughest regulatory bodies in the state, with the toughest regulations in the nation, and Neely has shown herself to at least be open to the idea that some development should be allowed along California’s coast. So it’s not surprising that she’s receiving campaign funds from businesses 700 miles south. After all, if she were to lose her seat on the Humboldt County Board of Supervisors, she would lose her seat on the Coastal Commission.

Severance agreements for underperformers

A framed quote in my office reads, “Irish Diplomacy: The ability to tell someone to go to hell in such a way that they look forward to making the trip.”

How do you terminate underperforming employees so that they look forward to making the trip? It’s not easy. Employers generally have no obligation to offer severance. But, if you are offering a severance package, you may be missing opportunities and creating unanticipated risks. Here are some things to think about:No Surprises. Employees surprised by termination are more likely to sue you. 1)No big secret there. Underperformers should know they are not performing. Tell them, e-mail them and make sure it’s in performance reviews. This will be important when it comes to termination time.