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Tips for Hiring a Lawyer

January 20th, 2016 by Felicity Hardee

Nonprofits on a budget sometimes struggle about how and when to hire an attorney.  Getting legal help can be intimidating and expensive so being strategic about bringing a lawyer on board makes good sense.  Here are some tips to consider before making the call.

When do you need a lawyer?

 “An ounce of prevention is worth a pound of cure.”  Community development corporations sometimes believe that lawyers are only needed for closings and lawsuits.  However, there are many situations when some good legal advice at the outset of a difficult situation can save the agency time and money in the long run.  If a nonprofit is entering into a significant contract or has a tricky employment decision to make, up front legal review can save a lot of headaches later on.  On the other hand, there are many situations where the nonprofit can take on tasks that were formerly left to the lawyers—these include incorporating an entity with the secretary of state and annual corporate filings.  The bottom line is this:  if the stakes are high, or the issues are murky or unusual, think about reaching out for some support.  A lawyer may be able to offer helpful advice at the right time.

The right person for the work.

It is critically important that the lawyer you hire has the relevant experience to assist your organization.  This is especially true for public housing authorities and other public and quasi-public entities regulated by HUD or DHCD. Hiring a lawyer who is not familiar with procurement rules or open meeting law can be a recipe for trouble. Finding a lawyer with relevant experience can be handled through networking with other agencies and advocacy organizations. CHAPA also has a consultant page that identifies lawyers with relevant experience.  http://www.chapa.org/consultant_browse

Talking about fees.

Any lawyer you hire should be willing to discuss fees openly and you should not feel uncomfortable asking about how much the services may cost.  There are some situations where it may be difficult or impossible for the lawyer to provide a reliable estimate of how much the services required will cost. Complex litigation with a self-represented individual falls into this category. However, there are other engagements where it is reasonable to ask the attorney to provide at least a range of the expected cost.  If you are retaining a lawyer for a closing, ask if the lawyer will provide a “not to exceed” price for the services. A lawyer’s tasks are similar from one closing to another and lenders typically pay their attorneys on a fixed fee basis.  Therefore, you may want to ask whether the attorney would be willing to give you a fixed price for the transaction. Doing so provides both your organization and the lawyer some certainty. Other situations that lend themselves to a fixed fee may include contract review and preparation of simple contracts and releases.

Title insurance (for extra credit!)

Massachusetts is a “negotiated rate” state for title insurance policies over a certain amount. If your attorney is issuing a title insurance policy on a housing project under development and the acquisition price or loan amount is greater than $2 million, you should ask him or her to negotiate with the title insurance company the rate you will pay for your policy premium. For owner coverage (as contrasted with coverage for the lender), the savings can be significant.  While a standard rate may be $3.65/$1000 of coverage for smaller policies, some title insurance companies are willing to reduce the premium on a large policy for a nonprofit to as little as $1.25. On a $5 million policy with coverage for your agency as the owner, that is a savings of $12,000.

Your relationship with your attorney is a key ingredient to the success of your organization. Call when you need to and seek out an experienced lawyer who will work with you to keep your legal expenses in check while advancing the mission of your organization.

Felicity Hardee is an attorney who helps nonprofits and affordable housing developers with their community development needs. She assists clients with closings involving multiple financing sources, including Low Income Housing Tax Credits, and provides compliance assistance, litigation services and general legal advice to CDCs throughout Massachusetts. Find her at www.fhardee.com, on LinkedIn and on Twitter at @felicity_hardee.

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DOR Issues Draft Regulations for CITC Program

May 21st, 2014 by Felicity Hardee

The Massachusetts Department of Revenue has issued draft regulations for the Community Investment Tax Credit program (proposed regulations at 830 CMR 62.6M.1. Assuming the regs when adopted stay the same as the draft, they create some important incentives to taxpayers and donors who want to invest in their communities. For example:

  • You do not need to be a resident of Massachusetts to make a donation and obtain a credit. In fact, you do not even need to have Massachusetts taxable income. [Section 830 CMR 62.6M.1(13)]. Since the credit is refundable, if someone wants to make a donation to a community development corporation that has been allocated credits, he may do so, file a return, and receive 50% of the credit back as a refund from the state. The total donation is treated as a charitable donation for federal tax purposes. However, be aware that the refund will likely be treated as income for federal tax purposes when filing in the following tax year.
  • The clear winner is a donor who has Massachusetts income and whose donation approximates her tax liability. If Donor A has tax liability of $2,500 and makes a donation of $5,000, she will receive a credit of $2,500 eliminating her state tax liability and, as noted above, may claim the total donation as a charitable gift on her federal return. Since her tax credit offsets her Massachusetts income, the credit is not treated as income for federal tax purposes.
  • Corporations, partnerships and limited liability companies are also eligible to claim the credit. If the entity is a “pass through” entity and not taxed at the entity level, the credit is passed along to the owners pro rata or based on an executed agreement documenting an alternative distribution method. [Section 830 CMR 62.6M.1(10)(a)].
  • Nonprofit organizations that are tax exempt under IRC 501(c)(3) may contribute to a community development corporation and receive either a tax credit (eg. if the organization has unrelated business income), or the refund.

A word of caution to businesses that wish to donate and have a business relationship with the community development corporation: the contribution will only qualify if it “is not in any way an element of or contingent upon such contractual relationship [with the CDC] or upon its continuation.” [Section 830 CMR 62.6M.1(15)(b)]. If there is a business relationship between the donor and the donee, the donor must disclose that when it applies for the tax credit.

For more information, check out the Massachusetts Association of CDCs website at http://www.macdc.org/community-investment-tax-credit. You can access the list of qualified community development corporations at http://www.macdc.org/2014-citc-allocations.

Felicity Hardee is an attorney in Springfield, Massachusetts who represents affordable housing developers and lenders in the development and financing of housing for low and moderate income individuals, families and seniors. She assists clients with closings involving multiple financing sources, including Low Income Housing Tax Credits and HOME, HSF and HIF financing.  She serves as the President of Valley CDC and the Treasurer of Community Legal Aid.

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