ITKOWITZ PLLC STORIES

Philadelphia Skyline

Itkowitz PLLC Wins for Client in Federal Court on Case by Tax Credit Broker on Deal Gone Bad

October 5, 2017

We recently had to travel to Federal Court in Virginia, to try a case. We represented a developer who was being sued by a tax credit broker.

Why does one buy tax credits? Well why not! I like any sentence that adds the word “credit” to the word “tax”. In this case, the developer had entered a long-term lease for an historic building that wasn’t really worth developing after Hurricane Sandy. But it came with the possibility of tax credits. Such deals are brokered.

The trouble here started when the IRS changed its regulations governing tax credit investments, due to an appellate case coming out of the Third Circuit federal court. After the change, a passive investor with no real stake in the running of a project could no longer take advantage of such tax credits. The investor would need to be “at risk” in order to reap the benefits. Here, this particular investor had no money “at risk” because it was only obligated to put up its investment until the project had been satisfactorily built. Ultimately, the developer terminated the project. Thus, no tax credit was available. 

Nevertheless, the tax credit broker sued the developer, claiming it was entitled to $1M on its commission. The broker was a company headquartered in Virginia with an office in Washington. It sued our New York developer client in federal court in its home state of Virginia, on the basis of diversity of citizenship. 

My law partner and husband, Jay B. Itkowitz, tried the case.

The jury decided the broker was only entitled to $2,800.

Respectfully submitted,

Michelle Itkowitz

Labels: , ,

0 Comments:

Post a Comment

Subscribe to Post Comments [Atom]

<< Home

Go to older posts Go to newer posts

Copyright by Itkowitz PLLC.

Sitemap   |   Disclaimer