The Cummings & Cummings Law Journal

The New Baseline: What Section 174 Requires Today For tax years beginning after 2021, Internal Revenue Code Section 174 requires businesses to capitalize and amortize specified research or experimental expenditures, rather than deduct them currently. This regime applies to amounts paid or incurred in connection with the development or improvement of a product, including software.

Understanding Flow-Down Clauses and Why They Matter Flow-down clauses are provisions in a prime government contract that the prime contractor must incorporate into its subcontracts. These clauses ensure that subcontractors are bound to the same statutory and regulatory obligations that the government imposes on the prime. The concept appears straightforward, yet the execution is rarely

Why Inadequate Clawback Provisions Create Outsized Legal Exposure An underdeveloped clawback provision for bonus compensation is often dismissed as a minor contractual detail. In practice, an inadequate provision can become the fault line for multi-year litigation, lost tax deductions, accounting restatements, and reputational harm. Employers frequently assume that “if it is in the plan, it

Understanding Appraisal Rights Through the Lens of Enterprise Value Enterprise value sits at the center of many appraisal rights disputes because it is meant to capture the value of the entire operating business on a debt-free, cash-free basis. In appraisal litigation, courts frequently seek to determine the fair value of a company as a going

Understanding a Flip‑In Poison Pill and Why Tax Consequences Are Not Intuitive A flip‑in poison pill, often adopted as a shareholder rights plan, allows existing shareholders (other than a triggering acquirer) to purchase additional shares at a steep discount if any party crosses a specified ownership threshold. The economic effect is immediate dilution of the

Understanding Synthetic Equity and When It Makes Sense Synthetic equity refers to incentive arrangements that mimic the economic upside of ownership without issuing actual shares or membership interests. Common structures include phantom stock units (or phantom units) and stock appreciation rights (SARs). These awards typically deliver cash, or sometimes settle in shares, based on the

Understanding Transfer Pricing Rules and the Arm's Length Principle Transfer pricing refers to the pricing of goods, services, financial arrangements, and intangible property transferred between related entities within a multinational enterprise. The cornerstone standard is the arm's length principle, which requires that the terms of intercompany transactions mirror those that would have been agreed by

The Regulatory Baseline: What “Current” Means Under the Federal Securities Laws Public companies are required to maintain and file financial statements that are current, complete, and prepared in accordance with U.S. GAAP (or IFRS for certain foreign private issuers) under the Securities Exchange Act of 1934 and related rules. “Current” is a term of art.

Choosing the Right Entity and Ownership Structure Selecting the business entity that will own, finance, and operate renewable energy equipment drives nearly every downstream tax result. A single-member limited liability company offers administrative simplicity but is disregarded for federal income tax purposes, rolling all credits, depreciation, and income into the owner’s return where passive activity

Understanding the Non-Compete Buyout in an Asset Purchase A non-compete buyout is a payment from the buyer to the seller, or to key owners or employees of the seller, in exchange for an agreement not to compete with the acquired business for a specified time and geography. In an asset purchase, this covenant is commonly

The Allure and the Reality of the Self-Directed IRA LLC The promise of a Self-Directed IRA LLC, often marketed as a “checkbook IRA,” is seductive: broader investment latitude, quicker execution, and the perception of enhanced control. In theory, the structure allows an IRA to own a limited liability company, and the LLC then acquires assets

Understanding What a Preferred Return Really Represents In private equity funds, the “preferred return” is often described informally as a simple hurdle rate paid to limited partners before the general partner shares in profits. In practice, a preferred return is a legally defined economic right embedded in the fund’s limited partnership agreement (LPA) and is

Understanding a Direct Public Offering and Why It Is Not Do-It-Yourself A Direct Public Offering is a method of raising capital by selling securities directly to investors without using a traditional underwriter. It is frequently misunderstood as a simple marketing exercise. In practice, a DPO is a regulated securities offering subject to an intricate overlay

What “Sourcing” Means in State Income Tax and Why It Matters Sourcing is the process by which a state determines where income is earned for purposes of its income tax or franchise tax regime. In multistate operations, sourcing governs whether revenue from a sale or service is assigned to State A, State B, or potentially

Understanding Nexus: The Foundation of Multi-State Tax Obligations The first and most consequential building block in multi-state business taxation is nexus, the legal threshold that determines whether a state may impose tax and filing obligations on your business. Many owners assume that the absence of a physical office or warehouse in a state shields them

Attracting and retaining top performers requires more than a competitive salary. Key employees evaluate the full compensation package, the long-term value of benefits, and the credibility of the employer’s commitment to their success. A well-designed profit-sharing plan can anchor that value proposition. When properly implemented, it aligns incentives, delivers meaningful retirement wealth, and signals a

Understanding What a Capital Interest for Services Really Is A capital interest granted for services is an ownership right in a partnership (including a multi-member LLC taxed as a partnership) that entitles the service provider to a share of the partnership’s assets upon a hypothetical liquidation immediately after the grant. In plain terms, if the

Why Board Minutes Matter Under Corporate Law Board minutes are not mere summaries; they are the authoritative legal record of director deliberations and decisions. As an attorney and CPA, I routinely see the consequences when organizations treat minutes as optional or perfunctory. Minutes memorialize that the board observed fiduciary duties of care and loyalty, that

Understand Taxable Events in Cryptocurrency Mining Operations Cryptocurrency mining generates multiple taxable events that must be identified and documented with precision. Under current federal guidance, newly mined coins are treated as ordinary income upon receipt, measured by the fair market value of the tokens at the time you obtain dominion and control. For a miner

Understanding Payment-in-Kind Interest in Mezzanine Financing Payment-in-kind (PIK) interest allows a borrower to accrue interest to the loan principal rather than paying cash interest on a current basis, a feature frequently deployed in mezzanine financing to preserve liquidity. In practice, PIK is not a monolithic concept. It can be structured as pure PIK, as a