* Please join us in welcoming (back) Christopher P. Carrington as Senior Counsel. 

It is a common misconception that attorney's fees are automatically awarded to the successor at the completion of a case.  Litigants often feel that a "win" at trial is representative of the fact that they should not have had to proceed to litigation in the first place, and should be compensated accordingly.  While this notion is understandable, courts do not award attorney's fees to a party simply because it is the fair or just thing to do.  Rather, in most cases, an award of attorney's fees in Colorado follows what we colloquial refer to as "the American Rule."

See, e.g.,Alyeska Pipeline Svc. Co. v. Wilderness Soc'y, 421 U.S. 240 (1975).  

Often, an award of attorney's fees can be found in a contract for services in the event that the service provider is forced to engage in collection proceedings.  Other times, such an award is allowed by statute, such as C.R.S. §14-10-119, which allows the court to make an award of attorney's fees to either party in a divorce proceeding after considering the financial position of both parties.  However, it important to understand that without such an express provision for attorney's fees, both parties are expected to pay for their own attorney's fees regardless of the result of the case. If you are considering participating in any kind of litigation, it is important to consult with an attorney who will be able to help you 

The Colorado Oil and Gas Conservation Commission (COGCC) regulates oil and gas exploration operations in Colorado.  The COGCC has enacted rules with which oil and gas operators must comply when drilling and operating oil and gas wells in Colorado.  There are COGCC rules that prohibit operators from drilling oil and gas wells within specified distances from existing buildings, residential dwellings, and outside activity areas, these restricted areas are called "Setbacks" in the COGCC rules.  In February, 2013, the COGCC modified its rules to increase some of the Setbacks that restrict development of oil and gas wells near existing buildings, residential dwellings, and outside activity areas.  These changes go into effect on July 1, 2013.  If you own property in Colorado upon which improvements have been constructed or property that you intend to develop in the future, it is important for you to be aware of the changes to the COGCC Setback rules

The following are the major changes to the COGCC rules regarding Setbacks:

• Designated Setback Locations for Oil and Gas Locations will be 500 feet from building units, 1,000 feet from High Occupancy Building Units, and 350 feet from Designated Outside Activity Areas.

• Waivers are required from Building Unit owners within 500 feet of a proposed Oil and Gas Location in Urban Mitigation Areas. If waivers cannot be obtained, the operator can seek a variance from the director, and if not granted, have a hearing before the Commission.

• Rule 604(b)(2) exempts Existing Surface Use Agreements or Site Specific Development Plans.

• Rule 604(b)(3) exempts surface development after August 1, 2013 pursuant to a Surface Use Agreement or Site Specific Development Plan.

The capitalized words used above are defined in the COGCC rules.  You can find the COGCC rules on the COGCC website at http://cogcc.state.co.us/.  We would be happy to assist you with any questions you have regarding the changes to the COGCC rules.  

A (Very) Brief Primer on Self-Directed IRAs

by Steven M. Weiser, Esq.

Most people are familiar with Individual Retirement Accounts (IRAs), those handy retirement tools that allow taxpayers to sock away their savings tax-free (or nearly tax-free).  With a "traditional" IRA amounts earned in the financial account are not taxed until distributions are made.  Contributions to a traditional IRA are often made using pre-tax dollars (meaning the amounts deposited are excluded from the taxpayer's taxable income in the year of contribution).  A more recent variant of the IRA is the "Roth IRA" which uses after-tax dollars for contributions, but allows users to avoid income taxes for qualified distributions (in effect, the earnings associated with these accounts are never taxed even upon distribution).

However, the lesser-known "self-directed IRA" (which can also be a traditional or Roth IRA) has actually been around since 1974, when the IRS first published its framework for all IRAs.  A self-directed IRA gives the account holder more investment options than traditional IRAs.  In fact, it's easier to speak about what a self-directed IRA cannot invest in, rather than what it can invest in.  Some taxpayers are familiar with self-directed IRAs promoted by large financial institutions that give investors the opportunity to choose a variety of marketable securities to invest in.  However, under federal tax laws the only investments an IRA can't hold are life insurance contracts and collectibles.  This means real estate, precious metals, secured and unsecured promissory notes, oil and gas interests, tax liens, and just about any other "alternative" investments can be held in an IRA.

One difficulty my clients often face in setting up a self-directed IRA is finding a custodian/trustee to manage the IRA.  Your typical large financial institutions don't have the infrastructure in place to handle IRAs that hold alternative investments.  One of my roles as a client's advisor is to assist people in locating an institution capable of managing the self-directed IRA account.  Often, we can locate an institution that not only serves as custodian of record for the investment, but also performs all administrative and bookkeeping functions associated with the retirement account.  Other times the custodian utilizes a third party to provide administrative and bookkeeping services.

A common complaint I hear from clients concerns the costs involved in establishing a self-directed IRA.  Generally, the trustee of a self-directed IRA has larger up-front costs that must be paid to establish the IRA.  Additional costs may be incurred with regard to administrative services.  However, when you consider the "hidden" costs associated with IRAs managed by large financial institutions the self-directed IRA may actually be less expenses.  For example, a large financial institution may charge no fee for establishing an IRA, but may charge a fee every time marketable securities are bought and sold.  When choosing a custodian it's important not only to consider costs, but also that the custodian has a program suitable for the type of asset an individual would like to invest in.

Perhaps the most important consideration with respect to self-directed IRAs is ensuring that a prohibited transaction does not occur.  In general, an IRA may not engage in a prohibited transaction with the following "disqualified persons:"

• the IRA owner,
• the IRA owner's spouse, descendants and ascendants (parents, grandparents, etc.),
• spouses of the IRA owner's descendants,
• certain fiduciaries (CPAs, attorneys, etc.),
• other retirement plans or accounts held by disqualified persons, and
• any entity that these people own or control.

Prohibited transactions include the following transactions between the IRA owner and her IRA:

• sales, exchanges and leasing of property,
• extending credit,
• furnishing goods, services or facilities,
• having personal use of IRA assets, and
• pledging IRA assets to secure a personal loan.

These rules are essentially designed to prohibit persons from obtaining a non-retirement benefit from their IRA, and to provide or obtain impermissible tax-advantaged benefits from family members.  Under these rules an IRA cannot allow its owner to use beach-front property owned by the IRA regardless of whether the IRA owner pays fair market rent.  A violation of the prohibited transaction rules can be catastrophic - the IRA can lose its tax-preferred status and the value of all IRA assets can become taxable in a single year.  In addition, if the IRS discovers the existence of a prohibited transaction years after it occurred huge penalties and interest charges may also be assessed.

The rules concerning IRAs are not surprisingly complex, particularly with regard to the prohibited transaction laws.  Although a self-directed IRA (traditional or Roth) can be incredibly beneficial, particularly to individuals inclined to invest in alternative investments such as real estate, careful planning and the advice of a competent tax professional is strongly encouraged.

If you have any questions about establishing a self-directed IRA, or any other tax or estate planning matter, you may contact Steven Weiser at 303-333-9810.