Sentiments Vary on Benefit of State Tax Credits

By Michael J. Novogradac, CPA

Several recent studies have shown that state tax credits have generated considerable economic activity resulting in new and retained jobs that are often high-paying and sustainable, as well as new state and local sales and tax revenue and increases in investment. One of those studies, authored by researchers from the Center for Urban Policy Research at Rutgers University and released by the Historic Tax Credit Coalition, found that the federal historic tax credit (HTC) is a highly efficient job creator, accounting for the creation of 1.8 million new jobs over the life of the program. Thirty-one states have HTC programs and supporters are quick to remind us that historic rehabilitation generates jobs in the construction trades at a time when employment in this sector is needed desperately.

 

 

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The Current:
Codification of the “Economic Substance Doctrine”—
What Does it Mean for Energy Tax Credit Transactions?

By Forrest Milder, Esq., Nixon Peabody LLP

Over the years, the courts have applied several theories as to why a transaction should not be “respected” as a matter of federal income tax law. For example, a court might conclude some or all of the following: that the taxpayer’s participation lacked economic motivation other than tax considerations, that the taxpayer was not able to demonstrate a non-tax “business purpose” for undertaking the transaction, or that the taxpayer could not demonstrate a reasonable prospect of making a profit from the transaction.

 

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Guidance Clears the Way for
Some Stalled Recovery Act Projects

By Jeff Nishita, CPA, Novogradac & Company LLP

On March 17, 2010, the Internal Revenue Service (IRS) released greatly anticipated guidance regarding issues stemming from sections 1404 and 1602 of the American Recovery and Reinvestment Act of 2009 (Recovery Act). In Notice 2010-18 the IRS clarifies how a grant under Section 1602, otherwise known as the tax credit exchange program, is taken into account when calculating a state’s housing credit ceiling. It also discusses whether a subaward under Section 1602 is taxable to the recipient and if it decreases depreciable or eligible basis. This notice helps clear some of the major roadblocks that were holding up the closing of many Section 1602 projects.

 

 

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NMTC Working Group Update: May 2010

By Brad Elphick, CPA, Novogradac & Company LLP

On April 7, the Community Development Financial Institutions (CDFI) Fund opened the 2010 round of the New Markets Tax Credit (NMTC) program by announcing the notice of allocation availability (NOAA) and releasing a copy of the application. I’m not sure there has been any NMTC application round that has been waited on with such anticipation.

 

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Citi, New York City Housing Authority Close
$900 Million Rehabilitation Deal

By Jennifer Hill, Staff Writer, Novogradac & Company LLP

After years of searching for solutions to its growing operating deficit, the New York City Housing Authority (NYCHA) in March concluded a complex, two-part mixed-finance deal with Citi Community Capital.

At the announcement of the U.S. Department of Housing and Urban Development’s (HUD’s) approval of the more than $900 million transaction, Secretary Shaun Donovan observed that the number of units the transaction will benefit is equal to the whole of Chicago’s affordable housing stock. Donovan called the day potentially “the most important day in the preservation of public housing in the nation’s history.”

 

 

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Sen. Maria Cantwell, D-Wash., in April called for an extension of the one-year Section 1602 low-income housing tax credit (LIHTC) cash grant exchange program under the American Recovery and Reinvestment Act (Recovery Act).

 

The National Multi Housing Council (NMHC) last month released its annual rankings of the 50 largest apartment owners and 50 largest apartment managers.

 

Boston Capital will invest in a to-be-built Section 202 affordable housing development for seniors in Staten Island, N.Y. Lafayette Manor will feature 24 studios, 35 one-bedroom units and one two-bedroom manager’s unit in a five-story building.

 

On April 1 Gov. Tim Pawlenty signed into law House File 2695, a bill comprised of tax incentives to stimulate job growth in Minnesota (See more on state tax credits in the Washington Wire, page 4).

 

The Community Development Financial Institutions (CDFI) Fund has released its fiscal year 2009 Performance and Accountability Report, an annual publication that provides a comprehensive assessment of its operations.

 

Applications for funds through Preserve New York, a grant program administered by the Preservation League of New York State and the New York State Council on the Arts (NYSCA), are now available to eligible municipalities and not-for-profit organizations.

 

Wind energy manufacturing continued to grow in 2009, albeit at a slower pace than in 2008, according to the annual U.S. wind industry market report released in April by the American Wind Energy Association (AWEA).