Notes from Novogradac

Published by Bob Ibanez, Peter Lawrence on July 31, 2019

The new markets tax credit (NMTC) has been subject to reauthorization since 2006-most recently through the Protecting Americans from Tax Hikes Act (PATH Act, 2015) that extended the credit through calendar year 2019.

Published by Peter Lawrence on July 31, 2019

Congress last week moved closer to finalizing H.R. 3877, the Bipartisan Budget Act of 2019, a two-year $2.7 trillion budget deal that would raise spending caps for fiscal years (FY) 2020 and 2021 and suspend the debt limit until July 31, 2021. The bill raises nondefense spending by $25 billion (4 percent) in FY 2020 compared to the FY 2019 spending cap, and $79 billion (15 percent) more than current law FY 2020 spending cap as mandated by the Budget Control Act of 2011 (BCA), but $9 billion less than the amount set by the House earlier this year when drafting its FY 2020 spending bills.

Published by Bob Ibanez on May 10, 2019

This month, Inclusiv, formerly known as the National Federation of Community Development Credit Unions, will present the third of three webinars for its members about the New Markets Tax Credit (NMTC) program.

Published by Peter Lawrence on April 4, 2019

In August 2018 the Office of the Comptroller of the Currency (OCC) released an advanced notice of proposed rulemaking (ANPR) soliciting public comment on reform of Community Reinvestment Act (CRA) regulations.  Nearly 1,500 national, state and local organizations and businesses submitted comments to OCC in response to the ANPR, a sample, comprised of key affordable housing and community development associations and sta

Published by Peter Lawrence on March 18, 2019

On March 12, House Ways and Means Committee Members Terri Sewell, D-Ala.; Tom Reed, R-N.Y.; Jason Smith, R-Mo.; and Senators Roy Blunt, R-Mo.; and Ben Cardin, D-Md., introduced the New Markets Tax Credit Extension Act of 2019 (H.R. 1680, S. 750).

Published by Peter Lawrence on March 11, 2019

The Trump administration today released its $4.7 trillion fiscal year (FY) 2020 budget request, which includes $750 billion in defense spending including overseas contingency operations and other adjustments and $567 billion for nondefense spending including adjustments.  The proposed base nondefense discretionary spending cap is $543 billion, a cut of $54 billion from FY 2019 spending cap.

Published by Peter Lawrence on February 14, 2019

After a delay related to the 35-day partial government shutdown, the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) Fund awarded more than $142 million in Capital Magnet Funds (CMF) during its fourth funding round for fiscal year (FY) 2018 on Feb. 13. The 38 awardees were selected from 116 applications, which requested more than $570 million in awards this CMF round.

Background

Published by Peter Lawrence on February 11, 2019

As changes to Community Reinvestment Act (CRA) regulations are considered and developed, it is imperative to consider how those changes could affect regulated financial institutions and their investment and lending activities.

Published by Bob Ibanez on January 16, 2019

Since the expiration of the continuing resolution to fund portions of the federal government, including the Treasury Department, on Dec. 21, the Community Development Financial Institutions (CDFI) Fund has suspended its services, including access to the CDFI Fund help desks and the CDFI Fund Awards Management Information System (AMIS). Because non-essential CDFI Fund staff, including New Markets Tax Credit (NMTC) program office staff, have been furloughed the partial U.S.

Published by Bob Ibanez on December 21, 2018

The Community Development Financial Institutions (CDFI) Fund recently released a summary report and public data on new markets tax credit (NMTC) investments through fiscal year (FY) 2016. Updated annually, the data once again reflects the flexibility of the NMTC with respect to the types of businesses financed with flexible or non-traditional rates and terms.

Published by Bob Ibanez on December 18, 2018

In November, the Community Development Financial Institutions (CDFI) Fund released data that reveal the diversity of institution types (i.e. banks, credit unions, loan funds and venture funds), products and services offered by CDFI Fund awardees, and resulting impacts in low-income communities.

Published by Bob Ibanez on December 11, 2018

The New Markets Tax Credit (NMTC) program was authorized as part of the Community Renewal and Tax Relief Act of 2000. Since then, the Community Development Financial Institutions (CDFI) Fund has made 1,105 awards totaling $54 billion in tax credit authority. Out of the pool of successful allocatees, only 12 awards or approximately 1 percent have gone to either an affiliate of a credit union (Self Help Ventures Fund) or the sponsor of a credit union (Hope Enterprise Corporation).

What Credit Unions should know about the NMTC

Published by Bob Ibanez on November 13, 2018

The Office of the Comptroller of the Currency (OCC) is currently soliciting comments in connection with an advance notice of proposed rulemaking (ANPR) aimed at updating the regulations that implement the Community Reinvestment Act (CRA) of 1977. The original intent of the CRA was to help meet the credit needs of the communities that banks serve.

Published by Peter Lawrence on November 7, 2018

On Nov. 6, Democrats took control of the House while Republicans retained control of the Senate. According to the Associated Press, Democrats have been declared the winner in 220 House seats, Republicans in 194 seats and 21 seats are still uncalled. Of those 22 races, Democrats are leading in nine, and Republicans are leading in 12. Assuming those races proceed as predicted, and the leading candidates in the 21 uncalled races are eventually confirmed, Democrats will have 229 seats in the House and Republicans will have 206.

Published by Michael Novogradac on October 26, 2018

Lame-duck sessions of Congress–the final weeks of a two-year term, those that follow an election–are a Rubik’s Cube of legislative periods. There are multiple moving pieces, each affecting others.

For affordable housing, community development and historic preservation advocates, the 2018 lame-duck session could be fertile ground for long-desired legislation. Or Congress could decide to work on the bare minimum before heading home for the holidays. It depends on moving pieces and how they each affect others.

Published by Bob Ibanez on September 26, 2018

The Internal Revenue Service (IRS) is currently working on guidance on how the qualified opportunity zone (OZ) benefit under Internal Revenue Code (IRC) 1400Z-2 will be administered. Thus far, the IRS has posted a list of Frequently Asked Questions about OZs with additional guidance in the form of interim regulations anticipated in the very near future.

Published by Peter Lawrence on August 31, 2018

The Office of the Comptroller of the Currency (OCC) released August 28 an advanced notice of proposed rulemaking (ANPR) soliciting public comment on reform of Community Reinvestment Act (CRA) regulations.

Published by Bob Ibanez on August 27, 2018

Under H.R. 6627, legislation introduced by two members of the House Ways and Means Committee, Reps. Jason Smith, R-Miss., and Terri Sewell, D-Ala., an additional $1 billion in new markets tax credit (NMTC) allocation authority would become available to community development entities (CDEs) that commit to investing in rural jobs zones. The legislation defines a rural jobs zone as any area outside a city or town with a population of 50,000 or more and its immediate adjacent urbanized area, using the definition of areas eligible for assistance under the U.S.

Published by Michael Novogradac on June 22, 2018

Late last month the Joint Committee on Taxation (JCT) released its Estimates of Federal Tax Expenditures for Fiscal Years 2017-2021. As in years past, the report highlights the comparatively low cost of the low-income housing tax credit (LIHTC), historic tax credit (HTC), renewable energy production tax credit (PTC), renewable energy investment tax credit (ITC), and new markets tax credit (NMTC) compared to other tax expenditures.

Published by John Sciarretti, Michael Novogradac, Peter Lawrence on February 23, 2018

As noted in a recent client alert, opportunity zones (OZs), the new community development tool authorized in the tax law enacted in December, represent the first new tax incentive for private capital in low-income communities since the creation of the new markets tax credit (NMTC) in 2000.

Published by Michael Novogradac on February 13, 2018

With the award of calendar year 2017 new market tax credits (NMTC), the total amount allocated through the program stands at $54 billion. The CDFI Fund allocated $3.5 billion in tax credit authority to 73 community development entities (CDEs), which are again expected to invest more in operating businesses than real estate projects, continuing a trend that began in 2011. This round, the funds awarded to CDEs investing in operating businesses and real estate accounted for $3.419 billion of the total $3.5 billion awarded.

Published by H. Blair Kincer on January 9, 2018

Real estate economics are key drivers in the success or failure of mixed-use developments, even those using equity from historic tax credits (HTCs) and new markets tax credits (NMTCs)–something that’s becoming more and more evident as Novogradac & Company LLP provides market analysis for clients on a broad range of mixed-use properties. More and more investors, lenders, developers and others are recognizing the importance of deeper understanding of the real estate market.

Consider one recent investor who asked, “How many boutique hotels does one small town need?”

Published by Michael Novogradac on December 15, 2017

(as of 2017-12-15 7:05 p.m. ET)

The House-Senate Conference Committee today approved the conference report containing the final version of the Tax Cuts and Jobs Act by a party-line 17-12 vote. The bill now goes to the full House and Senate next week for final passage, which is expected next week. The lone Republican to vote against the Senate bill, Sen. Bob Corker, R-Tenn., today announced his support for the final bill.

Published by Brad Elphick, Michael Novogradac on November 13, 2017

Today the Senate Finance Committee began its discussion and markup of the chairman’s mark of the Tax Cuts and Jobs Act. The chairman’s mark is significantly better for the New Markets Tax Credit (NMTC) program than the related House version released Nov. 2. The House bill, which was approved by the Ways and Means Committee last Friday, includes a termination of the NMTC after 2017, eliminating the 2018 and 2019 rounds.

Published by Brad Elphick, Peter Lawrence on August 14, 2017

Discussions around tax reform can represent an important opportunity to support and defend community development tax incentives. So when Senate Finance Committee Chairman Orrin Hatch, R-Utah, in June requested recommendations for tax reform, the Novogradac & Company New Markets Tax Credit Working Group (NMTC Working Group) submitted recommendations on how the new markets tax credit (NMTC) could be retained and enhanced.

Published by Michael Novogradac on August 2, 2017

The New Markets Tax Credit (NMTC) program works as designed.

That’s the key takeaway of a 66-page report, Compliance Review of New Markets Tax Credit Program, that was released this week by the Community Development Financial Institutions (CDFI) Fund.

Published by Nicolo R. Pinoli on June 16, 2017

Representatives from the Internal Revenue Service, Community Development Financial Institutions (CDFI) Fund and Treasury Department shared a number of insights regarding the new markets tax credit (NMTC) and low-income housing tax credit (LIHTC) in remarks made May 24at the American Bar Association (ABA) Forum on Affordable Housing and Community Development. It’s important to note that the representatives did not speak on behalf of their respective agencies, but rather provided personal observations and reflections.

Published by Michael Novogradac on March 10, 2017

In the debate over corporate tax reform, lawmakers continue to look for a way to lower the top tax rate below its current 35 percent rate. When former House Ways and Means Committee Chairman David Camp, R-Mich., was drafting his tax reform bill in 2013, Novogradac & Company looked at what effect the repeal of the low-income housing tax credit (LIHTC) would have on the top corporate tax rate.

Published by Michael Novogradac on March 3, 2017

As Congress considers comprehensive tax reform, all tax expenditures are the under the microscope and possibly at risk because they may be repealed in favor of lower tax rates. However, not all tax expenditures have the same impact on the federal budget. The low-income housing tax credit (LIHTC) doesn’t rank among the 25 most expensive tax expenditures for the federal government, according to the Joint Committee on Taxation’s latest tax expenditure estimates. Other key tax credit programs are nowhere close.

Published by Michael Novogradac, Michael Kressig on January 24, 2017

In previous posts we have examined the likely effects of corporate tax reform on the generally accepted accounting principles (GAAP) financial statements of corporate investors in low-income housing (LIHTC), and historic (HTC) tax credits. This post addresses the likely GAAP effects of lower corporate tax rates on new markets tax credit (NMTC) investments.

Published by Michael Novogradac, Michael Kressig on January 9, 2017

A previous post discussed the likely effects of corporate tax reform on the generally accepted accounting principles (GAAP) financial statements of corporate investors in low-income housing tax credit (LIHTC) properties. This post addresses the likely GAAP effects of lower corporate tax rates on historic tax credit (HTC) investments.

Published by Michael Novogradac on December 6, 2016

Reports indicate that President-elect Donald Trump and House Republicans plan to aggressively pursue tax reform in early 2017. It’s too soon to say what the tax reform might mean for specific tax provisions, such as the low-income housing tax credit (LIHTC), new markets tax credit (NMTC), historic preservation tax credit (HTC) and renewable energy tax credits.

Published by Michael Novogradac on November 21, 2016

When the CDFI Fund announced details of this week’s record $7 billion allocation of new markets tax credits (NMTCs) for 2015-2016, it continued a years-long trend of focusing a majority of the awards on operating businesses, rather than real estate activities.

Published by Peter Lawrence on November 9, 2016

On Nov. 8, Donald Trump was elected president, likely winning 306-232 in the projected Electoral College vote, according to the Associated Press (AP).  Michigan and Arizona have yet to be called, but are likely to go for Trump, and New Hampshire is also uncalled, but is expected to go for Secretary Hillary Clinton.  Clinton is ahead in the popular vote and appears likely to keep that lead when the votes are confirmed.

Published by Michael Novogradac on October 27, 2016

On Oct. 20, Rep. Charles Boustany, R-La., spoke to attendees of the Novogradac 2016 New Markets Tax Credit Fall Conference in New Orleans, La. Among many other topics, he shared his perspective on questions that should be considered during the tax reform process as lawmakers consider which deductions and credits to revise or eliminate.

Published by Peter Lawrence on October 20, 2016

Rep. Charles Boustany, R-La., in September introduced a bill to provide sweeping relief for areas of Louisiana that were hit by catastrophic flooding a month earlier.

Here are the chief provisions of his bill that relate to the low-income housing tax credit (LIHTC) and new markets tax credit (NMTC) allocations.

 

Published by Peter Lawrence on October 3, 2016

The U.S. Treasury’s September 22 announcement of $91.5 million in Capital Magnet Fund (CMF) awards to 32 organizations was a milestone: the first such announcement since the program’s funding was suspended after just one round of allocations. What’s more, based on Novogradac & Company’s projections, even more funding will be available under this program next year.

About the Awards

Published by Michael Novogradac on June 27, 2016

The House Republicans Tax Reform Task Force last week released a blueprint and two-page summary calling for three individual tax brackets and the reduction of individual and business tax rates. The blueprint’s implications for the tax credit community are uncertain, but could be substantial.

Published by Nicolo R. Pinoli on June 3, 2016

A number of regulation and guidance projects are making their way towards publication that will significantly impact the historic tax credit (HTC), new markets tax credit (NMTC) and low-income housing tax credit (LIHTC), according to remarks made May 25, 2016, at the ABA Forum on Affordable Housing and Community Development by representatives from the Internal Revenue Service, Community Development Financial Institutions (CDFI) Fund and Treasury Department.

Published by Peter Lawrence on March 1, 2016

In 2014, 18 percent of Texas’s nearly 27 million residents lived in poverty, including about 25 percent of children. Those levels put Texas 38th nationally. Also in 2014, Texas ranked 50th for health insurance coverage and 49th in food insecurity. Approximately one quarter of all African Americans (24.9 percent), Asian Americans (25.9 percent) and Latinos (26.2) in Texas live in poverty. More than 800,000 households in Texas pay more than half their income on rent.

Politics

Published by Peter Lawrence on February 26, 2016

In 2014, 19 percent of Alabama’s nearly 5 million residents lived in poverty, including more than 300,000 children. While the housing downturn in 2008 took longer to hit Alabama than some other states, recovery has similarly been slow to come, with tax revenues still lagging nearly 9 percent off the pre-2008 levels. Housing units in multi-unit structures comprise more of the total housing stock in Alabama (26 percent) than in the country as a whole (16 percent).

Politics

Published by Peter Lawrence on February 22, 2016

At first glance, Nevada might seem like a community development and historic preservation desert. As of 2013 there were four historic tax credit (HTC) or new market tax credit (NMTC) developments completed in the state. But these figures are misleading and understate the true impact of tax credit investment. Those four projects generated nearly 700 jobs and nearly $50 million in economic activity.

Published by Peter Lawrence on February 10, 2016

The Obama administration released its $4.2 trillion fiscal year (FY) 2017 budget request Feb. 9, the last budget submission of Obama’s presidency.

Published by Peter Lawrence on February 9, 2016

New Hampshire lost 35,000 jobs during the Great Recession and in April 2014 still had 1.5 percent fewer jobs than it did in December 2007, according to research conducted by the New Hampshire Housing Finance Authority (NHHFA). Two-thirds of the jobs created post-recession pay below average wages.

Published by Brad Elphick on February 5, 2016

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Published by Michael Novogradac on January 19, 2016

Bigger may be better when it comes to investing in distressed communities, according to research released Dec. 22, 2015 entitled “What Matters More for Economic Development, the Amount of Funding or the Number of Projects Funded? Evidence from the Community Development Financial Investment Fund.” The report’s authors answered the title question definitively as it relates to the New Markets Tax Credit (NMTC) program, based on data from California.

Findings

Published by Michael Novogradac on January 15, 2016

For the new markets tax credit (NMTC) world, 2015 was a landmark year–one bookended by the beginning of the year with a budget proposal and legislation introduced to make the NMTC program permanent and at the end of the year with the five-year extension of the program. Along the way, there were some important reports issued, as well as significant changes at the Community Development Financial Institutions (CDFI) Fund and a landmark anniversary.

Here are some of the major developments for the NMTC community, in chronological order:

Published by Michael Novogradac on December 7, 2015

As noted last week, it’s been almost 15 years since President Bill Clinton signed the Community Renewal Tax Relief Act of 2000, which created the new markets tax credit (NMTC).

Last week’s post outlined the NMTC’s history. This week, Part 2 highlights key facts that illustrate the tax credit’s effectiveness and significance.

Published by Michael Novogradac on December 4, 2015

Nearly 15 years ago, on December 21, 2000, President Bill Clinton signed
into law the Community Renewal Tax Relief Act of 2000. Among other things, the bill created the new markets tax credit (NMTC), which was designed to
encourage investment in low-income communities with a credit equal to
39 percent of the investment, granted over seven years.

As noted in this brief history, more than 9,000 NMTC investments have been made and have generated more than 596,000 jobs so far.

Published by Michael Novogradac on September 1, 2015

The tax credit communities face an air of uncertainty after the Government Accounting Standards Board (GASB) issued final guidance that requires more detailed disclosures on tax abatement programs. The programs affected could include both federal and state low-income housing tax credits (LIHTCs), new markets tax credits (NMTCs), historic tax credits (HTCs) and renewable energy tax credits (RETCs).

Published by Michael Novogradac on August 25, 2015

When Hurricane Katrina made landfall in southeastern Louisiana Aug. 29, 2005–a decade ago–it became the costliest natural disaster in United States history and killed more than 1,800 people. The hurricane–and inadequate preparations for it–did horrific damage to the entire region, but low-income communities suffered the worst, many of whom are still suffering today. However, amid the destruction, the storm spurred heroic rescue and recovery efforts. And it produced a game-changing use of tax credits to redevelop areas hit by natural disaster.

Published by Michael Novogradac on July 21, 2015

On July 21, the Senate Finance Committee approved legislation that included a 2015 and 2016 extension of most tax provisions that expired at the end of 2014. It came on a strong bipartisan vote of 23-3, with only Sens. Michael Enzi, R-Wyo.; Pat Toomey, R-Pa.; and Dan Coats, R-Ind., opposed. Included in the bill are the following:

Published by Michael Novogradac on June 25, 2015

Operating businesses continue to outpace real estate projects as likely beneficiaries of new markets tax credit (NMTC) financing. The last two NMTC allocation rounds have seen awardees expecting to use about $3 of NMTC awards for an operating business for every $1 dollar for real estate activities.

Published by Michael Novogradac on February 3, 2015

On Feb. 2, the Obama administration released its $4 trillion fiscal year (FY) 2016 budget request. The budget requests $1.09 trillion in FY 2016 discretionary spending, $74 billion more than the levels in the Bipartisan Budget Act of 2013. This $74 billion increase, split $38 billion more for defense and $37 billion non-defense spending, would be fully offset by revenue raising and mandatory spending reforms to remain within the budget caps.

Published by Michael Novogradac on January 26, 2015

Senate Finance Committee Chairman Orrin Hatch, R-Utah, and Ranking Member Ron Wyden, D-Ore., started tax reform deliberation in the 114th Congress on Jan. 15 by announcing five tax reform working groups to examine different components of the tax code and produce a report by May on the topic.