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Novogradac has resources available for private companies and nonprofits affected by Accounting Standards Codification (ASC) 842, which changed lease accounting standards. The change–which took effect Jan. 1 for fiscal years beginning after Dec. 15, 2021–affects the way certain contracts are accounted for under generally accepted accounting principles, particularly entities that are lessees. Rather than disclosing operating leases in notes to financial statements, but not on balance sheets, the new guidance requires lessees to record a right-of-use asset for the leased asset and a corresponding lease liability equal to the financial obligation over the lease term, as well as new disclosure requirements.
President Joe Biden today signed into law the Inflation Reduction Act (IRA), a $750 billion budget reconciliation bill that includes $369 billion in clean and renewable energy provisions that feature extensions of the renewable energy production tax credit (PTC) and investment tax credit (ITC).
Total investment in qualified opportunity funds (QOFs) tracked by national accounting and consulting firm Novogradac surpassed $30 billion as of June 30, according to a special report released today. Novogradac Opportunity Zones Investment Report: Data Through June 30, 2022, reports that $30.49 billion was raised by QOFs tracked by Novogradac for investment in opportunity zones (OZ). Novogradac is tracking 1,475 funds, of which 1,097 report a specific amount of equity raised. The June 30 total is $6.09 billion more than Novogradac reported at the end of 2021, giving the six-month period the second-largest dollar increase in OZ investment since Novogradac began tracking the data. Michael Novogradac, CPA, published a blog post on the QOF investment data, which is also topic of this week’s episode of Novogradac’s Tax Credit Tuesday podcast.
Legislation in Rhode Island to require all entities that receive the Rebuild Rhode Island Tax Credit pay prevailing wages to construction workers became law when Gov. Daniel McKee took no action within 10 days after adjournment of the Legislature. H.B. 7985 applies to all applications for that credit, which includes the state historic tax credit (HTC) and a credit for mixed-use developments in opportunity zones (OZs) that support new affordable or workforce housing. The legislation provides for the revocation of Rebuild Rhode Island Tax Credits for a failure to meet the requirements.
Ohio Gov. Mike DeWine signed legislation this week to temporarily expand and enhance the state’s opportunity zones (OZ) tax credits and temporarily double the state’s annual historic tax credit (HTC) cap. S.B. 225 increases funding for OZ tax credits for investments in qualified opportunity funds (QOFs) that hold all assets in Ohio OZs. That amount goes from $50 million to $75 million for 2022 and 2023 before dropping back to $50 million in 2024 and settling at $25 million annually thereafter. Investors without state tax liability can now transfer the OZ credit. The bill also temporarily increases the state HTC cap from $60 million to $120 million for fiscal years 2023 and 2024 and increases the tax credit percentage for those years from 25% to 35% for any county, township or municipal corporation with a population of less than 300,000.
The proposed global minimum tax and its potential effect on community development tax credit equity investments is the subject of this week’s Novogradac Tax Credit Tuesday podcast episode. Michael Novogradac, CPA, and Novogradac partner Brad Elphick, CPA, discuss the proposal and potential approaches to mitigate the damage to tax credit equity investment. They also examine next steps in the proposal and for community development tax credit stakeholders. Novogradac has also published a white paper on the subject called Pillar Two and Tax Credit Equity Investments and is seeking public comment on the paper. Comments may be sent to [email protected]
The weekly Tax Credit Tuesday podcast offers an in-depth discussion of various tax incentive topics with expert guests.
Ohio legislation that would temporarily expand and enhance the state’s opportunity zones (OZ) tax credits and temporarily double the state’s annual historic tax credit (HTC) cap has passed both houses of the Legislature and is headed for the desk of Gov. Mike DeWine. S.B. 225 would increase funding for the state OZ credits from $50 million to $75 million for 2022 and 2023 before dropping back to $50 million in 2024 and $25 million annually thereafter. Investors without state tax liability could transfer the OZ credit under the new legislation. The bill also would temporarily increase the state HTC cap from $60 million to $120 million for fiscal years 2023 and 2024 and would increase the tax credit percentage for those years from 25% to 35% for any county, township or municipal corporation with a population of less than 300,000.
Qualified opportunity funds (QOFs) tracked by Novogradac report a cumulative $28.37 billion in equity raised as of March 31, a $3.97 billion increase over the similar number reported Dec. 31. Michael Novogradac reported the figures at the 2022 Novogradac Spring Opportunity Zones Conference today in Long Beach, California, and wrote a blog post with more information. The increase in equity reported in the first quarter of 2022 is more than three times the increase in the same quarter of 2021 and is nearly equal to the equity increase in the final quarter of 2021. Novogradac reports QOF equity raises based on a collection of information from QOFs that voluntarily provide information or from other public sources. The Novogradac data does not include proprietary or private QOFs owned or managed by their principal investors.
The Internal Revenue Service (IRS) announced Tuesday in a news release that some qualified opportunity funds (QOFs) that filed Form 8996 may receive one of three letters seeking additional information about opportunity zones (OZ) investing. Some QOFs that attached Form 8996 to their returns may receive Letter 6501, which seeks additional information to support the annual certification of investment standard requirement. Filers of Form 8997 may receive either Letter 6502, Reporting Qualified Opportunity Fund Investments, or Letter 6503, Annual Reporting of Qualified Opportunity Fund Investments. For recipients of any of the three letters, additional details are required.
Bipartisan legislation was introduced today in the Senate and House of Representatives that would extend the federal opportunity zones (OZ) incentive, add reporting requirements, provide an early sunset for nonimpoverished OZs and more. The Opportunity Zones Transparency, Extension and Improvement Act would extend the OZ incentive through the end of 2028 to facilitate continued investment, implement the reporting requirements that were included in 2017 in the Investing in Opportunities Act and sunset the OZ designation for census tracts with a median family income at or above 130% of the national median family income. The legislation would also allow qualified opportunity funds (QOFs) to be organized as “funds of funds” to invest in other QOFs which would allow smaller projects to receive funding.
Legislation introduced in the Rhode Island House of Representatives would require all entities that receive the Rebuild Rhode Island Tax Credit–which includes the state historic tax credit (HTC) and a credit for mixed-use developments in opportunity zones (OZs) that support new affordable or workforce housing–to pay prevailing wages to construction workers. H.B. 7985 applies to all applications of the Rebuild Rhode Island Tax Credit and provides for the revocation of such credits for failure to meet the requirements.
Qualified opportunity funds (QOFs) tracked by Novogradac reported equity investment of $6.88 billion over the final six months of 2021, according to the Novogradac Opportunity Zones Investment Report: Data Through Dec. 31, 2021, which was released today. As of the end of 2021, the 1,342 QOFs tracked by Novogradac (978 of which report a specific amount of equity raised) had raised $24.40 billion in equity. The jump of nearly $7 billion in reported equity since June 30, 2021, is the largest increase in any reporting period since Novogradac began tracking QOF investment in May 2019. The semiannual report also includes data on the types of reported investment, the planned geographic focus of investment and the top 20 states and top 40 cities for targeted QOF investment.
The Internal Revenue Service (IRS) published two private letter rulings (PLRs) granting relief to a taxpayer who was late to file a Form 8996 to self-certify as a qualified opportunity fund (QOF). PLR 202205020 concerns a taxpayer that didn’t file a Form 8996 in a timely manner because the taxpayer and its accountant were unaware of the requirement to do so and PLR 202205021 addresses a similar situation in which the accountant filed a return and then an amended return without including a Form 8996. The IRS granted relief to file Form 8996 within 60 days of the ruling. PLRs are only directed to the taxpayer and may not be used or cited as precedent.
Legislation passed in Washington, D.C., and awaiting congressional approval would clarify that capital gains deductions related to the opportunity zones (OZ) incentive are available to individuals, estates and trusts in the same manner as to corporations. D.C. Council Bill 240513 would take effect following its 30-day period of congressional review.
The Internal Revenue Service (IRS) last week released a private letter ruling granting an extension to a limited liability company to make a timely election to be certified as a qualified opportunity fund (QOF). PLR 202202009 determined that the failure of the LLC’s accounting firm to file IRS Form 8996–which allows the self-certification as a QOF for the opportunity zones (OZ) incentive–was unintentional and the LLC acted reasonably and in good faith. The IRS also ruled that the government’s interests are not prejudiced by providing an additional 45 days to file a Form 8996 to self-certify as an QOF. PLRs are directed only to the taxpayer requesting them and may not be used or cited as precedents.
Sen. Ron Wyden, D-Oregon, chair of the Senate Finance Committee, today sent letters to several qualified opportunity funds (QOFs) seeking detailed information about the opportunity zones (OZ) incentive projects into which they have invested. Wyden requested responses as soon as possible, but no later than Feb. 3. Wyden requested details including the list of all OZ projects, job creation data, details of OZ-related tax benefits, timelines and more.
Legislation in the Mississippi House of Representatives would conform the state tax code to the Internal Revenue Code (IRC) concerning opportunity zones (OZ) investment in 19 of the state’s 82 counties. H.B. 133 would apply to the deferral or nonrecognition of gain by investment in a qualified opportunity fund (QOF) in those 19 counties through Dec. 31, 2024. Beginning Jan. 1, 2025, the conformity would expand to any investment in the state. Mississippi’s four bordering states all have either limited or full conformity to the IRC.
Nine Democrats on the U.S. House of Representatives’ Ways and Means Subcommittee on Oversight sent a letter Tuesday asking the U.S. Department of the Treasury to consider three ways to boost the benefits of the opportunity zones (OZ) incentive in helping communities in need: implementing a rigorous certification process for OZ funds, allocating a dedicated agency staff to oversee OZs and requiring transaction reporting separate from tax forms. The letter is the product of a Nov. 16 committee hearing on OZs. Rep. Bill Pascrell of New Jersey, the subcommittee chairman, was among the nine signatories.
The U.S. Government Accountability Office (GAO) today released a report on the opportunity zone (OZs) incentive with two major recommendations: that the Internal Revenue Service (IRS) address risks caused by limited data availability and take steps to mitigate those risks, and that the IRS research compliance risks of high-wealth investors and large partnership qualified opportunity funds (QOFs). GAO found that on average, the census tracts selected and designated as OZs had higher poverty and a greater share of non-White populations than eligible, but not selected, tracts, and that these differences were statistically significant.
Novogradac partner John Sciarretti announced at the Novogradac 2021 Fall Opportunity Zones Conference in Cleveland this week that qualified opportunity funds (QOFs) tracked by Novogradac raised $20.28 billion by the end of September, a jump of nearly 16% over three months. Novogradac is tracking 1,243 QOFs, of which 909 report a specific equity amount–an amount that is $2.76 billion more than the total at the end of June. While the equity amount increased by 15.8% over that period, the number of QOFs reporting an equity raise increased by 6.6%.
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