1 / 16

Historic Tax Credits for Developers: A Guide to Syndication and Beyond 10:45am – 12:15pm Thursday, February 8

Combining Historic Tax Credits and New Markets Tax Credits . Historic Tax Credits for Developers: A Guide to Syndication and Beyond 10:45am – 12:15pm Thursday, February 8. New Markets Tax Credits and Historic Tax Credits. New Markets Tax Credit Fundamentals. NMTC Synopsis

lavender
Télécharger la présentation

Historic Tax Credits for Developers: A Guide to Syndication and Beyond 10:45am – 12:15pm Thursday, February 8

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Combining Historic Tax Credits and New Markets Tax Credits Historic Tax Credits for Developers: A Guide to Syndication and Beyond 10:45am – 12:15pm Thursday, February 8

  2. New Markets Tax Credits and Historic Tax Credits

  3. New Markets Tax Credit Fundamentals NMTC Synopsis A federal tax credit available to those that provide equity to certain certified community development entities (CDEs) that in turn lend or invest in qualified businesses located in low-income communities.

  4. New Markets Tax CreditsWhat is a CDE? • A partnership or corporation who: • Has a primary mission of community development; • Maintains accountability to residents of low-income communities through their representation on any governing board or advisory board; and • Is certified by the CDFI Fund division of the Treasury • CDEs participate in national competition for allocations of NMTC authority

  5. New Markets Tax CreditsWhat is a Qualified Business? • Any corporation or partnership (including nonprofits) engaged in the active conduct of a qualified business; must meet requirements regarding gross income, tangible property, services performed, collectibles, and nonqualified financial property • No financing of residential rental property • Mixed use okay • Restrictions on certain types of business operations and tenants • E.g. massage parlor, hot tub facility, liquor store, gambling facility

  6. New Markets Tax CreditsWhat is a Low-Income Community? • Generally, a census tract where • The poverty rate is at least 20%, or • The median family income is 80% or less of either statewide median family income, or the greater of statewide or metropolitan median family incomes. • Special rules for “Targeted Populations,” low population areas, and high migration rural counties Go to: www.cdfifundhelp.gov and click on “NMTC” tab

  7. New Markets Tax CreditsHow They Work Tax Credit Investor CDE (Allocatee) Tax Credits over 7 years ($39) and Cash Return QEI ($100) Suballocation of Tax Credit Authority CDE (Subsidiary) QLICI (85%+ of QEI) QALICB

  8. Tenants Typical HTC Structure (Single Entity) Tax Credit Investor LLC Tax Credit Investor Managing Member (Developer Affiliate) HistoricTax CreditEquity 99.99% Credits, Profits & Losses and Cash Flow .01% Credits, Profits & Losses, Fees andCash Flow DeveloperEquity Tax Credit, LLC (Property Owner) Developer Dev.Fee DebtServicePayments RentalPayments LoanProceeds Construction/Perm Lender

  9. QEI QLICI QLICI Sub-Tenants/End Users Master Tenant/NMTC Structure CDE Tax Credit Investor LLC Tax Credit Investor Tax Credit Investor Managing Member (Developer Affiliate) Non-Member Manager 99.99% Credits, Profits & Losses, Fees and Cash Flow DeveloperEquity HistoricTax CreditEquity 100% Credits, Profits & Losses, and Cash Flow .01% Credits, Profits & Losses,Fees andCash Flow Landlord, LLC (Property Owner/Lessor) QALICB Pass-through of Historic Tax Credits & Share of Residual Single Member LLC (Disregarded Entity) Master Tenant, LLC (Master Tenant) Lease Payment &Equity Investment DebtServicePayments RentalPayments LoanProceeds Construction/Perm Lender

  10. Qualified Rehab Expenditures 24,060,799 Credit Rate 20.00% Total Calculated Credit 4,812,160 Tax Credit Investor Allocation 99.99% Total Credit to Investors 4,811,679 Credit Price Per Each $1 of Credit Equity Contributions by Investors 4,727,474 Sample TransactionCalculating the HTC Equity 0.98

  11. Gross HTC Equity 5,252,800 Credit Rate 39.00% Total Calculated NMTC Credit 2,048,592 Iterative Effect 124.21% Total Credit to Investors 2,544,556 Price per Each $1 of NMTC Credit 0.65 Add’l Equity Contributions by Investors 1,653,961 Sample TransactionCalculating the NMTC Equity

  12. Key Business Issues • Pricing (e.g. $.9825 vs. $1.24+) • Equity Pay-In Schedule (same or faster) • Exit Strategy (unwind may be delayed 2-3 years) • Put Option • Call Option

  13. Key Business Issues cont’d • Guarantees (expanded – negotiable; adjuster gross up) • Reserves (no change) • Cash Flow Participation (3% industry standard) • Operational limitations (subtenant mix)

  14. Dia:BeaconBeacon, New York

  15. Portland ArmoryPortland, Oregon

  16. Thank you • Merrill Hoopengardner, Esq.401 9th Street, NWSuite 900Washington, DC 20004 • 202.585.8169 • 202.585.8080 (Fax) • mhoopengardner@nixonpeabody.com

More Related