Novogradac & Company Llp

The announcement of new markets tax credit (NMTC) allocation awards are expected soon, with the next allocation round opening after that. Well informed and well positioned businesses have a great opportunity to secure NMTC financing, even if they were not originally in a community development entity's pipeline. Michael Novogradac, CPA, and Novogradac partner Matt Meeker, CPA, discuss how to close an NMTC transaction successfully in the current economic climate. They'll cover how rising interest rates, growing inflation and supply chain issues are affecting NMTC transactions. They'll also discuss how to prepare a business for NMTC financing. They'll close with some common challenges faced in closing NMTC transactions and how to address them.

With the upcoming allocation round of the new markets tax credit (NMTC) looming, now is a great time for qualified active low-income community business (QALICBs) to know the important roles in an NMTC transaction as well as potential ways to leverage the sources in their capital stack. In this week's Tax Credit Tuesday podcast, the second of a three-part NMTC series, Michael Novogradac, CPA, and Novogradac partner Amanda Read, CPA, identify and define those important roles, including the Community Development Financial Institutions (CDFI) Fund, community development entities (CDEs), accountants, lawyers and more. Later, they define and discuss how QALICBs can leverage different sources of financing such as "soft money," capital campaign dollars and bank debt to maximize the tax credit financing that they can generate from a CDE.

The new markets tax credit (NMTC) incentive provides $5 billion a year in allocation authority to community development entities (CDEs) to support businesses in low-income communities or those that support low-income people. As a qualified active low-income community business (QALICB), there are standards to meet and competition with which to contend to receive the financing. In this week's podcast, the 750th of Tax Credit Tuesday and the first of a three-part NMTC series, Michael Novogradac, CPA, and Novogradac partner Nicolo Pinoli, CPA, discuss the standards and provide tips for businesses to be more competitive to receive such financing. They examine the big picture of the incentive and go over the qualifications to be a QALICB before looking at the amount of financing available and the competition to receive NMTC financing. After they, they examine what businesses should consider at the start of transaction in which they'd like to receive NMTC financing, share key points in the timeline and discuss at wh

In this week's podcast, Michael Novogradac, CPA, and Novogradac partner Brent Parker, CPA, discuss how the Inflation Reduction Act makes it more affordable to include renewable energy and energy efficiency measures in residential rental real estate. They discuss an extension of the Section 45L new energy efficient home credit, qualification updates under the Section 179D deduction and retroactive extension of the renewable energy investment tax credit.

One week ago, President Joe Biden signed The Inflation Reduction Act into law, legislation that includes major clean and renewable energy provisions, as well as raising a net total tax of about $90 billion over 10 years, according to the Joint Committee on Taxation. In this week's podcast, Michael Novogradac, CPA, is joined by Nat Eng, CPA, and Novogradac's director of public policy and government relations to talk about the provisions of the bill. After giving and overview, they discuss the significant broad and crosscutting provisions of the legislation before diving into the specifics of the clean and renewable energy provisions, including the effect of the increase in credit totals, the direct-pay provisions, transferability and bonus credits. They also discuss provisions that are related to affordable housing and community development.

The U.S. Department of Treasury July 27 announced new frequently asked questions (FAQ) guidance to increase the use of Coronavirus State and Local Fiscal Recovery Funds (SLFRF) to boost the supply of affordable housing. In today's podcast, Michael Novogradac, CPA, and Novogradac partner Dirk Wallace, CPA, examine the guidance and implications for those in affordable housing. They begin by discussing the difficulties with the rule issued earlier this year, then discuss the clearly allowable uses and the ability to use recovery funds as long-term loans for affordable housing. Then they look at the pros and cons of different approaches, outstanding questions about intermediary uses and issues with layering recovery funds into a capital stack. They continue by examining reactions by stakeholders in affordable housing, discussing outstanding issues with the guidance and looking at how to best access recovery funds.

Investment in qualified opportunity zones tracked by Novogradac surpassed $30 billion as of June 30, according to a special report published today. In today's podcast, Michael Novogradac, CPA, and Novogradac partner John Sciarretti, CPA, discuss highlights of the report, as well as other opportunity zones (OZs) issues. They begin by discussing key takeaways from the report, then look at how the economy'with higher interest rates and low unemployment'is affecting the OZ investment space. After that, they talk about some long-term trends that are highlighted in the special report and look at the top cities and top states for planned investment. They wrap up the discussion by talking about OZ extension legislation and decertification regulations.

Affordable housing'specifically that financed by tax-exempt, private-activity bonds and 4% low-income housing tax credits (LIHTCs)'is seeing the effects of rising interest rates and inflation. Those factors have implications on finances, meeting the 50% test and many decisions before and during property development. In today's podcast, Michael Novogradac, CPA, and Christina Apostolidis, CPA (and lead editor of the new edition of the Novogradac Tax-Exempt Bond Handbook) share how inflation and rising interest rates are affecting various areas of PAB-financed housing, the implications of inflation on the 50% test for developers in construction, how those factors affect potential properties and more. They also discuss the differences between 4% and 9% LIHTCs, how competition affects PAB developments and details in the newly released Novogradac Tax-Exempt Bond Handbook.

On May 5, the three regulatory agencies that oversee the Community Reinvestment Act (CRA) proposed the first significant, interagency overhaul of CRA rules since 1995. Michael Novogradac, CPA, and Novogradac's director of public policy and government relations, Peter Lawrence, discuss in this week's Tax Credit Tuesday podcast what the proposed rules are, how they could affect community development investment and lending, and what stakeholders can do to help influence the rulemaking.

The term sheet is where investors outline the principal terms and conditions of their investment in a tax credit transaction. When evaluating a term sheet, it's important for developers to look at a variety of factors and not just tax credit equity pricing. In today's podcast, Michael Novogradac, CPA, and Novogradac partner Thomas Boccia, CPA, share how developers can pursue an optimal balance between tax for equity pricing and other key factors. While the focus of the podcast is historic tax credits and the role of the term sheet, the principles discussed are applicable to all types of developments seeking to raise tax credit equity.

The COVID-19 pandemic has killed more than 1 million Americans, while 87 million Americans have tested positive for the virus'creating an event that has affected virtually every aspect of life. For owners, operators, investors and tenants in affordable housing, the pandemic created both a health care crisis and a potential financial crisis that required new and different approaches. Novogradac examines those issues in a new report, "Resilience and Responsiveness: How LIHTC Properties Weathered the COVID-19 Pandemic and What to Expect in the Future." In today's podcast, Michael Novogradac, CPA, and Novogradac partner Blair Kincer, the lead author of the report, discuss the findings, including how the pandemic affected occupancy and rental receipt rates, whether stimulus payments are a baked-in part of the federal response to future pandemics, takeaways for property owners and underwriters and the technological adaptations made at low-income housing tax credit properties during the pandemic.

How have capitalization rates changed over the past 12 months of rising inflation? Michael Novogradac, CPA, and Novogradac partner Lindsey Sutton discuss the effects of high inflation on observed market capitalization rates, as well as long-term debt financing.

Michael Novogradac, CPA, and Novogradac partner Frank Buss, CPA, help listeners answer three key questions regarding the new lease guidance, ASC 842: 1. What are the new operating lease accounting requirements? 2. How will the new standard affect various tax credit property partnerships? 3. What do you need to know about complying with the new lease guidance?

More than 130 nations are working toward an agreement to ensure that multinational corporations pay a minimum level of income taxes. The second of two "pillars" in this framework would ensure that the world's largest and most profitable companies are taxed in each jurisdiction in which they do business at an effective rate of 15%. Since any rate less than 15% would make the corporation subject to a top-up tax to reach that level, there are concerns about how U.S. general business credits'including the low-income housing tax credit (LIHTC), historic tax credit (HTC), new markets tax credit (NMTC) and renewable energy tax credits (RETCs)'would contribute to lowering effective tax rates below 15%. In this podcast, Michael Novogradac, CPA, and Novogradac partner Brad Elphick, CPA, discuss the global minimum tax and issues associated with it concerning tax credit equity. They discuss how and when potential guidance would affect tax equity investments, potential approaches to mitigate the damage to tax equity inves

The vast majority of business and nonprofits that receive new markets tax credit (NMTC) financing serve low-income communities that are physically located in a low-income census tract. However, there's another underutilized method for businesses and nonprofits to qualify for NMTC financing that is not geography based. It's called the targeted populations approach. Michael Novogradac, CPA, and Novogradac partner Bryan Hung, CPA, discuss the potential benefits of the targeted populations method, how to meet the targeted populations criteria, compliance considerations and more.

The definition of qualified rehabilitation expenditures (QREs) is important not just for purposes of satisfying the substantial rehabilitation test. The amount of QREs determines the amount of historic tax credits a project is eligible for, meaning every additional dollar of QREs results in 20 cents more in tax credits. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Tom Fantin, CPA, discuss commonly overlooked QREs and costs that some developers may assume are QREs but are not.

The historic tax credit (HTC) substantial rehabilitation test may seem simple on the surface, but there are some important nuances that even experienced developers may not be fully aware of. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Roy Chou, CPA, discuss what developers need to know about meeting the substantial rehabilitation test and planning their qualified rehabilitation expenditures so they can optimize the amount of HTC equity they can raise.

With much competition for 9% low-income housing tax credits (LIHTCs), more developers are turning to 4% LIHTCs to fund affordable housing'at the very time that competition for 4% LIHTCs (which are available to properties financed with tax-exempt private-activity bonds) is increasing. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Tabitha Jones, CPA, discuss the key differences between 4% LIHTC-financed transactions and developments financed by 9% LIHTCs. They also discuss various pitfalls that those new to the 4% LIHTC should be careful to avoid, including problems with bond arbitrage, Form 8709 and the 50% financed-by test. They wrap up with information on the 9% LIHTC that developers unaccustomed to that world should know.

Many solar energy developers do early stage work to get a property ready for construction, then they sell the property to a developer who takes control, raises equity to fund the development and begins construction. However, more early stage solar developers are considering the option of maintaining control of the property and handling the construction, including receiving funding through equity from investment tax credits. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Rob Bryant, CPA, discuss the options and considerations for such developers. They examine the typical life cycle for a solar property and then look at the issues that developers should address when considering a long-term hold of the property. After that, they look at typical financing options, as well as tax and equity structuring issues for a developer who maintains control of a solar property as well as tools developers should consider while making a decision.

The U.S. Department of Housing and Urban Development (HUD) last week posted income limits for fiscal year 2022 to determine eligibility for HUD-assisted programs as well as for low-income housing tax credit (LIHTC) and tax-exempt bond financed properties. The national median income was a 12.5% increase over 2021, but HUD set the cap on increases at 11.89%. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Thomas Stagg, CPA, discuss the income limits, including the major storylines. They also examine how inflation affects income limits and how it will impact future income limits, then provide insight into implementing new rent and income limits and also discuss how issues with the 2020 American Community Survey will affect income limits. They conclude with some suggestions for how HUD could approach those issues and what LIHTC stakeholders should be considering.