NH&RA thanks Harold Berk for the following update on a recent Fourth Circuit Court decision impacting state tax credit structures. Berk notes that “The Fourth Circuit decided the Virginia Historic Funds case on March 29, 2011. They held that the Virginia state historic tax credits were sold to investors in a taxable transaction. The Court rejected the usual view on tax credit transactions that the investors are limited partners who make capital contributions (which are not taxable) to the partnership and receive various tax credits in return.”
“In another case, IRS filed an appeal, on March 29, 2011, to the Third Circuit from a Tax Court decisions holding that a complicated federal historic tax credit transaction was properly structured and not a sham transaction. Pitney Bowes was the investor there on a project where the old Atlantic City Hall, where, among other things, the Miss America Pageant was held, was rehabilitated using federal historic tax credits. IRS is challenging the way the deal was structured. The Tax Court disagreed with IRS, but IRS has now appealed.”
Additionally, a third case “GEORGE H. TEMPEL AND GEORGETTA TEMPEL, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent” dated April 5, 2011 also addresses the transferability of state conservation easement tax credits in Colorado.
All three cases have implications on how transactions are structured utilizing state tax credits. NH&RA is currently conducting its own analysis of the case law will be providing further updates on all three cases shortly. Check back soon for additional details.
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