How Would Tax Reform Affect HTC Investors’ GAAP Financials?

In his article, Mike Novogradac predicts the implications of potential tax reform on generally accepted accounting principles for the Historic Tax Credit. The article discusses both impairment and deferred tax considerations. While a lower corporate tax rate may adversely affect the LIHTC, results differ significantly for the HTC:

“If all other factors remain constant, in a lower tax rate environment HTC investments would be more profitable on a cumulative basis. To be more precise, HTC investments would be more profitable on both an after-tax cash basis and on an after-tax GAAP net income basis. This result differs from LIHTC investments because the HTC is a taxable credit; that is, there is a basis reduction or income inclusion associated with claiming the tax credit. At a lower tax rate, the cost of this basis adjustment or income inclusion is less, so after-tax cash and net income is higher.”

For the full article: https://www.novoco.com/notes-from-novogradac/how-would-tax-reform-affect-htc-investors-gaap-financials