All posts by Jerome A. Breed

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Breaking Down an Important Qualified Contracts Case

Late this summer, the U.S. District Court for the District of Hawai’i granted a motion for summary judgment in Michael Tuttle, et al. vs. Front Street Affordable Housing Partners, et al., No. 18-00218 JAO-KJM, 2020 BL 305979, 2020 U.S. Dist Lexis 145071 (D. Haw. Aug. 12, 2020), a case brought by prospective low-income tenants seeking to reinstate an extended use agreement, which was released by the state agency at the end of the Low Income Housing Tax Credit compliance period following an owner’s request for a qualified contract. While a federal district court decision has limited precedential value, the decision is instructive for state allocating agencies, practitioners and LIHTC transaction participants, given the scarcity of cases involving qualified contracts since the enactment of Section 42(h)(6)(E)(i)(II).

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The Land of OZ

The second set of proposed regulations (the “Proposed Regulations”) released by the IRS with respect to the Opportunity Zone (OZones) program on April 16, 2019 is extremely helpful, generally taxpayer friendly and provides investors with sufficient guidance to close transactions without waiting for a third round of regulations.

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The Land of OZ

As you have read in these pages, the Tax Cuts and Jobs Act of 2017 enacted a new incentive for community development, the Opportunity Zone Program found in Internal Revenue Code Sections 1400Z-1 and -2.

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The Lawyer’s Perspective

Public Law No: 115-97 enacted on December 22, 2017 and commonly known as the “Tax Cuts and Jobs Act” (TCJA) maintained Section 42 of the Internal Revenue Code of 1986 as amended (the “Code”) leaving private activity bonds for housing rendering Low Income Housing Tax Credits (LIHTC) untouched. But there were other changes throughout TCJA that impact the LIHTC industry and investing. Here are six we have identified:

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2015 NMTC Allocation Round

The Community Development Financial Institution Fund (CDFI), which provides credit and financial services to underserved populations and oversees the distribution of New Markets Tax Credits, made a number of changes for the 2015 application round, the most significant being the imposition of restriction on the use of Qualified Low Income Community Investments (QLICI) proceeds.

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Certainty at Last: Safe Harbor Guidance Issued for Historic Tax Credit Transactions

The new guidance does not establish substantive tax law. Rather it creates a “safe harbor” for structuring HTC transactions. Compliance with the terms of the guidance provides certainty that the HTC generated by a project will be treated as allocated to the investor and that the investor will be respected by the IRS as a partner in the allocating partnership for federal tax law purposes.

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