Novogradac & Company Llp

Recent legislative and market changes are influencing renewable energy tax credit structures. In this week's episode of the Novogradac Tax Credit Tuesday podcast, Michael Novogradac, CPA, and Tony Grappone, CPA, discuss which ownership structures are gaining popularity and how the major economic benefits generated by renewable energy facilities are being apportioned between investors and developers.

The three agencies that oversee the Community Reinvestment Act (CRA)'designed to ensure banks invest in the low- and moderate-income areas where they receive deposits'released their final regulations Oct. 24, making the first substantial change to CRA regulations since 1995. In this week's Tax Credit Tuesday, Michael Novogradac, CPA, and Peter Lawrence, Novogradac's director of public policy and government relations, discuss the new CRA regulations and how they may affect various tax incentives. They begin by looking at the provisions of the final rule, then discuss the implications for the low-income housing tax credit (LIHTC) and new markets tax credit (NMTC) before moving on to see how the regulations might affect the historic tax credit (HTC), renewable energy tax credits (RETCs) and the opportunity zones (OZ) incentive. After that, they discuss the possible timeline and share resources about the coming changes.

The Community Development Financial Institutions (CDFI) Fund last month released the application for the calendar year 2023 new markets tax credit (NMTC) allocation awards. In this week's episode of the Tax Credit Tuesday podcast, Michael Novogradac, CPA, and Novogradac partner Rebecca Darling, CPA, discuss the new application and what applications and businesses that benefit from NMTC financing should know and should be doing. They discuss how the application is organized and scored, look at deadlines and examine changes to the application. Then they discuss how to approach the application, including how much time to expect and how Novogradac can assist community development entities (CDEs). They also talk about the communities outcomes section and what businesses should do to be on a CDE's radar.

The U.S. Census Bureau released in September the American Community Survey data for 2022, which is the first step for the U.S. Department of Housing and Urban Development (HUD) to determine 2024 rent and income limits for low-income housing tax credit (LIHTC) properties. In this week's episode of the Tax Credit Tuesday podcast, Michael Novogradac, CPA, and Novogradac partner Thomas Stagg, CPA, discuss how the new data affects the income limits calculation, how HUD calculates the cap, how that could possibly change, how significant rent and income limits are compared to other financial considerations at an affordable housing property and whether HUD might use a different metric to determine the limits. They also discuss how rent and income limits affect the determination of difficult development areas and qualified census tracts and look at other resources to deepen your understanding of this issue.

There are more than 3,000 public housing authorities (PHAs) in the United States and those PHAs oversee nearly 1 million public housing units while being involved in a variety of U.S. Department of Housing and Urban Development (HUD) programs, including housing choice vouchers. In this week's episode of the Novogradac Tax Credit Tuesday Podcast, Michael Novogradac, CPA, and Rich Larsen, CPA, discuss a variety of HUD- and PHA-affiliated topics, including the state of the Rental Assistance Demonstration (RAD) program, an update on the Faircloth-to-RAD opportunity and recent HUD guidance on solar power and compliance.

In this Renewable Energy Tax Credit Finance Series episode of the Novogradac Tax Credit Tuesday Podcast, Michael Novogradac, CPA, and Tony Grappone, CPA, discuss year-end financial reporting recommended practices for renewable energy tax credit-financed facilities. First, they discuss tax and financial reporting recommended practices, so sponsors and investors can prepare for a successful post-closing phase. They discuss deficit restoration obligations and commonly misunderstood differences between what costs can be capitalized versus expensed. In the second part of the discussion, they share several important issues to consider during the operations phase.

In this So You Want to Be a LIHTC Developer Series podcast episode, Michael Novogradac, CPA, and Stacey Stewart, CPA, discuss five key investor concerns that low-income housing tax credit developers should understand and know how to address. They discuss 1) estimating the timing of the projected tax benefits, which are namely tax credits and tax losses, 2) satisfying administrative requirements that developers commit to under the partnership agreement with their investor, 3) respecting the allocations of tax losses, 4) investor expectations at the end of their investment period, and 5) the effect of a significant positive capital account on investors rights to share in cash at the end of the compliance period.

The Community Development Financial Institutions (CDFI) Fund announced calendar year 2022 (CY22) new markets tax credit (NMTC) allocation authority awards Sept. 22, marking the 19th round of such allocations and beginning speculation on when the next round's application season will begin. In this week's Tax Credit Tuesday podcast, Michael Novogradac, CPA, and guests Rebecca Darling, CPA, and Brad Elphick, CPA, discuss the takeaways from the CY 2022 awards and what community development entities (CDEs) should be doing now, whether or not they were awardees. They also discuss what low-income community businesses should do to improve their chances of receiving NMTC financing and make informed speculation on when the next round of applications will open. Following that, they discuss the case for NMTC permanence and look at upcoming education and networking opportunities for those in the NMTC world.

Every affordable housing developer needs financial forecast to anticipate expenses, cash flow and access to capital to build the property, including developments built using low-income housing tax credit (LIHTC) equity. In the latest installment of the Novogradac Tax Credit Tuesday podcast's recurring "So You Want to Be a LIHTC Developer" series, Michael Novogradac, CPA, and Miao Xue, CPA, discuss four key schedules for developers to consider when preparing their own financial forecasts and potential roadblocks on the path for each. They discuss the development budget and eligible basis schedule, sources and uses and 15-year cash flow waterfall, the taxable income and loss schedule, and income and loss allocations and the Section 704(b) capital schedule.

This 800th episode of the Novogradac Tax Credit Tuesday podcast launches "Renewable Energy Tax Credit Finance Series," which will focus on renewable energy tax credit (RETC) financing updates and trends. In this episode, Michael Novogradac, CPA, and Tony Grappone, CPA, discuss various factors affecting RETC structuring trends, including the Inflation Reduction Act, transferability, refundability and bonus credits.

State tax credits are often the crucial tool to filling financial gaps for high-impact community development investments. This statement is no more true than in the arena of state historic tax credits (HTCs). Thirty-eight states have some version of a state-level HTC, a credit that's paired with the federal tax credit. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Novogradac partner Warren Sebra, CPA, discuss how to get started using state HTCs, how federal and state HTCs compare, the difference between certificated and allocated credits and how to close financing gaps in states that do not have a state HTC.

The Inflation Reduction Act of 2022 created two new ways to monetize renewable energy tax credits (RETCs): 1) transferability, the ability to transfer certain RETCs as if they were separate property, and 2) elective pay or direct pay, the ability for certain tax-exempt owners of renewable energy property to report certain RETCs on their tax returns, and in turn, have the Internal Revenue Service refund the tax credits. Treasury recently held separate public hearings on their proposed guidance for transferability and for elective pay. In this week's episode, Michael Novogradac, CPA, and Novogradac partner Alvin Lee, CPA, discuss where the industry stands on using transferability and elective pay, when renewable energy property owners might consider the various options and what types of stakeholder questions remain.

Since its passage one year ago, the Inflation Reduction Act of 2022 has spurred hundreds of billions of dollars in domestic, utility scale clean energy investments. Three incentives'the HOMES Energy Rebate Program, the Internal Revenue Code Section 45L Energy Efficient Homes Credit and the solar investment tax credit (ITC)'provide options to developers, investors and others in the affordable housing community who want to add green and clean energy elements to their properties. On this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Brent Parker, CPA, discuss these three incentives and what affordable housing and renewable energy professionals should know about each when considering including them in their low-income housing tax credit (LIHTC) developments.

Affordable housing professionals who use the 4% low-income housing tax credit to finance and build homes may be familiar with two key tests that are crucial to bond transactions: The 50% test and the 95-5 test. On this week's episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Charlie Rhuda, CPA, unpack four essential pieces of information about each of these two tests. First, they give background on each of the tests before discussing issues of timing and application. Then, the two discuss the consequences of failing the test and then suggest ways to overcome those obstacles.

Rental property owners who receive assistance from the U.S. Department of Housing and Urban Development (HUD) through debt financing and/or tenant rent subsidies used to develop and preserve affordable housing are subject to several reporting and compliance requirements. On this week's episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Susan Wilson, CPA, delve into the reporting and compliance requirements that come with these programs. The two discuss what the compliance requirements include, what are some of the common pitfalls or hurdles to know for property owners and managers who use these subsidies or financing and then best practice to avoid violations and/or issues.

While the supply of community development tax incentives is a multi-billion-dollar annual market for tax credits that include the low-income housing tax credit (LIHTC), new markets tax credit (NMTC), historic tax credit (HTC) and various clean/renewable energy tax credits (RETCs), the demand for such credits plays a major role in determining their value. On this week's Tax Credit Tuesday, Michael Novogradac, CPA, is joined by Novogradac partners Tony Grappone, CPA; Dirk Wallace, CPA; and Brad Elphick, CPA; for Part 2 of a two-part podcast series on the entire tax credit equity market. They look at how the current state of the economy affects tax credit demand, how recent bank problems affected the market and how new transferability and elective pay mechanisms for clean energy credits might affect demand. They then talk about how proposed global minimum tax, expected Community Reinvestment Act (CRA) reform, a recent change in the proportional amortization accounting method with tax credits and environmental, s

Community development tax incentives create a multi-billion-dollar annual market for tax credits, including the low-income housing tax credit, new markets tax credit, historic tax credit and various clean energy tax credits. On this week's Tax Credit Tuesday, Michael Novogradac, CPA, is joined by Novogradac partners Tony Grappone, CPA; Dirk Wallace, CPA; and Brad Elphick, CPA; for Part 1 of a two-part podcast series on the entire tax credit equity market. In this podcast, the focus on the supply of tax credits, beginning with a look at the state of the current tax credit equity market in each of the four major areas, including the typical tax credit price. After that, they look at the overall size of the tax credit equity market and describe the primary investors. They wrap up with a look at legislative proposals and what effect they could have on the various tax credit equity markets, then preview next week's podcast, which will focus on the demand side of the economic equation.

The U.S. Department of Housing and Urban Development (HUD) annually releases income limits to determine eligibility for low-income housing tax credit (LIHTC) properties. HUD also releases caps that determine the maximum annual income a family can have and still be eligible to occupy HUD-assisted and LIHTC-financed housing, as well as to determine the maximum rent that tenants can be charged. On this week's Tax Credit Tuesday, Michael Novogradac, CPA, and Thomas Stagg, CPA, discuss the income limits cap'which is 5.92% this year'and whether HUD could have a more predictable methodology to set the cap. They discuss what the cap affects, the history of income limit caps and speculate why HUD changed its methodology in 2022. After that, they look at how a lack of predictability is a challenge in affordable housing, possible methodologies HUD could use and look at key upcoming dates in setting the 2024 income limits and cap.

This summer marks five years since the effective launch of the opportunity zones (OZ) incentive. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and guests John Sciarretti, CPA, and Jason Watkins, CPA, discuss OZ hot topics, such as the recently introduced Opportunity Zones Transparency, Extension and Improvement Act, which would create rural opportunity zones and create reporting requirements. They also discuss eight common OZ mistakes and how to avoid or correct them.

One of the crucial steps to an affordable housing property receiving low-income housing tax credits (LIHTCs) is the placed-in-service application the developer files with the housing credit agency. That application sets up the property to receive its Internal Revenue Service (IRS) Forms 8609, which allocate the tax credits on a per-building basis. In this Tax Credit Tuesday podcast, Michael Novogradac, CPA, and Novogradac partner Tabitha Jones, CPA, talk about the placed-in-service application. They begin by discussing what is in the application and variations from state to state. After that, they address common mistakes made in placed-in-service applications, the differences between such applications for 4% LIHTC and 9% LIHTC transactions and the role of final cost certifications in the application.