Spring 2011 issue of Horizons

Keller and Partner Dave Herdlick then shared the details and updates on today’s tax credit legislative environment and market conditions. Of particular interest is President Obama’s Deficit Reduction Commission led by Co-Chairs Erskine Bowles and Alan Simpson. Bowles-Simpson proposed a staggering $4 trillion in reductions by 2020 that includes elimination of most tax expenditures, including most tax credits. Although the Bowles-Simpson report failed to get enough votes that would have required action, it warrants attention and will most likely be revisited given the growing momentum for radical tax reform. All of the states are experiencing similar economic conditions and every state’s proposed legislation is calling for some form of appropriation, sunset or complete elimination of various tax credit programs. Keller and Herdlick urged the audience to increase their involvement in and support of various industry organizations at both the national and local levels. Missouri’s Alliance for Investment, Jobs and Preservation has taken the lead on Missouri’s tax credit programs. The alliance is a state-wide trade organization for the historic redevelopment business community and is working diligently to educate state lawmakers on the strong economic returns and overall job creation the program has produced since its inception. As far as the current state of the market, the results were mixed with much good news related to equity flowing back into the low-income housing tax credit market and strong pricing on both coasts. However, the need for increased equity and improved pricing across the rest of the county is a top priority for 2011. On the New Markets Tax Credit (NMTC) front, the 2010 extender bill signed by President Obama late in 2010 yielded the NMTC program a lifeline,

extending the program for two more years (2010 and 2011) at $3.5 billon each. Industry advocates are now focusing efforts to gain support to extend the program beyond its 2011 sunset date. The NMTC has been an instrumental tool in getting most large projects completed over the last year. The Historic Tax Credit (HTC) industry has seen its share of ups and downs with financing being a significant issue over the last year. Additionally, there are very few active investors for large projects. The small and mid-sized projects have had no issues raising equity, provided they can get their financing in place. Complex Deal Structure Managers David Taylor and Bob Dumstorff discussed complex deal structuring for master leases. Two master lease models were reviewed on a step-by-step basis for both a stand-alone HTC project and an HTC and NMTC combined project.

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