Novogradac & Company Llp

Investment in qualified opportunity zones tracked by Novogradac surpassed $30 billion as of June 30, according to a special report published today. In today's podcast, Michael Novogradac, CPA, and Novogradac partner John Sciarretti, CPA, discuss highlights of the report, as well as other opportunity zones (OZs) issues. They begin by discussing key takeaways from the report, then look at how the economy'with higher interest rates and low unemployment'is affecting the OZ investment space. After that, they talk about some long-term trends that are highlighted in the special report and look at the top cities and top states for planned investment. They wrap up the discussion by talking about OZ extension legislation and decertification regulations.

Affordable housing'specifically that financed by tax-exempt, private-activity bonds and 4% low-income housing tax credits (LIHTCs)'is seeing the effects of rising interest rates and inflation. Those factors have implications on finances, meeting the 50% test and many decisions before and during property development. In today's podcast, Michael Novogradac, CPA, and Christina Apostolidis, CPA (and lead editor of the new edition of the Novogradac Tax-Exempt Bond Handbook) share how inflation and rising interest rates are affecting various areas of PAB-financed housing, the implications of inflation on the 50% test for developers in construction, how those factors affect potential properties and more. They also discuss the differences between 4% and 9% LIHTCs, how competition affects PAB developments and details in the newly released Novogradac Tax-Exempt Bond Handbook.

On May 5, the three regulatory agencies that oversee the Community Reinvestment Act (CRA) proposed the first significant, interagency overhaul of CRA rules since 1995. Michael Novogradac, CPA, and Novogradac's director of public policy and government relations, Peter Lawrence, discuss in this week's Tax Credit Tuesday podcast what the proposed rules are, how they could affect community development investment and lending, and what stakeholders can do to help influence the rulemaking.

The term sheet is where investors outline the principal terms and conditions of their investment in a tax credit transaction. When evaluating a term sheet, it's important for developers to look at a variety of factors and not just tax credit equity pricing. In today's podcast, Michael Novogradac, CPA, and Novogradac partner Thomas Boccia, CPA, share how developers can pursue an optimal balance between tax for equity pricing and other key factors. While the focus of the podcast is historic tax credits and the role of the term sheet, the principles discussed are applicable to all types of developments seeking to raise tax credit equity.

The COVID-19 pandemic has killed more than 1 million Americans, while 87 million Americans have tested positive for the virus'creating an event that has affected virtually every aspect of life. For owners, operators, investors and tenants in affordable housing, the pandemic created both a health care crisis and a potential financial crisis that required new and different approaches. Novogradac examines those issues in a new report, "Resilience and Responsiveness: How LIHTC Properties Weathered the COVID-19 Pandemic and What to Expect in the Future." In today's podcast, Michael Novogradac, CPA, and Novogradac partner Blair Kincer, the lead author of the report, discuss the findings, including how the pandemic affected occupancy and rental receipt rates, whether stimulus payments are a baked-in part of the federal response to future pandemics, takeaways for property owners and underwriters and the technological adaptations made at low-income housing tax credit properties during the pandemic.

How have capitalization rates changed over the past 12 months of rising inflation? Michael Novogradac, CPA, and Novogradac partner Lindsey Sutton discuss the effects of high inflation on observed market capitalization rates, as well as long-term debt financing.

Michael Novogradac, CPA, and Novogradac partner Frank Buss, CPA, help listeners answer three key questions regarding the new lease guidance, ASC 842: 1. What are the new operating lease accounting requirements? 2. How will the new standard affect various tax credit property partnerships? 3. What do you need to know about complying with the new lease guidance?

More than 130 nations are working toward an agreement to ensure that multinational corporations pay a minimum level of income taxes. The second of two "pillars" in this framework would ensure that the world's largest and most profitable companies are taxed in each jurisdiction in which they do business at an effective rate of 15%. Since any rate less than 15% would make the corporation subject to a top-up tax to reach that level, there are concerns about how U.S. general business credits'including the low-income housing tax credit (LIHTC), historic tax credit (HTC), new markets tax credit (NMTC) and renewable energy tax credits (RETCs)'would contribute to lowering effective tax rates below 15%. In this podcast, Michael Novogradac, CPA, and Novogradac partner Brad Elphick, CPA, discuss the global minimum tax and issues associated with it concerning tax credit equity. They discuss how and when potential guidance would affect tax equity investments, potential approaches to mitigate the damage to tax equity inves

The vast majority of business and nonprofits that receive new markets tax credit (NMTC) financing serve low-income communities that are physically located in a low-income census tract. However, there's another underutilized method for businesses and nonprofits to qualify for NMTC financing that is not geography based. It's called the targeted populations approach. Michael Novogradac, CPA, and Novogradac partner Bryan Hung, CPA, discuss the potential benefits of the targeted populations method, how to meet the targeted populations criteria, compliance considerations and more.

The definition of qualified rehabilitation expenditures (QREs) is important not just for purposes of satisfying the substantial rehabilitation test. The amount of QREs determines the amount of historic tax credits a project is eligible for, meaning every additional dollar of QREs results in 20 cents more in tax credits. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Tom Fantin, CPA, discuss commonly overlooked QREs and costs that some developers may assume are QREs but are not.

The historic tax credit (HTC) substantial rehabilitation test may seem simple on the surface, but there are some important nuances that even experienced developers may not be fully aware of. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Roy Chou, CPA, discuss what developers need to know about meeting the substantial rehabilitation test and planning their qualified rehabilitation expenditures so they can optimize the amount of HTC equity they can raise.

With much competition for 9% low-income housing tax credits (LIHTCs), more developers are turning to 4% LIHTCs to fund affordable housing'at the very time that competition for 4% LIHTCs (which are available to properties financed with tax-exempt private-activity bonds) is increasing. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Tabitha Jones, CPA, discuss the key differences between 4% LIHTC-financed transactions and developments financed by 9% LIHTCs. They also discuss various pitfalls that those new to the 4% LIHTC should be careful to avoid, including problems with bond arbitrage, Form 8709 and the 50% financed-by test. They wrap up with information on the 9% LIHTC that developers unaccustomed to that world should know.

Many solar energy developers do early stage work to get a property ready for construction, then they sell the property to a developer who takes control, raises equity to fund the development and begins construction. However, more early stage solar developers are considering the option of maintaining control of the property and handling the construction, including receiving funding through equity from investment tax credits. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Rob Bryant, CPA, discuss the options and considerations for such developers. They examine the typical life cycle for a solar property and then look at the issues that developers should address when considering a long-term hold of the property. After that, they look at typical financing options, as well as tax and equity structuring issues for a developer who maintains control of a solar property as well as tools developers should consider while making a decision.

The U.S. Department of Housing and Urban Development (HUD) last week posted income limits for fiscal year 2022 to determine eligibility for HUD-assisted programs as well as for low-income housing tax credit (LIHTC) and tax-exempt bond financed properties. The national median income was a 12.5% increase over 2021, but HUD set the cap on increases at 11.89%. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Thomas Stagg, CPA, discuss the income limits, including the major storylines. They also examine how inflation affects income limits and how it will impact future income limits, then provide insight into implementing new rent and income limits and also discuss how issues with the 2020 American Community Survey will affect income limits. They conclude with some suggestions for how HUD could approach those issues and what LIHTC stakeholders should be considering.

Unlike other community development incentives that typically have seasoned developers and investors, renewable energy transactions often have developers and/or investors who are new to tax incentives. It's critically important that investors and developers understand the book accounting or generally accepted accounting principles (GAAP) and implications of their proposed and existing investments. In this episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Novogradac partner Alvin Lee, CPA, discuss how an understanding of these issues can help a developer of a renewable energy project raise the optimum amount of cash for equity and help both the developer and investor avoid any unwanted accounting surprises.

The introduction of the Opportunity Zones Transparency, Extension and Improvement Act in both houses of Congress last week brought attention to the opportunity zones (OZ) incentive. In this week's episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Novogradac partner Brent Parker, CPA, discuss the legislation and preview next week's Novogradac 2022 Spring Opportunity Zones Conference in Long Beach, California. They discuss the provisions of the bill and share what experts will provide insight at the conference. They also discuss the preconference workshops and highlights of the agenda, as well as a look at the Novogradac opportunity zones investment report. The discussion also includes how businesses can benefit from being part of the conference and a crucial upcoming deadline for qualified opportunity funds.

Like with all of society, the COVID-19 pandemic had a dramatic effect on tenants and operations at low-income housing tax credit (LIHTC) properties. In this week's episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Novogradac partner Blair Kincer, MAI, CRE, discuss the various ways the pandemic and its economic repercussions affected LIHTC properties. They discuss the overall impact, then look at how occupancy levels were affected, as well as what happened to properties that came online during the pandemic. They then discuss the ability to achieve maximum rents as we emerge from the pandemic, how operating expenses changed during the pandemic, what changes are being made while underwriting proposed LIHTC developments and how underwriters are using the pandemic years to estimate future LIHTC expenditures. They wrap up with a comparison of the effects of the Great Recession to the financial issues coming out of the COVID-19 pandemic.

The United States is experiencing the highest rate of inflation since the low-income housing tax credit (LIHTC) became a permanent part of the tax code and rising costs have a combination of effects on operators and tenants of LIHTC properties. In this week's episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Novogradac partner Blair Kincer, MAI, CRE, discuss the ways inflation can affect LIHTC development costs, operating expenses, financing and operating revenue. They also discuss how utility expenses are affected and compare this scenario to the Great Recession.

Understanding the many requirements and nuances of the low-income housing tax credit (LIHTC) can mean the difference between delivering tax credits to investors on time or not. In this week's episode of Tax Credit Tuesday, Michael Novogradac, CPA, and Novogradac partner Tonya Johnson, CPA, discuss common pitfalls and risk areas that first-time LIHTC developers should be aware of so they can avoid them. They discuss tax credit deadlines, tax credit construction-related issues and lease-up and stabilization issues.

Qualified opportunity funds (QOFs) tracked by Novogradac report an equity investment of $24.40 billion at the end of 2021, a jump of $6.88 billion in the final six months of the year, according to the Novogradac Opportunity Zones Investment Report: Data Through Dec. 31, 2021. In this week's Tax Credit Tuesday podcast, Michael Novogradac, CPA, and Novogradac partner John Sciarretti, CPA, discuss data from the report and the implications for the opportunity zones incentive. They begin with an overview of the information, then discuss the impact of the expiration of the five-year benefit on QOF investment, before looking at the types of investments being made and the top states and cities for planned investment. They wrap up with a look at the ranges of QOF sizes and an explanation of the services to help those involved in the OZ incentive.