On December 30, 2013, the Internal Revenue Service (the “IRS”) issued Revenue Procedure 2014-12 (“Guidance”), which establishes a “safe harbor” for federal historic tax credit (“HTC”) investments made within a single tier or through a master tenant structure. The Guidance was issued largely in the response to the recent decision in Historic Boardwalk Hall, LLC v. Commissioner, 694 F.3d 425 (3d Cir. 2012), cert. denied, US No. 12-90, May 28, 2013 (“HBH“), in which the Third Circuit Court of Appeals held that an investor was not a partner in the partnership that owned a project, because it did not have a meaningful upside potential nor a meaningful downside risk in the economics of the property.
The Guidance will undoubtedly serve as a very large first step in restarting an HTC industry that has been stagnant for months, but due to some of the ambiguous requirements in the Guidance, additional measures in the coming months will likely need to be undertaken before Investors return to investing at levels experienced prior to the HBH decision. Such additional measures may include additional clarification, interpretation, and/or elaboration on certain provisions by government officials and/or the adoption of new standard investment terms by developers, Investors, and their respective tax advisors to conform to the requirements of the Guidance. Attorneys from Winthrop & Weinstine will be closely monitoring and actively participating in such ongoing conversations as the HTC industry prepares to implement the safe harbor requirements in the financing structures of historic projects going forward.
For Winthrop & Weinstine, P.A.’s summary of the Guidance, as supplemented by guidance from IRS officials Joseph Worst and Craig Gerson at the January 14, 2014, conference held by IPED, Inc. (the “IPED Conference”), and our analysis of the material terms and conditions of the same, please click here.
If you have any questions about any topics in this Alert, or any other concerns that arise as a result of the Guidance, please do not hesitate to contact any of the attorneys from Winthrop & Weinstine’s Federal Tax Credit Practice Group.