Federal Plenary Federal Plenary Michael Novogradac Broadening the Base And lowering the rates RATES Tax Revenue 35%/ 39.6% 25% Big Ticket Tax Expenditures novogradac.wordpress.com Big Ticket Tax Expenditures novogradac.wordpress.com Dave Camp and Tax Reform • Drive to 25! … • Accept a Rate of 28? • Meetings with committee Republicans… Rep. Dave Camp Chairman of the House Committee on Ways and Means R – Michigan www.taxcredithousing.com • Democrats? Status In the Senate? Priorities? Senate Finance Committee Chairman Max Baucus D - Montana Senate Finance Committee Ranking Member Orrin Hatch R – Utah LIHTC – Impact of Tax Reform Keep up to date! www.twitter.com/Novogradac Page 90 Page 92 Tax Reform Effects on LIHTC Pricing and Yields • Impact of lower rates & longer depreciation lives • 9% volume cap new construction investment • Tax rate/LIHTC price per dollar relationship novogradac.wordpress.com Tax Reform Effects on LIHTC Pricing and Yields 35% Corporate Tax Rate: $1.00 Per Tax Credit Equity Raise = $0.35 Net Federal Tax Benefits 25% Corporate Tax Rate: $1.00 Per Tax Credit Equity Raise = $0.25 Net Federal Tax Benefits 29% Reduction in Nominal Return! novogradac.wordpress.com Tax Reform Effects on LIHTC Pricing and Yields Bottom Line Impact Equity Raised: 8% – 12% Less Industry Wide: $700 million to $1 billion in Lost Equity novogradac.wordpress.com 9% Floor Support Rep. Pat Tiberi R – Ohio Rep. Richard Neal D – Massachusetts Sen. Maria Cantwell D – Washington Sen. PatSen. Former Roberts Olympia Snow R – Kansas Maine Effective Yield Method Expanded Use of Effective Yield Method • March 14th - Financial Accounting Standards Board Emerging Issues Task Force (EITF) • Effective yield accounting for LIHTC investments when a guarantee is not provided when certain criteria are met Allowing for the expanded use of effective yield accounting would… EXPAND the pool of potential LIHTC investors. Company income Pass-through book loss Net income before tax Tax expense, pre-credits (35%) Tax credits (net of amortization) Net tax expense Net income after tax Equity Method 10,000,000 ( 1,500,000) 8,500,000 2,975,000 2,000,000 ( 975,000) 7,525,000 * Based on a 4.28% IRR, paying $0.795/credit to the fund Effective Yield Method 10,000,000 0 10,000,000 ( 3,500,000 ) 1,142,079* ( 2,357,921) 7,642,079 September 13 September November 14 October November Federal Plenary Federal Plenary Charles WehrweinNeighborWorks America Who We Are • Chartered by Congress 35 years ago, NeighborWorks America is a recognized leader in affordable housing and community development. • In the last five years, we leveraged more than $16 billion in investments to local communities. Our Mission To create opportunities for people to live in affordable homes, improve their lives and strengthen their communities. How We Work Investment in local community organizations Programs for homeownership and rental opportunities Training and professional development Technical assistance Last Year We Helped: 18,500 families preserve their homes 102,200 families live in affordable rental housing 15,000 individuals and families become new homeowners create and maintain 26,700 jobs Our Results - 2012 305,000 households assisted 20,000 training certificates awarded to community development partners $4.6 billion in direct investment leveraged 1.23 million volunteer hours spent improving communities $82.5 million in grants to local and regional organizations Federal Plenary