Federal Plenary
Federal Plenary
Michael Novogradac
Broadening the Base
And lowering the rates
RATES
Tax
Revenue
35%/
39.6%
25%
Big Ticket Tax Expenditures
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Big Ticket Tax Expenditures
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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
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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!
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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
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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