On November 6, 2009, President Obama signed the Worker, Homeownership and Business Assistance Act of 2009. The new law extends the first-time homebuyer temporary federal tax credit for qualifying home purchases to April 30, 2010 and expands the eligibility requirements for purchasers.
Under the new law an eligible taxpayer must buy, or enter into a
Ohio’s Budget Bill, signed by Governor Ted Strickland on July 17, contained provisions authorizing Ohio’s first state-run New Markets Tax Credit, as well as substantially revising the state’s Historic Preservation Tax Credit. Here is a breakdown of each:
New Markets Tax Credit
Modeled after the federal New Markets Tax Credit, the state program allows up to a nearly $1 million cumulative, nonrefundable tax credit for an entity that holds an investment in a “qualified community development entity” over the next seven years. Like the federal Credit, the Program is intended to aid development in low-income areas where new projects are typically more difficult to finance.
Only insurance companies and financial institutions are eligible to receive the credit, and they may do so by holding a “qualified equity investment.” A “qualified equity investment” is an investment in a “qualified community development entity” (i.e. an entity with an allocation agreement under the Federal Credit that does business in Ohio) that: (1) is acquired solely for cash after July 17, 2009; (2) has at least 85% of its purchase price used to invest in low-income communities; and (3) is designated by the issuer as a qualified equity investment.
To receive the credit, the community development entity must invest in a “qualified active low income community business” (“QALICB”). The intention behind this provision is to ensure the credit is used for new projects that actively promote job creation in the state. The QALICB definition excludes from such businesses those that derive 15% of annual revenue from real estate, such as developers. The language may permit a developer to be a QALICB, however, if it is the end user of the property through a sale-leaseback transaction. The program permits investment in a special purpose entity (“SPE”), principally owned by the property user, if the SPE was formed solely to rent or sell the property back to the principal user. Therefore, a developer could form an SPE and lease the property to itself as the owner of a separate end user entity, so long as the user is not itself a real estate developer.
An eligible entity may receive the credit if it holds such an investment on the first day of January in 2010 through 2016. The Program credit is equal to the “applicable percentage” of the purchase price. In years 2010 and 2011, however, the applicable percentage is zero. In 2012, the credit is seven percent, and in 2013 through 2016 the credit is eight percent. At the end of seven years, the entity may receive a 39% credit on a statutorily capped maximum investment price of $2,564,000, for a total credit of up to $999,960. The total amount of credits allocated by the state under the Program each year may not exceed $10 million.
Ohio joins a number of states that offer a New Markets Tax Credit in conjunction with the federal Credit. The Program should be a useful tool, along with the Historic Preservation and Low Income Housing Tax Credits, for encouraging investment in underserviced areas.
Continue Reading Ohio Creates New Markets Tax Credit and Revises Historic Tax Credit
In Woda Ivy Glen Limited Partnership v. Fayette County Board of Revision (2009), 121 Ohio St.3d 175, the Supreme Court of Ohio considered whether restrictions on real property resulting from participation in the federal low-income housing tax credit program should be taken into account when appraising the property for real estate tax purposes. The
Recent activity in Washington, D.C. suggests that the federal government is moving one step closer to regulating greenhouse gas emissions. US EPA has determined that greenhouse gas emissions are pollutants that endanger the public’s health and welfare. US EPA’s endangerment finding could lead to regulation of greenhouse gas emissions under the Clean Air Act. Alternatively, a new cap-and-trade bill has been introduced, which would remove greenhouse gases from regulation under the Clean Air Act, but would require a reduction in greenhouse gas emissions of 85% from 2005 levels by 2050.
What does the potential regulation of greenhouse gases mean for real estate development?
INCREASED ENERGY COSTS !
Energy-utility companies will be greatly impacted by regulation of greenhouse gases. Particularly, in Ohio and other Midwest states, where electricity production is almost entirely dependent upon coal-burning, reducing greenhouse gas emissions could be quite costly. Moody’s has estimated that consumer electricity costs will rise between 15-30% as a result of any cap-and-trade regulation.
With the expectation of increased energy costs, real estate developers should look to energy-efficient building systems or alternative energy sources as ways to reduce these costs. The Ohio Department of Development and the Ohio Air Quality Development Authority offer grants to help offset some of the initial costs for installing alternative energy sources. Additionally, tax credits are available for certain projects.
If you would like to learn more about potential climate change regulation and Ohio funding for alternative energy projects, these topics will be presented at the CREW of Greater Cincinnati 2009 Midwest Regional Conference. The conference will take place April 23-25, 2009 at the Cincinnati Hilton Netherland Plaza. Other topics presented at the Conference include: "Successful Urban Renaissance Developments"; "Diversity by Design: Successful Inclusion Projects"; "Case Studies in Brownfield Redevelopment"; and "Capital Markets — Effects from Washington Decision Making". Continue Reading Potential Effect of Climate Change Regulation on Real Estate Development
"Every night before I rest my head; See those dollar bills go swirling ’round my bed."
So sang Patti Smith in the composition Free Money on her critically acclaimed 1975 debut album, Horses.
That’s a tune that cash-desperate real estate developers and project owners may have found themselves humming during the current credit crisis. But
After much wrangling, the House and Senate came together in Conference Committee and each subsequently passed President Obama’s Stimulus Bill in record time. President Obama has now signed this historic legislation. The Stimulus Bill provides in part for a refundable tax credit for first time home buyers (who are defined as buyers who have not owned their
If we want a healthier community we need to start with a healthy core city. I am a social worker, turned tax attorney, turned real estate deal maker. I tell you this because those phases of my life have all brought me to this point in my career. You know the theory about the donut. If there
Recently at the January monthly Real Estate Roundtable breakfast sponsored by the University of Cincinnati, I was introduced to a fascinating new concept – the Roof Lease. Featured speaker Mike Phillips, President of Cincinnati based national real estate developer Phillips Edison Company, mentioned that Roof Leases are starting to spring up across the country. The basic