Using Tax Credits To Finance Projects

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Godwin Dawson
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1 Florida s 18 th Annual Brownfields Conference Using Tax Credits To Finance Projects Jeff Jacobson, President, Clocktower Tax Credits, LLC October 6, 2017 Tampa, FL

2 Tax Credit Universe Federal State Investment-Based Credits: Rental Housing Rental Housing Historic Rehabilitation Housing Donation Renewable Energy = Available through New Markets Clocktower Tax Credits, LLC Credits Based on Core Business: Earned Income Child Care Research & Development Job Creation Payroll Research & Development Historic Rehabilitation Housing Donation Brownfields CAPCOs You!

3 States Offering Tax Credit Investments MN MI MA MI OH PA NJ MO MI LA FL Brownfield Credit

4 State Brownfields Corporate and Income Tax Credit Programs (from Redevelopment Economics) State Conn. Del. Fla. Ill. Ind. Iowa Ky. Mass. Program/website credit amount and eligible expenditures Industrial Site Investment Tax Credit Up to 100% of redevelopment costs with a $100 million per project ceiling. Credit scheduled over 10 years. Qualified Investment in Targeted Areas Job creation and investment tax credits of $400 to $750 credit for each $100,000 of new investment, and $400 to $900 for each new job. Voluntary Cleanup Tax Credit Program 50% for site rehabilitation costs includes site assessment, monitoring and cleanup; not to exceed $500,000 per year; An additional 25% of total eligible site rehabilitation costs if a Site Rehabilitation Completion Order is approved; not to exceed $500,000 per site (one-time); 50% of total eligible landfill/solid waste removal costs not to exceed $500,000 (one-time application). Environmental Remediation Tax Credit 25% of site assessment and remediation costs over $100,000. Limit - up to $40K/yr, $150k per site. Voluntary Remediation Tax Credit The lesser of 10% of the total cost of the remediation or $100,000. Brownfields-Greyfields Tax Credit Greyfields site: 12% to 15% of total investment costs; Brownfields site: 24% 30% of total investment costs Voluntary Remediation Tax Credit 100% of site assessment and remediation up to $150,000 (see also the statute) Brownfields Tax Credit 25-50% of site assessment and cleanup

5 State Brownfields Programs (cont d) Miss. MO NY NJ SC Brownfields Tax Credit in Redevelopment Project Areas Tax capture/reimbursement program: counts state sales, income, and franchise taxes generated by the site and reimburses the developer for 2 ½ times eligible site assessment and cleanup costs. Brownfields Tax Credit (Statewide, including outside Redevelopment Project Area) 25% up to $150,000 ($40,000 annual ceiling) of site assessment and remediation costs. Brownfield Remediation Tax Credit Up to 100% of site assessment, remediation, and demolition costs - need must be demonstrated Brownfields Cleanup Program Tax Credit Redevelopment Credits - 10% - 22% of total development costs up to $35 million or three times site prep costs, whichever is less Site prep credits 22% to 50% of cleanup and site preparation costs depending on the extent of the cleanup Environmental Insurance - One-time credit of 50% (up to $30,000) of environmental insurance costs NJ Brownfield Contaminated Site Remediation Act/Site Reimbursement Fund Post-development reimbursement of up to 75% of eligible site assessment and remediation costs based on state taxes generated from the site. Credit for Expenses Incurred Through Brownfields Voluntary Cleanup Program 50% of site assessment and remediation costs up to $50,000 per year. Any unused credit up to $100,000 may be carried forward five years. (See also the application).

6 Important Features of the VCTC: Created in 1998 by the Florida Legislature (FS ) Administered by the Florida Department of Environmental Protection Credit = 50% of the costs of voluntary cleanup activity that is integral to site rehabilitation Program awards capped at $5 Million annually Applicant awards capped at $500,000 annually per site per year, plus 25% of total cleanup costs up to $500,000 in final year of cleanup Transferable (one time)

7 Important Features of the VCTC (cont d): Applied against Corporate Income Subject to forfeiture from audit, fraud, or other reasons. Application requires Certifications from: Owner Environmental Engineer Accountant

8 Parties to the Sale Transaction Credit Holders Broker Investor Private Developers Municipalities Clocktower Tax Credits, LLC Cash Tax Credits ABC Corporation Accounting Firms with Brownfields Specialty Consultants Law Firms with Brownfields Specialty Environmental Firms with Brownfields Specialty

9 Breakdown of Transfer Activity 284 Total Certificates Issued (through 2012) 5 Large Corporations 16% Transferred 68% Municipalities 5% Too Small 3% In Progress 1% Small Holders 7%

10 Elements of a Sale Contract Timing Purchase contract when Certificate is received, or contract in advance for transfer when Certificate is received. Amount Can be sold in whole, or in parts of no less than 25% of the total credit. Due Diligence Payment Who blinks first? Use of Escrow. Pricing Net proceeds to Developer: $0.83-$0.88 Indemnification Tax credits are subject to audit by FL Department of Revenue, for up to three years. Purchasers typically require indemnification against any loss of the credit value.

11 2015 Effects of the Supplemental Funding Caught market participants by surprise. Required the solicitation and entry of new corporate Investors. Flight to Quality investors now have a choice of credits. More scrutinous underwriting new investors not accustomed to the program requiring personal guarantees. Pricing? Not much change, able to balance supply and demand. Next Year? Perhaps more of a Seller s market, due to decrease supply and expanded demand.

12 The Holy Grail!

13 The Holier Grail! Investor Corp a New Date!

14 Questions? Jeff Jacobson, President Clocktower Tax Credits, LLC Maynard, Massachusetts (978)

Final Paycheck Laws by State

Final Paycheck Laws by State ALABAMA AL No Provision No Provision ALASKA AK 23.05.140(b) ARIZONA AZ Ariz. Rev. Stat. 23-350, 23-353 ARKANSAS AR Ark. Code Ann. 11-4-405 CALIFORNIA CA Cal. Lab. Code 201 to 202, 227.3 COLORADO CO Colo.