It’s been a while since we used this forum to explain in the most basic terms what we do here at Clocktower Tax Credits.  We get a lot of phone calls and emails, especially around tax filing time, from individuals looking to reduce their tax bills.  Or calls from individuals who think they own something that they can sell to help someone else reduce their tax bill.  Sometimes we can help; other times we cannot.

Most of our work is in helping individuals or small companies raise money for their projects or companies by “selling” or otherwise monetizing certain tax attributes that they earned.  Some of our callers don’t really know what “credits” they have.  In those cases, we probe enough to discover that they are referring to operating losses that have been carried on the books of their firm.  These are not tax credits, and they cannot be transferred except through the acquisition of such losses by a company acquiring the subject firm.  This acquisition needs to have a legitimate business purpose and is not being done solely to monetize these losses.   This category of calls also includes those situations involving charitable donation deductions.  Similarly, the IRS does not allow the sale of interests in an entity solely to benefit from a charitable donation.  The history of such transactions is littered with abusive investments involving inflated appraised values of the donated property.  Clocktower will not participate in such transactions.

Individuals or groups looking to offset federal tax liabilities in the range of $25,000 to $250,000 cannot ordinarily benefit from tax credits for two reasons.  First, all Federal Tax Credit monetizations entail the use of a structured partnership to properly allocate the cash and tax attributes of a project, and the legal and accounting work required for such a transaction precludes these small investments.  Second, most individuals, LLCs or S-corporations are restricted in their ability to use the tax benefits by passive loss limitations.  Thus, we cannot help most individuals seeking tax relief in this financial range.

Finally, we have much more flexibility in the world of State Tax Credits, which are authorized and issued under unique State rules which do allow for transfers from owners of credits to other state taxpayers.  Here, the minimum amount of credits usually sold starts at $10,000 and can rise into the millions.  Again, project owners must know that they own these specific tax credits because they applied for them; they are not typically discovered by an owner after the fact.

The experts here at Clocktower Tax Credits can help you determine whether you have something to sell, or whether the government allows you to find someone who has some tax savings to convey to you.  Please call President Jeff Jacobson at (978) 823-0200, or email him at JJacobson@ClocktowerTC.com, to start a conversation.

As we turn the page on 2020, a year that has been immensely challenging for all, we take time to reflect on the past and look forward to the future.  The COVID-19 pandemic has created an unprecedented level of disruption for people within their communities and homes, as well as in their jobs, across the world.  As challenging as 2020 has been for many, here at Clocktower Tax Credits we also began a new phase, entering our second decade as one of the nation’s leading brokers of State and Federal Tax Credits.

We entered 2020 with a vision of celebrating our 10^th year anniversary as a reflection of the previous decade of growth, creativity and our success as a business. As a result of completing six tax credit transactions in our first year, to sixty-three closed transactions during 2019, we created a host of long-term, genuine relationships between developers, producers, new credit buyers, and investors, that have helped pave this path of success leading to where we are today.

Looking into 2021 and beyond, our mission has been, and always will be, to invest in the success of others.  This past year has added the additional challenge to adapt to the COVID slowdown and the new opportunities that the crisis presented.  We, like many of our inspired and inspirational clients, persisted and even thrived from our remote and upside-down worlds.  As we enter this next chapter, more than ever are we eager to try new things and work differently to seize the opportunity to emerge stronger … not just echoing the accomplishments that we achieved over the last decade, but exceeding them.  As Albert Einstein said, “In the midst of every crisis lies great opportunity.”  With that vision, we hope and expect that our next decade will be filled with expansion, improvement, and many new partnerships and relationships, which will provide us the opportunity to continue to grow.

For more information on how you as either a Developer/Producer or an Investor looking to save on taxes can participate in our growth, please call Jeff Jacobson at (978) 823-0200, or email him at JJacobson@ClocktowerTC.com.

Miriam Apartments, developed by Mercy Housing Lakefront, has won a national award in the Preservation category by Affordable Housing Finance magazine.  The project entailed the adaptive reuse of the historic Miriam building, which was a blighted structure in the Uptown neighborhood of Chicago.

The development team, including Mercy and Landon Bone Baker Architects, transformed the building to produce 66 studio apartment units for low-income Uptown residents, including transitioning the layout of communal kitchens and bathrooms to accommodate private ones for each resident.  The project also added community-wide amenities for all residents on the ground floor, and installed air conditioning in the building for the first time in its history, all while preserving its historic character.  New tenants, who were formerly homeless, have begun to move into the building since its placement into service in early 2020, providing a necessary living environment for many local at-risk members of the community.

Clocktower Tax Credits helped monetize the project’s award of Illinois Affordable Housing Tax Credits through a Fortune 1000 corporate purchaser and donor, providing the project with a vital source of funds available for the construction and operations of the building.

Clocktower continues to have ample state tax credit demand for our developer clients, along with experience and expertise in transactions for programs in Illinois and across the greater Midwest.  For any questions on Midwest state affordable housing tax credit programs, please contact David Curtis at (978) 440-0742 or DCurtis@ClocktowerTC.com.

Historic Tax Credit Projects are getting COVID-19 relief to meet the “Substantial Rehabilitation Test” for claiming historic tax credits (HTCs).  The IRS published Notice 2020-58 on July 30, 2020.  Taxpayers with a 24- or 60-month measuring period who are required to finish the project under the substantial rehabilitation test on or after April 1, 2020, and before March 31, 2021, now have until March 31, 2021 to satisfy the test to claim the HTC or determining if the project qualifies under the transition rule provided in tax reform legislation at the end of 2017.

The Substantial Rehabilitation Test means the cost of rehabilitation must exceed the pre-rehabilitation cost of the building.  Generally, this test must be met within two years or within five years if it is a multi-phased project, whichever is applied for with the State Historic Preservation Office at the onset of the project.  Per the National Park Service’s eligibility requirements, the cost of the project must exceed the greater of $5000 or the building’s adjusted basis.  The adjusted basis is the cost of the building minus the cost of the land, less any depreciation taken with the addition of any capital improvements made since purchase.

Under normal conditions and especially under COVID-19, many smaller HTC projects are finding it difficult to raise money.  The industry is advocating for changes that would help in this effort and the HTC in general.  The Moving Forward Act, a bill passed by the House of Representatives, contains numerous infrastructure and tax legislation changes, with significant amendments to the HTC.  This is only a proposal and will have to pass the Senate, and then be signed into law.  The industry remains hopeful that some of these items will be passed.  The list of improvements contained in the proposal include:

• Increasing the HTC percentage to 30% (from 20%) for 2020 through 2024, then reducing it to 26% in 2025, 23% in 2026, and back to 20% in 2027.
• Increasing the rate permanently to 30% for small projects with eligible QREs capped at $2.5 million.
• Reducing the substantial rehabilitation to 50% of adjusted basis, from 100%.
• Eliminating the basis adjustment so the HTC would no longer be deducted from a building’s basis. This would eliminate the 50(d) income for two-tiered transactions, which would make it easier to do joint LIHTC-HTC transactions as they would be on par with one another.  Currently, the law creates a complex structure for investment in the partnership and the basis reduction reduces the LIHTC component.
• Making the HTC available to many tax-exempt projects, such as museums, theatres and non-governmental colleges and universities.
• Making the HTC available for public school buildings.

Clocktower Tax Credits will continue to monitor these proposals and will provide updates on any significant progress made.  If you have a project that needs investor tax credit equity, don’t hesitate to call us.  We work with developers with prospective Historic rehabilitation or Low-Income Housing tax credit projects seeking Federal and/or State tax credit equity, and unique state incentives such as the Massachusetts HDIP and Pennsylvania REAP credits.  For inquiries, please contact Sue Ellyn Idelson at (978) 793-9574 or SIdelson@ClocktowerTC.com.

Clocktower Tax Credits, LLC is enjoying a banner year during its 10^th anniversary of helping corporations nationwide save on their State and Federal income taxes.  In spite of the COVID-19 pandemic that has disrupted commerce for most of the calendar year, Clocktower has successfully raised millions of dollars for much needed economic development projects.

At the mid-year point, Clocktower has closed over 40 separate tax credit transactions, a record pace for the firm.  “We have sold over $43 million in state tax credits alone, covering 13 states from Rhode Island to Hawaii, and from development programs as diverse as Film, Historic Buildings, Wind Energy and Affordable Housing,” according to President Jeff Jacobson.

Part of the success of Clocktower is due to the lengthy time horizon that the firm respects in its projects.  “As a tax credit investment broker, we work with both Developers and Film Producers to budget, schedule, gain approval, and ultimately develop and complete their projects,” Jacobson noted.  “And then it may take up to a year to certify the project costs and generate the tax credits from their state agency.  At the proper time in this process, we bring the opportunity to the investor market to determine the best fit for providing equity.”

Given this timeframe, it’s clear that the current economic pandemic only affects a portion of the development process.  However, that portion may be crucial, and it may entail finding a replacement investor for one whose tax liability significantly decreased.  “Our real expertise,” Jacobson pointed out, “is in identifying buyers whose appetite for tax credits is healthy within very specific jurisdictions.  Even while many tax credit investors are sidelined, we bring huge value in knowing how and where transactions can still be completed.  Our track record here in 2020 proves that.”

For more information on how Clocktower can help Developers or Producers sell tax credits into this difficult marketplace, please call Jeff Jacobson at (978) 823-0200, or email him at JJacobson@ClocktowerTC.com.