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.

By David Curtis

As the American election cycle comes into full swing, the Opportunity Zone program has become a focal point of discussions for both sides of the aisle.  The national program, passed as part of the Tax Cuts and Jobs Act of 2017, provides a structure for using deferred capital gains to facilitate investment in economically disadvantaged areas of each state.  The investment can be in either operating businesses or tangible assets, with real estate being one of the largest beneficiaries of the program, including investments in low-income housing and historic building rehabilitation.

President Trump has lauded the program since its inception, claiming in the most recent State of the Union address, “Wealthy people and companies are pouring money into poor neighborhoods or areas that haven’t seen investment in many decades.”

Opponents of the Opportunity Zone program claim that it has enhanced luxury real estate projects for developers already generating large windfalls, and the Treasury Department’s internal watchdog group is investigating the selection of some census tracts for being improperly allocated the tax benefit.  However, Presidential election opponent Joe Biden has not specifically mentioned the program, instead pushing a repeal of “most all” of the Tax Cuts and Jobs Act.  How he will address the Opportunity Zones themselves, however, remains a topic that will emerge as the election campaign continues.

The Opportunity Zone program will continue to be a point of contention between both sides as tax benefits become a key debated issue before November.  As the program and other tax incentives’ outlooks change as the election cycle comes to a head, Clocktower Tax Credits continues to be focused on providing up-to-date analysis for our clients, along with outlook on future tax programs and their impact on tax credit markets.  For any questions on the Opportunity Zone program and its intersection with the tax credit marketplace, please contact Jeff Jacobson at (978) 823-0200 or JJacobson@ClocktowerTC.com.

In my last article for this website in February, I wrote about the completion of our project in Kelley Square, Worcester, MA, where the Triple-A Affiliate of the Boston Red Sox is building their new stadium called Polar Park.

One month later, the country was hit by the pandemic, Covid-19, and the world was suddenly upside down.  Construction on the park stopped on April 1 and on a positive note, resumed the third week of May, as it did in most cities in Massachusetts and around the country.  Clocktower is currently involved in real estate development projects all over the US, in various stages of development.  We are finding that although each state is operating on its own back-to-work schedule, construction either never stopped or if halted temporarily, is now back in force under new health and safety guidelines.

Developers have had to adapt to the new normal during this crisis.  When a client was due for an in-person inspection of their building and the inspector couldn’t be there, a virtual inspection was arranged using an iPhone.  When an in-person notarization couldn’t happen, our client used video conferencing with the notary to oversee the signing and recording of the session.  When our client’s attorney hand-delivered documents to a State Credit agency for signature, they expected to have it hand stamped on the spot but had to wait a week to obtain the stamped document.  To facilitate a closing, our client’s attorney drove around the city, donned with mask and gloves to obtain signatures from housing authority executives at their homes.  It goes to show that people can be creative and adapt to get things done when faced with a crisis.

Clocktower Tax Credits has been fully operational throughout the stay-at-home period and has remained in touch with our developers and our investor base.  We have been busy placing and closing transactions.  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 or Pennsylvania REAP credits.  For inquiries, please contact Sue Ellyn Idelson at (978) 793-9574 or SIdelson@ClocktowerTC.com.