New U.S. tax law lessens federal historic tax credit, putting projects at risk

A federal tax incentive that “has helped revive more than 42,000 buildings” and “yielded about $30 billion in federal tax receipts” was “eroded” by the new U.S. tax law that President Donald Trump signed in December, Fox Business reports. The federal historic tax credit “provides reimbursement for 20% of certain costs” for renovations of historic buildings, but the tax-law changes mean the “payback is now spread over five years instead of one,” reducing its value to developers, according to the article. In Dayton, developer Cross Street Partners “rushed to complete long-term leases” on a project to “overhaul a long-vacant collection of buildings known as the Dayton Arcade” before the change took effect after the end of 2017. Senior development director David Williams said “the weakened version [of the incentive] could have threatened a carefully constructed financing plan that includes multiple tax incentives.” For more, read the full article

Federal Updates, Financial Incentives, Legal Developments

Conference agreement on tax reform: Private activity bonds, stadium bonds spared; Advance refundings and tax credit bonds axed

The Tax Cuts and Jobs Act (TCJA) was released on December 15, 2017. The Committee of Conference chose not to follow the House’s repeal of authorization for private activity bonds — a financing vehicle used to finance 501(c)(3) institutions, such as private universities and hospitals, as well as other projects, such as low-to-moderate income housing. Additionally, the prohibition on the use of tax exempt bonds for professional stadium financing was, likewise, not included in the TCJA, preserving that option for governmental issuers. Read more >>

Federal Updates, Financial Incentives, Legal Developments

Tax Reform’s Restrictions on Municipal Bonds

In the early morning hours of Saturday, December 2, 2017, the United States Senate, by a vote of 51-49, approved its version of H.R. 1, the Tax Cuts and Jobs Act of 2017, commonly referred to as the Senate's tax bill. The Senate bill, unlike the House's version, does not repeal private activity bonds. However, the Senate bill contains the repeal of the authorization for advance refundings that first appeared in the Chairman's Mark. The Senate and House are expected to attempt to reconcile the two versions this week in order to produce a single piece of legislation that must pass both chambers of Congress before finding its way to the desk of President. Read more >>

 

Federal Updates, Legal Developments

House of Representatives and Senate Finance Committee pass Tax Cuts and Jobs Act

The House of Representatives passed H.R. 1, the Tax Cuts and Jobs Act, on November 16, 2017, by a vote of 227 to 205. The House bill continues to contain the repeal of private activity bonds and advance refundings. The Senate Finance Committee passed its version of tax reform hours later, 14-12. The Senate bill is silent on private activity bonds but contains the advance refunding repeal. The full Senate is expected to consider its version after Thanksgiving. Read more >>

Federal Updates, Legal Developments

Senate releases its version of the Tax Cuts and Jobs Act

On November 9, the Senate Finance Committee released the "Chairman's Mark," which is a summary of what the Senate's version of the Tax Cuts and Jobs Act is expected to contain. Unlike the House's version of tax reform, the tax exemption for private activity bonds is not repealed. However, the repeal of authorization for advance refunding has been included in the Senate version. Especially with the appearance of the prohibition for advance refundings in both the House and Senates tax bills, modification of financing techniques that provide significant flexibility to governmental issuers and 501(c)(3) entities and help them take advantage of falling interest rates is likely on the horizon. Read more >>

Federal Updates, Legal Developments

H.R. 1 proposes significant limits on municipal bonds

On November 2, 2017, the U.S. House of Representatives Ways & Means Committee released its first draft of H.R. 1, known as the Tax Cuts and Job Act (the bill). If enacted in its current form, the bill would prohibit the use of a number of funding techniques that use tax exempt bonds. Specifically, the bill would no longer permit private activity bonds to be issued as tax exempt, would forbid the use of tax exempt advance refunding bonds, would eliminate tax credit bonds and would terminate tax exempt bonds for professional sports stadiums. Read more >>

Federal Updates, Legal Developments

Annual survey of top site selection factors: skilled labor tops list for 2016

What is the most important factor when companies are looking for a location to establish or expand their business? According to the results of  AreaDevelopment.com’s annual survey of corporate executives, the availability of skilled labor is the first thing they take into account. AreaDevelopment.com reports that “68 percent of the respondents say they consider whether there are businesses performing activities similar to those of their company in the area of search” as an indicator of whether the talent pool they need will already be established in that area. Other top site selection factors in the top ten are, in order: highway accessibility, quality of life, occupancy or construction costs, available buildings, labor costs, corporate tax rate, proximity to major markets, state and local incentives, and energy availability and costs. For more, read the full article on the survey results.

Federal Updates

Slow economic growth is the “new normal,” experts say

Business economists say that “Americans should get used to a ‘new normal’ of slow economic growth,” Cincinnati.com reports. “The median estimate from economists surveyed by the National Association for Business Economics surveyed calls for the American economy to grow 2.2 percent in 2017,” up from 1.6 percent forecasted this year, according to the article. From 1948 to 2015, economic growth in the United States averaged 3.1 percent a year, but 80 percent of economists surveyed believe the potential growth rate of the country’s economy “will remain at 2.5 percent or lower over the next five years.” However, they think the risk of recession is remote, and “90 percent expect the current economic expansion to continue until at least 2018.” Two-fifths of the economists said infrastructure spending increases “would be the best way to boost economic growth over the next four years,” while 36 percent of them said tax reform would best promote growth. For more, read the full article.

Federal Updates

IRS issues new safe harbor provisions for management contracts

The Internal Revenue Service has announced a new safe harbor for management contracts relating to certain bond-financed facilities.  Rev. Proc.  2016-44 aims to provide what it characterizes as a “more flexible and less formulaic approach” to the question of whether an arrangement with a service provider could adversely affect the tax-exempt status of governmental bonds and qualified 501(c)(3) bonds under the Internal Revenue Code of 1986, as amended.  The new safe harbor permits longer term arrangements between the beneficiaries of tax exempt bonds and service providers without adversely affecting the tax status of those bonds. For more, read the full article.

Federal Updates, Financial Incentives, Legal Developments