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Tax Law Roundup current law developments in U.S. taxation

Category Archives: Tax Credits

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Temporary Regulations Address Allocation of Creditable Foreign Tax Expense

Posted in International, Partnership/LLC, Tax Credits

The IRS published temporary and proposed regulations on allocations of creditable foreign tax expenditures (CFTEs).  The regulations make various technical changes to the existing regulatory safe harbor for allocating CFTEs.  The regulations are effective on February 4, 2016. The existing regulations provide special rules for foreign tax expense allocations when those expenses are eligible for… Continue Reading

Supreme Court Rules on Limits of State Taxing Authority – Refund Claims in Order

Posted in State and Local Tax, Tax Credits

In Comptroller v. Wynne, the Supreme Court ruled that individuals who earn income in states in which they do not reside may be entitled to refunds if the taxes they pay to the nonresident state are not fully creditable against their resident state taxes. This case involved residents of Maryland who held interests in an… Continue Reading

Favorable IRS Guidance on Pre-2014 Renewable Energy Projects

Posted in Energy, Green, Tax Credits

The IRS and Treasury announced taxpayer-favorable guidance regarding the grandfathering of pre-2014 projects for the purposes of the renewable electricity production tax credit (PTC) or the energy investment tax credit (ITC).  As noted in our 2013 blog, a “qualified facility” is eligible to receive either a renewable electricity production tax credit or energy investment tax… Continue Reading

New Simplified Financial Accounting for Low-Income Housing Tax Credit Projects

Posted in General, Real Estate, Tax Credits

The Financial Accounting Standards Board (FASB) has announced new simplified financial accounting rules for qualified investors in Low-Income Housing Tax Credit (LIHTC) projects. The rule change will make it easier for investors to opt out of the Equity Method of accounting for LIHTC investments and instead use the new Proportional Amortization Method. The main benefit… Continue Reading

IRS Issues Historic Rehabilitation Credit Safe Harbor

Posted in General, Joint Venture, Partnership/LLC, Real Estate, Tax Credits

After much anticipation, the IRS issued Rev. Proc. 2014-12, a Safe Harbor for when an investor in an historic rehabilitation credit partnership will be respected as a partner for tax purposes.  Such partner status is essential to allocating rehabilitation credits to the investor and the guidance is a direct result of the 2012 Historic Boardwalk… Continue Reading

IRS Revokes PLR Allocating Value of Power Purchase Agreement to Wind Facility

Posted in Deductions, Green, Tax Credits

In new PLR 201249013 the IRS revoked PLR 201214007.  The original ruling had allocated acquisition costs for a wind facility that economically related to an underlying Power Purchase Agreement (PPA) to the wind facility itself (resulting in faster tax depreciation).  In the new ruling the IRS states that “the Service has determined that Private Letter Ruling… Continue Reading

Third Circuit Concludes Historic Rehab Credit Investors Were Not Partners

Posted in Debt vs. Equity, Economic Substance, Partnership/LLC, Real Estate, Tax Credits

The IRS has won a significant victory in the world of tax credit partnerships.  Federal tax credits are typically monetized through syndicated credit-investment partnerships where the investor is required to be treated as a partner for tax purposes in order to receive an allocation of the credit.  In a reversal of the Tax Court, the… Continue Reading

Final New Markets Tax Credit Regulations Address Targeted Populations

Posted in General, Tax Credits

Treasury issued final regulations under the New Markets Tax Credit program, saying that an entity may be eligible to be treated as a qualified active low-income community business serving targeted populations where (i) at least 50% of the entity’s total gross income for any tax year is derived from sales, rentals, services, or other transactions… Continue Reading

Tax Court Reversed, State Tax Credits Transferred in Taxable Sale

Posted in Tax Credits

In a reversal of the much discussed Virginia Historic Tax Credit Fund decision, the 4th Circuit Court of Appeals reversed a Tax Court decision and found a taxable disguised sale of state tax credits. The Virginia tax credits, under state law, could be assigned differently than the economic ownership of the partnership, effectively allowing what… Continue Reading

Short-Term Capital Gain on Sale of State Tax Credits

Posted in Tax Credits

The Tax Court in Tempel v. Commissioner held that an individual taxpayer’s sale of Colorado transferable state tax credits from a conservation easement resulted in short-term capital gain from a zero-basis asset. The taxpayer had argued that the gain should be long-term capital gain based on the acquisition date of the underlying land and should… Continue Reading

Tax Court Reversed, State Tax Credits Transferred in Taxable Sale

Posted in Partnership/LLC, Real Estate, Tax Credits

In a reversal of the much discussed Virginia Historic Tax Credit Fund decision, the 4th Circuit Court of Appeals reversed a Tax Court decision and found a taxable disguised sale of state tax credits. The Virginia tax credits, under state law, could be assigned differently than the economic ownership of the partnership, effectively allowing what… Continue Reading

Obama Proposes Incentives for Energy Efficient Buildings – Paid for by Oil & Gas Industry

Posted in Energy, REITs, Tax Credits

Obama announced a new “Better Buildings Initiative” to make commercial buildings 20 percent more energy efficient over the next decade. In a February 3 speech, President Obama proposed significantly increasing the existing §179D incentives for energy efficient buildings. The President is calling on Congress to redesign the current tax deduction for commercial building upgrades, transforming… Continue Reading

Obama Proposes Startup American Campaign to Promote Entrepreneurship and Innovation

Posted in Tax Credits

On January 31st, the White House launched the “Startup America” campaign to promote high-growth entrepreneurship. This campaign includes proposals to make permanent the elimination of capital gains taxes on certain small business stock (called “1202 stock”) and to expand the New Markets Tax Credit to encourage private sector investment in startups and small businesses operating… Continue Reading

Court Respects Historic Rehab Credit Syndication

Posted in Tax Credits

Taxpayers won a significant victory in the Tax Court, overcoming an IRS position that an investor in a historic rehabilitation tax credit partnership should not be respected as a partner for tax purposes. The IRS argued that the transaction lacked economic substance, was a sham, and that the investor was merely purchasing tax credits and… Continue Reading