On December 30, 2013, the Internal Revenue Service issued much anticipated guidance, in the form of Revenue Procedure 2014-12, providing a safe harbor under which it will not challenge a partnership’s allocations of rehabilitation tax credits to its partners. Because Revenue Procedure 2014-12 is similar to Revenue Procedure 2007-65, which established a safe harbor for the allocation of production tax credits by wind partnerships, the two revenue procedures are compared below.
Safe Harbors for Rehabilitation Tax Credits -
On December 30, 2013, the Internal Revenue Service (IRS) issued Revenue Procedure 2014-12, which provides the requirements under which the IRS will not challenge a partnership’s allocations of Internal Revenue Code (Code) Section 47 rehabilitation tax credits to its partners (Safe Harbor) for all allocations made by a partnership on or after December 30, 2013 (or made prior to December 30, 2013 for those existing partnerships already satisfying the Safe Harbor). The Safe Harbor is a response to the U.S. Court of Appeals for the 3rd Circuit decision in Historic Boardwalk Hall, LLC v. Comm’r, 694 F.3d 425 (3d Cir. 2012)(Historic Boardwalk). As discussed below, in Historic Boardwalk, the Third Circuit disallowed a partnership’s allocation of rehabilitation tax credits because the purported partner did not have a meaningful stake in the economic realities of the partnership.
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