Impact of “Tax Cuts and Jobs Act” on Important Federal Tax Credits

by Bradley Arant Boult Cummings LLP
Contact

Bradley Arant Boult Cummings LLP

The “Tax Cuts and Jobs Act” (the Act) has passed both chambers of Congress and is expected to be signed by President Trump on or before January 3, 2018.  The final agreement among House and Senate Republicans includes rate cuts for “C” corporations, individuals and pass-through businesses, which are further summarized in our Federal Tax Alert.

While the initial plan from the House would have only preserved the Research & Development (R&D) Tax Credit and Low-Income Housing Tax Credit (LIHTC), the conferees’ agreement also preserved the Historic Rehabilitation Tax Credit (HTC), the New Markets Tax Credit (NMTC), and the Investment Tax Credit for energy projects, with some modifications to the HTC that could require developers to take action before the end of the year.

This alert summarizes the Act’s impact on these credits and highlights how the Act differs from the bills that passed both chambers earlier. Excerpts from the Conference Committee summary of the compromise bill regarding these five credits can be found on our website.

Historic Rehabilitation Tax Credit

House: Repeal the HTC, effective for amounts paid or incurred after December 31, 2017, subject to a transition rule.
Senate: Retain the 20 percent HTC but provide that the credit must be claimed ratably over a five-year period beginning in the year when the project is placed in service. Also, eliminate the 10 percent credit for non-historic structures (i.e., buildings placed in service before 1936), subject to a transition rule.
Joint Agreement: Same as the Senate but with a clarification to the transition rule. The changes generally apply to qualified rehabilitation expenditures paid or incurred after December 31, 2017, unless the building is (i) “owned or leased by the taxpayer during the entirety of the period after December 31, 2017” and (ii) the 24-month period selected by the taxpayer (or the 60-month period selected by the taxpayer under the rule for phased rehabilitation) for determining whether the substantial rehabilitation test is satisfied must begin no later than 180 days after the date of the enactment of the Act, i.e., anticipated to be July 2, 2018, depending on the signing date.

Developers and other parties who are currently evaluating the use of historic tax credits to finance their projects should take steps by the end of the year to ensure or confirm that the title to the underlying property is in the right entity and that such owner entity is treated as a partnership for federal tax purposes.

New Markets Tax Credit

House: Terminate the NMTC after December 31, 2017, which would allow previous allocation of these credits before that date to be preserved.
Senate: Not addressed.
Joint Agreement: Not addressed, thus preserving the NMTC as currently authorized through 2019, retaining the 2017, 2018 and 2019 annual allocation rounds at $3.5 billion each.

Energy Investment Tax Credit

House: Eliminate the 10 percent investment tax credit for energy projects that begin construction after 2021 (2027 for solar energy property). The 30 percent investment tax credit for solar energy and fiber optic solar energy property would be available for projects that begin construction before 2020 and would then be phased out for projects that begin construction before 2022.
Senate: Not addressed.
Joint Agreement: Not addressed, thus preserving the investment tax credit for certain renewable energy projects, including solar and wind, without any changes to current law.

Research and Development Tax Credit

House: Preserve R&D tax credit.
Senate: Preserve R&D tax credit.
Joint Agreement: Same as House and Senate and thus preserves the R&D tax credit and allows the credit to be taken against the newly created Base Erosion and Anti-Abuse Tax.

Low Income Housing Tax Credit

House: Preserve the LIHTC.
Senate: Generally, preserve the LIHTC but replace the current public use requirement exception for artist housing with one for veterans; reduce the offset of basis for buildings in high cost areas from 130 percent to 125 percent; treat rural areas as difficult development areas for purposes of receiving a basis boost.
Joint Agreement: Same as House and thus simply retains the LIHTC with no modifications.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bradley Arant Boult Cummings LLP | Attorney Advertising

Written by:

Bradley Arant Boult Cummings LLP
Contact
more
less

Bradley Arant Boult Cummings LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.