Has anyone worked with Historic Tax credits on distressed/value-add deals?
I'm curious, what is the federal "tax credit" that the developer receives? Since there are no federal level property taxes, and most development shops are pass-through LLCs, does it effect the individual developer's federal ordinary income/capital gains taxes?
You should google "tax credit" or "historic tax credit" before you post uneducated shit like this. Here is a link to wikipedia: https://en.wikipedia.org/wiki/Tax_credit
Tax credits are typically syndicated and monetized and used as a portion of the capital stack.
Let's cut the guy a break, he was just asking a question. Sure, he could have googled it and had a relatively easy answer or even read some white papers on it.
Agreed that it's ideal to use these tax credits in the capital stack, but a lot of banks underwrite it differently. They'll look at the tax credits as a cash flow a X time rather than an "equity". This works out alright too because a lot of developers will sell of these tax credits to monetize that value and bump up the IRR.
It often takes a long time to go through the historic tax credit process. You have to finish up the entire construction of the project before going through to the state. Which is another reason banks sometimes will underwrite it as a CF vs sticking it in the capital stack.
Having a bad day? I understand what a historic tax credit is , but not many sources (including the NPS) describe HOW exactly they are applied to the capital stack. I posed the question for a high level overview and perhaps examples from people who work with them. I thought that is what this forum is for. Unless the forum is solely for undergrads asking questions on how to secure analyst positions? My mistake. How exactly are the tax credits monetized? Since there are requirements to secure the tax credits from start to finish, are there some lenders/equity partners who do not want to get involved with that risk? These are the kinds of questions that are hard to find online without the help of people who have experience with them.