For months, the renewable energy industry speculated how the new tax bill would alter the fate of the Federal Investment Tax Credit and Production Tax Credit.  Thankfully, the Tax Cuts and Jobs Act that President Trump signed into law did not devastate the financing of most solar and wind developments.

Under the original bill, there was the threat of the Production Tax Credit (PTC) and Investment Tax Credit (ITC) being completely removed from the tax code, but fortunately the PTC and ITC were kept intact and remain unchanged.  These tax credits serve as the mechanism for a large proportion of financing the renewable energy capital stack.  Corporations create a partnership with developers of tax credit eligible renewable energy projects by investing in the project company in return for the credits and other financial benefits of the project.  Clocktower Tax Credits plays an important role in such transactions by representing developers in presenting their renewable energy project to a network of Fortune 500 Investors in order to source tax equity.  While the elimination of the PTC and ITC was always a concern, an unexpected outcome was a new provision in the tax bill known as the Base Erosion Anti-Abuse Tax (BEAT) that would be detrimental to the financing of renewable energy projects.

The consequence of the original BEAT provision mandated that there be a minimum tax for international corporations, which would have resulted in the PTC and ITC becoming worthless for certain tax credit equity investors.  By having a mandatory minimum tax, corporations that normally would have invested in renewable projects would lose the incentive to offset their tax base, and renewable energy projects would lack a major source of the capital stack.   A late exception was added to this provision which allows tax credits for wind and solar developments to offset 80% of the BEAT levy.  We are still waiting to ascertain the impact of the BEAT provision on tax equity supply.

While there was more legislation that would have slowed instead of fostering the growth of renewable energy, the impact of the changes was not as drastic as expected.  Going into 2018, the industry can now focus on creating better technologies, growing the workforce, and retaining confidence in financing renewable energy projects.

For more information, please contact Nathan Howe at (978) 460-4244 or NHowe@ClocktowerTC.com.

The Federal Historic Rehabilitation Tax Credit (HRTC) was created in 1978 to tilt the preservation/demolition decision in favor of preservation and slow down “urban renewal” demolition, popular in the 1950’s and 60’s.  It recognized that restoration and rehabilitation of existing architectural details costs more per square foot than typical commercial construction.  Since that time, numerous states have piggy-backed on the Federal incentive with state subsidies, beginning with New Mexico in 1984.  Texas lagged greatly behind other Midwestern and Western states in the number of Federal Historic Rehabilitation projects per capita because it lacked a matching state credit.  From 2001 to 2012 Texas produced only 111 projects that earned HRTC’s.  Ohio, by contrast, with half the population but having a robust 25 percent State Historic Rehabilitation Tax Credit, saw 697 projects completed in the same period.  To create more historic rehabilitation projects and utilize more Federal HRTC dollars, Texas joined the thirty-three other states when it passed enabling legislation in 2013 for a state tax credit.  Combined with the 20% HRTC, Texas added a 25% credit so developers can recoup 45% of “qualified rehabilitation expenses”.  That’s a strong financial incentive to preserve existing architecture rather than tear down and replace a building. With modern technology in construction materials and building techniques, older properties are proving surprisingly adaptable to new uses.

Due to IRS passive income rules, most developers can’t effectively use the federal tax credits themselves. Therefore, a market has developed to bring in corporate investors to use the credits, effectively monetizing the awards and reducing the dollar amount of a developer’s own funds needed to complete a project.  To broaden the market for investors in its State Tax Credit, Texas recently added the Insurance Premium Tax to the Business Franchise Tax for those taxes which can be offset by the credit. This change is important because it greatly increases the size of the investor pool, and consequent demand, for Texas state credits.  Developers have noticed the increased demand for their credits, and have responded by aggressively pursuing older properties in established markets to use them.  The increased credit pricing and resulting profitability will likely bring more projects to cities like San Antonio with many historic properties but lower real estate values than Dallas and Houston.

While late to the party, Texas is off to a great start. Waco developer Jerry Dyer says, “Over the years I have had several interactions with the Texas Historical Commission (THC) ranging from multiple phone conversations…to a couple of on-site meetings to discuss the eligibility of a project.  Without exception, they have all bent over backwards to be accommodating to help get the project eligible and completed.  I can say the THC truly puts their money where their mouth is when it comes to getting historic tax credit projects funded in Texas.”

Clocktower Tax Credits is pleased to be connecting developers restoring Texas real estate with our deep pool of institutional tax credit investors. From the massive cleanup effort from Hurricane Harvey on the Gulf Coast, to the beautiful buildings all over the state in need of a freshening, many projects await.

For more information, please contact David Weinstein at (978) 793-9157 or DWeinstein@clocktowertc.com.

By Nathan Howe

The end of summer gives filmmakers the opportunity to reflect on recent legislative changes, market outlook, and where to plan on filming their next blockbuster. Over the years, many states have adopted an incentive program to keep media production in their home state. These incentive programs include, but are not limited to, tax credits, grants, and rebates. The summer of 2017 was a highly contentious season for the film industry in the United States as the legislation for film was threatened, changed, and expanded. It is important to take note of these occurrences in the major film market states:

Massachusetts: Massachusetts has been home to many popular films such as Black Mass, Jaws, Good Will Hunting, Ghostbusters and currently, X-Men, I Feel Pretty; and Castle Rock, the first television series produced in the state in almost thirty years. However, the future of the film industry was threatened this summer when the Senate proposed a significant scale back of the incentive program. The proposal would have increased the proportion of funds required to be spent in the state, limiting the tax credit eligibility for the film, and would have instituted a cap on certain qualified expenses. Fortunately, the proposal was defeated and the Massachusetts Film Tax Credit Program remains one of the strongest in the country.

Louisiana: When Canada began offering lucrative incentives for filmmakers, Louisiana was the first state to take the lead in bringing film production back to the United States. Over the years, Louisiana underwent changes to the incentive program but recently made major modifications to the program. Under the new law, an annual issuance cap was put in place, along with lower project caps for films and TV series, smaller incentives, and a lower threshold for qualified expenses. Most notably, the former tax credit is now being treated as a rebate, shaping the way films can monetize the inventive and raise funding for the film. The new changes have disrupted the way filmmakers finance films, and have left a degree of uncertainty in the marketplace. However, filmmakers, financiers, and the state are optimistic about the new program and the economic impact it will have on the state.

Florida: Florida used to have a robust film incentive but scaled it back in the recent years. However, Miami-Dade County wants the film program back, and created its own incentive program. The incentive is in the form of a rebate, and to qualify, a production would need to spend over $1 million in the county, employ at least 50 people, and spend the majority of principal photography in the county. The $100,000 rebate per film is just a fraction of the $300 million state incentive that expired but demonstrates the enthusiasm in Miami-Dade to keep film production in the county.

Economic Impact:

Georgia: The film industry generated $9.5 billion in economic activity in the state during fiscal year 2017.

New Mexico: The Governor recently announced that over half a billion dollars of economic activity was generated in 2016 from film production. That is up by more than $115 million from the previous record.

New York: In only the first quarter of 2017, the New York film industry hired over 45,000 workers and the state issued over $150 million in rebates.

As the Fall season approaches, and the film industry continues to generate content, filmmakers need to strategize on how to finance their next feature film. Clocktower Tax Credits stands ready to help filmmakers and producers to generate maximum incentives, and provide cash for such incentives. Our comprehensive brokerage service as well as our large lender network allow producers access to capital so that they can focus on their core competency, filmmaking.

For more information, please contact Nathan Howe at (978) 460-4244 or NHowe@clocktowertc.com.

Clocktower Tax Credits, LLC assisted the Brewster and Mary Hosmer Apartment rehabilitations in Freeport, Illinois.  The two buildings closed financing simultaneously at the end of 2016, and are scheduled to be re-opened to tenants after a 12-month construction period.  Once finished, the two buildings will combine to improve 167 units of affordable rental housing in northern Illinois.  The two towers were originally built in 1965 and 1971, respectively, and were in dire need of upgrades to the apartments and common area facilities for its low-income tenants.  The rehabilitations included kitchen layout reconfigurations, new cabinets, fixtures, flooring, tenant storage areas, fire code and disability compliance upgrades, and structural modernizations.

The project received numerous incentives from the Illinois Housing Development Authority, including Federal Low-Income Housing Tax Credits, Illinois Affordable Housing Tax Credits, Tax Exempt Bonds, and a Risk Share Loan, to incentivize private developers to conduct the rehabilitations.  Through our past experience in working with Brinshore Development, L.L.C., a real estate development firm working in the market-rate and affordable spheres in the Midwest, Clocktower helped the project by monetizing $3,600,000 in Illinois tax credits through a Fortune 500 company, providing millions of dollars of equity that ultimately bettered the Freeport community.

Clocktower has worked with over a dozen Affordable Housing developments over the past three years, and has brokered over fifty million dollars of both Federal and State Low-Income Tax Credits to low-income Housing projects nationwide in our firm’s history.  We understand the deadlines and program specifics of all State and Federal Low-Income Housing Tax Credit programs, and assist developments in their Tax Credit equity closing process.  Our expertise in sourcing either equity partners for non-transferrable Tax Credits or buyers for certificated transferrable Tax Credits has afforded us the opportunity to help community-oriented projects of all kinds.

The report can be viewed online at http://www.journalstandard.com/news/20170224/freeport-housing-authoritys-brewster-and-hosmer-20m-apartment-renovations-underway.  For more information, please contact David Curtis at (978) 440-0742 or DCurtis@clocktowertc.com.

Clocktower Tax Credits is proud to help finance projects that make a significant impact on a community.  One in particular is Howard House, a historic renovation and adaptive re-use of the former Howard Home located on the Brockton VA Medical Center in Brockton, MA.  Clocktower brokered the sale of $1,000,000 in Massachusetts Historic Rehabilitation tax credits, providing equity necessary to finance this important project.

The home was transformed into a permanent supportive housing community for formerly homeless Veterans.  The residence features fourteen, fully furnished efficiency apartments along with community space.  Supportive services will be available to residents to increase their economic self-sufficiency and well-being.  Veterans who want to stay at the Howard House sign a lease and pay 30% of their income for rent, receiving subsidies for the balance.  The residents are welcome to stay there as long as it’s beneficial to their well-being.

The project is one in a series of developments initiated by the US Veterans Administration to use the campus of VA Hospitals nationwide to provide housing at the same location where there is a Veterans healthcare facility.  The former Howard Home for the Aged provided a natural opportunity to convert this underutilized office facility into much needed housing, giving residents easy access to services and medical care.  The VA and its partners have made a major effort over the past five years to end homelessness for Veterans and as a result, they have reduced the number of homeless Veterans by half.

This project is the result of a successful public private partnership in Massachusetts to create affordable housing for Veterans.  Kudos to the developers who made this project happen: Affordable Housing and Services Collaborative, Inc., Peabody Properties, Inc. and Windover Construction, LLC.

For more information, please contact Sue Ellyn Idelson at (978) 793-9574 or Sidelson@clocktowertc.com.