Historic Rehabilitation Tax Credit Transactions After The Safe Harbor

Lenders, Developers and Borrowers were all frustrated by the chilling effect that revenue rulings and court cases had on Historic Rehabilitation loans in 2013, causing delays in closings and delays in admitting Federal tax credit investors as partners of the Borrower. After issuance of Revenue Procedure 2014-12, a Safe Harbor for Historic Tax Credit Transactions, a resurgence of Federal investor interest is now apparent; however, structuring loans for these transactions after the Revenue Procedure involves tackling new territory.

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The IRS Has Kicked Another Hornet's Nest

Before December 30, 2013, a real estate developer rehabilitating a historic building in Virginia could have raised about 40% of his rehabilitation costs from outside parties. He accomplished this feat using a carefully structured limited liability company. Unfortunately, the Fourth Circuit Court of Appeals did not condone such a business structure in a case decided in early 2011.

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