News, Analysis and Commentary On Affordable Housing, Community Development and Renewable Energy Tax Credits
August 2013, Volume IV, Issue VIII
Published by Novogradac & Company LLP
washington wire
How Will Tax Credits Fare with a Blank Slate?
By Michael J. Novogradac, CPA
T
he “blank-slate” approach
proposed by Senate Finance
Committee Chairman Max
Baucus, D-Mont., and Ranking
Member Orrin Hatch, R-Utah,
as a legislative starting point for
tax reform is a bold step in the
years-long effort to rewrite the
tax code. This proposal puts all
tax provisions on even footing,
at least in theory, as lawmakers
consider which tax expenditures
and other provisions should be added back to a reformed
tax code.
Fortunately
for
affordable
housing,
community
development, historic preservation and renewable energy
tax credit supporters, the low-income housing tax credit
(LIHTC), new markets tax credit (NMTC), historic tax credit
(HTC) and the investment tax credit (ITC) and production
tax credit (PTC) for renewable energy boast successful track
records, provide significant contributions to the economy
and support important policy objectives. However, in a
process of this magnitude, even those strengths are no
guarantee of the programs’ futures.
Starting from Scratch
In a “Dear Colleague” letter circulated on June 27, Sens.
Baucus and Hatch called on their Senate colleagues to
submit legislative language or detailed proposals by July
26 for which tax expenditures and other provisions should
be added back to a reformed tax code. In the letter, Sens.
Baucus and Hatch write that they “both believe that some
existing tax expenditures should be preserved in some
form” but that tax expenditures and other provisions should
be added back only if they help grow the economy, make
the tax code fairer, or effectively promote other important
policy objectives.
Under this framework, the Senate Finance Committee will
begin its deliberations with a tax code devoid of all tax
credits. Senators were given until July 26 to submit proposals
to be considered during the crafting of the committee’s bill.
Legislators were asked to provide detailed specifications
on what they want to retain as well as legislative language
if possible. Each tax credit will only be added back to the
tax code if enough senators make a compelling case for it
and Sens. Baucus and Hatch indicated they will give special
attention to proposals that are bipartisan. Accordingly,
supporters of various tax expenditures – including the
LIHTC, NMTC, HTC, energy tax credits, and tax-exemption
for bonds – spent much of last month reaching out to
Senators to make a case for retaining those provisions
during tax reform.
On July 8, House Ways and Means Committee Chairman
Dave Camp and Sen. Baucus kicked off a tour designed to
gather public input on priorities for tax reform with visits to
continued on page 2
novogradac journal of tax credits
www.novoco.com 
August 2013
2
continued from page 1
two businesses in the Minneapolis-St. Paul, Minn. area. One of
those visits was to Baldinger Bakery, a fourth generation, familyrun businesses in St. Paul. The bakery was founded in 1888 and
has grown into a commercial bakery. The bakery also used a $19
million loan using the NMTC to construct a new 144,854-squarefoot state-of-the-art facility. Supporters of the NMTC were
heartened by the opportunity to showcase how the NMTC is
supporting economic growth and job creation.
Mixed Reactions
Many reactions were supportive of the comprehensive, cleanslate approach. For example, Ways and Means Chairman Dave
Camp issued a statement after the announcement saying of the
plan, “This significant step forward underscores that the Senate
and House are on the same page as they work in a bicameral,
bipartisan manner to fix our broken tax code.”
Novogradac Journal of Tax Credits
Editorial Board
Publisher
Michael J. Novogradac, CPA
EditorIAL DIRECTOR
Alex Ruiz
Technical Editors
Robert S. Thesman, CPA
James R. Kroger, CPA
Owen P. Gray, CPA
Thomas Boccia, CPA
Daniel J. Smith, CPA
ASSOCIATE EDITOR
Jennifer Dockery
Staff Writers
Teresa Garcia
Mark O’Meara
Editorial Assistant
RATE Coalition Co-Chairs Elaine Kamarck, former White House
adviser to President Bill Clinton and Vice President Al Gore,
and James P. Pinkerton, former White House domestic policy
adviser to Presidents Ronald Reagan and George H.W. Bush,
sent a letter to the Senate Finance Committee applauding them
for their approach to tax reform and their letter to colleagues.
RATE is a coalition of businesses, associations and other likeminded groups that joined together to advocate for tax reform.
The RATE letter says, “By asking their colleagues to make a case
for specific tax exemptions and provisions, Chairman Baucus and
Ranking Member Hatch have again shown their determination
“to complete tax reform this Congress.’”
However, some were skeptical of the ambitious goal of completing
tax reform during the 113th session of Congress, in light of the
political realities of the congressional calendar. For example, even
if the House Ways and Means Committee members and Senate
Finance Committee members each pass their own versions of
tax reform legislation this year, some questions have been raised
about whether the full House and Senate would be able to vote
on either bill before 2014. And because 2014 is an election year,
the path toward passage for such large-scale legislation would be
that much steeper.
Elizabeth Orfin
Contributing Writers
Peter Lawrence
Brandi Day
Sun-Ae Woo
Jim Kroger
Flynann Janisse
Justin Walker
Michael Kotin
Annette Stevenson
Rebecca Darling
Jason Korb
John M. Tess
Tony Grappone
Forrest David Milder
CARTOGRAPHER
David R. Grubman
Production
Alexandra Louie
Jesse Barredo
James Matuszak
Novogradac Journal of Tax Credits
Information
Correspondence and editorial submissions:
Alex Ruiz / 415.356.8088
Inquiries regarding advertising opportunities:
Emil Bagalso / 415.356.8037
Editorial material in this publication is for informational
purposes only and should not be construed otherwise.
Advice and interpretation regarding the low-income
housing tax credit or any other material covered in this
publication can only be obtained from your tax advisor.
What’s Next
At the time of this writing, the initial deadline for Senators to
submit proposals had passed but no information has been made
public about what those proposals included. Initial reports
suggest that draft legislation could be released as early as this
month. But it’s also possible that Senate Finance Committee staff
will continue working throughout the month, while Congress is
away for its August state and district work period. When Congress
reconvenes in September, the Senate Finance Committee is
continued on page 3
© Novogradac & Company LLP
2013 All rights reserved.
ISSN 2152-646X
Reproduction of this publication in whole or in part in any
form without written permission from the publisher is
prohibited by law.
continued from page 2
expected to hold a series of hearings and a mark-up of the draft
language that is being developed now.
Low-Income Housing Tax Credits
As such, August will remain a pivotal time for the crafting of the
Senate Finance Committee’s draft legislation.
Bud Clarke
Boston Financial Investment Management
Jana Cohen Barbe
SNR Denton
Tom Dixon
Boston Capital
Rick Edson
Housing Capital Advisors Inc.
Richard Gerwitz
Citi Community Capital
Rochelle Lento
Dykema Gossett PLLC
John LisellaU.S. Bancorp Community Dev. Corp.
Phillip Melton
Centerline Capital Group
Thomas Morton
Pillsbury Winthrop Shaw Pittman LLP
Mary Tingerthal
Minnesota Housing Finance Agency
Rob WassermanU.S. Bancorp Community Dev. Corp.
Property Compliance
Michael KotinKay Kay Realty
Michael Snowdon
MCA Housing Partners\
Kimberly Taylor
Housing Development Center
Housing and Urban Development
Flynann Janice
Rainbow Housing
Ray Landry
Davis-Penn Mortgage Co.
Denise Muha National Leased Housing Association
Monica Sussman
Nixon Peabody LLP
New Markets Tax Credits
Frank Altman
Community Reinvestment Fund
Merrill Hoopengardner
Advantage Capital
Scott Lindquist
SNR Denton
The most accessible option for reaching out to your senators
and representatives may be to write a letter. Groups such as
the ACTION campaign, the Housing Advisory Group, the New
Markets Tax Credit Coalition and others have drafted template
letters that can be used as a starting point.
In addition, by meeting with lawmakers in person in their district
offices or in Washington, D.C., tax credit supporters can share
vital information about these important programs. For example,
the Novogradac LIHTC Mapping Tool and Novogradac NMTC
Mapping Tool can help document the tangible, beneficial results
of these programs in urban and rural areas by showing exactly
where investments are being made.
novogradac journal of tax credits
Novogradac Journal of Tax Credits
Advisory Board
To convey the big-picture effects of these programs, a wealth of
research is available that chronicles their successful track records.
For instance, the report “Affordable Rental Housing After Tax
Reform: Calculating Corporate Tax Reform’s Possible Effects on
Equity Raised from Low-Income Housing Tax Credits,” describes
the projected impact of tax reform on the LIHTC. In addition,
“Low Income Housing Tax Credit: Assessment of Program
Performance & Comparison to Other Federal Affordable Rental
Housing Subsidies,” highlights the remarkable track record
of LIHTC-financed properties and the efficiency of the LIHTC
program as a whole.
Matthew PhilpottU.S. Bancorp Community Dev. Corp.
Matthew Reilein JPMorgan Chase Bank NA
Ruth Sparrow Futures Unlimited Law PC
Elaine DiPietro
Enterprise Community Investment Inc.
John Leith-Tetrault
Bill MacRostie
John Tess Capstone Communities
National Trust Comm. Investment Corp.
MacRostie Historic Advisors LLC
Heritage Consulting Group
Renewable Energy Tax Credits
Bill Bush Borrego Solar
Ben Cook
SolarCity Corporation
Forrest Milder
John Pimentel Dudley Ventures
Nixon Peabody LLP
Foundation Windpower
August 2013
Jim Howard
Perhaps the most effective way to demonstrate the important
results of the LIHTC, NMTC, HTC and energy tax credits is to
invite lawmakers to tour a tax credit property in their district.
We know from experience that members of Congress who have
visited tax credit properties in person are the strongest supporters
of the programs. The August state and district work period spans
almost the entire month; lawmakers aren’t scheduled to reconvene
www.novoco.com 
Historic Tax Credits
Jason Korb Similarly, the “Historic Rehabilitation Tax Credit Recapture
Survey” describes how, because of key characteristics of the
historic tax credit such as third-party investors, careful screening
of properties, economies of scale and uniform practices, and IRS
guidance and enforcement, HTC transactions have experienced
very low recapture rates. Likewise, “NMTC Program Outperforms
Comparable Cash Grant Program,” a report by the New Markets
Tax Credit Working Group, reveals that the NMTC is more
efficient than a comparable cash grant program and as the price
paid per credit rises so does the efficiency of the NMTC.
continued on page 4
3
novogradac journal of tax credits
continued from page 3
in Washington, D.C. until September 9. This is an ideal
time for in-person meetings and property tours while
legislators are in their home states and districts.
There’s Still Time to Speak Up
Even after a draft bill has been released by either the
Senate Finance Committee or House Ways and Means
Committee, the road to passage will be long. And each
step in the process can represent an opportunity to
support the LIHTC, NMTC, HTC and energy tax credits
and tax-exemption for bonds. In the immediate term, the
affordable housing, community development, historic
preservation and renewable energy communities should
continue actively reaching out to lawmakers.
When congressional hearings begin, there may be
additional opportunities to submit comments or written
testimony. And following hearings, it will also be
important for tax credit experts to refute and rebut any
inaccurate or misleading characterizations of beneficial
tax credits, such as those made about the LIHTC during
the April 25 Ways and Means Committee hearing on tax
reform and residential real estate. (For more information,
see “Setting Straight the LIHTC’s Stellar Record,” in the
June 2013 Novogradac Journal of Tax Credits.)
Tax reform is going to be an ongoing process, and
successfully protecting the LIHTC, NMTC, HTC, and
energy tax credits will require diligence and dedication.
This article first appeared in the august2013 issue of the Novogradac Journal of Tax Credits.
© Novogradac & Company LLP 2013 - All Rights Reserved
Notice pursuant to IRS regulations: Any U.S. federal tax advice contained in this article is not intended to be used, and cannot
be used, by any taxpayer for the purpose of avoiding penalties under the Internal Revenue Code; nor is any such advice intended
to be used to support the promotion or marketing of a transaction. Any advice expressed in this article is limited to the federal
tax issues addressed in it. Additional issues may exist outside the limited scope of any advice provided – any such advice does
not consider or provide a conclusion with respect to any additional issues. Taxpayers contemplating undertaking a transaction
should seek advice based on their particular circumstances.
This editorial material is for informational purposes only and should not be construed otherwise. Advice and interpretation regarding
property compliance or any other material covered in this article can only be obtained from your tax advisor. For further information
visit www.novoco.com.
www.novoco.com 
August 2013
4