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Real Estate E-News February 2013

This newsletter is published by RubinBrown’s Real Estate Services Group to inform our clients and contacts about relevant industry updates, legislation and accounting information.

Accounting Change to Benefit LIHTC

The housing industry is fully engaged and supporting a white paper which was commissioned by a 20-member task force, led by Raymond James Tax Credit Funds, Inc.

The white paper proposal encouraged the Financial Accounting Standards Board to change the accounting treatment of LIHTC investments and outlines the reasons why public companies investing in LIHTC properties should be able to change the way they report these investments on their financial statements.

The paper was recently presented to the FASB’s Emerging Industry Task force (EITF), which, fortunately, has the proposal on their March 14 meeting.

RubinBrown is hopeful that the accounting rules surrounding LIHTC investments change. Currently, companies must report the investment (cost) of housing credit investments pre-tax while the benefits are reported below the line, in the tax section of the financial statements. Simply put, it’s bad financial statement geography because it reduces a company’s pre-tax earnings while the benefits from the investment are reported after tax.

On a net basis, there is no difference; however the current accounting treatment misreports the investment cost from the benefits of investing in housing credits. The result of current accounting rules makes it more difficult to attract investors as public companies and their investors are focused on pre-tax earnings.

The industry is hoping for a change that would allow companies to report in their financial statements both the cost and benefits either above the pre-tax line or both below in the tax section. There is no question in the LIHTC industry that an accounting change would attract more capital for investment in affordable housing.

Tax Reform’s Unintended Impact on Affordable Housing Development

With pending tax reform on the horizon and the fact that all tax expenditures will likely be called into question could one of the most successful financing tools ever created to provide affordable housing and community development be in trouble?

RubinBrown's Real Estate Services Partner-In-Charge was the featured guest blogger on The Affordable Housing Tax Credit Coalition's website. Keller discusses the future of the LIHTC as well as the affect it has had on many communities.

Click here to view the blog posting.

Internal Review Ordered to Improve Federal Historic Tax Credit

Last January in Detroit, Michigan, Secretary of the Interior Ken Salazar asked the National Park Service (NPS) to conduct an internal review of the Federal Historic Preservation Tax Incentives Program to ensure that the program is achieving its intended goals.

Salazar ordered a review of the rules governing the use of historic preservation tax credits in order to make the credits easier to use in urban communities and to strengthen partnerships with local communities and State Historic Preservation Offices.

Click here to view the Department of Interior's press release on this topic.

LIHTC Survey Results

In January, the RubinBrown Real Estate Services Group surveyed our clients, colleagues and friends to learn what they thought on these five questions related to the 2013 LIHTC:

  1. Do you believe that LIHTC equity will be more or less available in 2013?
  2. Do you expect LIHTC equity pricing to increase, fall or remain flat?
  3. What are you considering the most for your business growth in 2013?
  4. How concerned are you about pending tax reform and what that may or may not do to LIHTC?
  5. What debt sources do you plan to utilize in 2013?
The results of the survey have summarized. You may click here to view the results.

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