Posted by Arthur J. Momjian
@ January 19, 2013 12:38 PM EST
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19 Jan · Sat 2013
Appeal of Historic Boardwalk Hall Case made to the U. S. Supreme Court
On Thursday, January 17, 2013 Counsel for Historic Boardwalk Hall and the New Jersey Sports and Exposition Authority filed a Petition for a Writ of Certiorari in the United States Supreme Court seeking reversal of the Third Circuit Opinion in the Historic Boardwalk Hall Case. The Third Circuit in the Historic Boardwalk Hall case had reversed the Tax Court decision and ruled that the Pitney Bowes affiliate was not a true partner in Historic Boardwalk Hall, LLC. As a result, the Third Circuit affirmed the IRS Administrative Adjustment to reallocate all of the Historic Rehabilitation Tax Credits from Pitney Bowes to the tax-exempt New Jersey Sports and Exposition Authority, a political subdivision of the State of New Jersey. The taxpayer in the petition argues that “…this is the first litigated case in the country in which the IRS has made a sweeping challenge to the allocation of federal HRTCs from a partnership to a partner in the very type of rehabilitation project that formed the basis for Congressional enactment of the HRTC statute. In a true sense, this case represents a dramatic legal clash between the Legislative Branch’s clearly stated intent in enacting the HRTC statute to encourage private investment in the restoration of historic properties…”. [Read More]
23 Oct · Tue 2012
Third Circuit Denies Historic Boardwalk Petition for Rehearing
The petition for rehearing filed by taxpayer in the Historic Boardwalk case was reviewed the Third Circuit Court of Appeals judges who participated in the Historic Boardwalk case and the other available circuit judges of the Third Circuit Court of Appeals. The Third Circuit Court of Appeals noting that no judge who concurred in the Historic Boardwalk decision asked for a rehearing, and a majority of the circuit judges of the circuit in regular service did not vote for rehearing, denied the petition for rehearing by the panel and the Third Circuit Court of Appeals en banc. The only appeal left to the taxpayer in the Historic Boardwalk case is to the United States Supreme Court.
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Posted by Arthur J. Momjian
@ October 23, 2012 03:47 PM EDT
22 Oct · Mon 2012
Petition Filed for Rehearing of Historic Boardwalk Case
Following the reversal by the Third Circuit Court of Appeals of the Tax Court’s decision in the Historic Boardwalk case, the taxpayer has filed a petition for a rehearing or rehearing en banc of the Historic Boardwalk Hall case. The taxpayer’s brief in support of the petition asserts that the Third Circuit Court of Appeals misapplied the reasoning of the U. S Supreme Court case of Commissionerv. Culbertson. Under Culbertson, a partnership exists if, based on the totality of the facts and circumstances, it is determined that "the parties in good faith and acting with a business purpose intended to join together in the present conduct of the enterprise." The brief also contends that the Court of Appeals made a fundamental error in treating the historic tax credits as a return of capital. [Read More]
Posted by Arthur J. Momjian
@ October 22, 2012 03:06 PM EDT
17 Sep · Mon 2012
After Historic Boardwalk - A New Look at the Wind "Safe Harbor"
In the aftermath of the Historic Boardwalk case, the Historic tax credit investment community is struggling with a partnership investment structure which will not be challenged by the Service. Conceptually one may only need to look to Rev. Proc. 2007-65 in which the Service set forth a safe harbor for investors in partnerships owning qualified energy facilities. The positions advanced by the Service in its appeal of the Tax Court decision in the Historic Boardwalk case mirrored many of the safe harbor requirements of the Rev. Proc. 2007-65. As a result, to follow the safe harbor of Rev. Proc. 2007-65 one would conclude at a minimum future historic tax credit partnership agreements should: (1) provide both cash flow and tax credits to the investor; (2) no longer be structured as “pay as you go” transactions; (3) no longer have tax credit indemnities in favor of the investor; and (4) no longer have an investor “put” to the developer for nominal consideration.
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Posted by Arthur J. Momjian
@ September 17, 2012 12:06 PM EDT
08 Sep · Sat 2012
Life After the Historic Boardwalk Case
In the aftermath of the Third Circuit Court of Appeal’s decision in the Historic Boardwalk Case, investors, accountants, attorneys, and developers have been analyzing and discussing the ramifications of this case for the Historic Tax Credit industry. Several historic tax credit investors have indicated that they are holding for future historic tax credit investments and many tax counsels to historic tax credit investors have indicated challenges to their ability to issue tax benefit legal opinions to their clients. Some of the preliminary pronouncements from the Historic Tax Credit industry are that future deals will need to generate real cash flow which will not be paid for by investors, non-profit deals will be challenging because of the real lack of upside potential, and for tax opinions to be issued deals may need to be structured to follow the safe harbor provided by the Internal Revenue Service in Revenue Procedure 2007-65 which addressed the partnership flip with the wind production tax credit.[Read More]
Posted by Arthur J. Momjian
@ September 08, 2012 01:48 PM EDT
28 Aug · Tue 2012
Court of Appeals Reverses Tax Court Decision in the Historic Boardwalk Case
Dealing a blow to the Historic Tax Credit syndication industry, the Third Circuit Court of Appeals on August 27th reversed the Tax Court decision in the Historic Boardwalk Case. In siding with the Internal Revenue Service, the Court of Appeals examined a partnership structure commonly used in the syndication of federal Historic Tax Credits and ruled that the tax credit investor was not partner in the entity generating the Historic Tax Credits. The Court of Appeals concluded that the tax credit investor “did not have any meaningful downside risk or any meaning upside potential in HBH [the entity generating the historic tax credits]”. Citing a tax credit recapture guaranty in favor of the tax credit investor to protect its capital contributions and a guaranteed investment contract in favor of the tax credit investor to guaranty its 3% preferred return, the Court of Appeals determined there was no downside risk to the tax credit investor. In a similar vein, the Court of Appeals concluded that the consideration contained in the put and call agreements for the sale of the tax credit investor’s partnership interest had no bearing to the economic reality of the transaction. While the Internal Revenue Service appealed the Tax Court decision on several grounds, the Court of Appeals assumed for purposes of its opinion that the transaction had economic substance and based its decision on one issue – whether the tax credit investor was a partner. [Read More]
Posted by Arthur J. Momjian
@ August 28, 2012 08:21 AM EDT
26 Jun · Tue 2012
Third Circuit Hears Oral Argument in the Historic Boardwalk Case
On June 25th in Philadelphia Pennsylvania a three judge panel of the Third Circuit Court of Appeals heard oral argument on the appeal by the Internal Revenue Service of the Tax Court decision in the Historic Boardwalk case. The Tax Court had upheld the allocation of a Federal Historic tax credit to the tax credit investor member. One of the primary issues on appeal is whether the tax credit investor member had risk in the transaction. The Service argued that the tax credit investor was not at risk in the transaction and consequently was not a “partner” in the Historic Boardwalk investment entity and entitled to the allocation of the Federal historic tax credit. While it is clearly the intent of Congress that the Federal historic tax credit serve as an incentive for the rehabilitation of historic buildings, there is very little guidance on how the tax credit can be syndicated to investors.[Read More]
Posted by Arthur J. Momjian
@ June 26, 2012 11:19 AM EDT
03 May · Thu 2012
Historic Boardwalk Case
The Internal Revenue Service has appealed the decision of the Tax Court in the Historic Boardwalk Case to the Third Circuit Court of Appeals. The Tax Court decision upheld the allocation of 99.99% of the rehabilitation tax credits to a corporate investor, which contributed capital of over $18 million to the historic rehabilitation project in consideration for 99.99% of the tax credits, profits and losses including any residual. The basic structure of the Historic Boardwalk Case is typical of many historic rehabilitation transactions. [Read More]
Posted by Arthur J. Momjian
@ May 03, 2012 05:48 PM EDT
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