Ohio Board of Tax Appeals May Accept Property Valuations Not Previously Presented to the Tax Commissioner

Posted by David Lindner on August 25, 2011

In WCI Steel, Inc. v. Testa, the Ohio Supreme Court recently held that a taxpayer is allowed to introduce a new property valuation or appraisal at the Board of Tax Appeals (BTA) not previously presented to the Ohio Tax Commissioner. Although this case involved Ohio personal property tax, the ruling also applies to real property valuation disputes, as explained by Attorney Steven A. Dimengo in an interview with WKSU. To properly preserve one’s right to dispute the Tax Commissioner’s determination of property value, and therefore present a valuation or appraisal not previously presented to the Tax Commissioner, the taxpayer’s Notice of Appeal to the BTA must: (1) state the objection to the Tax Commissioner’s actions in valuing the property; and (2) identify the treatment the Tax Commissioner should have applied.

In this case, the Supreme Court remanded the case to the BTA to determine the value of the taxpayer’s property, taking into consideration the newly presented appraisal.

 

New Market Tax Credits, Part II

Posted by David Lindner on May 12, 2011


 

Attorney Neil Bhagat presents a follow-up to his Introduction to New Market Tax Credits: 

            Recently, Bloomberg Markets Magazine published an article criticizing the use of New Market Tax Credits (NMTCs) to finance commercial real estate developments.  In particular, the article focused on the renovation of the Blackstone Hotel in downtown Chicago, which used $15.6 million in NMTCs.  While the article largely questions specific NMTC appropriations, it also raises the issue of whether more oversight is needed to ensure the program accomplishes its purpose.

            Many of the criticisms of the NMTC program focus on the “census tracts” that determine where such credits can be utilized.  The census tracts combine various data that measure facts such as low median family income, unemployment rates, and family poverty rates in order to establish those locations in which NMTCs are available.  Critics of NMTCs assert that this methodology is not exact and that census data from ten years ago is not current enough to reflect gentrifying areas.  While there is certainly an argument that any type of development is critical to spurring the growth of an impoverished area, it is uncertain at this juncture when and if changes will happen in determining eligibility criteria for NMTCs.  

            Despite the potential need for changes with the criteria determining what areas should be eligible for NMTCs, it is clear that there is opportunity for a wide variety of projects.  While one might not think a luxury hotel qualifies for NMTCs, the fact that it is located in an area meeting the U.S. Department of Treasury’s guidelines is critical.  This should encourage developers to examine whether a location in which they are considering development might qualify for NMTCs.  Throughout Ohio, there are numerous census tracts that qualify for NMTCs, not only in Cleveland, Akron, Canton, and the larger cities, but in rural counties as well.  NMTCs were originally created to spur development in underdeveloped and underutilized areas, not only metropolitan cities.  As a result, it may be wise for a developer to conduct some research or contact an advisor in order to determine if any projects in the pipeline might qualify for NMTCs.

            While conscientious of the negative publicity a luxury hotel might get for receiving tax credits, a developer, especially one in a smaller city or rural area, might consider this an opportunity.  Should the backlash against tax credits going to large developers increase, the opportunity for smaller developers who have complied with the application process may increase as well.

            In Ohio, besides the NMTC program, there are a wide range of incentives available to businesses.  Some of these include the Enterprise Zone Program and Community Reinvestment Areas.  You might be surprised to learn what options are available.  For a more in-depth discussion of what areas might qualify for NMTCs and other related incentives and credits, contact attorney Neil Bhagat at nbhagat@bdblaw.com or 888.811.2825. 

            Check back next month for a further discussion regarding some of these possibilities and how they can save money for developers or your business.

An Introduction to New Market Tax Credits

Posted by David Lindner on January 20, 2011

Buckingham attorney Neil Bhagat provides the following introduction to New Market Tax Credits:

            New Market Tax Credits (NMTCs) are an increasingly utilized strategy for encouraging economic development in struggling areas.  At its core, the program allows investors to receive a tax credit in return for making qualified equity investments in groups designated as Community Development Entities (CDEs).  The CDEs must then use these investments in low-income communities that are located throughout the United States.  For organizations that need access to capital, NMTCs are a valuable tool for getting a commercial project from the planning stages to the building stage.  While not meant to be a lead source of financing, NMTCs can provide the edge in making a project market worthy.

            NMTC investments are used to finance a variety of activities, including: loans or equity investments in businesses, loans or equity investments in real estate projects, and capitalization of other CDEs.  NMTCs have been utilized to create community health care centers, charter schools, community facilities, public markets, factories, commercial developments, and more throughout the United States.  Among the thousands of projects successfully financed with NMTCs, some specific examples include a grocery-anchored shopping center in San Diego, a charter school in Newark, the development of a high-tech business incubator in Detroit, and a manufacturing facility in rural Iowa.  The possibilities for developers are limitless, provided the development will occur in what qualifies as a low-income community.

            In December of 2010, Congress extended the NMTC program for two years, making $3.5 billion available in tax credits each year.  Ohio has a smaller NMTC program making $10 million available in tax credits to those who have already been allocated federal NMTCs.  Despite the success of NMTCs, with the political uncertainty surrounding 2012, now is the time to investigate and examine whether utilizing NMTCs is right for your organization.

            It is important to remember that the NMTC process can be both lengthy and competitive.  It is estimated that the dollar amount of credits requested is 12 times greater then the number of credits awarded.  As a result, you will need to ensure compliance with the many regulations surrounding NMTCs.  With appropriate guidance, your NMTC application can be targeted to increase your chances of successfully receiving credits.

            The application process for New Market Tax Credits can be complicated, so please consider the following a general introduction.  A developer must first create a CDE, certified by the Community Development Financial Institutions Fund at the United States Department of Treasury.    Provided the CDE is certified, the CDE can then apply for the right to receive tax credits, which in turn are sold to investors.  This provides equity to the CDE to place in community development projects while the investor receives a tax write-off.  CDEs are evaluated on the following criteria: business strategy, community impact, management capacity, and capitalization strategy.  The investor receives a credit totaling 39 percent of the cost of the investment which is then claimed over a seven-year period.  As you can see, there are a variety of areas in which one can get involved with NMTCs.  Loans for development and reducing tax liability jump to the top of the list.  Should you choose to utilize NMTCs, know that beyond acquiring extra capital for your project, you are helping to create infrastructure and jobs in areas that need them.

Helpful Resources

The following are some resources to learn more about the New Market Tax Credit program.  Remember that consulting with an advisor or attorney specializing in New Market Tax Credits will help to ensure you are getting advice that is relevant to your situation.

The Community Development Financial Institutions Fund is a part of the Department of Treasury and provides a wealth of information regarding frequently asked questions and the application process. 

Ohio also has a New Markets Tax Credit Program designed to help leverage the federal version of the NMTC program.

The New Markets Tax Credit Coalition provides helpful information and highlights some success stories of the program.

If your project needs that final boost of financing to ensure its viability, New Market Tax Credits may be the answer.