The Download: Cash for credits
Friday, February 4, 2011
The US Tax Court is making it easier to turn tax credits into cash.
Travis Blais, a Mintz Levin tax attorney, issued an alert about a recent decision that he says gives tax credit investors a big boost. The case revolved around a $100 million renovation of Boardwalk Hall in Atlantic City, a certified historic structure that over the years hosted the Beatles, the 1964 Democratic National Convention, and the Miss America Pageant.
The renovation qualified for a 20 percent federal historic rehabilitation tax credit, but the renovator, the tax-exempt New Jersey Sports and Exposition Authority, had no use for tax credits. So the authority structured a complicated deal to turn the tax credits into cash by having Pitney Bowes acquire $20 million of tax credits by investing a little over $18 million in the project. The deal largely insulated Pitney Bowes from any losses associated with running Boardwalk Hall, an arrangement rejected by the Internal Revenue Service.
The IRS held that a company seeking to take advantage of tax credits had to have a legitimate economic stake – such as the prospect of profits and losses -- in the project generating the credits. But the Tax Court, in its ruling, set the bar lower. It held that Pitney Bowes did have an economic stake in the New Jersey project. It also ruled that rejecting the deal with Pitney Bowes would undermine the intent of Congress.
“The court found that Congress enacted the rehabilitation tax credit to spur private investment in what would otherwise be an unprofitable activity,” Blais wrote in his alert “If the government attacks investors who respond to that incentive, ‘it takes away with the executive hand what it gives with the legislative.’”
Blais, in an interview, said the decision opens the door to much broader use of tax credits to help finance all sorts of projects. He noted the decision dealt with federal historic rehabilitation tax credits but could just as easily apply to a host of federal energy tax breaks. He said the court’s reasoning could also influence how Massachusetts tax officials would view similar use of state historic rehabilitation and energy tax credits. Under certain circumstances, he said, the ruling could be helpful to Cape Wind in financing its offshore wind farm.
“This should give parties greater flexibility in negotiating deals that give each side what they really want without fear of an ‘economic substance’ attack from the IRS,” Blais wrote. “Tax credit investors should now hold their heads high knowing they are doing the work of angels…or at least Congress.”
-- BRUCE MOHLSNOWMAGEDDON
is closing its schools today so workers can remove snow from the roofs of several buildings. A section of the roof at the elementary school collapsed yesterday, the Eagle-Tribune reports
is doing the same, the Lynn Item reports
. Roof worries closed
two elementary schools in Norfolk
The exasperated Boston mayor reached out to MIT to help melt the piles of snow that were accumulating with no place to put them. No, not Mayor Thomas Menino but James Michael Curley in 1948, suggesting MIT engineers use their brains to find a solution by “the use of flame throwers or chemicals or otherwise.” Via Not Running a Hospital.BEACON HILL
The Globe editorial page says enough with the antics of the antiquated Governor's Council, and calls for the Legislature to begin the process of getting rid of this vestige of colonial-era government. The paper calls for passage of a bill sponsored by state Sen. Brian Joyce to do this. Joyce has been pushing the bill for years, and penned this piece for CommonWealth in 2003 making the case. Governor's Councilor Christopher Iannella authored this reply in defense of the eight-member council.
Sen. Stanley Rosenberg, the Amherst Democrat, and Rep. Michael Moran, the Brighton Democrat, begin meetings with members of the Massachusetts congressional delegation to discuss how their districts should fare under redistricting. The State House News Service via The Arlington Advocate.
House Speaker Robert DeLeo says he opposes the tax and fee proposals in Gov. Deval Patrick's budget plan. Sen. Stephen Brewer, of Barre and Senate chairman of the Ways and Means Committee, decides to stay neutral on the issue for now, according to a Springfield Republican report.
Western Massachusetts officials weigh in on Patrick's call for communities to join the Group Insurance Commission.
Turnpike toll takers once again land on the list of the state's top earners.
Karyn Polito resuscitates several campaign talking points, including the need for a 401(k)-style system for public retirees, in a Herald op-ed column. The former state rep lost a race for treasurer in November.
Legislators ask: Retailers get a tax-free weekend, so why not restaurants?TRANSPORTATION
CommonWealth's Jack Sullivan reports that the MBTA's lawsuit to recover millions of dollars in damages from the manufacturer defective railroad ties on its commuter rail lines could be imperiled by a warranty change the T agreed to.
The Eagle-Tribune, in an editorial, says T service has been abysmal lately when it’s been needed the most. EDUCATION
The principal of Goddard School of Science and Technology in Worcester is reprimanded after the school’s 2010 MCAS scores were invalidated because of testing violations, the Telegram & Gazette reports.
CommonWealth's Michael Jonas takes a look at the controversy stirred up by Yale Law School professor Amy Chua's parenting memoir, and says the “tiger mother” is more right than wrong. MUNICIPAL AFFAIRS
Williamstown plans to step up its enforcement of a town bylaw prohibiting private contractors from dumping snow on public streets.
A North Adams Transcript editorial throws cold water on a decision to open up the city's planning process to residents (only a few will show up, the paper says) and argues that officials need to concentrate on implementing existing ideas.
Gorton’s of Gloucester is urging people to eat more fish, but none that are landed in Gloucester itself, the Gloucester Times reports.
Vertex Pharmaceuticals' move to South Boston is no sure thing, the Boston Business Journal reports.
JP Morgan Chase allegedly earned hundreds of millions of dollars in fees by ignoring Bernie Madoff's Ponzi scheme.
WBUR’s CommonHealth blog says Massachusetts spend $68 billion last year on health care.
Federal officials are outlining ways for cash-strapped states to strategically reduce their Medicare burdens, but won't say whether they'll allow governors to toss the poor off public health insurance. ENERGY AND THE ENVIRONMENT
Charles River Watershed Association Executive Director Robert Zimmerman tells the MetroWest Daily News that despite the snowy winter there is still the possibility for municipal water bans come summer.
An organization formed by two former Marines
and backed by the Patrick administration
to build a memorial to veterans
killed since 9/11 has shut down amid questions
over how it raised and spent its funds.
Joan Vennochi thinks John Kerry, who has been decisive in calling for Hosni Mubarak to step down, is auditioning for the job of secretary of state.
House Republicans want to cut funding for everything, now, except for defense accounts. They're also hoping to drive popularity by not doing much at all, Slate's David Weigel argues.
Federal Reserve Chairman Ben Bernanke has no patience for GOP brinkmanship, even before it begins.
WBUR reports that US Rep. Barney Frank will run for a 17th term in 2012 because issues he is pursuing require a time commitment longer than two years. His former Republican opponent, Sean Bielat, says it’s unclear to him why the previous 32 years haven’t been sufficient to achieve Frank’s goals. Meanwhile, the Outraged Liberal is stunned that the Boston Herald reports Republicans are stunned about Frank’s non-stunning decision to seek reelection. The Boston Globe reports that Frank’s decision increases the possibility that two incumbents could end up running against each other. MEDIA
Dan Kennedy says Rupert Murdoch’s new made-for-iPad “newspaper” The Daily looks remarkably similar to a 1994 Knight Ridder concept for the digital paper of the future.