Hoosier Banker 27 the future tax credits and tax losses exceed the investment balance (per your financial statements). If utilizing the proportional amortization method, a one-time adjustment may be necessary to adjust the investment balance at the end of 2017. Essentially, impairment will be recorded as a component of the investor’s operating income, more commonly referred to as “above the line,” whereas the adjustment to the amortization of the investment would be reflected as “below the line.” What are some of the other substantial changes in the tax law affecting affordable housing? The change in the tax rate impacts the total benefit from losses to be received by the investor and may result in lower yields than previously seen on prior LIHTC investments. However, there are other provisions of this new tax law that may have a positive impact on the overall yield for new investments, such as 100 percent bonus depreciation. The impact of bonus depreciation on the overall yield of an existing investment is likely nominal; however, it will provide a more significant boost to yields on properties first placed in service after Sept. 27, 2017. Another provision is the new rule that limits the business interest deduction to 30 percent of taxable income. Most likely, affordable housing developments will make an election to opt out of this limitation, in exchange for depreciating the real property using the “alternative depreciation system” (ADS). Additionally, under the new law, the ADS recovery period for residential real property has changed from 40 years to 30 years. According to industry experts, there likely will be technical corrections to the new law that will affect both new and existing investments. Cinnaire is here for you. Feel free to reach out to us directly to discuss your existing investment, or reach out to one of our partners, who can provide you with more technical detail and answer specific questions you may have. HB Providing Creative Financing Solutions to Support Community Development Since 1993 We have an unwavering belief that all people deserve the opportunities provided by living in healthy communities. Ψ Ϊ 4 in Community Impact Ψ Ϊ Ͷ 4 in Total Investments Ψ Jobs Created Ψ Homes Created for Families in Need By working closely with investors, developers and local stakeholders, we bring the expertise, capital and resources to markets in need and improve lives. advancing community cinnaire.com 844-4CINNAIRE IBA Mega Conference The largest, most comprehensive state banking event in the nation, the Mega Conference provides bankers with the tools and resources to prepare for opportunities and challenges. Attendees choose from 48 educational tracks, ranging in topic from talent management, to compliance, to technological advances in payments and mobile banking. Click on the icon at left in HB Digital to register, or go to indianabankers.org/education-events. Indianapolis MAY 13
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