On Thursday, Governor Scott announced that the Vermont Housing Finance Agency (VHFA) successfully placed $37 million in sustainability bonds to fund the State’s “Housing for All” affordable housing initiative. The bond sale was very well received by investors, reportedly receiving seven times more orders than available bonds.
This was great news for advocates of safe, affordable housing, as the sale exceeded the $35 million goal that had been set by the State. VHFA is currently accepting applications from affordable housing developers seeking to access the funds. To learn more, see VHFA’s announcement regarding the sale.
Dunkiel Saunders Partner Drew Kervick recently presented at a small business workshop in Wilmington, Vermont. The workshop was hosted by Wilmington Works, a group that was formed in 2013 to help the community recover from the devastation of Tropical Storm Irene. The organization now focuses on developing and improving the vibrancy of Wilmington’s downtown.
At the event, Drew fielded questions from small business owners and individuals seeking to launch new businesses on topics ranging from entity formation to contracting to real estate matters. “It was great to see the energy and innovation coming out of the Wilmington community,” Drew said after the event. “The town was hit hard by Irene, but the community has supported each other in truly creative ways and largely restored its vibrant downtown. I appreciated the opportunity to provide some tips to some of the folks driving this rebuilding effort and was inspired by their energy and passion for their town.”
Drew was joined at the workshop by co-presenters from the State of Vermont, the Brattleboro Development Credit Corporation, and from other professionals based out of Southern Vermont.
Earlier this week, the Senate and House each passed the final version of the Tax Cuts and Jobs Act of 2017. Upon its enactment, this bill will have significant and long-lasting implications for the four major federal tax credit programs aimed at incentivizing private investment in socially beneficial projects: New Markets Tax Credits (NMTC), Low-Income Housing Tax Credits (LIHTC), Historic Tax Credits (HTC) and Renewable Energy Tax Credits (RETC). These tax credit programs have had a profound impact in Vermont and beyond by revitalizing communities and historic downtowns, spurring investment in economically depressed areas, improving the stock of safe, affordable housing and combating the growing threat of global warming.
The good news for supporters of the federal tax credits is that the tax bill does not eliminate any of these programs. Many were taken off guard when the House introduced its initial version of the bill, which proposed to eliminate the New Markets Tax Credit and the Historic Tax Credit programs effective in 2018 and the Renewable Energy Investment Tax Credit program effective in 2022. The House version also proposed eliminating private activity bonds and the so-called “4 percent” LIHTC program, which would have resulted in a substantial loss of low income housing. The House’s bill was particularly surprising as each of these programs had conservative roots, in that they focused on incentivizing private investment as opposed to relying on federal entitlements or similar programs. Fortunately, the draconian provisions of the House version of the bill have been removed from the final Tax Cuts and Jobs Act and each of the tax credit programs remain largely intact.
The Act will have significant implications for each of these tax credit programs, however, foremost of which is a substantive reduction in the value of and the demand for these tax credits. In lowering the corporate tax rate from 35 percent to 21 percent, the value of these tax credits to potential investors will decrease. In addition, because corporations will have a significantly lower aggregate tax liability under the new Act, the demand for tax credits to offset tax liability will also drop appreciably.
A second significant change caused by the Act is the creation of a new “Base Erosion and Anti-abuse Tax”, which is essentially a new alternative minimum tax on foreign-owned corporations or U.S. corporations with significant foreign operations. This new tax among other things prevents corporations subject to the tax from claiming NMTC or HTC, and limits such corporations from realizing the full value of LIHTC and RETC, among others. This will again have the effect of reducing the demand for and the value of these tax credits.
Aside from these changes, the final Tax Cuts and Jobs Act leaves the tax credit programs largely in place, however. The final tax bill retains both the 9-percent and the 4-percent LIHTC, as well as the private activity bonds that are critical to the LIHTC program. It generally preserves the status quo for NMTC, retaining the program through 2019. In fact, the bill’s elimination of the corporate alternative minimum tax should benefit the NMTC program somewhat, as these credits cannot be used to reduce the corporate alternative minimum tax. The HTC was retained at its current twenty percent level for certified historic buildings. However, whereas presently the entire credit can be claimed in a single tax year, going forward (subject to transition rules) the credit will have to be taken over five years. The credit has been repealed for buildings that are not listed on the historic register that were previously eligible for the HTC (i.e., that were placed in service prior to 1936). Finally, the new bill more or less retains current law for RETC, including the phasedown schedules for the investment tax credit and the production tax credit.
Overall, the passage of the Tax Cuts and Jobs Act was not a positive development for advocates of these programs. The bill promises to reduce the value of and demand for these credits, among other impacts. However, the given the nature of the proposals contained in the initial House bill, advocates for these programs are breathing a sigh of relief, as each of the major tax credit programs were ultimately retained and should continue to be a viable funding source for socially beneficial development projects for years to come.
To learn more about financing projects using federal tax credit programs, contact Drew Kervick.
Disclaimer: This blog post is provided for general informational purposes only and is not intended to constitute legal advice or to substitute for the advice of an appropriately licensed attorney. If the reader requires legal advice, s/he should contact a competent attorney licensed to practice in the reader’s jurisdiction. This blog post is general in nature and may not apply to particular factual or legal circumstances. The information presented is not an invitation to, and does not form, explicitly or implicitly, an attorney-client relationship.
There was good news this week for advocates and supporters of affordable housing, as Governor Scott signed into law a new state budget that includes a $35 million bond for housing projects throughout the State. The affordable housing bond is the largest in the State’s history and will facilitate the expansion of Vermont’s stock of safe and affordable housing both through the development of new homes and the renovation of existing homes. The Vermont Housing Finance Agency will issue the bond, and funds will be administered by the Vermont Housing and Conservation Board. More information about this exciting development is available here. To learn more about the firm’s affordable housing practice, contact Drew Kervick, Mark Saunders, Kelly Lowry, or Sash Lewis.
Dunkiel Saunders attorneys Drew Kervick and Mark Saunders recently assisted Chroma Technology Corp. close a twenty-two million dollar New Markets Tax Credit financing for the renovation and expansion of its manufacturing facility in Bellows Falls, Vermont. Chroma is an employee-owned company and certified B-Corp that manufactures interference filters for the ultra-violet, visible and near-infrared portions of the spectrum.
Chroma’s continued growth has led to a demand for additional production space, as well as new machinery and equipment. The current project will allow Chroma to add approximately 25,000 square feet to its facility and additional machinery and equipment to its operations.
Chroma’s expansion was financed with funding from U.S. Bancorp Community Development Corporation, People’s United Bank, Vermont Economic Development Corporation and the Town of Rockingham, as well as a New Markets Tax Credit allocation from Vermont Rural Ventures and Massachusetts Housing Investment Corporation. Chroma partnered with the Brattleboro Development Credit Corporation to develop the project, utilizing a complex sale-leaseback structure.
The New Markets Tax Credit program is a federal program that incentivizes investment in low-income communities by providing private investors with federal tax credits for qualifying investments in businesses or economic development projects in economically distressed areas. To learn more about financing projects using federal tax credit programs such as New Markets Tax Credits or Low Income Housing Tax Credits, contact Drew Kervick.
The Vermont Medical Society has published an updated version of the Vermont Guide to Health Care Law for 2017. Dunkiel Saunders attorneys Eileen Elliott, Jon Rose, and Drew Kervick are authors of the chapter on Fraud and Abuse Compliance.
According to the VMS website, the Guide "is designed to give physicians and health care facilities a fundamental understanding of legal and regulatory requirements that affect the delivery of health care in Vermont today."
The Guide is available as a PDF on the VMS website. To view or download a copy, click here.
Last Thursday, attorney Drew Kervick presented a workshop at the Cotton Mill in Brattleboro as part of the INSTIG8 series, hosted by the Brattleboro Development Credit Corporation. The INSTIG8 series provides workshops and other resources for creative entrepreneurs in the Windham, Vermont area.
The ‘Structure Stress’ workshop provided an overview of the different types of legal entities available to new and emerging business, including corporations, limited liability companies and non-profit corporations. Particular focus was given to entities well-suited for socially responsible or mission-oriented businesses, such as benefit corporations and low-profit limited liability companies.
Information about the workshop is hosted here on the Brattleboro Development Credit Corporation website.
Last weekend Dunkiel Saunders partner Geoff Hand and associate Drew Kervick presented at the 2017 Vermont Bar Association Conference, the YLD Winter Thaw, held in Montreal on January 13th and 14th.
Geoff presented as part of a panel of experts on Act 250, Vermont’s land use and development law. His presentation focused on key strategic decisions to be made by parties participating in the Act 250 process, including developers, municipalities, and individuals or adjoining landowners. He also described the relationship between Act 250 and other important permitting processes in Vermont, and offered comments on areas for potential amendments to the process going forward.
Drew presented with Commissioner Mike Pieciak from the Vermont Department of Financial Regulation on federal and state securities laws and how they impact small businesses trying to raise capital. Much of Drew’s portion of the presentation involved a detailed overview of certain exemptions from federal securities registration requirements that may be useful to Vermont businesses. The presentation also covered important state-based registration exemptions such as the Vermont Small Business Offering Exemption.
On November 30th, Dunkiel Saunders’ client, the Randolph Area Community Development Corporation, acquired Armstrong Mobile Home Park, after two years of negotiating and raising funds. The mobile home park was first developed in the 1960s, and major repair needs threatened to compromise the park’s affordability for its current residents.
RACDC will now undertake important repairs, renovations and improvements to the park, to expand the stock of safe, affordable housing in the greater Randolph region.
Read more at Our Herald.
Seven Days and WCAX Channel 3 News recently featured Dunkiel Saunders client Morrisville Food Coop, documenting a fundraising effort the co-op is using, known as the Member Loan Program. The program allows members residing in Vermont to make loans to the co-op to help launch the new store—which is affectionately known as MoCo for short.
Attorneys Mark Saunders and Drew Kervick assisted MoCo in pursuing a securities exemption for these loans, known as the Vermont Small Business Offering Exemption (VSBOE). This exemption became available to Vermont businesses in 2014, to make it easier for Vermonters to invest in a local business. Read more about the VSBOE here.