Syndicating the Tax Credit
Once you’ve proceeded through the Redeeming questions and determined that rules will sufficiently impact your redemption of the historic tax credit, syndicating the credit may be a wise option.
In instances where IRS regulations significantly limit your ability to redeem the credits yourself, it may be beneficial to explore your options for selling the credits.n reality, this is not a “sale” of credits; instead, ownership of the building would need to be held by a partnership or a limited liability company and one or more investors would be admitted to the partnership or LLC, agreeing to provide equity to the project in exchange for an allocation of an interest in profits, losses, cash and federal credits earned by the partnership or limited liability company. The investor would redeem the credits allocated to it against its federal income tax liability. Often these investors are banks, publicly held corporations, and other institutional investors that are not subject to passive loss rules.
Traditionally, projects generating less than $1 million to $3 million in tax credits have been excluded from selling their credits because the costs of closing the transactions outweighed the benefits. Today, however, the marketplace has grown to where developers of projects generating as little as $200,000 in tax credits may be able to sell their tax credits, albeit at less favorable terms then those that are available to owners of larger projects. There are several funds in existence today, each focusing on projects generating different dollar amounts of tax credits.
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