STRUCTURING METHOD AND ASSOCIATED MODELING SOFTWARE FOR TAX CREDIT INVESTMENTS THAT WILL GENERATE POSITIVE EARNINGS BEFORE INCOME TAX DEPRECIATION AND AMORTIZATION (EBITDA) UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPALS (GAAP)

• US 20120036050A1
• Filed: 08/04/2010
• Published: 02/09/2012
• Est. Priority Date: 08/04/2010
• Status: Abandoned Application

• Current Assignee: TCIP Holdings LLC
• Original Assignee: TCIP Holdings LLC
• Inventors: NORRIS, Jason Paul
• Application Number:
  US12/850,302
• Publication Number:
  US 20120036050A1
• Time in Patent Office: Days
• US Class Current: 705/30
• CPC Class Codes: G06Q 40/12 Accounting
• CPC Class Codes: G06Q 99/00 Subject matter not provided for in other groups of this subclass

Abstract

Low-income housing projects generate federal low-income housing tax credits. Previously, due to numerous impediments, investing in tax credits results in a negative, or at best a neutral effect on the investor'"'"'s EBITDA for financial accounting purposes. The present invention relates a method that allows for a more efficient syndication of the available tax credits that generates positive EBITDA to investors at a lower cost.

Claims

1. A method of assessing and effecting the transfer of federal tax credits generated by low-income housing projects to a recipient capable of utilizing the tax credits and losses, the method comprising:

identifying one or more housing projects with tax credits available for syndication;

determining a corporate structure for effecting the syndication of the tax credits;

determining the yield of the one or more projects;

determining terms of common stock and preferred stock in a new corporation, wherein the terms include a schedule of an investor'"'"'s preferred stock in the new corporation such that the investor and the new corporation are consolidated for federal income tax purposes and the new corporation and a syndicator are consolidated for financial accounting purposes;

documenting enforceable agreements transferring value from the investor to the new corporation, transferring value from the new corporation to an owner of the one or more projects, and transferring at least a portion of the tax credits from the owner to the new corporation; and

at least partly carrying out said agreements.

2. The method of claim 1, wherein the terms include a dividend rate and;

the schedule is configured such that the investor receives a specified yield.

3. The method of claim 1, further comprising determining the amount of a guaranty to be provided by the syndicator necessary to ensure that the investor'"'"'s investment in stock is treated as a debt instrument for financial accounting purposes.

4. The method of claim 3, further comprising the amount of the guaranty is further determined by value-based economic factors.

5. The method of claim 3, further comprising determining the amount of a guaranty to be provided by a guarantor to the syndicator.

6. The method of claim 1, further comprising determining the amount of a guaranty to be provided by a guarantor to the syndicator.

7. The method of claim 1, further comprising receiving project inputs;

and

calculating the effects of value-based economic factors.

8. The method of claim 7, wherein the economic factors include cash flow, profits, capital gains, depreciation, and internal rate of return to the investor of the project.

9. The method of claim 7, wherein the calculations are used to optimize the agreements, including maximizing available syndicatable tax credits.

10. The method of claim 7, wherein the calculations are performed by a computer program.

11. A computer software program having computer program logic therein that causes a computer to:

receive inputs associated with the transfer of federal low-income housing tax credits generated by a low-income housing tax credit project; and

determine output related to economic factors that affect at least one of the syndicatability of the tax credits, the structure of corporations involved in the syndication of the tax credits, the terms of the preferred stock and common stock in a new corporation, the terms, amount and timing of the tax sharing payments to be made by an investor to the new corporation, and the form of documents and agreements.

12. The computer software program of claim 11, wherein the economic factors include cash flow, profits, capital gains, and intended internal rate of return of the project.

13. The computer software program of claim 11, further comprising computer program logic therein that causes a computer to perform calculations to optimize the corporate structure, including maximizing available syndicatable tax credits.

14. The computer software program of claim 11, wherein the inputs comprise one or more variables relating to at least one of the projects and the syndication of the tax credits.

15. The computer software program of claim 11, wherein the variables comprise one or more of development information, tax credit information, debt parameters, fair market value information, tax depreciation information, information relating to the expected loss performance of the projects, estimated gain or loss upon the departure of the investor from the new corporation, and cash flow projections.

16. The computer software program of claim 11, wherein the variables comprise one or more of total project development costs, tax credits, parameters of the debt, fair market value, tax depreciation, amortization of deferred costs, required yield on the tax credit investor, tax rate, ownership percentages, numbers of shares of stock, present value, term, and cash flow projections.

17. The computer software program of claim 11, further comprising computer program logic therein that causes a computer to allow a user to provide input regarding desired corporate structure.

18. The computer software program of claim 11, further comprising computer program logic therein that causes a computer to output models.

19. The computer software program of claim 18, wherein the models comprise at least one of graphs, charts, and tables.

20. The computer software program of claim 19, wherein the model conveys information about investor capital accounts, developer capital accounts, benefits to developers, 15-year projections of the net operating income, taxable income, and net cash flow, investor tax credit valuation, investor cash valuation, pricing and terms of the preferred stock and common stock in the new corporation, and the expected gain or loss upon the exit of the investor from the new corporation.