Tax Credits and Related Financing Process


The success of any major construction project requires seamless coordination between owners, the construction team, Investors and Financing Institutions along with the corollary Accounting, Tax and Legal providers. This coordination is especially important when utilizing “Tax Credit” financing. Tax Credit programs will add several new dimensions to your project, specifically:

  • Compliance with the Secretary of the Interior Standards is required for “Historic Rehabilitations,” certain wall and infrastructure retention requirements come into play with “Pre-1936” non-historic building Rehabilitations, and specific approval and reporting processes become involved with Federal Rehabilitation Tax Credits.
  • Access to “special allocations”, among other funding capabilities are needed in order to benefit from “New Markets Tax Credits.”
  • State credit regulations vary from State to State. Credits typically require that new entities be formed with different ownership structures, operations of each defined, and protocols for the rights and responsibilities of each implemented.
  • Preparation of extensive budgets, forecasts and Business Plans;
  • After project completion, there is an ongoing compliance period during which special reports are required, including management and record keeping for the multiple entities that have been created.

Most organizations attempting to integrate Tax Credit financing into their construction project will benefit by using an outside resource that:

  • Provides experience and skills beyond just the financing;
  • Provides only the services they need when they need them;
  • Is knowledgeable enough to identify and recommend the required and qualified additional resources as needed;
  • Is skilled at managing and integrating multiple dissimilar activities.

Plymouth Soundings, LLC works with Clients in many ways to help them through the activities required to complete a tax credit based financing. Typically we act as a:

  • Liaison between the implementation and financing teams and all the other stakeholders throughout the whole project process from inception through the compliance period to provide understanding, guidance and ultimately achieve the benefits of Tax Credits;
  • Financial Coordinator for the Client, guiding the Client through the data collection, preparation and reporting process, translating the needs of Lenders, Investors, the Accounting and Tax counsel so that the Client is able to respond with meaningful information in a timely and efficient process;
  • Knowledge Base that can educate the Client and various stakeholders to the overall process, identify key issues unique to the particular project and recommend additional resources and possible solutions;
    • Project Coordinator for all groups involved in the project process providing the:
        • Coordination between the design/construction process and the Tax Credit financing process is very important. Plymouth Soundings can help the design and construction team understand critical timing issues, possible implications of proposed changes to designs and materials, or significant cost changes; and,

        • Coordination between the fund raising process and the Tax Credit financing process is equally as important. Grants awards, bond issues, State funding programs, tax exempt fundings, and conditional donor funding all could impact the use of Tax Credits, or require additional solutions to be crafted.

        What you bring to the table is the bridge between an extraordinarily complex federal transaction and the day-to-day world of the Non-Profit. Clemens Center

        The Bridge is an important role in getting the Client Leadership and Board to understand highly technical issues they would not normally ever encounter and driving them to make decisions they might rather put offReznick Group


        Most Clients executing a “once in a lifetime project” may not be fully aware of the number of tasks required by the Tax Credit financing process. The following list is intended to help the Client understand the volume and nature of activities that can be involved and how Plymouth Soundings’ services can provide assistance.

        • Coordinate the overall Tax Credit financing process with Client Team, Investor Team, Certified Development Entities (if acquiring New Markets Tax Credits), and lending institutions including all related Accounting, Tax and Legal personnel;
        • Assist in identifying and evaluating specialty consultants and other service providers experienced in Historic Rehabilitation and New Markets Tax Credits that may be required;
        • Determine, with the Historical Preservation Consultant or Historical Architect, the applicability of Historic Rehabilitation and New Markets Tax Credits and assess the impact of these credits on project definition, schedule, funding and approach;
        • Explain to Management, Board and other key stakeholders the Tax Credit Investing process, options, timing, complexities and opportunities;
        • Evaluate the initial project budget for cost elements typically not included in a construction estimate to assure that the budget is as complete as possible and Qualified Rehabilitation Expenditures are thoroughly identified;
        • Coordinate the review of anticipated grants, bonds and other cash sources for synergy with Historic Rehabilitation Tax Credits and ability to flow same through a Certified Development Entity to leverage New Markets Tax Credits;
        • Develop project cash sources and uses from data available to identify potential funding shortfalls and estimate benefits of credits in filling these shortfalls;
        • Refine project cash sources and uses, including estimated qualified rehabilitation expenditures, based on emerging project funding and cost data, for submission to potential Investors as part of application for initial letter of interest;
        • Develop defendable monthly project cash flow cycle by item detail for analysis of monthly cash needs, bridge financing capacity required, and presentation of needs to Banks and other funding sources including explanation of the Tax Credit Investment process, timing, risks and impact on bridge financing;
        • Develop defendable future operation’s budgets over multiyear timeframe with owner/manager, based upon mission, usage, maintenance goals, programming goals, attendance, pricing, personnel and results of planned renovation for submission to potential Investor as part of application for initial letter of interest;
        • Coordinate financial information and definition of need for “phasing” options with Architect for Part 2 application to the National Park Service as well as working with Architect and other historic professionals on the project team to maximize qualifications for credits;
        • Assist in identification and evaluation of potential Tax, Legal and Accounting professionals who are nationally recognized and accepted as experts in both Historic and New Markets Tax Credits to represent owner in Investor negotiation and closing process;
        • Coordinate Investor and Lender due diligence processes, collecting and transmitting required documents as received and reviewed, receiving feedback from Investor and lender institutions and obtaining additional documentation as required;
        • Develop project budgets, Qualified Rehabilitation Expenditure analysis, balanced Sources and Uses, Monthly Cash Flow Projections, Post Opening Operations projections and initial Tax Credit estimates at a level of detail and in a format acceptable to Certified Accounting Professionals for their use in generating the multi-entity projection compilation and analysis of returns required by potential Investors;
        • Provide guidance to Client regarding the changes needed in the accounting structure to most easily segregate qualified rehabilitation expenditures, develop defendable spending documentation and to accommodate multiple entities’ records typically created as part of a Historic Rehabilitation;
        • Provide guidance and training to Client in setting up report formats, obtaining appropriate supporting input and defining frequency of issuance as required by Investors and Lenders during project phase;
        • Continue to monitor and update project budget, detailed cash flows (to date and future by month), and funding needs during construction based on input on scope changes, change orders, expenditures and schedule;
        • Create lender, Investor, and Stakeholder reports, draw requests, related budget updates, and budget reallocation reports;
        • Provide financial information needed for Part 3 Submission to the State Historic Preservation Officer and National Park Service;
        • Review final project spending details and project cost in preparation for cost certification audit as well as review of independent accountant’s draft certification;
        • Provide guidance on issues, questions, or discrepancies in interpretations of cost certification classifications by owner’s or Investor’s accountants including basis for logic used in generating information for Accountant’s review for Qualified Rehabilitation Expenditures upon which Historic Rehabilitation Tax Credits are earned;
        • Provide ongoing interaction with Client’s professional team during the financing, construction and closeout processes to strive for the best possible options to maximize overall equity return, both during the project implementation and throughout the compliance period.

        Your process management skills are terrific. You have the ability to “will” things to happen through perseverance and persistence. Many times Clients don’t have someone that can sustain this at the level at which it is needed and with the knowledge of where and when they need to push. Reznick Group