Tax Credit Challenges
Most project teams pursuing a “once in a lifetime” Tax Credit project will benefit from an outside resource to help them understand, evaluate, and decide whether to pursue new funds via the Tax Credit program.
When a project team decides to move forward, it may not fully understand what to expect in order to prepare for and execute the financing. The demands, financing requirements, and the specialized resources needed are not immediately obvious.
As a Tax Credit financing progresses, the sheer volume of information to be prepared and provided, the expanded number of professionals involved, and the technical considerations could be overwhelming. The project team’s resources are often insufficient to execute the project and begin operations, as well as coordinate and accomplish the closing and subsequent multiple compliance requirements that extend from project inception and planning, financing, and continues through the project completion, multi-years operations, compliance period, and wind down when investor exits.
The project team quickly finds that multiple stakeholders, including the potential investors, bankers, community development entities (CDEs), syndication accountants, Tax Credit legal counsels, and their own legal counsel, require large amounts of financial information, project documentation, and economic information. While some of the information exists, it often is not in the form needed for the Tax Credit financing, or it is incomplete. The project team may not fully understand how to prepare the requested financial information in a form and manner that is needed or have the resources needed to do so.
Additionally, the project team may be unaware of the far-reaching impact of the Tax Credit process on almost every element of the project including design compliance with Department of Interior Standards for Historic Rehabilitations, the implications for types of business if using New Markets Tax Credits (“sin Businesses”), compatibility with other financing resources, future operations, cash flow segregation, and roles of each of the organizational/entity structures involved.
Most of Plymouth Sounding’s clients do not have the resources in-house, the time, or the background to effectively manage, execute and comply with all of the conditions and challenges of the Tax Credit financing process as well as all elements of the entity legal structure, design and construction considerations, other financing sources, operations impact, and compliance requirements. In fact, most organizations attempting to integrate Tax Credit financing into their construction project will benefit by using a consultant with the experience to contribute to all areas of the project.
Darlene Smolik provides great in-depth counseling on setting up and navigating through the complicated process of using historic and new market tax credits for special projects. She is always available to answer questions and takes it upon herself to do much of the hard work.
She is meticulous and accurate on the accounting end of things and ensures that her clients meet all the necessary benchmarks and regulations of the tax credit process.