Pub. 8 2013-2014 Issue 2

www.nebankers.org 10 Extraordinary Service for Extraordinary Members. important to note that dollars invested would otherwise be paid out in federal tax and earn a zero rate of return. More importantly, these dollars are kept locally in the Midwest to build much needed affordable housing. An LIHTC invest- ment is sound and offers a very attractive “after-tax” yield compared to most bank investments. Banks may receive favorable CRA consideration under the investment, lending, and service tests. Please consult with your regulator as to the extent. The programpertains to real estate development; sponsors/developers obtain financing for construction, permanent, and TIF debt. Credit opportunities may exist for your bank as well as deposit relationships. Q: What are the risks associated with such an investment? A: The most significant risk to an investor is a recap- ture event. This would occur if the property did not maintain its “affordability” status. In other words, tenant incomes and rental charges are restricted throughout the 15-year compli- ance period. Non-compliance could jeopardize the credits an investor expects to receive. Other risks include those typical of any real estate investment such as occupancy, operating expenses, and reputation. Omaha, Neb.-based,  CRA Requirements — continued • Banking & Finance • Municipal Law • Bankruptcy • Employment Law • Business & Commercial Law • Sanitary & Improvement Districts 2120 South 72nd Street, Suite 1200, Omaha, NE 68124 (P) 402.391.6777 (F) 402.390.9221 www.crokerlaw.com Croker,Huck,Kasher,DeWitt, Anderson & Gonderinger,L.L.C. AT T O R N E Y S AT L AW Providing quality legal services to businesses and individuals in such areas as: • Real Estate • Estate Planning • Probate • Taxation • Litigation • Tax Foreclosure Midwest Housing Equity Group (MHEG), a local tax credit syndication firm, plays a critical role in mitigating all risks. It provides comprehensive oversight throughout the life of the investment with the sole purpose of protecting the asset and interest of the investor. Throughout MHEG’s 20-year history, the organization has not incurred a recapture or a property foreclosure. MHEG has helped buildmore than 350 affordable housing developments to create nearly 10,000 rental units in the Midwest. This year MHEG expects to surpass the $1 billion mark of equity capital raised. Q: What things should a bank consider before investing? A: There are a few points of review prior to a bank investing. The first is profitability. The investment provides a stream of federal tax benefits (credits and losses) over 15 years and, subsequently, the bank should be confident of stable earnings. Unused credits can be carried forward 20 years and carried back one. The second point to consider is tax status. Both a Subchapter S and C corporation can invest; however, for an S corp, owners must have “passive” income to offset the benefits against. Banks are strongly encouraged to consult with their tax accountant for confirmation and capacity. Third, investment dollar limitations are in place. In summary, a bankmay invest up to 15 percent of its capital and surplus as an aggregate. The Nebraska Department of Banking and Finance has a convenient worksheet to assist with the analysis from the call report. Q: Above all, what impact does such an invest- ment have? A: The LIHTC program is the most successful housing programour government has launched. The positive impact these investment dollars have on individuals, families, and communities is immeasurable and remarkable. Examples include housing for the homeless, behavioral health, sub- stance abuse, and veterans of war. Other examples include workforce housing that enables businesses to expand and alternative independent housing for the elderly—one of the greatest housing needs today. MHEG sees firsthand the many lives that are touched. As Warren Buffett once ex- pressed: What other investment offers such a great return and does so much good?  For more information regarding the program and an investment, contact Thomas Judds at Midwest Housing Equity Group at (402) 334-8899 or tjudds@mheginc.com, or visit the MHEG website at www.mheginc.com. MHEG has raisedmore than $900 million in equity capital and has invested in almost 10,000 units of affordable rental housing. In addition, the Nebraska Investment Finance Authority (issuer of the credits for the state of Nebraska) or the Nebraska Department of Banking and Finance are both good sources. Visit their respective websites at www. nifa.org and www.ndbf.ne.gov.