Pub. 8 2013-2014 Issue 2

July | August 2013 9 Extraordinary Service for Extraordinary Members. GUEST EDITORIAL Increasing Taxes, Liquidity & CRA Requirements What’s a Banker to Do? Thomas Judds , Midwest Housing Equity Group W ith the recent uptick in our national economy and surge in the agricultural industry, many banks in theMidwest have reported strong earn- ings. In addition to the increase in their bottom lines, banks have seen an increase in liquidity and federal tax liability. Also, as the size of a bank expands so may its CRA requirements. Collectively, these issues have caused bankers to seek alternative strategies for effectively managing their capital while fulfilling regulatory responsibilities. One choice for consideration is an investment in the low- income housing tax credit (LIHTC) program. LIHTCs offer a history of outstanding performance. The following questions and answers are designed to provide your financial institution with a better understanding of the program, as well as the benefits and risks associated with an investment. Q: What are low-income housing tax credits? A: They are federal tax “credits” allocated to owners of eligible affordable housing developments. The LIHTC program was established through the passage of the Tax ReformAct of 1986with the objective of providing economic incentives for promoting public and private partnerships to produce and preserve affordable housing. Developers use the equity capital generated from the sale of the tax credits to lower the debt burden of the property so rents are afford- able. Q: Why are banks interested in the LIHTC pro- gram? A: Banks participate in the program for several com- pelling reasons, including reducing a bank’s federal tax li- ability, meeting CRA obligations, and generating additional business opportunities. Benefits are realized via a Schedule K-1 tax form, reflecting tax credits and deductions. It is Blue Cross and Blue Shield of Nebraska is an Independent Licensee of the Blue Cross and Blue Shield Association. nebraskablue.com for the road ahead. Count on us  CRA Requirements — continued on page 10