Compliance Bulletin

U.S. Supreme Court Declines to Hear Tax Case
August 5, 2013

A federal Court of Appeals decision, Historic Boardwalk Hall, LLC et. al v.Commissioner of Internal Revenue, makes it more difficult for partnerships to qualify for tax credits if an investor is not adequately exposed to risks of loss or does not enjoy the economic potential of the enterprise.

The federal tax credit at issue in Historic Boardwalk is for restoration of historic properties but the ruling could have broad ramifications for credit syndications that rely in part on securing tax credits of all kinds.The structure of the partnership between a government entity that owned the property and an outside investor was deemed to lack economic substance and was treated by the IRS as an impermissible sale of federal tax credits. The Court agreed.  The decision should prompt property owners, investors, government entities, and lenders to re-evaluate the structure and economics of joint venture projects that rely on the generation of tax credits for investors.  

See CBA’s Regulatory Compliance Bulletin for more information.