Business Continuity Bulletin - July 29, 2020
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Coats Rose is monitoring the latest legal developments at the federal, state and local levels to provide clients with swift and comprehensive advice on new laws, policies and programs. As you navigate through this unusual time, Coats Rose is your resource on community and economic development matters.
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Historic Rehabilitation Tax Credits Extended
: The Louisiana state historic rehabilitation tax credit, which had been set to expire after 2021, has been extended for 4 more years. The credit will equal 20% of the eligible costs and expenses of a rehabilitation incurred on or after January 1, 2018, and before January 1, 2026, regardless of which year the project is placed in service. For taxpayers who submit their Part 2 applications on or after January 1, 2021, the availability of the credits will be subject to an annual cap. The aggregate amount of credits that can be claimed in connection with such projects will be capped at $125 million annually; if the amount of credits claimed in a calendar year is less than the cap, the excess amount is available for issuance in subsequent years. The Louisiana Department of Culture, Recreation and Tourism will issue rules to establish the method for reserving credits, which could include reserving credits on a first-come, first-serve basis.
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Louisiana New Markets Jobs Tax Credits
: A new round has been created under the state New Markets Jobs tax credit program for the allocation and certification of up to $75 million in qualified equity investment (“QEI”) authority, with applications accepted from qualified community development entities beginning August 1, 2020. The credits are worth 55% of the QEIs issued after August 1, 2020, an increase from 45% for QEIs issued previously. The credits will be taken as 15% on the fourth, fifth and sixth anniversaries of when the investment is made, with 10% taken on the seventh anniversary; the credits may be carried forward for 5 years. Unclaimed tax credits continue to be transferable to one or more transferees.
The upcoming round of the program has new restrictions after August 1, including a new requirement that the QEIs are required to be made in certain industries and the qualifying recipient businesses must have a total number of employees that does not exceed the greater of 250 or the number of employees set forth for such business's NAICS sector in 13 CFR 121.201. In addition, at least 50% of the QEI must be invested into an “impact business,” a newly-defined category of businesses that must be either located in a rural parish (less than 100,000 people) or is majority owned by women, minorities or veterans. The maximum amount of any investment made to a business and its affiliates (whether by one or multiple community development entities) will be $5 million, a decrease from $10 million under the previous program rules. Additional restrictions include that community development entities (together with their affiliates) must have invested at least $100 million in certain Louisiana investments to be eligible to participate.
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Angel Investor Tax Credit Extended; Enhanced to Pair with Opportunity Zones
: Governor Edwards signed legislation extending Louisiana’s Angel Investor Tax Credit (“AITC”), a 25% income or corporate franchise tax credit on investments in small businesses that are certified by the Louisiana Department of Economic Development as a "Louisiana Entrepreneurial Business." Credits will not be granted or reserved under the program for reservation applications received by the Louisiana Department of Economic Development on or after July 1, 2025. The regular Louisiana AITC will remain a 25% credit and may be taken in equal portions over 2 years, rather than taken over 3 years as under prior law.
In addition, the AITC was enhanced, effective July 1, 2020, to complement the federal Opportunity Zone (“OZ”) incentive by allowing investors to claim an increased 35% tax credit over 2 years for investments made in Louisiana Entrepreneurial Businesses that are located in OZs. The program is subject to an annual cap of $7.2 million; a $3.6 million cap for the preexisting AITC and a $3.6 million cap for the new enhanced AITC. If the amount of credits claimed in a calendar year is less than the applicable cap, the excess amount is available for issuance in subsequent years.
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Limitation on COVID-19 Liability
: Governor Edwards signed a law limiting liability from civil lawsuits relating to COVID-19, retroactively effective on March 11, 2020. The law states that no person or state or local government subdivision can be held liable for civil damages for injury or death resulting from exposure to COVID-19 in the course of the person’s business operations. However, the limitation of liability will not be available if the plaintiff proves that the person, government, or political subdivision was not in substantial compliance with applicable COVID-19 procedures and that the damage was caused by gross negligence or wanton or reckless misconduct. Generally, businesses that are subject to more than one set of COVID-19 procedures (i.e., federal and state) need only comply with one set of applicable COVID-19 procedures. The law specifically extends protection to certain event planners and organizers hosting, promoting, producing or otherwise organizing a trade show, convention, corporate event, sporting event, or exhibition. In addition, employees who are exposed to COVID-19 cannot sue their employers unless the exposure was intentional. Finally, designers, manufacturers, labelers or distributors of personal protective equipment are also protected under the new law.
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IRS Extends Deadlines for Time-Sensitive New Markets Tax Credit Actions
: IRS Notice 2020-49 provides relief to investors and businesses affected by COVID-19 in New Markets Tax Credit transactions by extending the deadlines for certain time-sensitive actions, including making investments, making reinvestments, and expending amounts for construction of real property under § 45D of the Internal Revenue Code that would otherwise have been due to be performed between April 1, 2020, and December 31, 2020. Such time-sensitive actions are now required to be completed by December 31, 2020.
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IRS Extends Deadlines for Time-Sensitive Opportunity Zone Actions:
IRS Notice 2020-39 extends the 180-day deadline for taxpayers to invest capital gains in qualified opportunity funds (QOFs) to December 31, 2020 for taxpayers whose deadline otherwise would have fallen between April 1 and December 31. Similarly, a QOF’s failure to satisfy the 90% asset test on a testing date that falls between April 1 and December 31 will be disregarded because of COVID-19. In addition, the 30-month “substantial improvement” period is tolled from April 1 to December 31, the working capital safe harbor period has generally been extended for up to 24 months, and the deadline for certain QOFs to reinvest proceeds has been extended for up to 12 months if January 1, 2020 fell within that QOF’s reinvestment period.
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IRS Provides Relief for LIHTC and Bond Requirements
: IRS Notice 2020-53 provides relief for low-income housing tax credit (LIHTC) projects in several ways, including extending some, but not all, deadlines to December 31, 2020 that would otherwise have fallen between April 1 and December 31. LIHTC property owners are not required to perform on-site tenant income recertifications, and allocating agencies are not required to conduct inspections between April 1 and December 31, 2020. Eliminating access to an amenity or common area during this time period will not result in a reduction of eligible basis, provided the closure was in response to COVID-19. Finally, medical personnel or certain other essential workers providing services during the pandemic may qualify as “Displaced Individuals” through the end of 2020 and may be provided with emergency housing under existing IRS guidelines.
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IRS Extends Deadlines for Investment Tax Credit and Renewable Energy Production Tax Credit
: Notice 2020-41 extends the so-called continuity safe harbor for the renewable energy production tax credit (PTC) and investment tax credit (ITC) from 4 years to 5 years for projects that commenced construction in 2016 or 2017. The guidance also provides relief related to the impact of supply chain disruptions by addressing the application of the “3½ month rule” in light of COVID-19 and providing a new safe harbor for services or property paid for by the taxpayer on or after September 16, 2019 and received by October 15, 2020.
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Kelly Longwell
504.299.3075
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Ben Guider, III
504.299.3084
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Christopher Wootten
504.299.3073
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Molly Stanga
504.299.3081
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Sarah Yednock
504.299.4006
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Elizabeth Haecker
Ryan
504.299.3085
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Affordable Housing and Community Development
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From site selection to the closing table, Coats Rose attorneys provide in-depth knowledge and experience regarding the legal issues faced by developers, lenders, owners and operators of public and private commercial real estate.
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Coats Rose, P.C.
is a transactional and litigation law firm focused on development: the development of real estate, affordable housing, special purpose districts, business and private wealth. We provide legal counsel to businesses, governmental entities corporate and high-net worth clients across the U.S. and internationally. For over 30 years, the firm has leveraged its vast legal experience to fulfill clients’ needs spanning real estate law, affordable housing and community development, public finance, construction/surety law, commercial litigation, government relations, intellectual property, mergers and acquisitions, securities law, tax, wealth transfer planning and wealth preservation planning.
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