Association News Rochester Chapter

LEGAL ALERT FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC:  Mixed-Use Development Incentives for Downtown Rochester Extended to 2021

A valuable incentive for mixed-use development in downtown Rochester has been extended. The City of Rochester has reauthorized an exemption from real property taxation and special ad valorem levies for the conversion of property within the Rochester Center City Zoning District from non-residential to a mix of residential and commercial uses.  Read Full Article

LEGAL ALERT FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC:  White House Opportunity and Revitalization Council to Facilitate Investment in Opportunity Zones.

President Trump has established the White House Opportunity and Revitalization Council (the “Council”) by Executive Order 13853 (“Order”) issued on December 12, 2018. Its stated purpose is to encourage public and private investment in urban and economically distressed areas, including Qualified Opportunity Zones (“QOZs”).

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LEGAL ALERT FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC: LEGAL ALERT: IRS Issues Proposed Regulations and Guidance on Opportunity Zones.  Read below or download the document.

On October 19, the IRS and Treasury Department issued long-awaited proposed regulations, Revenue Ruling 2018-29 (the "Revenue Ruling"), and draft forms regarding the Opportunity Zone program to encourage private investment in low-income communities.

Enacted as part of the Tax Cut and Jobs Act of 2017, Sections 1400Z-1 and 1400Z-2  of the Internal Revenue Code of 1986, as amended (the "Code") establishes the Opportunity Zone program as the first new federal economic development tax incentive since the popular New Markets Tax Credit Program was enacted in 2000.  This program is designed to provide a federal tax incentive for investors to reinvest capital gains generated in 2018 into economically distressed areas. 

The program allows a taxpayer to defer federal income tax on capital gains due upon the sale of property(any property type, real or personal) if the capital gains are reinvested within 180 days in a Qualified Opportunity Fund ("QOF") in a Qualified Opportunity Zone ("QOZ").  A QOZ is a low-income area, determined on a census tract basis, where new investments, under certain conditions amplified under the new regulations and Revenue Ruling, may be eligible for preferential tax treatment. Those gains are deferred until December 31, 2026; or, if earlier, the gains will be recognized upon the sale of the investment in the QOF. If the investment in the QOF is held for ten years, a taxpayer may elect to step-up basis in the investment to eliminate tax on any appreciation on the investment value. There are approximately 9,000 QOZs in the United States, including 514 QOZs in New York State.

The regulations and the Revenue Ruling contain proposed guidance addressing the type of gains that may be deferred by investors, the time by which corresponding amount must be reinvested in QOFs, and the manner in which investors may elect to defer specified gains.

For example, only capital gains may be deferred, and taxpayers must invest in a QOF within the 180-day period beginning on the day of the sale or exchange of the capital asset. Taxpayers may make multiple elections within these 180 days.

In addition, the regulations amplify rules relating to QOFs, including self-certification, valuation of QOF assets and guidance on qualified opportunity zone businesses. Proposed Form 8996, Qualified Opportunity Fund, will be used by QOFs to self-certify and for annual reporting compliance. The Revenue Ruling discusses particular QOZ issues pertaining to a QOF's purchase of an existing building located in a QOZ, providing that the basis of the underlying land purchased with an existing building is not taken into account in determining whether such a building is deemed "substantially improved" in accordance with the regulations.

A public hearing on the regulations is scheduled for January 10, 2019 at 10:00 a.m. in the IRS Auditorium in Washington, D.C.  In the meantime, you can review a full text of the  IRS regulations and Revenue Ruling on its website. We will continue to provide updates as the regulations move toward adoption.

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LEGAL ADVISORY FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC:  Senate Version of Tax Bill Preserves Certain Development Tax Credits

The Senate Finance Committee advanced the Tax Cuts and Jobs Act on November 17, 2017, moving the tax reform legislation to the full Senate for consideration. The bill, originally introduced in October, marks the first effort in three decades to reform the Internal Revenue Code. Lawmakers have said its goal is to reduce taxes on the middle class, while growing jobs across the country. Several tax policy experts criticize the bill for its corporate tax cuts and a balloon plan they believe will ultimately cost the middle-class more in ten years.

Of particular note is that the Senate version includes the retention of the following development tax credit programs:

  • the new markets tax credit (NMTC) through 2019 in its current form without change
  • interest-free private activity bonds in its current form, which bonding help finance more than 50% of affordable low income rental housing each year
  • the 9% allocated low-income housing tax credit (LIHTC)
  • the 20% historic tax credit (HTC) of qualified rehabilitation expenditures, with one change from current law: rather than claiming the HTC 100% in the year at placed-in-service as under current law, the HTC would be claimed ratably over 5 years instead of being.  While the HTC would be retained, the ratable entitlement to the HTC over 5 years would reduce HTC pricing by an investor's internal rate of return (time value) requirement.

The full Senate is expected to take up this bill after the Thanksgiving break.

LEGAL ALERT FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC:  The Impact of the Tax Cuts and Jobs Act Provisions on Tax-Exempt Bonds

On November 2, 2017, the U.S. House of Representatives Ways and Means Committee released the Tax Cuts and Jobs Act (the "Bill"). Among what is being called the "biggest transformation of the tax code in more than thirty years" are the following proposed changes to the provisions of the tax law that pertain to tax-exempt bonds: (i) the termination of the ability to issue qualified private activity bonds; (ii) the elimination of the ability to issue advance refunding bonds; (iii) the repeal of the authorization to issue tax credit bonds; and (iv) a prohibition on issuing tax-exempt bonds to finance professional stadiums.

Termination of Ability to Issue Qualified Private Activity Bonds

Under current law, interest on "qualified private activity bonds" is excluded from gross income. However, as proposed under the Bill, no qualified private activity bond can be issued after December 31, 2017. This means that the following types of tax-exempt bonds could no longer be issued: (i) qualified 501(c)(3) bonds, which provide tax-exempt financing for qualifying capital projects undertaken by 501(c)(3) organizations, such as colleges, hospitals and other health-care facilities, senior housing facilities, libraries, private schools and museums, among others; (ii) exempt facility bonds, which provide tax-exempt financing for, among other types of projects, residential rental projects (e.g., affordable or low-income housing), airports, docks and wharves, mass commuting facilities, facilities for the furnishing of water, sewage facilities and solid waste disposal facilities; and (iii) qualified small issue bonds, which provide tax-exempt financing for manufacturing facilities.  Continue Reading ...

LEGAL ADVISORY FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC: NYSERDA Wind Farm Proposal Could Create More Clean Energy and Controversy

New York state is attempting to move closer towards its goal of fifty percent renewable energy production with an announcement by the New York State Energy Research and Development Authority (NYSERDA) that it has identified more than one million acres of offshore area along the south shore of Long Island for potential development. The proposed offshore area has the potential to generate 2,400 megawatts of energy by 2030, enough to power 1.2 million homes.[1]

After a significant period of research, planning and consultation with commercial fisherman, NYSERDA has released recommendations to the Federal Bureau of Ocean Energy Management (BOEM), which identifies four large offshore areas suitable for the creation of windfarms, as well as a written request from New York State Governor Andrew M. Cuomo for expedited approval from federal regulators to begin bidding for leases. The proposed windfarms are a significant development in green energy production along Long Island and would dwarf the recently approved Montauk Point wind farm, currently under development by Deepwater Wind, which is expected to generate 90 megawatts of power by 2022.[2]  Continue Reading ...

LEGAL ALERT FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC: U.S. DOT Proposes Rules to Eliminate Duplication of Environmental Reviews

On September 28 and 29, 2017, the U.S. Department of Transportation ("DOT") published Notices of Proposed Rulemaking to commence a public comment period on proposed regulations governing DOT's Program for Eliminating Duplication of Environmental Reviews, established by Section 1309 of the Fixing America's Surface Transportation Act ("FAST Act").  Section 1309 directed the U.S. Secretary of Transportation to establish a pilot program authorizing up to five states to conduct environmental reviews and provide approvals for projects utilizing state environmental laws and regulations, rather than subjecting such projects to the review process of the National Environmental Policy Act ("NEPA"). 

The FAST Act, signed into law by President Obama on December 4, 2015, was the first federal law in over a decade to provide long-term funding certainty for surface transportation infrastructure planning and investment.  It authorized $305 billion over fiscal years 2016 through 2020 for various critical transportation projects.  Continue Reading ...

 

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