Sign Up for Tax Credits
Tax credits are in limited supply this year, sign up here for first access.
Our Capabilities
- We are one of the largest clearing houses of federal and state tax credits in the Southeast
- We have expertise in low-income housing, historic rehabilitation, energy, and film, among others; to give you tax credit options.
- We offer consulting services to navigate which tax credits are suited for a client's situation
Frequently Asked Questions
A tax credit is an economic incentive issued by a government agency to encourage the private activity, typically investments, in economic development an example would be the State of Georgia's Film & Entertainment credits. Such incentives can be in the form of grants, rebates, loans or tax credits.
At The Strategic Group, we work with tax credits that can be transferred to outside investors.
Tax credits are issued by the Federal government as well as U.S. State and territory governments, and thus can be applied against tax liabilities at either level. States credits typically cannot offset Federal liabilities, and vise versa.
Tax credits are either transferrable, meaning they can be sold by the entity earning them and purchased by another, or nontransferable. This is usually determined by the law creating the tax credit.
Most nontransferable credits are allocable to partners in the project. As a result, many credits are monetized by silent equity partners that receive the credits in exchange for capital contributions. These capital contributions typically resemble the sales prices paid by investors purchasing transferable credits.
Tax credits are either refundable or nonrefundable. A refundable tax credit can be “sold back” to the State or Federal government that issued them for a specified amount defined in the rules and regulations of the tax credit program through which they were issued. Nonrefundable tax credits are redeemed only by applying the credit against a tax payment on year-end tax filings.
Almost all tax credits are a combination of these elements. For example, a film studio could be earning a State transferrable tax credit certificate. Meanwhile, a real estate developer could be receiving a Federal Historic Tax Credit that is nontransferable, nonrefundable and thus, can only be utilized by the entities in the partnership sponsoring the project earning the tax credits. The latter can be allocated to an Investor who has been admitted into the partnership.
Tax credit clearing houses work to facilitate the transfer of tax credits from the developers and producers earning tax credits to investors who want to purchase them to offset their tax liabilities. Not all producers or developers need a clearing house if they know the right staff at profitable firms paying significant taxes in the applicable fiscal year in their tax jurisdiction. However, most do not have these contacts.
As a clearing house, we connect the investment community, comprising billion-dollar corporations with significant and complex tax liabilities. We seek out the most attractive programs to meet the needs of our clients and close transactions through a variety of investment structures. These transaction structures range from simple tax credit certificate sales to complex tiered partnerships.
Whether a tax credit is issued at the State or Federal level also impacts which tax liabilities it can be used against.The type of tax liability that can be offset by a tax credit is dependent upon the rules and regulations of the program through which the credit is issued. At The Strategic Group, we know which credits work with which taxes and use this expertise to help match project sponsors with investors.
Entertainment & Film Credits
The Strategic Group is an experienced and trusted partner in Georgia entertainment tax credits with relationships with some of the largest productions groups in the state.
- May offset 100% of a taxpayer's liability
- Excess credits carry forward for five years. Starting in 2021, credits will have a three-year carry forward.
Tax Implications
- Applicable against the Georgia income tax liability of any individual,
corporation or trust - May offset 100% of a taxpayer's liability
- From the year of generation of the credit purchased in one-year
increments - Historically priced at around 89-91 cents per credit, higher or lower subject to market conditions
- Credits go through pre-audit with the state or are certified by a CPA firm and are guaranteed by the production company
Timing of Purchases
- Credits can be used in the year they are purchased, the year they were created, or any year in between to the extent it doesn’t surpass the carry-forward rule.
Process
- The credits are sold directly by the production company to the end user.
Credits may not be resold.
Federal Taxation
- The investor is treated as acquiring an intangible asset upon buying the
credits. - The investor is deemed to sell and credit and recognizes a capital gain
on the difference between the face value of the credit and their basis in
the credit when the taxpayer files their tax return and uses the credit to
offset tax. - Taxpayer realizes a deduction for state income tax payment equal to the
face value of the credit at that same point in time
Georgia Affordable Housing Credits
We offer several ways for investors to take advantage of these tax credits.
- May offset 100% of a taxpayer's liability
- Excess credits carry forward for three years
Tax Implications
- Applicable against state income taxes on Individuals, trusts, and any insurance premiums taxes.
- May offset 100% of the taxpayer’s liability.
Timing of Purchases
- Credits can be purchased in one to five-year increments
Excess credits carry forward for three years - One-year credit priced between 85 and 88 cents per credit depending
upon the time of year
Process
- The credits are allocated to buyers through a partnership in accordance with Federal rules
- Our Georgia Housing credit fund invests in multiple developments yielding a diversified pool of credits
- Taxpayers can buy into our tax credit fund on a one-year basis to receive an allocation for the current year.
Federal Taxation of Tax Credit Funds
- The investor is treated as acquiring an intangible asset upon buying the credits.
- The investor is deemed to sell when the taxpayer files their tax return and uses the credit to offset tax, and credit and recognizes a capital gain on the difference between the face value of the credit and their basis in the credits.
- The taxpayer realizes a deduction for state income tax payment equal to
the face value of the credit at that same point in time.
Federal Historic Rehabilitation Tax Credits
Historic Rehabilitation
The Strategic Group has partnered with some of the largest developers of historic rehabilitation programs across the country. We have helped restore some of America’s most cherished landmarks including hotels, theaters, and repurposed government buildings.
- May offset 75% of a taxpayer's liability
- Excess credits carry backward one year and forward for twenty years
Tax Implications
- The Federal Historic Rehabilitation Tax Credit program (“Federal HTC”), was created by Congress in 1976. This incentive is available for the rehabilitation of qualified historic structures, also has many states with an additional state credit component for state taxes.
- The Federal program can be used up to 75% of tax liability for corporate taxes or for individuals with “passive income.”
Timing of Purchases
- The Federal HTC is a credit pro-rated over 5-years once the Historic project is placed in service.
- The Federal HTC can generally offset up to 75% of current year tax liability.
- Excess credits can be carried back one year and carried forward for 20 years.
Low Risk
- The US Trust for Historic Preservation’s “Survey on Historic Credit Recapture; 2002-2012” quantified credit recapture risk at a mere 0.73% of tax credits claimed. This study takes into account the real estate recession of 2008 and demonstrates the strength of incentivized Developments.
Federal Taxation
- Federal HTC’s are available to offset federal regular tax AND federal AMT.
- Investors make capital contributions into our funds (LLC’s taxable as partnerships) at roughly $.90-.92 for every $1 of available federal HTC to be allocated to them.
- Our funds may invest in one or multiple credit partnerships which receive federal historic credits and further lower an already negligible risk profile.
Contact us to learn more about how you can benefit from federal and state tax credits.
