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Alert: Emerging Issues Task Force (EITF) considering expansion of proportional amortization method for qualified tax credit structures

The Financial Accounting Standards Board (FASB) is looking at expanding the proportional amortization method to investments in tax credits other than Low Income Housing Tax Credit ("LIHTC") investments.

At the September 22, 2021, FASB Agenda Prioritization meeting, the Board decided to add a project to the Emerging Issues Task Force (EITF) agenda to consider whether the proportional amortization method should be expanded to investments in tax credits beyond LIHTC investments such as New Markets Tax Credit (NMTC) programs, Historic Rehabilitation Tax Credit (HTC) programs, Renewable Energy Tax Credit (RETC) programs, and others.

What This Means:

FASB issued guidance on the LIHTC in January 2014, enabling investors to use the proportional amortization method for qualified investments. FASB made these adjustments, in part, to encourage investors to support low-income housing projects that may have otherwise lacked capital. This expansion could have an impact on Solar Investment Tax Credit (ITC) and Production Tax Credit (PTC).

DHG View:

DHG is supportive of FASB's prioritization of expanding the amortization method to include RETC programs.

The expansion of the proportional amortization method for qualified investments would lessen accounting complexity and, in most instances, align the economics of the investments to the investor's financial statements.

EITF will perform additional outreach and research and discuss the issue at a future EITF meeting. For questions and more information regarding these potential changes, .

Resources:

FASB: EITF 21-A, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method

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