1805-2680661 EO Technical Education Indirect Taxes 5-17-18 v3

Indirect tax credits and incentives
May 17, 2018

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Page 2 May 17, 2018 Indirect tax credits and incentives

Presenters
► Kara Adams
Executive Director, Ernst & Young LLP
Irvine, CA
► Akshay Honnatti
Senior Manager, Ernst & Young LLP
San Francisco, CA
► Megan Knutson
Manager, Ernst & Young LLP
Minneapolis, MN
► Eva Nitta (Moderator)
Senior Manager, Ernst & Young LLP
San Francisco, CA

Agenda
► Diesel engine replacement grants (DERG)

► New markets tax credits
► Federal tax credits
► Childcare facility income tax credit
► Veterans tax credit
► How tax credits work with NFPs and where to report them
► Disaster zone and family and medical leave tax credit status
► Tax reform changes to unrelated business income (UBI)

Diesel engine replacement grants (DERG)

DERG overview
There is $2.9b of funding available for fleet repower or replacement with

each of the 50 states receiving funding.
Grants will provide cash payments for a portion of the eligible costs.
Eligible expenditures include the repower or replacement of existing

vehicles/equipment with newer diesel or alternative fuel vehicles/equipment or
all-electric vehicles/equipment.
The funding is available through an environmental mitigation trust (the trust)

as a result of an emissions litigation settlement with the US EPA.
Grants will be administered through each state’s EPA/DEQ or other

state agency.

Potential eligible activities
Repower or Repower or Other activities and

replacement of: replacement of: requirements:
► On-road heavy-duty vehicles: ► Non-road equipment: ► Light-duty, zero-emission
► Class 8 local freight trucks and ► Airport ground support vehicle supply equipment
port drayage trucks (large equipment, forklifts and port may be eligible (up to 15% of
trucks) cargo handling equipment allocation)
► Class 4–8 school buses, ► Freight switchers, including ► Additional projects not
shuttle buses or transit buses pre-tier 4 switcher specifically listed in the
(buses)
locomotives settlement but typically
► Class 4–7 local freight trucks funded through the Diesel
► Commercial marine vessels:
(medium trucks) Emissions Reduction Act
ferries, tugs and shore power
for ocean-going vessels may be eligible
► Eligible engines include
1992–2009 model years with
some exceptions
► Vehicles, equipment and
engines being replaced must
be scrapped

Funding allocations
Funds will be allocated based on registered vehicles in all 50 states, Puerto Rico,
Washington, DC and federally recognized Indian tribes.
VT
RI
DE
State key
US$100m–US$422m
US$30m–US$100m
US$8m–US$30m

Mitigation Trust Fund: timeline
► On March 15, 2017, the court appointed Wilmington Trust, N.A. as the
trustee.
► The Trust effective date was set on October 2, 2017.
► The Notice of Beneficiary Designation was filed January 29, 2018.
► States have started finalizing programs, and will start accepting applications
Q2-2018 onwards
By Early spring Spring Late spring

10.2.2017 1.29.2018
December 2017 2018/onward 2018/onward 2018/onward
States may
States are States release
States elect States file a request
Trust notified of RFPs for
to become beneficiary disbursement
effective date beneficiary funding
beneficiaries mitigation plan of funds
designation

State timeline for funding (estimated)
Q2 2018
AK Q3 2018
CO Q4 2018
DC MT
ID
IA TN DE (1st phase)
Q1 2019
ME
IN VT DE (2nd phase)
NV
MI UT
OH
MO
MN

State program requirements
Each state will develop its own program within the

parameters of the trust agreement.
Ernst & Young LLP is monitoring/in discussions
with each state.
Potential features could include:
► Time-sensitive competitive applications
► Awards based on $/nitrous oxide (NOx) reduction
► Geographical considerations
► Environmental justice considerations
► Restricted to certain vehicles
► Categories of vehicles
► In-state vehicles
► Scrapping of old vehicles
► Prospective funding
► Compliance requirements and timing
► Global positioning system vs. attestation
► Length: five years to seven years
► Public vs. private
► Some states may reserve some funds specifically for

public vehicles.

Polling question
Which of the following are true about the DERG program?

A. There is $2.9b for fleet funding available for fleet repower
or replacement, with each of the 50 states receiving
funding.
B. Grants will be administered through each state’s PA/DEQ
or other state agency.
C. Each state will develop its own program within the
parameters of the trust agreement.
D. All of the above.

New Markets Tax Credit

NMTC overview
► The new markets tax credit (NMTC) program was enacted in 2000 to
help spur economic and community development and job creation in
“low-income communities” (LICs).
► It provides a credit against federal income taxes to investors that
make qualified equity investments (QEIs) into community
development entities (CDEs).
► NMTCs are awarded to the CDEs, not to individuals or businesses.
► A CDE is a domestic corporation or partnership that is an
intermediary vehicle for the issuance of loans, investments or
financial counseling in LICs.
► CDEs use the proceeds of QEIs to make “qualified low-income
community investments” (QLICIs) in “qualified active low-income
community businesses”.

NMTC overview
► QLICIs include, among other things, investments in businesses and

real estate projects in LICs.
► Qualified projects are projects that are in LICs based on census data.
► Generally, a company does not receive a tax credit but, instead,
receives cash upfront to reduce its cash investment in its project(s).
► It is a financing tool for qualified projects that, on average, may
provide a 15%–20% pretax return on investment.

Current state of the program
► On December 18, 2015, President Obama signed the Protecting

Americans From Tax Hikes (PATH) Act of 2015. Provisions of the
PATH Act extend the NMTC for five years, with a cost estimated by
the Congressional Budget Office of $3.5b a year through 2019.
► On February 13, 2018, the Community Development Financial
Institutions (CDFI) Fund awarded $3.5b in allocation to 73 CDEs.
► On May 9, 2018, the most recent allocation application was released.
This represents the fourth allocation round out of five as described in
the PATH Act of 2015.

Who qualifies for NMTC financing?
► Qualified active low-income community business (QALICB)

► A business that develops or rehabilitates commercial, industrial, retail and
mixed-use real estate projects in a LIC
► A business that develops or rehabilitates community facilities, such as
charter schools or health care centers, in a LIC
► A business that develops or rehabilitates for-sale housing units located
in LICs
► Qualified projects
► Community impact projects – i.e., charter schools, community facilities,
essential services

Who qualifies for NMTC financing?
► Qualified projects (cont.)

► Real estate, operating businesses, capex investment
► Asset purchases – large capital expenditures for assets used in the business
that will typically result in creation of jobs or retention of jobs
► Development – new development or expansion of real estate
► Ongoing business operations – i.e., inventory, operating supplies, etc.
► Healthy foods, health care, innovative technologies, “green” projects
► Combination of one or more of the above
► Traditional incentives typically have but/for requirement…does
NMTC?
► Yes and no.
► Projects must have a positive community impact.

Sin businesses
► Specific business activities are excluded:

► Trades or businesses consisting predominantly of the development or
holding of intangibles for sale or license
► Trades or businesses consisting of the operation of any of the following:
► Private or commercial golf course
► Country club
► Massage parlor
► Hot tub facility
► Suntan facility
► Race track or other facility used for gambling
► Or any store, the principal business of which is the sale of alcoholic beverages
for consumption off the premises
► Farming (within the meaning of IRC §2032A(e)(5)(A) or (B))

Target industries

Target Industries
► By industry ► By community benefit

► Grocery/healthy foods-related ► Job creation
► Health care ► Job retention
► Manufacturing ► New/increased services
► Retail ► Increased revenue to low-income
► Educational facilities community
► Community facilities ► Energy efficient/environmentally friendly
► Mixed-use ► By geography
► Underserved states:
► AL, FL, GA, IN, KS
► NV, TN, TX, WV, WY
► Puerto Rico, Guam, American Samoa, Mariana
Islands, US Virgin Islands
► Rural areas
► Region focused

Polling question
Which of the following is false about the NMTC program?

A. Charter schools or health care centers in Low Income
Communities qualify for NMTC financing.
B. Gambling facilities are considered a sin business for this
program and do not qualify.
C. NMTCs are awarded to individuals and/or businesses.
D. NMTC is a financing tool that may provide a 15%-20%
pretax return on investment.

NMTC opportunity

Estimated benefit: $10m project investment
Total project investment: $ 10,000,000

NMTC generated: $ 3,900,000
NMTC equity: $ 3,042,000
Leverage lender investment: $ 6,958,000
Less estimated fees*:

CDE projectfees: 5% $ (500,000)
Closing costs:
Legal fees: $ (275,000)
Financial projections: $ (35,000)
Total fees $ (810,000)
Total estimated benefit at closing: $ 2,232,000

Who are the parties involved?

Leveraged NMTC transaction: The investor
New markets tax NMTC investor NMTC investor

credit investor Makes equity Receives tax credits taken
investment over seven years
(bank)
► The NMTC investor is typically one of the larger banks (i.e., Chase, Bank of
America, Wells Fargo, US Bank, PNC).
► The investor purchases the credits at a discount.
► The going discount rate is 75–80 cents on the dollar.
► To buy the credits, the investor provides equity into the transaction and takes
back a credit equal to 39% of the total allocation, taken over seven years (5%
in years one–three; 6% in years four–seven).
► The investor not only receives tax credits but also receives Community
Revitalization Act (CRA) points for the investment into a LIC equal to the total
project size, even though they only commit a portion of the total project.

Leveraged NMTC transaction: The CDE
Sub-CDE
Community CDE
Subsidiary CDE Promises tax credit
development entity Provides NMTC sub-
certificates over seven years
allocation to sub-CDE (LLC or LP)
(allocatee) to tax credit investor
► The CDE is awarded authority to allocate tax credits by the CDFI

Fund.
► The credit is equal to 39% of the allocation awarded to the CDE by
the CDFI Fund.
► An investor purchases the tax credits.
► The CDE is most interested in the investment, job creation and
opportunity for the LIC and its residents created by the project.
► The CDE will create a subsidiary entity that serves as the vehicle to
transfer the tax credits through the structure.

Leveraged NMTC transaction: Leveraged
lender
Leveraged lender Leveraged lender

Leveraged lender Makes leveraged loan Receives collateral assignment
of the leveraged fund’s interest
in sub-CDE
► The leveraged lender could be a related party to the QALICB or a

third party.
► The leveraged lender will loan the additional capital needed to the
leveraged fund and will receive interest payments over the seven
years from the project.

Leveraged NMTC transaction: QALICB
QALICB
single-purpose
entity
► The QALICB is the project itself.

► QALICB will be responsible for all interest-only payments and
compliance during the seven-year compliance period.

Sample $10m transaction

Leveraged NMTC transaction: cash flow
Put/call option
New markets tax

credit investor $3,042,000 Leveraged lender
$6,958,000
(bank) equity
leveraged loan
Collateral
assignment of
Investment fund the leveraged
100% fund’s interest in
interest sub-CDE
99.99%
LP interest
$10,000,000
$3,900,000 QEI
NMTC
0.01% GP
interest $6,958,000
Subsidiary CDE A loan
$10,000,000 (LLC or LP)

NMTC allocation and
$1,000 cash
Community $2,542,000
B loan
QALICB
development entity single-purpose
$500,000
(allocatee) entity

Leverage transaction: seven-year interest
payments
Remaining
New markets tax loan B interest
credit investor to cover fund Leveraged lender
management
(bank) expenses
100% interest
Investment fund
Loan A
interest
payments
Remain loan B
interest and loan A
interest payments
Portion of loan B interest payments to cover

tax and audit expenses Loan B interest payments
Subsidiary CDE
(LLC or LP)
Community QALICB
Loan A interest payments
(allocatee) entity

Year seven: Unwinding the NMTC structure
Put/call option
New markets tax

credit investor Leveraged lender
$1,000
(bank) 100% interest
$6,958,000
and
Investment fund $2,542,000
Redemption of Redemption of
interest in 99.99% interest
leveraged fund for in subsidiary
loans A and B CDE
0.01% GP $6,958,000
A loan
interest Subsidiary CDE
(LLC or LP)
$2,542,000
Community B loan
QALICB
(allocatee) entity

Unwinding the NMTC structure
Put/call option
New markets tax

$1,000
Investment fund
Redemption of Redemption of
interest in 99.99% interest
leveraged fund for in subsidiary
loans A and B CDE
0.01% GP $6,958,000
A loan
interest Subsidiary CDE
(LLC or LP)
$2,542,000
Community B loan
QALICB
(allocatee) entity

Put/call option
New markets tax

$1,000
If the investor exercises their put Investment fund

option, $1,000 is paid by client to the
investor
*Some put options exceed $1,000; it
is a case-by-case basis.
$6,958,000
A loan
$2,542,000
B loan
QALICB
single-purpose
entity

If the put option is exercised, client will

now own their own debt.
Leveraged lender
$2,542,000 $6,958,000
B loan A loan
Investment fund
100% interest
$2,542,000 $6,958,000
B loan A loan
QALICB
single-purpose entity

NMTC road map
1. Location qualification – 3. Determine CDE interest – 5. Closing process – e.g., gather

determine whether or not meet and discuss project documentation, review terms of
the location falls into a with CDEs, investors and the transaction, structuring
qualified census tract community developers
Day 1 Day of
close
2. Review project information 4. Receive term sheet – the CDE 6. Final signoff and
– what is the investment, job and investor will formerly offer funding
creation, community impact allocation through a term
and need for NMTC? sheet – if accepted, closing
begins

Polling question
Who typically purchases the tax credits within the NMTC

program?
A. An investor
B. The future residents of the project
C. A large bank
D. Both A and C

Success stories – Health care

Case study – Adult emergency department
► Total project cost: $36m

► Allocation: $26.2m of federal allocation
► Number of CDEs: This deal had two separate closings:
► Closing 1: one Investor/CDE
► Closing 2: one Investor and three CDEs
► Community impacts:
► Job creation (both direct and indirect)
► Training
► Ability to expand in other areas of the campus
► Additional medical services in a medically underserved community
► Level 1 trauma
► Increased patient beds

Case study – Labor and delivery unit
► Total project cost: $17m

► Allocation: $6.5m of federal allocation and $10m of state allocation
► Number of CDEs: one Investor and two CDEs
► Community impacts:
► Job creation (both direct and indirect)
► Training
► Additional medical services in a medically underserved community
► Allowed the hospital to have one dedicated facility for both high-risk moms
and babies

Federal tax credits

Childcare facility income tax credit

Overview
► Federal income tax credit equal to the

sum of:
► 25% of the qualified childcare
expenditures
► 10% of the qualified childcare
resource and referral expenditures
► Capped at $150,000 for any taxable year
► Annuity credit
► Available to exempt organization through
a reduction in unrelated business income
tax (UBIT)
► Permanently extended with a 20-year
carryforward
► Able to look back to years opened under
statute (typically three years)

Overview
► Qualified childcare expenditures:

► Costs to acquire, construct, rehabilitate or expand property used as a qualified
childcare facility
► Eligible facilities allow deduction for depreciation and are not part of the principal
residence of the employer or its employees
► Operating costs for a childcare facility, including employee training, related
scholarship programs and increased compensation for employees with higher
levels of childcare training
► Qualified childcare facility:
► Must be principally used to provide childcare assistance
► Enrollment in facility must be open to employees during the taxable year
► Qualified childcare resource and referral expenditures
► E.g., subscription expenses paid to a third party to provide childcare services to
company employees

Claiming the tax credit
► Childcare facility tax credit

► Available for tax-exempt organizations
► Reported on Form 8882, then claimed as general business credit on
Form 3800, which is reportable on Form 990-T
Form 3800, Part III, Line 1k
Form 990-T, Part IV, Line 41c

Polling question
The maximum benefit for organizations eligible to use the

Veterans tax credit is the same for both for-profit and tax-
exempt organizations.
A. True
B. False
C. It depends

Veterans tax credit

Veterans tax credit
Overview
► An expanded work opportunity tax credit

(WOTC) is available to businesses that
hire eligible unemployed veterans, which
is also available to certain tax-exempt
organizations.
► The credit can be as high as $9,600 per
veteran for for-profit employers or up to
$6,240 for tax-exempt organizations.
► The credit for qualified tax-exempt
organizations is claimed as a credit
against the employer’s share of social
security tax on wages paid to all
employees.
► Employers who hire veterans with
service-related disabilities may be
eligible for the maximum credit.

Veterans tax credit
Overview
► The amount of the credit depends on a number of factors, including:

► The length of the veteran’s unemployment before hire
► Hours a veteran works
► The amount of first-year wages paid
► Qualified tax-exempt organizations described in Internal Revenue
Code (IRC) Section 501(c) and exempt from taxation under IRC
Section 501(a) may claim the credit for qualified veterans who begin
work:
► On or after December 31, 2014, and before January 1, 2020
► An eligible employer must file Form 8850 with the state workforce
agency within 28 days after the eligible worker begins work.

Claiming the credit
► Veterans tax credit

► Claimed on Form 5884-C as a credit against the employer’s share of
Social Security tax

Disaster zone and family and medical leave
tax credits status

HDZ employee retention tax credit
Overview
► Signed into law on

September 29, 2017
HR 3823
The Disaster Tax Relief and Airport and ► Provides broad array of relief measures
Airway Extension Act of 2017 aimed at assisting in the recovery efforts
(Hurricane
Disaster Zone “HDZ” employee for both individuals and businesses
retention tax credit) affected by Hurricanes Harvey, Irma
and Maria
► Provides a federal tax credit for

employers with work locations in disaster
zones that continued to pay employees
while the locations were inoperable

Key provisions
► Credit amount
► 40% of qualified wages (up to $6,000)
► Maximum $2,400 credit per employee
► WOTC cannot be claimed on the same set of wages but can be claimed
on the same individual
► Eligible employers
► An employer that had an active trade or business on the applicable date in
a Hurricane Harvey (8/23), Irma (9/4) or Maria (9/16) disaster zone that
was rendered inoperable by one of the hurricanes
► Eligible employees
► An employee whose principal place of employment on the applicable date
was in a Hurricane Harvey, Irma or Maria disaster zone
► See Form 5884-A Instructions for list of eligible disaster
zone counties

Key provisions
► Qualified wages
► Wages paid or incurred on any day after the applicable date and before
January 1, 2018, which occurs during the period:
► 1) Beginning on the date on which the trade or business became inoperable at
the principal place of employment of the employee
► 2) Ending on the date on which such trade or business has resumed significant
operations
► Qualified wages include wages paid, whether or not employee performs
any services, performs services at a different place of employment than
the principal place of employment or performs services at principal place
of employment before significant operations have resumed
► Wages as defined in §51(c)(1), which further defines wages as FUTA
wages under §3306(b)

California wildfires employee retention tax
credit
► On February 9, 2018, President Trump signed the

Bipartisan Budget Act of 2018 (Pub. L. 115-123) (the Act)
► Included in the Act was inclusion of counties impacted by the CA
Wildfires – CA Wildfires Employee Retention Tax Credit
► Law nearly identical to HDZ language, major difference being the
applicable date (October 8 for CA Wildfires)
► Same $6,000 cap on qualified wages
► Same “inoperability”/“resumption of significant operations” analysis
► Same December 31, 2017 end date for qualified wages
► See Form 5884-A Instructions for list of eligible disaster zone
counties

PFML tax credit
Overview
► Section 45S (the family and

medical leave credit) providing
employers a tax credit for paying
wages to eligible employees on
a leave under an employer’s
qualified family and medical
leave policy
► Enacted as part of the Tax Cuts
and Jobs Act of 2017
► Encourages employers to either
begin offering or expand paid
family and medical leave
policies benefiting employees

PFML tax credit
Overview
► Credit for wages paid during the employer’s tax years starting in 2018 and
2019
► Up to 12 weeks paid leave per employee per tax year
► Excludes certain wages paid:
► Made by a state/local government or mandated by state/local law
► For leave reasons not included in IRC §102(a) of the Family and Medical Leave Act
of 1993 (FMLA)
► Paid under other time-off programs, such as vacation and sick pay, and paid
personal leave
► Maximum benefit:
► Up to 25% of wages paid to each eligible employee (up to approximately $4,100
per eligible employee with an annual salary of $72,000)
► Wages taken into account for this credit may not overlap with wages taken
into account for other federal tax credits under same subpart of tax code
► Wages defined as FUTA wages under §3306(b)

Paid FML credit eligibility requirements
Employer Employee
► Must have a written policy providing a minimum of ► Must have been employed by such employer for
two weeks paid family and medical leave to all at least one year (no minimum hours
qualifying full-time employees (prorated for requirement)
qualifying part-time employees) ► For the preceding year, such employee must
► Payments must be equal to or greater than 50% of not have been paid in excess of 60% of the
the wages normally paid to such employee “highly compensated employee” amount in IRC
► Employer need not be subject to FMLA* to be §414(q)(1)(B) as indexed for the tax year**
eligible for the paid FML credit ► Employee need not be eligible for a job-
► Unclear if tax exempt employers are eligible for the protected family and medical leave for the
paid FML credit payment to qualify
*In general, FMLA covers employers with at least **$72,000 for 2018 ($120,000 x 60%)
50 employees who work at least 20 workweeks in
the current or prior calendar year.

Paid Family and Medical Leave
Tax credit opportunity
► Credit floor of 12.5% when employee is paid

50% of normal wages during leave Example:
If employees are paid 51% of normal
► Credit percentage increases 0.25% for each 1% wages, the tax credit would be
increase in wages paid 12.75%, which is 12.5% + .25% for
► Maximum of 25% credit when 100% of wages the additional 1% over 50%.
are paid during leave
% of eligible Credit % Total credit % of eligible Credit % Total credit

wages paid increase percent wages paid increase percent
50% 0% 12.50% 80% 7.50% 20.00%
60% 2.50% 15.00% 90% 10.00% 22.50%
70% 5.00% 17.50% 100% 12.50% 25.00%

Status of tax credit
► On March 27, 2018, the IRS issued the final 2017 Form 990-T
instructions.
► Contrary to the prior draft versions of the instructions, the updated
instructions specifically exclude employee retention credits.
► The instructions are contrary to 2005 Gulf Opportunity Zone Employer

Tax Credit for Hurricane Katrina, Rita and Wilma.

Status of tax credits
► Form 5884-A for calculating HDZ credit indicate only wages subject to
FUTA are eligible
► Anticipate a similar treatment for the PFML tax credit for 2018 and
2019
► Reached out to our contacts at the IRS and continue to seek other
avenues with EYWC
► Potential in future for look-back refund claims

Polling question
The maximum benefit for organizations eligible to use the

PFML tax credit is:
A. Up to 25% of wages up to approximately $4,100 per
employee with annual salary of $72,000.
B. Up to 40% of wages up to $6,000, or $2,400.
C. No longer applicable, the IRS took my credit away.
D. Capped at $150,000 for any taxable year.

Tax reform changes to unrelated business
income (UBI)

Key tax reform provisions affecting UBI
Treating expenses of certain fringe benefit programs as UBTI

► Tax-exempt organizations that provide such benefits must report the
expenditure as UBI unless the benefit is directly connected with a
taxable activity already included on Form 990-T.
► Fringe benefits subject to the rule:
► Expenses for commuter highway vehicle transportation, transit passes and
qualified parking increase UBTI if the benefits are excludable from employee
income under 132(f).
► On-premises athletic facility expenses increase UBTI if the facility is primarily
for the benefit of highlycompensated employees.
► Expense considerations:
► The employee pretax salary reduction (excludable under 132(f)) is likely to be
treated as UBTI.
► Post-tax reimbursements of commuting expenses that do not qualify for
exclusion under 132(f) should not generate UBTI.

Requiring UBTI to be calculated on a per-business, rather than per-

entity, basis
► For tax years beginning after December 31, 2017, organizations that
report income from more than one unrelated trade or business must
compute the net taxable income from each activity separately.
► Net operating losses (NOLs) of a particular business could offset
future income from that business but not from other businesses.
► However, NOLs arising in a tax year beginning before January 1, 2018,
that are carried forward to a tax year beginning after such date are not
subject to provision and can be applied to UBTI general.
► Key takeaway: The overall UBIT burden of organizations may increase
due to the inability to offset losses from one unrelated trade or business
against the gains of another.

Requiring UBTI to be calculated on a per-business, rather than per-

entity, basis (cont’d)
► Considerations:
► The key question for regulatory guidance will be, “What constitutes a
separate business?”
► Will all investment income of an exempt organization be treated as a single
business, or is each investment separate?
► There will be an increased emphasis on tracking and allocating expenses
to each business.
► If the separate computation would significantly increase UBTI, consider
transferring the unrelated business activities to a taxable corporation that
would be able to net the gains and losses on an aggregate basis.

Questions?

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Indirect tax credits and incentives

May 17, 2018

Page 2 May 17, 2018 Indirect tax credits and incentives

Page 3 May 17, 2018 Indirect tax credits and incentives

► Diesel engine replacement grants (DERG)

Page 4 May 17, 2018 Indirect tax credits and incentives

Page 5 May 17, 2018 Indirect tax credits and incentives

There is $2.9b of funding available for fleet repower or replacement with

Eligible expenditures include the repower or replacement of existing

The funding is available through an environmental mitigation trust (the trust)

Grants will be administered through each state’s EPA/DEQ or other

Page 6 May 17, 2018 Indirect tax credits and incentives

Repower or Repower or Other activities and

Page 7 May 17, 2018 Indirect tax credits and incentives

Page 8 May 17, 2018 Indirect tax credits and incentives

By Early spring Spring Late spring

Page 9 May 17, 2018 Indirect tax credits and incentives

Page 10 May 17, 2018 Indirect tax credits and incentives

Each state will develop its own program within the

► Awards based on $/nitrous oxide (NOx) reduction

► Environmental justice considerations

► Restricted to certain vehicles

► Scrapping of old vehicles

► Compliance requirements and timing

► Global positioning system vs. attestation

► Length: five years to seven years

► Public vs. private

► Some states may reserve some funds specifically for

Page 11 May 17, 2018 Indirect tax credits and incentives

Which of the following are true about the DERG program?

Page 12 May 17, 2018 Indirect tax credits and incentives

Page 13 May 17, 2018 Indirect tax credits and incentives

Page 14 May 17, 2018 Indirect tax credits and incentives

► QLICIs include, among other things, investments in businesses and

Page 15 May 17, 2018 Indirect tax credits and incentives

► On December 18, 2015, President Obama signed the Protecting

Page 16 May 17, 2018 Indirect tax credits and incentives

► Qualified active low-income community business (QALICB)

Page 17 May 17, 2018 Indirect tax credits and incentives

► Qualified projects (cont.)

Page 18 May 17, 2018 Indirect tax credits and incentives

► Specific business activities are excluded:

Page 19 May 17, 2018 Indirect tax credits and incentives

Page 20 May 17, 2018 Indirect tax credits and incentives

► By industry ► By community benefit

Page 21 May 17, 2018 Indirect tax credits and incentives

Which of the following is false about the NMTC program?

Page 22 May 17, 2018 Indirect tax credits and incentives

Page 23 May 17, 2018 Indirect tax credits and incentives

Total project investment: $ 10,000,000

Less estimated fees*:

Total estimated benefit at closing: $ 2,232,000

Page 24 May 17, 2018 Indirect tax credits and incentives

Page 25 May 17, 2018 Indirect tax credits and incentives

New markets tax NMTC investor NMTC investor

Page 26 May 17, 2018 Indirect tax credits and incentives

► The CDE is awarded authority to allocate tax credits by the CDFI

Page 27 May 17, 2018 Indirect tax credits and incentives

Leveraged lender Leveraged lender

► The leveraged lender could be a related party to the QALICB or a

Page 28 May 17, 2018 Indirect tax credits and incentives

► The QALICB is the project itself.

Page 29 May 17, 2018 Indirect tax credits and incentives

Page 30 May 17, 2018 Indirect tax credits and incentives