HTC Transactional Structures
While a multitude of ownership structure configurations are utilized for syndicated tax credit transactions, there are two primary ownership structures that serve as a basis from which the others originate: 1) single-tier; and 2) multi-tier lease.
In the single-tier transaction ownership structure, the tax credit investor becomes a Limited Partner or Investor Member of the Building Ownership Entity and receives both the tax credits and depreciation benefits.
In contrast, under the multi-tier lease transaction ownership structure in accordance with Internal Revenue Code Section 50(d)(5), the Building Ownership Entity keeps most of the depreciation benefits while passing the rehabilitation tax credits to the tax credit investor who is a Limited Partner or Investor Member of the Leasing Company.
Under both transaction structures, the CCG Historic Partners Funds is usually allocated 99.99% of the profits and losses of either the Building Ownership Entity or Leasing Company and thus 99.99% of the rehabilitation tax credits. This is necessary since recognition of the rehabilitation tax credit follows the allocation of profit and loss. Also, based upon the transaction structure and its capital contributions, the Fund usually receives an annual 2%-to-3% priority return of capital. In addition, each transaction is structured with a put option which may be exercised after the end of the compliance period. Typically, the put option is priced at 5% to 15% of the investor's total capital contribution plus any unpaid priority return.