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Affordable Housing: The FASB Approves New Accounting for LIHTC – Other Tax Credits Are Left Out


12/11/13

During its December 11, 2013 meeting, the Financial Accounting Standards Board (FASB) voted to approve and finalize the proposed accounting for investments in a qualified affordable housing project. The accounting for a qualified affordable housing project (or an investment for a low income housing tax credit (LIHTC)) was originally discussed by the Emerging Issues Task Force (EITF) through its Issue 13-B. A final accounting standard (or ASU) for LIHTC investments is expected to be issued by the Board before year end. Once issued, CohnReznick will publish a summary of the new accounting.

What Does CohnReznick Think?
The ratification by the FASB paves the way for a significant improvement to the current accounting for investments in affordable housing properties. Once the new guidance is finalized, investors will need to decide whether they intend to early adopt the new accounting in 2013.

The proposed guidance would be applied retrospectively. The effective date for all entities is for fiscal years, and any interim periods within those years, beginning after December 15, 2014.  Early adoption will be permitted.

Other Types of Tax Credits

During the meeting, the Board also agreed that additional information was needed around other types of tax credits prior to any further discussion. The Board directed the FASB staff to perform additional outreach efforts. Once the additional research is performed the Board will consider adding the topic to its future agenda. As such, no new accounting guidance is currently planned for other types of tax credits and they will continue to apply existing US GAAP.

What Does CohnReznick Think?
The Board’s decision to delay guidance around other types of tax credits was related to the Board’s need to better understand how other tax credit investments are structured. Specifically, the Board wanted additional information on how the cash flows of other tax credit investments are shared when a profit motive exists and which investments require a profit motive. The Board felt that without this information they were unable to conclude on whether the current criteria for LIHTC investments would apply more broadly to other tax credits.

Contact:

Investors should contact their CohnReznick professional to understand how the new rules may apply to them. For specific questions regarding the FASB’s meeting, please contact your CohnReznick engagement partner for assistance or Michael Beck, CohnReznick’s National Director of Audit and Accounting, at 404-847-7728.


Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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