Supreme Court Denies Certiorari in Historic Boardwalk Hall Case
(June 4, 2013)
On May 28, 2013, the U.S. Supreme Court denied certiorari on Historic Boardwalk Hall LLC’s appeal of the Third Circuit Court of Appeals’ decision holding that an investor in a historic rehabilitation tax credit project was not a partner in the partnership and, therefore, was not entitled to use historic rehabilitation tax credits generated by the partnership. The Third Circuit reasoned that the investor was not a partner for tax purposes because the investor had no meaningful upside or downside risk in the outcome of the venture. For more information on Historic Boardwalk Hall, LLC v. Commissioner, please refer to this earlier Crowe Horwath LLP Tax Alert.
Until IRS guidance is issued, taxpayers contemplating new investments in historic rehabilitation tax credit projects should proceed with caution in light of the court’s decision. The terms of new projects should be carefully reviewed to determine if the credit allocations will withstand IRS challenge. Due to the uncertainty, some investors may choose to forgo any new investments until the IRS provides guidance.
Investors in existing historic rehabilitation tax credit projects with facts substantially similar to the Historic Boardwalk Hall case should determine what, if any, exposure they have.
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