Presentation to NORA 2016 Annual Summit Creative Financing Strategies Clueless (No More): Presentation to NORA 2016 Annual Summit Creative Financing Strategies Cheryl Vinall Denney McAfee & Taft, Practice Group Leader (405) 552-2295 cheryl.denney@mcafeetaft.com

The content of this presentation has been prepared by McAfee & Taft for information purposes only and should not be relied upon as legal advice.  Specific legal action should be taken only after consulting a qualified attorney.

Overview: General Tax Incentives Federal Tax Incentives: New Markets Tax Credit Federal Historic Rehabilitation Tax Credit State & Local Tax Incentives Tax Increment Financing (TIF) Quality Jobs Program & Progeny State Historic Rehabilitation Tax Credit

Overview of NMTC Program Created in 2002 Administered by Community Development Financial Institutions Fund (CDFI Fund) Low-Income Housing Tax Credits (LIHTCs) incentivize taxpayers to invest in affordable housing NMTCs incentivizes taxpayers to invest in businesses located in “Low-Income Communities”

Taxpayer must make equity investment or loan through a “Community Development Entity” (CDE) that has received an allocation of New Markets Tax Credits from the federal government Current Oklahoma CDEs that have received allocations (present or past): New Markets Redevelopment / Chuck Wiggin Rural Enterprises of Oklahoma, Inc. Chickasaw Nation MetaMarkets Cherokee Nation

Community Development Entity Investor $$$ Community Development Entity (CDE) Operating Company

Investor Leverage Lender Investment Fund Comm Dev Entity (CDE) $$$ Investment Fund Comm Dev Entity (CDE) Operating Company

Calculation of Benefit to Project (Allocation Amount * Tax Credit Percentage) * Tax Credit Equity Percentage ($10,000,000 * 39%) * 86% = $3,354,000 Less CDE fees and Transaction Costs means “net benefit” is usually 20-24% of allocation amount Potential tax impacts at unwind

“Low-Income Communities” in Northeast Oklahoma

Overview of Federal Historic Rehab Credit Incentivizes taxpayers to rehabilitate historical properties Two Types of Credit 20% Credit -- Properties must either be (A) listed on the National Register or (B) part of a neighborhood that is listed on the National Register and contribute to history of such neighborhood 10% Credit – Properties just have to be constructed prior to 1936

Overview of Federal Historic Rehab Credit (cont’d) Credit accrues to owner of property but can be passed-thru to lessee under certain circumstances Must own property for five years following “placed in service” date Rehabilitation governed by National Park System and administered by State Historical Preservation Office Tax credit governed by IRS – part of Tax Code Historic Boardwalk Hall case and status of industry

Investor Property Owner Master Tenant Entity Tenants Historical Bldg

Calculation of Benefit to Project (Amount of “Qualified Rehab Expenditures” * Tax Credit Percentage) * Tax Credit Equity Percentage ($10,000,000 * 20%) * 90% = $1,800,000 Plus “piggy-back” state tax credit (see below) Less Return to Investor and Transaction Costs

Overview: General Tax Incentives Federal Tax Incentives: New Markets Tax Credit Federal Historic Rehabilitation Tax Credit State & Local Tax Incentives Tax Increment Financing (TIF) Quality Jobs Program & Progeny State Historic Rehabilitation Tax Credit

Tax Increment Financing (TIFs) State statute allows local governments to capture incremental taxes within a specified area and dedicate such funds to a specific use Incremental tax can be ad valorem (real and personal) and/or sales taxes Specific uses include, among other things: infrastructure improvements required for a specific project “assistance in development financing” – e.g., low-interest loans to private developers for project costs

Tax Increment Financing (cont’d) Public process requiring local government support Local government passes resolution creating TIF Review Committee TIF Review Committee prepares Project Plan usually with input from developer TIF Review Committee meetings are subject to Open Meetings Act and at least two meetings require public notice TIF Review Committee makes recommendation to local government Local government takes action on TIF Review Committee’s recommendation

Original Quality Jobs Program Provides cash rebate to employer up to 5% of new payroll for up to 10 years Up to 6% in certain instances (e.g., if at least 10% of new payroll are qualified military veterans) General Criteria: Qualifying industry (NAIC) Pay lower of average county wage or state threshold wage Achieve $2.5M new annual payroll within 3 years Offer basic health insurance to employees with employee not paying more than 50% of the premium State benefit limit

Small Employer Quality Jobs Program Provides cash rebates for qualifying small businesses up to a 5% of new payroll for up to 7 years Criteria 90 employees or less at time of application and average of 90 employees or less over the past four (4) quarters at the time of application Pay 110% of the average county wage Have 75% out-of-state sales Offer basic health insurance to employees with employee not paying more than 50% of the premium State Benefit Limit

Overview of State Historic Rehab Credit Piggy-backs on Federal Historic Rehab Credit and matches credit amount (20% / 10%) Freely transferable Required filings with Oklahoma Tax Commission Potential income tax on sale price reduces overall benefit