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Jones Day Talks Tax Credits

JONES DAY TALKS®: Tax Credits: The Original ESG Investment?

Long before ESG caught the attention of corporate boardrooms, Wall Street, and the investing public, socially responsible investing thrived in the form of tax credit investments, often in the form of incentives implemented by the federal and state governments to encourage the development of real estate projects beneficial to a specific community. Jones Day’s Jeff Gaulin, Patrick Cronin, Doug Banghart, and John Kelley explain how these programs work and the potential impact on the areas they are designed to help, as well as how they have expanded and can help investors of all kinds meet their ESG objectives. For more information on other ESG topics that may be relevant for your organization, please see our ESG insights page.

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Dave Dalton:

Oh, absolutely, yeah. I mean, it could find an operating business creating widgets or what have you, or they can fund a bio-fuel companies as a project that's ongoing that is going to convert methane gases in a landfill and sell those to local businesses as clean energy. I mean, really, again, it's practically anything that you can think of absent certain sin businesses such as massage parlors and businesses that primarily sell alcohol. Congress really wanted to provide a lot of flexibility here.ESG investing, that's environmental, social and governance, has recently attracted the attention of corporate boardrooms, financial services firms and the media. But one form of ESG investment, that is tax credit investments, has been around in the US since the mid 1980s. We have a panel of Jones Day partners here to talk about how various tax credits work, their positive impact in the communities they target and the trends to watch in the near term. I'm Dave Dalton, you're listening to Jones Day Talks.

Dave Dalton:

Jeff Gaulin has extensive experience in structuring transactions involving the historic rehabilitation tax credit, the new markets tax credit and state tax credits. His practice has recently evolved to include advising clients with the opportunity zone program.

Dave Dalton:

Doug Banghart represents major institutional investors, developers, local governments, community development entities, or CDEs, and nonprofit organizations. Primarily in real estate redevelopment projects using historic rehabilitation tax credits and new market tax credits.

Dave Dalton:

John Kelley has extensive experience in real estate financing transactions involving tax credits and other community development programs. He advises clients in structuring and closing transactions involving low income housing tax credits, new markets tax credits, historic tax credits, energy tax credits, state tax credits, and opportunity zone benefits.

Dave Dalton:

And Patrick Cronin has extensive experience structuring transactions that utilize federal and state new market tax credits, historic tax credits and energy tax credits within their capital stacks. He has represented numerous institutional credit investors.

Dave Dalton:

All four gentlemen are Jones Day partners based primarily in the firm's Boston office. Jeff, Patrick, Doug, John. Hey, thank you all for being here today.

Jeff Gaulin:

Thank you.

Dave Dalton:

The title of this podcast is Tax Credit Investments, the Original ESG. I love that. I think Jeff proposed the title when we were knocking around the ideas for this podcast a couple of weeks ago, but it's really true. ESG is getting so much attention and yet the tax credit universe, if you will, has been around for a while. Has been a success story in financial market circuits and so forth. But let's go to Jeff first. Tell us exactly what a tax credit is. Explain the rationale out of Washington for incentivizing this socially responsible investing. Where did all this come from?

Jeff Gaulin:

Sure. I think decades ago, certainly long before my career began, there's a recognition that certain activities that are socially beneficial, however you want to define, that need a nudge. They need an economic benefit in order to draw in investment. And without that investment, projects can't get done, investments can't get made and the government then has to revert to a more of a direct government subsidy program. I think John will talk about it a little bit later on the low income housing side. But common housing programs funded by the government, weren't exactly up to snuff for decades. They fell into disrepair, they were poorly managed and what the government and Congress really realized is you need a private public partnership that draw in not only the investment dollars, but to deliver the actual benefit to the end user.

Jeff Gaulin:

So Congress slowly but surely started implementing more and more different types of tax credits in order to provide the subsidy necessary to draw in that private investment. Then in the end, not only created, but really fostered a marketplace for those credits so that investors could come in to projects in a well established market and receive the government subsidy in a much more organized fashion than just the government throwing around dollars or keeping their fingers crossed that a low income housing project may generate enough economic benefit.

Dave Dalton:

I see. Okay, I've got to ask because this is an election year after all, is this the kind of legislation or kind of project that has bipartisan support? It sounds like a good thing. Is there generally agreement that tax credits are a good thing from a societal standpoint and an economic standpoint? Is it something that mostly the two parties can agree on?

Jeff Gaulin:

Yeah, I would say this is one of the rare areas of true bipartisan support and you will see frequently in Congress, bills being sponsored and co-sponsored on both sides of the aisle across a variety of tax credits. It garners a ton of support because it both benefits distressed low income communities and it provides an increased return to investors. So you end up on both sides of delivering value with the government in the middle. But the government also spending far less dollars than they would to accomplish the same goal. Rather than spending 100% to get project X built, the government provides a slim subsidy that draws in the private investment. So both sides of the aisle, I think really view it as a productive way of encouraging these socially beneficial investments.

Dave Dalton:

Sure, sure. Sounds like potentially a lot of bang for the buck. One more thing with Jeff before we move on for a second. I'm assuming most of our audience knows, but just in case, can you describe for us the difference between a tax credit and a tax deduction? How do they differ?

Jeff Gaulin:

Sure, sure. In the tax world, the tax deduction is going to reduce your taxable income so when you calculate your tax liability, you would have less liability, but it's going to be based on the tax rate. You take your taxable income times the rate. If your tax rate is 20% for every dollar of deduction, you save 20 cents. Tax credit is a dollar for dollar reduction in your tax liability. First, you calculate your tax liability and you reduce it by a dollar. If you have a tax of a dollar, you save a dollar. It's effectively the government paying over cash to the recipient of the tax credit, but via a savings on their tax return.

Dave Dalton:

Got you, got you. In a sense, it comes right off the tax bill, right?

Jeff Gaulin:

Correct. Yeah and I will say one other thing. These are very different from what you'll hear of as tax shelters or corporate welfare or some of these more pejorative terms. Because these again are not shelters or loopholes in the tax code. These are expressly passed, targeted programs looking to accomplish the very goals that the tax credits are intended to serve. These aren't those bad or poorly viewed programs.

Dave Dalton:

It sounds very unambiguous. That's a very positive thing, potentially that's for certain. Let's go over to Doug Banghart for a minute. Doug, talk about how the credits work and how they ultimately solve the targeted problem where the government's concerned. What's the actual process, the mechanics of this?

Doug Banghart:

Sure. Let me answer the second question first. They solve the government's problem by making an activity which would not be profitable on a pre-tax basis, profitable on an after-tax basis. As Jeff explained, you have all these projects and I'm thinking right now about the historic tax in particular, which simply could not be done without a subsidy. With the subsidy that's provided by these tax credits, it makes those projects on an after tax basis possible. It's a tipping point for a lot of those. There's been a lot of studies and other things that have been done over the years, measuring what the overall impact to the fisc is of these tax credits.

Doug Banghart:

What they have determined is the increase in the economic activity of having a building that wouldn't be renovated, be renovated and all the jobs that creates and all the federal income taxes that people pay as a result of working on those jobs, the cost actually is very minimal after you take into account the additional activity that results from those. That's how they solve the problem. Congress decides what it thinks needs to be done, whether that's we need to have more renewable energy or we need to have more affordable housing and much higher quality affordable housing, or whether we need to restore historic buildings. Then this causes those things to happen.

Doug Banghart:

The mechanics of how it happens are generally the same for most credits. The new markets tax credit, I think Patrick will talk about a little bit, is a bit different. But for the others, it's mostly the same. And that is you have a sponsor that usually owns the projects. Sometimes the sponsor is able to use the tax credits themselves. After they take the tax credit and don't have to write a check for the taxes the next year that's as big as they would have, they decide that the activity is profitable and they undertake the project.

Doug Banghart:

More often, substantially more often, and this is really what we do as a practice. Those sponsors are unable to use those tax benefits in a efficient way. Either because they don't have the liability, or they need cash, or for any other number of reasons. So they partner with someone who can use the tax credits and those tend to be large financial institutions, but there are certainly household names that are also very involved in these tax credits. I think John's going to talk about them a little bit. A big part of that has been because this is the original ESG type investment and many of these companies have long before ESG was a thing, really thought that it was important for them as good citizens of the community to invest in a lot of these things. So they've been involved in them.

Doug Banghart:

What happens is, in a general way, the sponsor does the project, does all the stuff they're supposed to do and earns the credit. The credit is then allocated out to the investor and the investor in turn contributes capital into the project. That capital then can be either used for the construction or to pay down permanent financing or for any number of other things related to the project.

Dave Dalton:

Doug, can you talk about current trends or changes in this market?

Doug Banghart:

Yeah, I mean, I think a big one that's happening literally right this second is because there's so much uncertainty as to the tax situations and a lot of the investors as they don't know how much taxable income they're going to have, pricing is going down. That's not a good thing necessarily for the projects, but it's a great thing I think for the longterm stability of the programs. Because as pricing goes down, it increases the economic returns for the tax rate investors. So you're seeing a lot of people that hadn't looked at these programs before, whether it's because of ESG or the increasing returns, that they're seeing a lot of new entrance coming into the market. That has at least in the longterm, a very positive impact because it's a competitive program and the more people we have competing, the more efficient the process is.

Dave Dalton:

Doug, I'm going a bit off script. I don't need a number, but it sounds like the market is huge potentially. I don't know how liquid the credits are once they're generated or approved, but sounds like this is something that could be a substantial part of the real estate and tax industries, if you will. Is that correct?

Doug Banghart:

It is. It's billions of dollars a year and it's a very substantial part of the industry. I think as John will talk about more, I mean, it's really how affordable housing is supplied in the United States today. You walk around almost any major city and you look around and if you see a beautiful old building, it's extremely likely that the renovation of that building was financed with historic tax credits. It's been extremely successful all around the country. In major markets like New York City and Boston and other places, but also in much smaller communities. There's one in particular in Roanoke, Virginia, which is down the street from where I went to school and I watched what's happened there. I have a client that's been down there that I've had for 20 plus years. What they've done in that community with tax credits, it's just simply stunning, so.

Dave Dalton:

Yeah, I like the way this conversation is going, it's very positive. We do probably 40 podcasts a year and there are always two sides of things. We're talking about litigated matter, or there's new regulations are burdensome. This is very upbeat, if I could use an unsophisticated term. But I like the fact that this stuff is going on and it's out there and it proves to be popular. Let's talk some specifics for a second. Let's go over to John Kelley. Doug punted you on this. The low income housing tax credit, or LIHTC. Give us an overview of that program if you could, John.

John Kelley:

Sure. As Doug mentioned, the low income housing tax credit program, along with the historic tax credit program or what we call the OG ESG, these programs have been around a long time. The low income housing program actually became law in 1986 and has since then become our primary housing program in the US for low income persons. As Jeff mentioned, the program is designed as a tax incentive program to encourage companies that would not otherwise invest in housing or in affordable housing, to make an investment in housing, in exchange for the tax credit. And in low income housing tax credits, that's usually a 10 year stream of credits.

John Kelley:

Because if you think about it, affordable housing is not a profitable venture. No big company is going to build an affordable housing complex and expect a high return like they might for luxury condos. But by pairing the tax credit with affordable housing, now there's an economic incentive to encourage some private investment. And the low income housing tax credit program is really in my view, an excellent example of encouraging private capital to invest in what was traditionally a government program. This is often referred to as community development or sustainable finance. Now when we're talking about ESG finance and you look at ESG and what that means, and you look at the S part of ESG, people refer to that as socially responsible investing or mission related investing. In a lot of ways, I think the low income housing tax program fits perfectly under the S of ESG.

John Kelley:

If you think about it, access to safe housing, a safe home, a safe place to go to at the end of a working day is the most important thing someone can have and a basic human need that we really need to fulfill before we can do anything else. The low income housing tax credit program is a great way to do that. Many investors have recognized that and we often see or always see most of names that you would recognize investing in these programs. Including large banks, medium-sized banks, insurance companies, Fortune 500 companies. Anybody that's got an interest in socially responsible investing and also an economic incentive to invest, will look at low income housing tax credits.

Dave Dalton:

I think it was Jeff referenced this earlier, but if you could, in a little bit of detail, talk about how this is better, John, than the housing projects that we grew up knowing about and hearing of. How has this advanced the ball a little bit?

John Kelley:

Well, this program was actually designed in response to the housing projects. The affordable housing in this country before 1986 was mostly financed through government grants and subsidies. Those resulted unfortunately, in the most derided so-called housing projects that people think about when they think about that term. It was in 1986 and if you remember, Ronald Reagan was president then, so it was a conservative president that advanced this program supported by a liberal Congress. So we had both sides of the political spectrum supporting this program. The way it was designed, as I said, encouraged private capital to invest in the program. The legislation actually encourages project proposals for housing to compete with each other to receive an allocation of tax credits. There's only a finite amount of tax credits that are allocated to this program every year. So if you want to build a low income housing tax project, you have to compete with other people who want to do the same. When you have that kind of competition, you get the best projects built.

Dave Dalton:

That's interesting because again, I shouldn't assume anything in these discussions. But I thought, "Okay, if you meet certain criteria, boom, here's a tax credit." But there's a ceiling, there's a limit.

John Kelley:

That's right.

Dave Dalton:

I was hoping you could talk us through the mechanics of a deal, but I guess if you can get to talking about who decides, who approves, who picks, that kind of thing in terms of a tax credit arrangement?

John Kelley:

The program is unique because even though it's a federal tax program and there's also, I should mention many state versions of the program as well, the federal program is administered by the states, which is unusual in our federal tax structure. Each state has an agency, and some states more than one agency, that decides what their housing needs are in their area. For example, a state with a large population in large cities may say, "We need lots of housing in the big cities. High rise apartment complexes." Other states with small populations that are maybe more rural says, "Well, we don't need high rise apartment complexes, what we need is a bunch of small garden style, apartment complexes spread out across the state."

John Kelley:

So the agencies have the ability to decide what their needs are, and then they will put together a plan that they communicate to the public that says, "All right, here's what we're looking for, for projects." And a developer of affordable housing will look at that and say, "Oh, okay. I think I can build a project here that meets these requirements." And they submit their application to the state. The state reviews all the applications and says, "Okay, we think application A, for example, is going to be the best application. So we're going to allocate some credits to it."

John Kelley:

What happens there is you have the competition and the best projects get built that meet the state's needs. The way we control that is Congress has capped the amount of credits each state can allocate per year. So with a finite resource like the tax credit, you engender the competition to build the best projects.

Dave Dalton:

That's so encouraging. And this is an annual allotment if you will, or every two years?

John Kelley:

Yes.

Dave Dalton:

Every year. So new tax credits...

John Kelley:

New allotment, it's based on population. Then what a developer of an affordable housing project will do is they'll put together their capital stack and they will look for a partner investor to be allocated the tax credit portion of the project. And in exchange, that partner will put equity into the project, which the developer will use to build the project with the rest of the capital stack.

Dave Dalton:

You don't have to name names, but are there pretty consistent players? Are always the same financial institutions coming in thinking, "We know this business, we understand it. We know what looks like a good project and we're in," or is it just all over the board?

John Kelley:

No, the investors in this industry are pretty standard. As I mentioned before, all the big banks invest in this industry. Many of the mid-sized banks invest. Insurance companies invest, some Fortune 500 companies also invest and they invest for a variety of reasons. Since the program has been around since 1986 and it's a well established market, investors are very confident investing in these types of projects because they hardly ever fail. I mean, quite honestly, they view this investment as very safe.

John Kelley:

Banks also like this kind of investment because they get credit under the community reinvestment act, which requires them to put money back into their communities where they bank. They get credit under that act for investing in low income housing so they can get a double header. They can get the tax credit and they can get credit under the community reinvestment act. So we see a lot of banks do that.

John Kelley:

Then other companies that want to make socially responsible investments, but are cautious about risk or care about housing or housing is something that they are motivated to invest in, will often look at the low income housing tax credit, as well.

Dave Dalton:

Interesting. Well, we're at a point, everyone is talking about ESG and someone earlier in this call said there seems to be a lot of emphasis on the environmental component of this. But this is something that's been around for a long time and has obvious tangible benefits to the communities where it serves. So I'm not surprised there's competition looking for the best deals.

Dave Dalton:

Let's go over to Patrick Cronin for a second. I wanted to talk about the new markets tax credit or NMTC. As I was researching, preparing for this program I was, I guess, going in less familiar with this program. But can you talk about what it is, Patrick, and how it differs from what we've talked about so far?

Patrick Cronin:

Yeah, sure. I'd be happy to. Congress created the NMTC program in 2000 to incentivize investments that create jobs and provide services in economically disadvantaged census tracks. The program is really flexible regarding the project type and purpose. While primarily used to fund commercial and industrial developments, community facilities, operating businesses and mixed use projects, I mean, really the sky's the limit. There are certain excluded businesses, certain types of sin businesses, but really sky's the limit when it comes to an NMTCs. NMTCs can be layered with many other financing sources, such as traditional debt, grants, tax increment financing, and historic tax credits.

Patrick Cronin:

To benefit from an NMTC, the project needs to obtain financing from an organization certified as what is known as a community development entity or a CDE, by the community development financial institutions fund, or a CDFI fund. That's a division of treasury and the CDFI fund administers the NMTC program and awards NMTC authority to CDEs via a pretty competitive application process on what is typically an annual basis. Many different entities, including banks, developers, local governments, nonprofits, have formed their own CDEs to be able to participate in this program.

Patrick Cronin:

These CDEs use the NMTC authority that they are awarded to provide subsidized financing to businesses that qualify as what is known as a qualified active low income community business, or a QALICB. There's an alphabet soup in the NMTC program, as with all of the tax credits. But in any event, the QALICBs could be for profit or nonprofit businesses and need to be located in and provide services to communities in qualifying census tracks. To obtain the funds that the CDEs need to invest in QALICBs, they reach out to private investors. The NMTC program provides these investors with federal income tax credits based on equity investments made in the CDEs. This investment known as a qualified equity investment or a QEI and the investors receive a tax credit of 39% of the QEI, which is claimed over seven years.

Patrick Cronin:

These investors are primarily large banks or other regulated financial institutions, such as insurance companies, or really any large corporation, Fortune 500 or otherwise, that has some ability to forecast their future federal income tax liability. Obviously, again, the credit is being claimed over seven years. You want to be able to use the credits. The CDE uses the proceeds of the QEI to provide below market rate equity or debt capital to the QALICBs and that capital is known as a qualified low income community investment or a QLICI. Those QLICIs are typically structured as seven year interest only loans to mirror the compliance period for QEIs. Then obviously, because the credits are claimed over seven years, investors are not paying a dollar per credit. They apply some discount factor when determining how much upfront cash they're willing to provide the CDE in return for each dollar of the tax credit.

Patrick Cronin:

I should mention too, that obviously qualifying as a QALICB doesn't guarantee that a project is going to get NMTC financing. Similar to the hyper-competitive aspect of the CDEs applying to the CDFI fund, for every deal that lands allocation, I'm sure there are dozens of QALICBs that don't actually ever get to participate in a new markets program. The CDEs typically finance projects that I think they think best meet the goals of the program. Those are the ones that can create positive community impacts that can be quantified and documented. And investing in those types of projects, I think the CDEs hopefully believe that those projects will strengthen their future applications so they continue to get awards.

Patrick Cronin:

Also too, there are some CDEs in the industry that have missions that are limited in terms of what types of projects they finance, whether it be charter schools, or supermarkets in food deserts, or what have you.

Dave Dalton:

You mentioned mixed use and it sounds like there are a lot of potential applications here. I mean, would it go as far as to light manufacturing in a downtrodden area where we need jobs here? We need well paying jobs, as they say, if you're grammatically correct, would it extend that far if someone says-

Patrick Cronin:

Dave Dalton:

Sure. Well, talk about how a typical deal comes together and how long is the process, generally? I know no two deals are alike, of course, but how does this come together and what can you expect if you want to be involved in terms of getting it done?

Patrick Cronin:

If you're a business and you want to participate in NMTC transaction, you really need to have a compelling story to stand out and say, "This is why you should invest in my project." Again, that goes back to the fact that the application process for tax credit authority is hyper competitive. So the CDEs are looking for deals that they believe will really stand out in their applications. Part of that is if you are a business looking for these deals, is to really be able to document and quantify the community impact that you're going to have. If you can find the allocation, then the way these deals are typically structured, going back to the QEI for a second. If you have a $10 million QEI, that's going to generate $3.9 million in tax credits over seven years. Again, an investor's not going to pay $3.9 million now for tax credits they're going to be able to claim over seven years, so there's a discount factor there.

Patrick Cronin:

Now, pricing goes up and down. Right now it's a little bit lower than what it has been in the past. But let's assume that an investor is going to pay .80 cents a credit. They're going to pay roughly $3.12 million for the $3.9 million in credits generated by a $10 million QEI. The question then is where does the CDE come up with the other funds to hit that $10 million number? What typically happens is that an investor will form an investment fund, a special purpose entity, a single member LLC investment fund, to pool tax credit equity that the investor is providing for the credits with other financing sources. These other financing sources put capital to the investment fund as debt so that the tax credit investor maintains ownership of the fund and can claim 100% of the credits. This loan is known as a leveraged loan.

Patrick Cronin:

In many cases, the leveraged loan is a traditional commercial loan that's based on the project's underlying economics. But in many other cases, the original source of the leveraged loan comes from the project sponsor or other non bank sources, such as grants, donations, tax increment financing, what have you. Typically, the private sponsor or the one bringing the deal to the table is responsible for arranging the sources to fund the leveraged loan. The leveraged loan is made to the investment fund, they pool that money with the tax credit equity that the investor's providing to make the QEI into the CDE. The CDE typically turns around and makes loans to the QALICB. As the QALICB is making debt service payments to the CDE, the CDE in turn distributes the vast majority of those funds to the investment fund, which is then able to make payments on the leveraged loan.

Patrick Cronin:

The CDEs often structure their QLICI loans in two pieces to mirror the leveraged loan and the NMTC equity at the investment fund level. The A loan typically mirrors the leveraged loan and the B loan mirrors the tax credit equity, minus any fees that the CDEs will charge and they do charge their fair share fees. The B loan, I'm going to shorthand it here a little bit, the B loan is in effect sold to the project sponsor, oftentimes for a nominal amount after the seven year compliance period ends. Thus converting the equity to a permanent subsidy.

Dave Dalton:

I see. A lot of moving parts here.

Patrick Cronin:

Absolutely.

Dave Dalton:

Yeah, yeah. You don't expect these things to necessarily be straight forward once you unwind this a little bit. Certainly it helps to have experienced counsel that's had their hand on this for a while, that's for certain.

Dave Dalton:

Let's go back to Jeff for a second and talk about historic tax credits. Now these are better known, right Jeff? I've heard of these. Even a lay person's probably heard of historic tax credits, but talk about that program and how it works.

Jeff Gaulin:

Sure. Yeah, it is more well known. I mean, you'll often see placards on the front of buildings that will evidence the fact that it's registered on the National Registry of Historic Places or otherwise is a historic property. This program as its name implies, is intended to assist in the revitalization and renovation of historic structures. I think anybody who's been to a city in America or has traveled around some regions of the country, will see dilapidated old structures that have been unused for decades, just sitting there. When the program was originally implemented, the goal was to figure out how to cause somebody to want to redevelop that site and incur all of the expense necessary to often clean up environmental issues, figure out how to structurally make the building sound. Repurpose the property for something else, which is obviously more expensive than just a ground up construction project.

Jeff Gaulin:

So the historic credit was passed in order to incentivize all of that and provide a slice of subsidy to offset those increased costs. This is another area where the government and private enterprise are teaming up because not only do you have the IRS and the tax aspects, but the National Park Service also reviews and approves the plans for rehabilitation to ensure that what you're doing to the property, in fact, retains its historic character. You can't just take a building, get a credit and have it look like any other new property. They really do want to make sure that the history of the building or the structure is retained.

Jeff Gaulin:

So it's a multi-government agency type program where the end product tends to be transformational. Not just for the building, but for the surrounding area. Huge mill complexes in some of these older American cities, right along waterways that were empty holes for a long time, being revitalized into multi-use real anchor properties that cause the entire neighborhood to come back to life. That was the purpose of the program. To bring in private capital to offset some of these costs and really encourage the redevelopment of these blighted areas.

Dave Dalton:

Again, it sounds like something that's got to be universally popular. Who could be against this? It sounds like a wonderful program. Is it as competitive as some of the other things we've talked about in terms of getting the credit?

Jeff Gaulin:

The good news in the historic area is there's no cap. There is no cap or awards process for the credit itself. You do need to get the park service to approve, but there's no dollar cap. It's capped by the number of historic properties. Although there are many, many, many, many, many historic properties. You can look that up on the National Park Service website, there's a list of properties. But there is no cap. The competitive nature in LITC and new markets where you're trying to get the best product, is really solved by the park service reviewing the plans, because they're going to make sure you're doing the rehab in the right way.

Dave Dalton:

Sounds fine. Sounds fine. Hey, this has been informative, instructive, very positive, like I said before. I've enjoyed talking about this. Let's look medium term, near term. Again, it's an election year, but I doubt this is something anyone would want to tamper with too much. But are there any changes that you're aware of, anything we ought to look for? Are there trends in terms of tax credit investments the audience might want to hear about or are we standing pat? We can go around the horn, but anything that you're sensing in terms of the marketplace that might be evolving good or bad?

John Kelley:

Well, this is John and I was going to mention one program that we didn't really have time to talk about today. But it's a new program called the opportunity zone program, which is also another tax incentive program. It was just passed in 2017, I believe. This was a program to encourage investments in economically distressed areas and designated census tracks. I think what that shows is because we keep adding new programs to existing programs that are working, and there's a lot of large appetite in Congress anyway to continue and to encourage and to incentivize this kind of investing, right now I see all tax credit projects and the opportunity zone program probably growing in the future years.

Dave Dalton:

John, thanks. Hey, we will leave it right there. Hey, great conversation today. Jeff, Patrick, Doug and John, thanks for your time. Let's do this again as circumstances arise or if there's a movement in the market or anything else we need to talk about. I think this is going to be a popular program. So thanks so much for your time today. Take care.

Jeff Gaulin:

Thank you.

Dave Dalton:

For more information on Jones Day's real estate and tax practices, please visit jonesday.com. You can also find complete biographies and contact information for Jeff, Doug, John, and Patrick on that site. And while you're there, be sure to visit our Insights page where you'll see white papers, client alerts, newsletters, more podcasts, videos, and other valuable content. Subscribe to JONES DAY TALKS® on Apple Podcasts or wherever you find quality podcasts. As always, we thank you for listening. I'm Dave Dalton, we'll talk to you next time.

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