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Note 5 - Qualified Affordable Housing Partnership Investments
 6 Months Ended
Jun. 30, 2020
Notes to Financial Statements  
Qualified Affordable Housing Project Investments [Text Block]

NOTE 5. QUALIFIED AFFORDABLE HOUSING PARTNERSHIP INVESTMENTS

 

We have invested in five separate LIHTC partnerships, which provide the Company with CRA credit. Additionally, the investments in LIHTC partnerships provide us with tax credits and with operating loss tax benefits over an approximately 23-year period. The tax credits and the operating loss tax benefits that are generated by each of the properties are expected to exceed the total value of the investments we made and provide returns on the investments of between 2% and 6% over the life of the investment. None of the original investments will be repaid.

 

Our investments in Qualified Affordable Housing Partnerships totaled $3.2 million at June 30, 2020. These investments are recorded in Other Assets with a corresponding funding obligation of $1.3 million recorded in Other Liabilities in our Consolidated Balance Sheets. The investments in LIHTC partnerships are being accounted for using the proportional amortization method, under which we amortize the initial cost of an investment in proportion to the amount of the tax credits and other tax benefits received, and recognize the net investment performance in the Consolidated Statements of Income as a component of income tax expense. During the first quarter of 2020, we invested $1.0 million in an additional LIHTC partnership, Boston Capital.

 

The following tables present our original investment in LIHTC partnerships, the current recorded investment balance, and the unfunded liability balance of each investment at June 30, 2020 and December 31, 2019. In addition, the tables reflect the tax credits and tax benefits, amortization of the investment and the net impact to our income tax provision for the six months ended June 30, 2020 and 2019.

 

  

At June 30, 2020

  

For the Six Months Ended June 30, 2020

 

(Amounts in thousands)

 

Original

Investment

Value

  

Current

Recorded

Investment

  

Unfunded

Liability

Obligation

  

Tax Credits

and

Benefits

  

Amortization

of

Investments

  

Net

Income Tax

Benefit (Expense)

 

Qualified Affordable Housing Partnerships:

                        

Raymond James California Housing Opportunities Fund II

 $2,000  $762  $22  $99  $90  $9 

WNC Institutional Tax Credit Fund 38, L.P.

  1,000   357   —   52   43   9 

Merritt Community Capital Corporation Fund XV, L.P.

  2,500   958   316   112   109   3 

California Affordable Housing Fund

  2,454   191   —   12   19   (7)

Boston Capital

  1,000   976   1,000   33   24   9 

Total

 $8,954  $3,244  $1,338  $308  $285  $23 

 

 

  

At December 31, 2019

  

For the Six Months Ended June 30, 2019

 

(Amounts in thousands)

 

Original

Investment

Value

  

Current

Recorded

Investment

  

Unfunded

Liability

Obligation

  

Tax Credits

and

Benefits

  

Amortization

of

Investments

  

Net

Income Tax

Benefit (Expense)

 

Qualified Affordable Housing Partnerships:

                        

Raymond James California Housing Opportunities Fund II

 $2,000  $852  $22  $100  $90  $10 

WNC Institutional Tax Credit Fund 38, L.P.

  1,000   400   —   54   45   9 

Merritt Community Capital Corporation Fund XV, L.P.

  2,500   1,067   316   112   110   2 

California Affordable Housing Fund

  2,454   210   —   12   20   (8)

Total

 $7,954  $2,529  $338  $278  $265  $13 

 

 

The following tables present our generated tax credits and tax benefits from investments in qualified affordable housing partnerships for the three and six months ended June 30, 2020 and 2019.

 

  

For the Three Months Ended

 
  

June 30, 2020

  

June 30, 2019

 

 

 

Generated

  

Tax Benefits From

  

Generated

  

Tax Benefits from

 

(Amounts in thousands)

 

Tax Credits

  

Taxable Losses

  

Tax Credits

  

Taxable Losses

 
Qualified Affordable Housing Partnerships:                

Raymond James California Housing Opportunities Fund II

 $43  $7  $43  $7 

WNC Institutional Tax Credit Fund 38, L.P.

  22   4   23   4 

Merritt Community Capital Corporation Fund XV, L.P.

  48   8   48   8 

California Affordable Housing Fund

  1   6   —   6 

Boston Capital

  11   5   —   — 

Total

 $125  $30  $114  $25 

 

 

 

  

For the Six Months Ended

 
  

June 30, 2020

  

June 30, 2019

 
  

Generated

  

Tax Benefits From

  

Generated

  

Tax Benefits from

 

(Amounts in thousands)

 

Tax Credits

  

Taxable Losses

  

Tax Credits

  

Taxable Losses

 

Qualified Affordable Housing Partnerships:

                

Raymond James California Housing Opportunities Fund II

 $85  $14  $85  $15 

WNC Institutional Tax Credit Fund 38, L.P.

  44   8   46   8 

Merritt Community Capital Corporation Fund XV, L.P.

  96   16   96   16 

California Affordable Housing Fund

  1   11   —   12 

Boston Capital

  22   11   —   — 

Total

 $248  $60  $227  $51 

 

The following table reflects the anticipated net income tax benefit and (expense) at June 30, 2020 that is expected to be recognized over the remaining lives of the investments.

 

(Amounts in thousands)

Qualified Affordable Housing Partnerships:

Anticipated income tax benefit, net less

amortization of investments

 

2020

  

2021

  

2022

  

2023

  

2024

and

thereafter

  

Total

 

Raymond James California Housing Opportunities Fund II

 $14  $19  $19  $18  $16  $86 

WNC Institutional Tax Credit Fund 38, L.P.

  12   16   14   13   14   69 

Merritt Community Capital Corporation Fund XV, L.P.

  3   3   3   3   4   16 

California Affordable Housing Fund

  (10)  (14)  (13)  (35)  —   (72)

Boston Capital

  11   23   24   23   171   252 

Total income tax benefit, net

 $30  $47  $47  $22  $205  $351