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GAAP Accounting for Tax Credits

Comment Letters and Advocacy

Letter to FASB about Proposed Accounting Standards Update (Topic 323)
Oct. 6, 2022

Letter to FASB about EITF 21-A, Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method – Issue Summary No. 1C
June 7, 2022

Letter to FASB about Emerging Issues Task Force 21-A
March 23, 2022

Working Group

Who We Are

The GAAP Accounting for Tax Credits Working Group (GAAP Working Group) was founded by Novogradac in 2021 to provide a platform for tax credit industry participants who want to see favorable accounting principles preserved and extended to investments in community development and renewable energy tax credits. When the Financial Accounting Standards Board (FASB) expressed an openness to potentially allowing the extension of the generally accepted accounting practices (GAAP) for tax credit investments beyond the low-income housing tax credit (LIHTC), which has benefited from favorable accounting treatment since 2014, the GAAP Working Group sprang into action. Correcting the accounting treatment for investments in tax credits is of vital importance to increase the effectiveness and accuracy of the financial reporting for investments such as those made through the new markets tax credit, historic tax credit and renewable energy investment tax credit and production tax credit, as well as any new credits in the future. In addition to extending the current GAAP accounting for tax equity investments to all tax credits, the GAAP Working Group is focused on other accounting issues that may be detrimental to the efficacy of such investments.

Members of the GAAP Working Group include investors, developers or project sponsors, consultants and other professional who are participants in the tax credits listed above, as well as other similar state tax credits.

What We Do

The GAAP Working Group encourages and facilitates the collaboration of industry stakeholders in their efforts to understand the possible effects of FASB's and other rulemaking boards' decisions and provide recommendations to resolve technical and administrative issues that may arise. Each month, members meet to discuss issues, answers to frequently asked questions and recommended practices for correcting the accounting treatment for investments in tax credits, and–based on those discussions–provide comments and suggestions that are submitted in writing to the respective rulemaking board.

Accounting principles should not discourage tax credit investments with similar attributes, which is the case now, and the GAAP Working Group will engage FASB and other accounting rulemaking boards until sufficient accounting guidance for tax credit investments is provided.

Benefits of Membership

Membership in the GAAP Working Group provides:

  • Access to Novogradac's updates and analyses on issues as they happen.
  • The ability to keep abreast of emerging issues and provide input for shaping future accounting guidance so that the rules and markets work well together.
  • The chance to participate directly, but have ideas and suggestions included anonymously in discussions with and letters submitted to FASB.
  • Access to conceptual models and analysis to assist in the understanding of the impact of various proposals.

Priority Issues

The GAAP Working Group priority issues include:

  • Addressing the disparate financial accounting treatment for certain federal tax credit investments and proposing ways new guidance could more accurately reflect the economics of community development tax credit investments.
  • Expanding LIHTC GAAP treatment to other community development tax credit investments.
  • Addressing accounting issues that arise because of domestic and international minimum tax schemes that use financial statement income as a component of the calculation.

Membership

For information regarding the group and how to become a member, complete this form or contact Brad Elphick at (678) 339-3675 or [email protected]. There is an annual membership fee that covers the time incurred by Novogradac professionals to research, collaborate and prepare written and oral communications on behalf of the GAAP Working Group.  

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