Previous posts have discussed the differences between a tax deduction and a tax credit. Transferability is the key distinction between the two. While we all have deductions that we can take against our gross income, these deductions are personal to each individual.
A tax credit is a direct credit against bottom line taxable income, and may be transferable to other taxpayers. There are restrictions to transferability based upon the type of tax credit, but in general, the portability of a tax credit has created a marketplace for the sale and transfer of many different types of tax credits. This is a very useful source of finance, equity, or reimbursement, especially in this economy.
At The Cherrytree Group, we advise many clients on the use, transfer, and sale of their tax credits, but in developing a market for tax credits, it is important that clients consult with us prior to conducting a project, rather than in the latter stages of a transaction. We can assist with developing the potential tax credit equity into a proposed budget or development pro-forma, which can lead to more control over financing costs.
Cherrytree has grown into a financial services company that has its own capital, credit lines and equity facilities, as well as a warehouse of tax credit buyers that include banks, insurance companies, Fortune 500 companies, multinational corporations, and high net-worth individuals. We have the capacity and capability to purchase your tax credits for our own account, or broker a sale of the tax credit to one of our buyers. For more information on this process, contact The Cherrytree Group.