State Tax Credits – Brief Overview Developers desire to “sell” their state tax credits Credit Investor purchases - Certificated Credit Investor has Federal deduction for payment of state tax. Income to Buyer as they use appreciated property Income to seller (Developer) of credit Credit Investor invests in partnership – Allocated Credit Loss of Federal Deduction Positive Capital account to write off What establishes investor as a partner? 1

Partnership Allocation State Investor MM Federal Investor Federal Credits Allocated 100% to Federal Investor State Credits Allocated 100% to State Investor 1% $’s 79% .01% 99.99% $’s Real Estate Entity Landlord Master Tenant $’s 20% Credit Pass Through Lease 2

Certificate Sale State Investor MM Federal Investor Federal Credits Allocated 100% to Federal Investor State Credits Certificate Sold To State Investor NA $’s 80% .01% 99.99% $’s Real Estate Entity Landlord Master Tenant $’s 20% Credit Pass Through Lease 3

Certificate Sale - Structuring State Credit Investor MM Cash Tax Credit General Partner Landlord Certificate Purchased Equity SCP Member Tax Credit certificate allocated 4