Revenue Procedure 2014—12 (the "Rev Proc") issued by the Internal Revenue Service creates a safe harbor for investors in the Federal Historic Tax Credit. It is anticipated that in the aftermath of the Rev Proc changes will be made in the underwriting and structuring of Federal Historic Tax Credit transactions. The Rev Proc requires that a tax credit investor receive reasonably anticipated value, exclusive of tax benefits, as a result of its investment in developer partnership or master tenant. The issue of value may be satisfied by the traiditonal preferential return although a preferential return cannot be guaranteed and must be dependent upon the success of the project. With respect t the back end, the Rev. Proc prohibits an option to the developer to purchase the Investor's interest but does permit the traditional "put" right of the tax credit investor to sell its interest to the sponsor as long as the sale is for not more than the fair market of the value of the investor's interest and the tax credit investor does not abandon its interest. Accordingly it appears that the traditional preferred return to the tax credit investor and the investor "put" right are preserved by the Rev. Proc provided that the preferred return is a not guaranteed and economic interest of the tax credit investor is not reduced by "unreasonable" fees and expenses which would distort the economic benefit to the tax credit investor.
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