HOW WE SERVE
INSURANCE COMPANIES
We partner with insurance companies to meet their specific tax planning needs. By acquiring tax credits, a tax department can address state tax liabilities at a discount while simultaneously redirecting tax dollars to underserved communities, leveraging their power to make a direct difference in individual lives. We focus on providing state tax credits that minimize additional workload for the tax department, and we provide unmatched guidance and on-the-ground support at every stage of the process. Clients benefit from our specialized expertise, knowledge of current and proposed legislation, and unwavering commitment to their objectives.
Can state tax credits offset state premium tax?
Legislation differs from state to state. Sugar Creek Capital invests capital in affordable housing and historics where the legislation allows the credit to offset insurance premium tax. Missouri and Georgia have the longest-running programs, and Sugar Creek Capital has expanded into other states and the District of Columbia as they have passed legislation allowing a credit offset. In recent years, these states include Arizona, Colorado, Hawaii, Kansas, Nebraska, Oklahoma, South Carolina, Utah, Virginia, and Wisconsin.
Does this investment contribute to meeting our ESG goals?
States approve the projects based on a point system that ensures that credits are awarded to the projects that create the greatest impact in the underserved communities where they are located. More specific data can be provided as credits are allocated to the taxpayer.
Generally, how does this work?
As a member of the Sugar Creek Housing Tax Credit Fund (SCHTCF), the taxpayer is entitled to an annual allocation of available state tax credits. A Tax Credit Allocation Agreement (TCAA) is signed each year, specifying the amount of credits the taxpayer requests. The taxpayer will fund at the specified price on the agreed-upon date, and the tax package is timely delivered for attachment to the premium tax return.
Is there a federal investor?
A federal syndicator invests side by side with Sugar Creek Capital in each project and syndicates the federal low-income housing credit or historic credits. These syndicators are generally well-known and trusted names in the investment community.
How do I account for these credits?
We recommend you meet with your accounting policy team to determine the correct reporting for GAAP and STAT.
Will I receive a federal or state K-1?
Sugar Creek is active in states that require the taxpayer to be a partner for state law purposes but not state tax purposes. Therefore, the taxpayer is only required to receive the credit allocation and does not share in other partnership attributes, such as capital, revenue, or expense. The taxpayer only receives a state Schedule K-1 equivalent with a single entry for the state tax credits. The state Schedule K-1 equivalent is part of the tax package sent to the taxpayer prior to the premium tax return filing. An accompanying schedule also provides each project’s specific credit allocation detail. Sugar Creek Capital works closely with state agencies to ensure that the tax package provided meets their requirements.
What is the monetary value of the tax credits?
Because the financial market is dynamic, the pricing of tax credits continues to fluctuate depending on supply and demand.
What happens if I under- or overestimate my credit need?
If the taxpayer discovers that their credit need changes after signing the annual agreement but before the end of the year, the agreement can typically be amended to adjust the amount. Each state also provides for a carryforward period if the taxpayer purchases more credits than needed. Missouri also allows for a three-year carryback of the credits.
How much risk do tax credits involve for investors?
Historic and low-income housing state tax credits offer an extremely safe, conservative investment opportunity.
Sugar Creek will oversee tax credit transfers only after a project has completed its expenditures, undergone an audit, or agreed upon procedures to verify the accuracy of expenses, and filed all required documents with the proper federal and state agencies. Because the taxpayer is not invested in a specific project upfront, the construction and/or lease-up risks are mitigated.
Sugar Creek executives have overseen nearly two billion dollars of successful state tax credit transactions. If, for any reason, any credits are disallowed, indemnification language is included to reimburse buyers for lost credits, refiling fees, legal fees, and penalties. To date, Sugar Creek has not experienced any recapture on state credits.
