Tax Credit Capital, LLC (TCC) created the Small Deal Fund to assist developers of historic properties generating under $2,000,000 in federal historic tax credits monetize the tax credits to create equity for their project. The federal historic tax credit program has been in existence for more than twenty years, and although an active and efficient market has evolved for larger tax credit transactions, TCC recognized a void in the market for smaller, but equally important projects. It is groupings of these smaller projects that are revitalizing the urban cores of American cities. In an effort to fill the void and ensure that developers of smaller projects have the same access to capital as those developers doing larger transactions, TCC created the Small Deal Fund in 2002.

In order to make the Small Deal Fund as efficient as possible for developers of small deals the Fund uses a single-tier structure and has established a “standard deal”. Smaller transactions typically do not have the complicated nuances often seen in larger transactions and the Small Deal Fund sought to capitalize on that fact. By using a single-tier structure, creating a pay-in structure, standard documentation and a streamlined due diligence process, the Small Deal Fund has been able to cap its closing costs at $10,000. This is a considerable benefit to the developer, as it allows monies that are diverted to legal costs in larger transactions to stay in the deal. The developer is responsible for his/her own counsel and the Small Deal Fund highly recommends the use of accountants and attorneys with tax credit experience as the learning curve for handling specialized transactions can prove costly.

The pay-in structure is straightforward. The developer of a smaller project will receive a 20% federal historic tax credit on qualified expenditures. The Small Deal Fund will pay up to $.85 on $1.00 for the credits it receives. The equity is paid in installments. A nominal $100.00 contribution is made at closing, 80% is paid upon receipt of a Part III from the National Park Service, 6.5% (less the initial $100) is paid in at six months of breakeven operations, and the remaining 13.5% is paid 61 months after the placed in service date.

Many states have historic tax credit programs that work in conjunction with the federal credit. If you are developing properties in Virginia, Maryland, Michigan, Rhode Island, Louisiana or Mississippi, the Small Deal Fund can separately arrange for the purchase of those credits as well. However, should your project be located in a state other than those listed it does not preclude you from using the Small Deal Fund for placement of the federal historic tax credits.