Proposed updates – accounting for investments in tax credit structures

by | Sep 9, 2022

ARTICLE | September 09, 2022

On August 22, 2022, the Financial Accounting Standards Board (FASB) issued The Proposed Accounting Standards Update – Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (proposed ASU), which expands the use of the proportional amortization method to all investments made primarily for the purpose of receiving income tax credits and other income tax benefits. Currently, the proportional amortization method is limited to investments in low-income housing tax credit (LIHTC) structures.

The proportional amortization method allows an entity to amortize the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognize the net amortization of the investment along with such tax credits and benefits received as a component of the income tax expense (benefit) in the income statement. Currently, investments in other tax credit structures (that are not investments in LIHTC structures) are typically accounted for using the equity or cost method, with investment gains or losses and tax credits being presented gross on the income statement in their respective line items.

Under the proposed ASU, reporting entities can elect to use the proportional amortization method to account for their tax equity investments, if they meet the following conditions:

  • It is probable that income tax credits allocable to the investor will be available
  • The investor does not have the ability to exercise significant influence over the operating and financial policies of the underlying project
  • Substantially all of projected benefits (determined on a discounted basis, using a discount rate that is consistent with the investor’s cash flow assumptions used in making decisions to invest in the project) are from income tax credits and other income tax benefits
  • The investor’s projected yield based solely on the cash flows from the income tax credits and other tax benefits is positive
  • The investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the investor’s liability is limited to its capital investment

The election to use the proportional amortization method would be on a program-by-program basis. Enhanced disclosures to help users understand how the entity’s investments generate income tax credits and other income tax benefits are also included in the proposed ASU. The proposed ASU is available for comment until October 6, 2022.

Questions or Want to Talk?

Call us directly at 972.221.2500 (Flower Mound) or 940.591.9300 (Denton),
or complete the form below and we’ll contact you to discuss your specific situation.

This article was written by RSM US LLP and originally appeared on 2022-09-09.
2022 RSM US LLP. All rights reserved.

The information contained herein is general in nature and based on authorities that are subject to change. RSM US LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM US LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit for more information regarding RSM US LLP and RSM International. The RSM(tm) brandmark is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.



KHA Accountants, PLLC is a proud member of RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources.

For more information on how KHA Accountants can assist you, please call 972.221.2500.

Business Travel Expenses: Per Diem vs Actual Expenses

If your employees travel for work purposes, it’s important to understand the various methods of tracking and substantiating travel expenses so that you can maintain accurate records, control costs, and take advantage of potential tax benefits. Watch this video to learn about business travel expenses, per diem allowances, and how they affect employees and employers.

6 Misconceptions of a Revocable Living Trust

A revocable living trust, or RLT, offers many benefits, including probate avoidance, privacy, and flexibility in managing assets during one’s life, incapacity, and death. However, despite their popularity as an estate planning tool, there are many misconceptions surrounding revocable trusts that lead to confusion and misunderstandings. Watch this video to learn about the top six misconceptions.

IRS Dirty Dozen Top Tax Scams To Avoid

Each year, the Internal Revenue Service publishes its annual Dirty Dozen list of tax scams highlighting various schemes that put taxpayers and their financial well-being at risk. In this video, we’ll provide an overview of five of the top scams on the list.