Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.

Wednesday, July 13, 2022 FASB Board Meeting

Ratification of EITF consensus-for-exposure on EITF 21-A, “Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method.” The Board ratified the following consensus-for-exposure reached by the EITF at its June 16, 2022 meeting and directed the staff to draft a proposed Accounting Standards Update reflecting the consensus-for-exposure for vote by written ballot.

The Task Force reached a consensus-for-exposure to expand the proportional amortization method of accounting to all tax credit investments that meet the criteria in paragraph 323-740-25-1. The Task Force reached a consensus-for-exposure that:
  1. The proportional amortization method can be elected on a tax-credit-program-by-tax-credit-program basis.
  2. The criteria in paragraph 323-740-25-1(a), (b), and (c) should be retained with no additional clarification to those criteria.
  3. The criterion in paragraph 323-740-25-1(aa) should be retained with a clarification that the criterion would be evaluated in relation to the operations of the underlying project.
  4. When applying the criterion in paragraph 323-740-25-1(aaa), the existence of refundable tax credits does not automatically preclude an investor from applying the proportional amortization method. Additionally, clarification to this criterion would include that:
    1. Projected benefits refers to total return, including tax credits, other tax benefits, and non-tax-related cash flows, including refundable tax credits. Refundable tax credits should be included in the denominator but not in the numerator when performing the substantially all test.
    2. Substantially all should be determined using discounted amounts. The discount rate to be used should be consistent with the cash flow assumptions used by the investor in making the investment decision.
  5. The existing reassessment requirement should be retained with no additional clarifications. That is, entities would reassess whether a tax credit investment meets the proportional amortization method criteria only upon a change in the nature of the investment or a change in the relationship with the project sponsor.
  6. Entities should apply the flow-through method to tax equity investments that qualify for and are accounted for using the proportional amortization method.
The Task Force also reached a consensus-for-exposure on other items, including disclosure requirements (those in paragraphs 323-740-50-1 through 50-2 should apply to all investments in tax credit programs for which the accounting policy election is made) and transition (optionality between modified prospective and fully retrospective).