BY: Brent Scher Follow @brentscher October 5, 2018 4:59 am
Since Claire McCaskill aing the Senate, her bedmate Joseph Shepard has fabricated at atomic $11 actor through a business that buys up tax credits awarded to Missouri affordable apartment developers and sells them to advantageous entities gluttonous tax relief.
Shepard’s company, the Missouri Tax Acclaim Fund, operates aural the Low-Income Apartment Tax Acclaim (LIHTC), a $9 billion a year federal affairs that awards tax credits to developers architecture able affordable apartment projects. The LIHTC affairs is advised for developers in charge of banknote to allure investors for projects by alms them tax credits.
Analysis by action institutions and government investigators, however, has begin the LIHTC affairs to be inefficient, with abundant of the money—intended for affordable housing—ending up in the pockets of middlemen syndicators who affix developers with investors, earning aerial fees from both sides.
Shepard plays the advantageous role of syndicator and has fabricated millions off the government program.
Records accessible on the Missouri secretary of state’s website appearance Shepard’s aggregation acquired tax credits awarded to at atomic 57 altered affordable apartment projects in Missouri amid 2006 and 2017. Together, the 57 projects were awarded $273.3 actor in LIHTCs, a ysis of the state’s tax acclaim database found.
It can’t be bent absolutely how abundant Shepard has fabricated off the tax acclaim business, due in allotment to a abridgement of accuracy in the alteration of tax credit, but additionally because Senate banking acknowledgment letters don’t crave specific abstracts on incomes beyond $1 million.
McCaskill’s disclosures appearance her bedmate becoming “over $1 million” from the Missouri Tax Acclaim Armamentarium for 11 after years from 2007 to 2017, acceptation that he’s becoming at atomic $11 million. McCaskill files taxes alone from Shepard and has never arise her husband’s returns, which would accommodate a added specific figure.
Much charcoal alien apropos how Shepard and added syndicators of LIHTCs acquire their aerial accumulation margins.
The U.S. Government Accountability Appointment was ordered to attending into “the role of syndicators” in the LIHTC process. In its findings, the GAO arise aftermost year that profits were becoming about through both antecedent and anniversary fees. The GAO was clumsy to accumulate capacity on the admeasurement of the fees.
In a consecutive GAO abode on the LIHTC arise aftermost ages calling for added blank of the affairs due to allegation that alone a atom of allocated funds ability their advised goal, the blank bureau places accusation on the alien amount of syndicators.
“Syndication costs represent a cogent amount of bearing affordable apartment with LIHTCs, but complete abstracts on alliance partnerships about were lacking,” the GAO found.
Chris Edwards, administrator of tax action for the Cato Institute and a above yzer of the tax credit, characterized it as “absurd” that there’s a government affairs so circuitous “that the GAO is larboard abrading its arch to amount it out.”
“It’s avant-garde accomplice commercialism area assembly acquire money on complex, nontransparent, government schemes,” Edwards said. “It may be legal, but it undermines the abridgement and assurance in government.”
Edwards said he was clumsy to actuate whether the millions of dollars Shepard fabricated off the LIHTCs were out of the ordinary.
“Whether or not McCaskill’s bedmate is earning above-normal allotment for the industry is unknown,” Edwards said. “Nobody absolutely knows how abundant money these syndicators are authoritative and how big the fees they acquire are. We charge added transparency.”
The accessible sources with the best advice on Shepard’s circuitous tax acclaim operation—where the Missouri Tax Acclaim Armamentarium is alone a cog—are banking abstracts assuming how the armamentarium uses the LIHTCs as accessory for coffer loans.
One such certificate filed on Nov. 26, 2008, shows the Missouri Tax Acclaim Armamentarium acquired a accommodation from Heartland Coffer by putting up as accessory “any and all Missouri Low Assets Apartment Tax Credits” awarded to the Martin Luther King Village, a 108-unit activity in Kansas City. The activity was ultimately awarded $6.5 actor in LIHTCs in 2009, according to a Missouri Accountability Portal database.
Another certificate filed on Dec. 21, 2012, shows a about identical structure, with the Missouri Tax Acclaim Armamentarium accepting a accommodation from Enterprise Coffer and Trust, this time application “any and all” tax credits awarded to Cedar Valley Apartments for the rehabilitation of 88 affordable apartment units. The activity was awarded $5.9 actor in LIHTCs that year.
Nearly identical affidavit exists assuming the Missouri Tax Acclaim Armamentarium accepting coffer loans application tax credits as accessory for 57 altered Missouri projects, which calm were awarded $273.3 actor in LIHTCs, according to the database. It has 15 added deals in abode with projects that are yet to be awarded LIHTCs.
The Missouri Tax Acclaim Armamentarium is aloof a baby allotment of Shepard’s tax acclaim operation, confined as the article that enters into the tax acclaim acquirement agreements with developers.
Once the tax credits are acquired, investors for the projects are brought in by Sugar Creek Capital, which advertises the tax acclaim investments on its website as “an effective, reliable tax planning opportunity” for “companies and advantageous individuals to aerate banknote flow.”
Both Shepard’s companies, the Missouri Tax Acclaim Armamentarium and Sugar Creek Capital, are amid at 17 W. Lockwood Ave. in St. Louis.
Less clearly circuitous in the operation is a Missouri aggregation alleged Horizon Asset Management, formed in St. Louis in 2004, the aforementioned year the Missouri Tax Acclaim Armamentarium was formed by Shepard, business filings show.
Horizon Asset Management is circuitous in about all the Missouri Tax Acclaim Fund’s partnerships with developers, including both the above-mentioned arrange with Martin Luther King Village and the Cedar Valley Apartments. The tax credits awarded arise to be allocated, at atomic for a aeon of time, to Horizon Asset Management.
Horizon Asset Management acts as the armory for the tax credits in the LIHTC operation, and the acumen for this is its ties to a tax-exempt Missouri nonprofit organization, the Horizon Apartment Foundation.
The Horizon Apartment Foundation’s anniversary tax filings appearance that it owns Horizon Asset Management, and that the foundation’s assets are acquired about absolutely from the tax credits allocated from developers to Horizon Asset Management. The foundation lists millions of dollars’ account of tax credits in its ascendancy anniversary year and has about no tax liabilities.
In its best contempo filing for 2016, the foundation arise $52.8 actor in assets in the anatomy of tax credits becoming through Horizon Asset Management’s “investments in affordable apartment projects.” The foundation arise aloof $1,466 in accommodating contributions and paid aloof $16,772 in taxes for the year, all for payroll, the filing shows.
The foundation’s filings additionally afford ablaze on the ample aggregate of tax credits in Horizon Asset Management’s ascendancy and how bound the operation has developed over the years.
The 2016 filing shows Horizon Asset Management with a book amount of $228.2 million, a fasten from $176.4 actor the antecedent year and the accomplished its anytime been. In 2007, McCaskill’s aboriginal year as a U.S. senator, its book amount was arise as $25.4 million.
The foundation currently has no accessible ties to Shepard a from actuality circuitous in about all the partnerships with developers, mainly Shepard’s Missouri Tax Acclaim Fund. But there are able break that it’s allotment of the aforementioned operation.
The arch adumbration is a 2002 Horizon Apartment Foundation filing area its listed address, 17 West Lockwood Ave. in St. Louis, and buzz number, (314) 968-2205, bout absolutely with the accepted acquaintance advice for Sugar Creek.
The foundation’s accepted listed abode is 23 North Gore Ave. in St. Louis, a area aloof about the bend from Sugar Creek’s offices.
Many of the foundation’s admiral additionally accept ties to added Shepard businesses.
Sugar Creek did not acknowledge to an ysis on how Horizon Asset Management and the Horizon Apartment Foundation fit into its tax acclaim operation. Neither are listed in McCaskill’s banking disclosures.
A adumbrative for the Horizon Apartment Foundation told the Free Beacon it could apprehend a alarm back, but the alarm has yet to come.
The LIHTC affairs has appear beneath added ysis in contempo years due to allegation such as the one accomplished by the Missouri Accompaniment Auditor, which begin that alone 42 cents of anniversary acclaim dollar awarded absolutely goes to low-income apartment projects, with abundant of the catastrophe up in the easily of middlemen syndicators like Shepard.
The St. Louis Post-Dispatch arise in 2014 that a above obstacle to alteration the affairs is the political ascendancy of syndicators such as Shepard, who beneath to be interviewed for the story. Shepard purchased added tax credits than any added syndicator in the accompaniment that year, the cardboard wrote.
Experts on the tax credits such as Cato’s Edwards accept advocated for catastrophe the “costly, complex, and corruption-prone” program, arguing that a demand-side arrangement area apartment vouchers are accustomed to those in charge of affordable apartment would be added effective.
“The supply-side access is actual inefficient, and a lot of money ends up dematerialization with the middle-men,” Edwards said. “The abundant irony of this affairs is it’s advised to advice the needy, but it seems to be benefiting the top one percent.”
McCaskill’s appointment did not acknowledge to an ysis into her husband’s tax acclaim operation or on accessible changes that could be fabricated to the LIHTC affairs to accomplish it added efficient.
The Kansas City Star arise beforehand this year that Shepard had been on the accepting end of added than $131 actor in federal apartment subsidies back 2007. McCaskill’s Republican adversary Josh Hawley has acicular to Shepard’s use of government programs to accomplish accumulation for his businesses as a acumen she should absolution his tax returns.
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