The “Meaningful Stake” Debate: Third Circuit Reverses Tax Court Decision in Historic Boardwalk

Contact: Jenny H. Connors and Allison T. Domson & Conrad Garcia; Williams Mullen (North Carolina and Virginia, USA)

On August 27, 2012, the United States Court of Appeals for the Third Circuit reversed the holding of the United States Tax Court in the case of Historic Boardwalk Hall, LLC v. Commissioner, 136 T.C. 1 (2011). Relying heavily on the decision of the Second Circuit in TIFD III-E, Inc. v. United States, 459 F.3d 220 (2d Cir. 2006) (“Castle Harbour”) and the decision of the Fourth Circuit in Virginia Historic Tax Credit Fund 2001, LP v. Commissioner, No. 10-1333 (4th Cir. 2011) (“Virginia Historic”), the Third Circuit found that Pitney Bowes, Inc. (“Pitney Bowes”), a private sector investor in Historic Boardwalk Hall, LLC (“Historic Boardwalk”), had no meaningful stake in Historic Boardwalk, and, therefore, was not a bona fide partner of the partnership for federal income tax purposes. As a result, all allocations of historic rehabilitation tax credits previously allocated to Pitney Bowes were reallocated to the New Jersey Sports and Exposition Authority (the “New Jersey Sports Authority”) as the owner of East Hall.

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