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Abstract: 

Robin Mahapatra starts the issue off with an article about the New Markets Tax Credit, which was adopted in 2000 to incentivize lending to low-income communities. The article describes the eligibility requirements and the structure of the credit, which over a seven-year period credits an investor 39 percent of the amount invested. This is followed by an article written by John Alfonsi and Walter McGrail that discusses tax risk management for real estate investment trusts (REITs), focusing primarily on commercial property REITs. As Messrs. Alfonsi and McGrail explain, a failure to properly manage tax risk may have several negative consequences--not just for the REIT but for its investors and lenders as well. Recent regulatory requirements applicable to credit ratings agencies when rating asset-backed securities are detailed our third article, by Evan Cappelli. These requirements, codified in Securities and Exchange Act Rule 17g-7, impose additional disclosure obligations on ratings firms relating to asset-backed securities’ representations, warranties, and enforcement mechanisms. Applicability of the Foreign Account Tax Compliance Act (FATCA) to non-U.S. investment funds is discussed by James N. Calvin, Kenneth M. Kess, and Pascal Noël in our fourth article. The authors also explain how FATCA, a U.S. statute, has developed into a global framework for reciprocal reporting by financial institutions, and related investment fund developments in Western Europe.Bank regulators’ increasing scrutiny on operational risk is covered in the issue’s fifth article. Authors Ralph Sharpe and Meredith Boylan focus on regulatory guidance related to two critical aspects of operational risk: Bank Secrecy Act/Anti-Money Laundering compliance and oversight of third-party relationships.We conclude the issue with two columns. First, James D. Goeller in his Community Banks column, examines the circumstances under which bank lenders may receive tax-exempt income when lending to tax-exempt organizations. Next, the Journal’s staff editors present a Regulation column that summarizes the recent Securities and Exchange Commission statement about the agency’s sequence for finalizing its rulemaking for over-the-counter derivatives—a topic on which the Commission has requested comment.

Keywords: New Markets Tax Credit; REITs, Credit Rating Agencies; FATCA; Anti-Money Laundering compliance; tax-exempt income; over-the-counter derivatives

Affiliations:  1: New York Law School.