How to use
Use this worksheet at term-sheet stage on any tax-credit-funded transaction to size the bridge against the executed equity pay-in or transfer agreement. Each section gives the inputs, the bridge-sizing formula, and a worked numeric example for one credit category. Not tax advice, engage tax-credit counsel and a syndicator on every transaction.
Section 1. Inputs (collect before sizing)
Tax-credit bridge sizing requires the executed equity LOI / transfer agreement and the construction draw schedule. Without both, sizing is speculative.
Section 2, LIHTC bridge sizing (formula + worked example)
LIHTC bridge sizes against the unfunded equity pay-in. Bridge max = advance rate × (total LP equity − equity already paid in).
Validate the bridge plus senior + soft loans does not exceed total project sources, and that the bridge amortizes from each scheduled equity pay-in milestone.
Section 3. Historic Tax Credit bridge sizing (formula + worked example)
HTC equity pays in mostly at NPS Part 3 certification. Bridge max = advance rate × (total HTC equity − equity already paid in by milestone).
Section 4, NMTC leverage loan sizing (formula + worked example)
NMTC bridge sits at the leverage-loan layer of the standard NMTC structure. Leverage loan = (CDE QEI total − NMTC investor capital) where NMTC equity = QEI × 0.39 × pricing.
- Worked inputs: CDE allocation = $20M QEI; NMTC tax credit = 0.39 × $20M = $7.80M over 7 yrs; pricing = $0.78 → NMTC equity $6.084M; sponsor leverage loan target = QEI − NMTC equity = $20M − $6.084M = $13.916M.
- Bridge advance rate against leverage loan: typically 100% (the bridge IS the leverage loan, sized to the QEI gap).
- Bridge interest cost (7-yr term): $13.916M × 8.0% interest × 7 yr = $7.79M (paid current; refinanced at year 7 unwind).
- Document CDE underwriting approval, QALICB eligibility (≥50% gross income from LIC), and 7-year recapture indemnity.
Section 5, IRA §6418 transferable credit bridge (formula + worked example)
Inflation Reduction Act §6418 lets sponsors sell credits for cash. Bridge lenders advance against the executed transfer agreement.
Bridge max = advance rate × (transfer price × eligible credit) − any holdback the buyer requires.
- Worked inputs: solar §48 ITC = 30% × $30M eligible basis = $9.0M base credit; bonus credits (prevailing wage 5x = +25 pts; domestic content +10; energy community +10) → total credit = ~$15.0M; transfer price $0.94 → buyer cash $14.10M.
- Bridge advance rate against transfer agreement: 80%-90% post-PIS; 50%-65% pre-PIS depending on milestone certainty.
- Bridge max (post-PIS): 0.85 × $14.10M = $11.99M; less 10% buyer holdback ($1.41M) = effective $10.58M.
- Bridge takeout: buyer wires transfer price within 30 days of IRS pre-filing registration + transfer election; bridge fully repaid at that wire.
Section 6. Recapture indemnity reserves
All four credit categories carry recapture risk during the compliance period. Bridge lenders require sponsor indemnity to be sized against the credit at risk.
Recapture period and indemnity sizing by credit category
| Credit | Compliance period | Recapture indemnity sizing |
|---|---|---|
| LIHTC | 15 years | Joint and several with sponsor; cap commonly = unrecaptured credit + interest + penalties |
| HTC | 5 years post-PIS | Full indemnity from sponsor; typically uncapped during 5-yr window |
| NMTC | 7 years | Joint and several; matched to remaining recapturable credit each year |
| IRA §48 / §45 | 5 years | Per transfer agreement; many transfers carry sponsor indemnity for the 5-yr ITC vesting period |