A Keen Eye on The Big Picture

11 min read

Bill Machen, Holland & Knight

“The Big Picture is I’ve always felt that those of us who operate in this area are doing something that is helping to implement Congressional intent to try to make affordable housing available to people, and to try to foster the rehabilitation of historic buildings. And even though the work can be very technical and you’re dealing with very complicated provisions, when you step back and look at that Big Picture, I’ve always taken a lot of satisfaction that what we’re doing is doing good. That’s important to me.”

So says William F. “Bill” Machen, partner in Holland & Knight, who operates out of the prestigious firm’s Boston office and is the recipient of this year’s NH&RA Affordable Housing Vision Award for his pioneering work and long dedication to innovation and excellence in the field of tax credit structuring and related issues.

“Within that context,” he states, “I’ve tried to make people aware of the issues in both the low income and historic equity markets that can accomplish those lofty goals. And I’ve tried to work with everyone in the industry to establish some consistent market practices.”

Peter Bell, NH&RA President and CEO, says of Machen, “Bill has been an innovator in structuring transactions to meet the needs of both investors and developers. He’s blazed the trail in making Historic Tax Credits effective for project sponsors and investors.”

Adds Executive Director Thom Amdur, “All of these transactions require tax opinions and Bill is the blue chip guy. He is the one who blesses all of these structures and makes sure they are IRS compatible.”

In a response that friends say is typical of him, Bill replies, “I’m really humbled by the award.”

Bill’s expertise includes tax and business planning, with an emphasis on real estate development and syndication, renewable energy development and syndication, joint ventures, and mergers and acquisitions. He also concentrates in venture capital transactions, partnership taxation and general business planning.

The Tax Credits Transactions Practice at Holland & Knight is one of the largest in the United States, on the forefront of new and developing areas involving the use of tax credits. And Bill Machen has been on the forefront of that practice. The 40-plus attorneys on Bill’s team represent a wide variety of clients, including developers, syndicators, lenders, governmental agencies, broker-dealers, equity investors and credit enhancers in structuring, negotiating and documenting tax-advantaged debt and equity investments.

But it wasn’t always like that. According to Bill’s close associate – and even closer friend – James “Jim” McDermott, a nationally recognized expert in his own right with whom he has worked practically day-to-day since 1981: “When the 1986 Tax Reform Act eliminated real estate tax shelters and created the Low Income Housing Tax Credit program (LIHTC), the way we were doing transactions was wiped out.

Everybody had to start over and our clients had to do a 180. Before that, incentives were built into the tax code. Our group dwindled down to three people: Bill, me and an associate. Bill is one of the guys who invented the industry of raising money through syndication to build housing. Bill was one of the leading guys in that industry.”

In his typically self-effacing way, Bill merely comments, “We came from humble beginnings,” but then adds, “As soon as I met Jim, I thought he had some real potential, and boy, was I ever right!”

For his own part, Jim goes on to say, “I give him full credit for my career, and in subsequent legal generations, there has always been someone whom he has taken under his wing and shown how to be a good lawyer. He has so many success stories and he takes pride in sharing credit in every way possible.”

As one might expect, the process in which Bill, Jim and their team engage can be extremely complex, involving analyzing and recommending the best structure for each transaction, preparing organizational, syndication, loan, acquisition and related documents, rendering specific tax advice and working closely with accountants to ensure the proper treatment of projected tax benefits.

Bill comes naturally by his commitment to the region. He grew up in Wellesley, Massachusetts and went to the public schools there. His father was an MIT graduate who eventually rose to the presidency of Boston Gas. After college at Wesleyan in Connecticut and law school at the University of Michigan, Bill returned to Boston in 1969 to work at the law firm Sherburne, Powers & Needham, where he says he began with what he calls “rudimentary litigation,” but never envisioned becoming a transactional tax lawyer. He has lived in the area ever since. In 1998, the 75-attorney firm merged with the 700-attorney Holland & Knight, which had 16 offices across the country.

“Back around 1974,” Bill recalls, “one of my partners had a contact at Boston Financial, which at that time was Boston Financial Technology Group – one of the two or three top real estate syndication companies based in the Northeast. They were looking for counsel to represent them in some of their tax-oriented transactions. I had done some tax work and corporate work and a little bit of real estate work, but I really didn’t have any particular expertise going in to the syndicated, tax-oriented real estate transaction business. And I owe a great debt of gratitude to the folks at Boston Financial because I underwent some real on-the-job-training representing them. I had to travel all over the country to closings because everything was done in-person then. It was a very interesting sort of baptism under fire. I learned as I went along and I’ve had a lot of interesting experiences and a lot of fun – with a lot of stress at the same time.

“I’ve told people that when the Low Income Tax Credit was first enacted, I thought it was so complicated it would never work. And how wrong I was! It has turned into the most effective subsidy program ever devised in the real estate area.”

Jim McDermott points to his partner for a good deal of the credit. “We had to figure out how does this program work, and then say to clients, ‘This is what you have to do to raise money and make your investment work.’

“Bill is a very smart and practical guy. He has figured out how to bring all of this down from the theoretical to the real world.”

Bill has been at the center of some of the classic legal battles in the field, including the 2009 Virginia Historic Tax Credit Funds decision. “That was a landmark case in which I actually testified, because it was about the federal tax treatment of state tax credits. It became complex and highly technical, and after appeal, set a precedent in a nebulous area for some of the transactional structures that investors had used for years. It meant that we had to come up with new ways of structuring state credit investments. Instead of treating tax credits as allocated tax items, the appeals court said they were to be treated as property, which meant there would be gains on any sale that someone would have to account for.

“As a result of that, a lot of people are biting the bullet and acknowledging that when you have state tax credits, somebody is going to have to realize income on the sale of those credits. It’s meant that lawyers and accountants are having to come up with some different approaches to how they structure those deals.”

Bill’s imagination and creativity in the field is allowing his clients “efficient ways to turn state credits into equity without being diluted too much by taxes.”

Another legal case with far-reaching implications was 2012’s Historic Boardwalk Hall v. Commissioner of Internal Revenue, decided by the U.S. Court of Appeals for the Third Circuit. It involved the rehabilitation of a famous sports venue in Atlantic City, New Jersey. Essentially, the court held that an institutional investor in a partnership engaged in the rehabilitation was not a “bona fide partner” in the partnership, resulting in the disallowing of the federal tax credits allocated to that investor.

“That was a case that really paralyzed the historic equity markets for a while,” Bill comments. “With the help of several of my colleagues, we were able to work out the details of Revenue Procedure 2014-12 – the historic credits “safe harbor” that the Internal Revenue Service issued. I think I had six separate meetings in Washington with the IRS and the Treasury on that and spent an enormous amount of time drafting proposed language and stuff like that. It almost became a labor of love for me.

“Essentially what I saw the Big Picture mission to be was to try to get a more effective private-public relationship between the IRS and the people practicing in the historic credit arena. The Historic Boardwalk case had really kind of poisoned the well and it became very important to explain to the IRS that this was a worthwhile program and there were some technical issues that they maybe hadn’t thought through, and what you had to do to make sure that an investor was treated as a true partner for income tax purposes. That’s obviously a critical issue, but there were other critical issues and in the last year and a half, I’ve tried to work with IRS and Treasury on those, some of which are really hyper- technical. But it’s been a very interesting period in my life. For a long time I was focused on doing deals, and now I’m trying to do things for the industry.”

At the same time, Bill wrote his first book, The Rehabilitation Tax Credit: A Practitioner’s Guide to the Technical Tax Issues, published this year by the American Bar Association.

Downscaling when their children grew up, Bill and his wife Leslie Martin recently moved to a townhouse in West Newton, Mass., and have another home in New Hampshire where Bill indulges his appetite for hiking, jogging, kayaking and outdoor life in general. He and Leslie have hiked in the French Alps and travelled to Africa, among other exotic destinations.

“And I love to play golf, although I’m not a great golfer.”

The entire family proves its service commitment on a daily basis. Leslie is a physician, a clinical oncologist specializing in breast cancer at St. Elizabeth Medical Center in Brighton, which is associated with Boston’s famed Dana-Farber Cancer Institute. Bill and Leslie have two children: Kaitlin, who teaches fourth grade in Newton; and Scott, who has a degree in psychology and currently works with Helping Hands, a unique organization that provides free, specially trained capuchin monkeys to those with spinal cord injuries and mobility impairment. Bill is gratified that both kids have remained in the area.

Outside of work and family, his consuming passion is music. “I’ve loved music all my life,” he declares, and reveals that all through college he played lead guitar in a rock and roll band with the memorable name “Uranus and the Five Moons.”

“We’ve had several reunions since then, but I think we may finally be done.”

While he likes almost all music genres, he has a particular partiality to blues. “There are so many people I enjoy, but if I had to pick some out, I’d say the more traditional ones, like Muddy Waters and Lightnin’ Hopkins, and people like that, and more modern people like Ry Cooder, who is a favorite of mine. I like Buddy Guy a lot and Tommy Castro.” Bill and Leslie go to blues and jazz festivals around the country whenever they have the opportunity. “It’s been an important part of our lives.”

He lectures frequently on real estate, tax and business planning issues for a variety of forums, including NH&RA, Massachusetts Continuing Legal Education, the Foundation for Continuing Education, Bentley College, the Federal Tax Institute and the National Council of State Housing Agencies, among others.

Aside from his longtime involvement with NH&RA, Bill is a member of the American Bar Association, the Massachusetts Bar Association, the Affordable Housing Tax Credit Coalition, Historic Preservation Development Council and the Historic Tax Credit Coalition, on which he serves on the Board of Directors.

Perhaps the best measure of the man is summed up by his longtime law partner. “There are hundreds of people around the country, in personal and professional life, who consider Bill one of their best friends,” says Jim McDermott. “Even people on the other side of deals – he earns their friendship. To me, that shows the impact of his character.”