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Note 5: Qualified Affordable Housing and Other Tax Credits

The Company invests in LIHTC limited liability partnerships and LLCs. The primary purpose of these investments is to earn an adequate return on capital through the receipt of low-income housing tax credits. Those investments are recorded at cost and then amortized using the proportional amortization method. The investments are included in other assets on the unaudited condensed consolidated balance sheets, with any unfunded commitments included in other liabilities. The investments are amortized as a component of income tax expense. The tax credits recognized reduced income tax expense for the period.

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The Company also has a pool of investments that are held for sale and are accounted for at the lower of cost or market. These investments include projects that are awaiting syndication in LIHTC funds through our MCI subsidiary. The investments are included in other assets on the unaudited condensed consolidated balance sheets.

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The Company is the primary beneficiary in one of its joint venture investments, therefore the results of this entity are consolidated, and the benefits of the new market fund are recognized through tax credits as a component of income tax expense. The Company consolidates this joint venture because it has the power to direct the activities that most significantly impacts the entity’s economic performance and has an obligation to absorb losses or the right to receive benefits that could be significant to the VIE.

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The following table summarizes the amortization expense and tax credits recognized for the Company’s low-income housing investments for the three months ended March 31, 2026 and 2025.

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Variable Fees Subject to Revenue Recognition Constraints

The Company serves as a general partner for several syndicated LIHTC funds that are owned by one investor, holding 85.00-99.99% of the funds, as a limited partner. The Company, as general partner, provides services including fund formation and the identification and acquisition of qualifying investments. Although some of these activities occur earlier in the arrangements, those activities do not provide a distinct benefit on their own and represent inputs to a single integrated service of managing the funds and delivering tax credits over the life of the arrangements. Accordingly, the services are accounted for as a single combined performance obligation that is satisfied over time.

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The Company is entitled to future fees of up to approximately $33.4 million; however, substantially all consideration is variable and contingent upon the achievement of future performance milestones, including the stabilization of the underlying properties and the delivery of tax credits to the limited partner. These contingencies may extend out until 2043.

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Due to the significant uncertainty associated with the achievement of these milestones, the extended duration of the agreements, and the potential for a significant reversal of revenue if the milestones are not achieved, the Company has fully constrained variable consideration as of March 31, 2026 and December 31, 2025. Accordingly, no revenue has been recognized to date. Revenue will be recognized only if, and when, the applicable performance milestones are achieved and constraint on variable consideration is lifted. The Company continually reassesses the constraint on variable consideration as facts and circumstances evolve. There were no changes in the Company’s conclusions during the three months ended March 31, 2026. 

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Because the Company’s right to consideration is contingent upon future performance and is not unconditional or enforceable until the underlying properties are stabilized and the delivery of tax credits is complete, no contract asset was recorded as of March 31, 2026 or December 31, 2025.

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The Company has also advanced these LIHTC funds $85.2 million and $102.7 million as of March 31, 2026 and December 31, 2025, respectively, to acquire its LIHTC investment projects. These advances represent long-term funding provided to the funds and are expected to be repaid over a similar period. Repayment of the advances is not contingent upon the achievement of performance milestones related to the Company’s general partner services and does

not arise from contracts with customers. Accordingly, the advances are not within the scope of ASC 606 and do not represent contract assets. These advances have been recorded in other assets on the unaudited condensed consolidated balance sheets. Repayment of the advances is expected to occur through capital contributions from the limited partner, and the advances are periodically assessed for recoverability.

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Supplemental Cash Flow Information

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The following table presents noncash and supplemental information related to the Company’s qualified affordable housing investments.

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