Tax Credit Investments

9 Months Ended

Sep. 30, 2020

Tax Credit InvestmentsValley’s tax credit investments are primarily related to investments promoting qualified affordable housing projects, and other investments related to community development and renewable energy sources. Some of these tax-advantaged investments support Valley’s regulatory compliance with the Community Reinvestment Act (CRA). Valley’s investments in these entities generate a return primarily through the realization of federal income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits and deductions are recognized as a reduction of income tax expense.

Valley’s tax credit investments are carried in other assets on the consolidated statements of financial condition. Valley’s unfunded capital and other commitments related to the tax credit investments are carried in accrued expenses and other liabilities on the consolidated statements of financial condition. Valley recognizes amortization of tax credit investments, including impairment losses, within non-interest expense in the consolidated statements of income using the equity method of accounting. After initial measurement, the carrying amounts of tax credit investments with non-readily determinable fair values are increased to reflect Valley's share of income of the investee and are reduced to reflect its share of losses of the investee, dividends received and impairments, if applicable.

The following table presents the balances of Valley’s affordable housing tax credit investments, other tax credit investments, and related unfunded commitments at September 30, 2020 and December 31, 2019:


	September 30, 2020		December 31, 2019
	(in thousands)
Other Assets:
Affordable housing tax credit investments, net	$	21,647	$	25,049
Other tax credit investments, net	49,907		59,081
Total tax credit investments, net	$	71,554	$	84,130
Other Liabilities:
Unfunded affordable housing tax credit commitments	$	1,397	$	1,539
Unfunded other tax credit commitments	1,139		1,139
Total unfunded tax credit commitments	$	2,536	$	2,678

The following table presents other information relating to Valley’s affordable housing tax credit investments and other tax credit investments for the three and nine months ended September 30, 2020 and 2019:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	$	1,352	$	1,666	$	3,979	$	5,087
Other tax credit investment credits and tax benefits	1,727		1,902		5,567		6,863
Total reduction in income tax expense	$	3,079	$	3,568	$	9,546	$	11,950
Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	$	642	$	530	$	1,733	$	1,796
Affordable housing tax credit investment impairment losses	585		857		1,668		2,381
Other tax credit investment losses	12		1,093		1,235		4,589
Other tax credit investment impairment losses	1,520		1,905		4,767		7,655
Total amortization of tax credit investments recorded in non-interest expense	$	2,759	$	4,385	$	9,403	$	16,421

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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