On June 25th in Philadelphia Pennsylvania a three judge panel of the Third Circuit Court of Appeals heard oral argument on the appeal by the Internal Revenue Service of the Tax Court decision in the Historic Boardwalk case. The Tax Court had upheld the allocation of a Federal Historic tax credit to the tax credit investor member.  One of the primary issues on appeal is whether the tax credit investor member had risk in the transaction.   The Service  argued that the tax credit investor was not at risk in the transaction and consequently was not  a “partner” in the Historic Boardwalk investment entity and entitled to the allocation of the Federal historic tax credit.  While it is clearly the intent of Congress that the Federal historic tax credit serve as an incentive for the rehabilitation of historic buildings, there is very little guidance on how the tax credit can be syndicated to investors.  The historic tax credit industry has developed a structure in which the investor is a “partner” in the ownership entity, receives a preferential return, and is bought out of the investment entity through a put/call agreement after the expiration of the tax credit compliance period.  The decision of the Court of Appeals may affect the structure of the syndication of future historic tax credit transactions.